Does McKinsey only do strategy work: the difference between strategy, operations and implementation consulting?
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.