Does McKinsey only do strategy work: the difference between strategy, operations and implementation consulting?
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In all my time as a management consultant, and after I left, I found one concept consistently misunderstood was the difference between strategy, operations and implementation. Here are the common misinterpretations I hear:
- McKinsey only does strategy work.
- Deloitte and the accountancy firms are great at implementation.
- Implementation is the same as operations.
I am going to explain the differences and which firms are good at which type of consulting.
Strategy work refers to helping senior executives determine the overall direction in which they will take the business. It is about taking a top-down view of the business and looking at the allocation of scarce resources. Strategy consulting is difficult. It requires deep analytical skills and the application of strong and disciplined problem solving skills. Principles like decision trees, MECE and hypotheses led research are used. Examples of strategy work include:
- What should be our long-term vision?
- Should we retain the same portfolio of businesses?
- Should we enter this market?
- What is the best way for us to extract value from our SUV division?
At the end of a strategy engagement, the client is given a detailed report outlining the exact market shares, pricing, volumes and other conditions under which the recommended strategy will work. The end of a strategy engagement must be a report. That’s because a strategy is a plan. And before you implement anything, you need a plan.
Strategy engagements tend to involve long hours; they have a high intensity and involve senior client engagement. Throughout the engagement, strategy consultants must work with the most senior executives of a firm. Proper strategy consulting can only be done for the most senior executives. These are after all the decision makers of a business.
The top firms in strategy work are Mckinsey, BCG and Bain. Other firms like Roland Berger, Marakon and Booz are good at strategy in selected markets and sectors. They are not consistently good.
Operations consulting is actually very similar to strategy and is not implementation work. In an operations engagement the consultants are again usually working for senior executives to determine how to extract value from an operation, facility, plant, mine, or division. Operations consultants apply the same problem solving approach as strategy consultants: MECE, decision trees and hypotheses led research. Examples of strategy work include:
- How do we increase the throughput of this plant?
- How do we reduce costs in this facility?
- How we do we increase productivity in this factory?
- How do we reduce bottlenecks in this plant?
Here is a crucial similarity with strategy engagements. At the end of an operations project, the client also will receive a detailed report outlining metrics, benchmarks and a laundry list of changes to improve the operations. At this stage the client and consultants have not yet implemented the recommendations.
Operations and strategy engagements use the same highly disciplined problem solving processes, but they apply it to different parts of the business. This is a very important point. Operations consulting is just as tough, just as intense and just as appealing as strategy consulting. Provided it is done correctly.
The top firms in operations consulting are still Mckinsey, Bain and BCG. To this list you can also add AT Kearney and Booz. In some areas of operations, firms like Deloitte, PWC, E&Y, KPMG and Mercer also do well. The accounting firms tend to be good at financial processes and operations. These latter firms are not consistently good across all sectors and markets.
Implementation consulting is totally different from operations and strategy consulting. The consulting skill sets are different, the hours are different, the type of work is different and so is the profile of consultants and fee structures. In an implementation engagement, the consulting team must take the recommendations from the strategy and operations engagement and help the client realise the targets. Let’s assume Bain advised an airline to set up a new low-cost airline division since. The strategy calculated that doing this would lead to the airline saving $100m over 3 years.
The implementation consultants need to determine the pieces of activity required to take all the existing employees within the airline, create a new division, brand it, set up the operating structures and move the employees to the new division. Although the implementation consultants will not do everything, like branding where a brand specialist firm would do the work, they will manage everything.
Here are some of the things involved in doing this:
- Setting up the new division
- Transferring employees and making adjustments to their employment contracts
- Creating a new profit centre
- Setting up a new accounting system and adjusting SAP
- Deciding if the low-cost fleet will be leased or bought
- Determine what will happen to the existing planes and how if/how will be transferred to the new division
- Creating a new organisational structure in micro-detail
- Set the start date for the new division and begin migrating process and employees
- Set up a trial run for the new division
- Determine the go live date
- Manage the labor unions
You get the picture right? Implementation is not just for the smartest MBAs. It’s for smart people who can roll up their sleeves and literally work alongside a client to solve countless tedious problems and march towards a common goal. Operations consultants also use the strategy or operations plan as a guide only. No matter how good a firm is, they can never predict all the problems with implementing a strategy. The implementation team will need to find a way to make the strategy work. Implementation projects also have less stressful work hours. Since the team is working hand-in-hand with the client, they generally need to work to the clients’ schedule. This slows down implementation projects. There is also a need to blend in more closely, use processes which can be used by everyone and focus more on transferring knowledge.
In my experience, despite the countless adverts, not many firms do implementation well. Capgemini used to be good at implementation through their United Research team. Accenture is great at technology implementation. E&Y is quite good and so is IBM. The rest have poor records. Of course, there are also regional and sector specialists.
So the next time someone says McKinsey only does strategy; know they are wrong. Mckinsey does plenty of operations work which is just as rigorous as any strategy engagement. The difference is that none of the elite consulting firms do implementation work. That’s different.
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Great read. I am wondering how attractive/competitive I will be for Deloitte Consulting and PwC Advisory. I am obtaining a masters in health policy and management at a top public school and will complete a summer internship at Kaiser Permanente’s internal Consulting & Implementation group. I have 3 years of professional clinical experience as well.
Hi Shamir,
I can only comment after reviewing your profile completely.
Michael
MBB does implementation. For example, McKinsey’s cost reduction (sourcing) engagement with MTA at NYC,
Thanks for the comprehensive response. I have not applied to any consulting firms yet as I have only recently started my MBA at a target school in the Asia Pacific region. This blog is a great resource to get some extra insight into consulting without the usual promotional/marketing talk when these firms come to present on campus. I’ll definitely be dropping by often to have a quick read.
Lee – Sounds great and enjoy your MBA. Michael
Great writeup, incredibly useful for students like myself considering a future career path in management consulting. What I find curious is the view that implementation consulting is often seen as considerably inferior to strategy consulting despite the high level of skill required to perform the job.
I have heard some claims that implementation work is booming as companies realize that they need expertise to guide them through this and apparently there is considerable value in hiring one single consulting firm for “end-to-end” engagements (strat+implementation). It will be interesting to see if the top strategy firms will one day venture into implementation work as well.
Thanks Lee. Have you applied to any firms yet? Let me know if you need any help. Unfortunately there is a prevailing view that implementation is less glamorous. I think it is tough work and equally challenging, yet can be just as rewarding.
The problem with a high-end consulting firms moving into implementation is as follows. The skill sets are different. Its tough to put implementation specialists on strategy projects, and vice versa. So this means the firm will have to create a group of implementation specialists. This will lead to consulting class wars within the firm. And unfortunately the fees are lower. If the fees are lower, then how do you have the money to hire top-quality consultants? If the rest of the firm subsidizes the implementation consultants, this can create animosity. I personally think the fee issue can be overcome by using a performance-fee structure.
The BIGGEST problem is one where consulting firms will give strategy advice which forces the client to do implementation work. High-end firms do not want to taint their image by creating this impression. This is why they will likely resist this move into implementation. I also think firms should specialize. No one can do everything and they should not.
Also the more successful you are at implementation. the deeper into the guts of an organization you need to go. The deeper you go, the further from the C-suite you are. This limits your ability to advise the CEO. So this tension prevents firms from succeeding in both spheres (strategy/ops and implementation). The only firm that tried this, Gemini Consulting, failed in the long run.
I believe there is a gap in the market for a firm to be the go-to firm for implementation. A firm that truly understands implementation and can own this space.
Great insights, Michael. Best regards.
My pleasure Luis.
Have your friend write in if he has any questions.
Michael
Great insights Michael, probably you are already aware of the fact that Mckinsey has set up an Implementation Group and is actively hiring for the group. As you made an interesting case of how gemni consulting failed at implementation, it will be interesting to observe how Mckinsey will fare in the endeavor.
Geo,
It will be tough to see how the McKinsey brand can mean do different things that are so different. Bain tries to position themselves as the “practical consultants” but that is more an image than reality.
Michael
Michael,
Thank your for the insights. I was approached by McKinsey last week for a position in their Implementation Group. Prior to that I did not know that McKinsey did implementation. Talking to the recruiter, it seemed as if they are trying to create a parallel structure to their generalist consulting group. It does seem interesting to me since i can leverage my 8 years of experience in operations transformations. However, I am doing my MBA from Texas (McCombs) and am equally attracted to Strategy Consulting.
I can see your point about compensation structure conflicts. I cannot imagine implementation consultants charging the same rate as strategy consultants. But the way I see this, Implementation engagements are quite longer and prepare you better for future general management roles as you have better experience executing strategies. I believe that most firms do a good job of developing a strategy. But few can follow through with good execution. So there is a risk reward tradeoff.
Venu
Hi Venu,
The salary for McKinsey is actually comparable for both roles. So good luck with your preparation.
I tend to disagree about the issue on companies being bad at execution. I tend to think companies are relatively bad at both.
Michael
Hi – i came upon this page in trying to look for some help for my upcoming interview with the Mckinsey Implementation group – I have cleared the initial phone screen and discussion and have been progressed to the case interview, PST phase. All the advice on the internet seems to be about interviewing for the strategy consulting arm.
I was wondering if some one can provide me some pointers
1) How do I prepare for a case interview (Recruiter mentioned that i will likely get an operations case)
2) Has anyone interviewed for a role with Mckinsey Implementation. The role I am interviewing for is a Lean Implementation role. How do I prepare for case interviews having no experience doing cases or CI before.
My Background – Industrial Engineer with a minor in Business with 3 years of experience in Supply chain and Transportation (Railroad) – current, I also have a Lean blackbelt in addition to my undergrad which is something i use in my current role implementing new processes.
Thanks and I would appreciate any insights, My interview is in 2 weeks.
Puneet
Hi Puneet,
I believe you have contacted us so we will not comment here.
Michael