How to develop the best business strategy without the BS.
BS as a Service …
It’s not what you think. Or maybe it is!
Business Strategy as a Service, or BSaaS, is the art of strategy consulting. But as we know, all art is not created equal. Take da Vinci’s Mona Lisa and Duchamp’s Fountain: both hang in museums. But how do we know we’re getting the real deal (instead of BS)?
Strategy consulting — which is often confused with management consulting — is a multitiered industry.
From my experience as a management consultant, I discern three distinct tiers. First are the top tiers, which include what are often referred to as MBBs (which stands for McKinsey, Bain, and BCG). Then, you have several boutique shops (often formed by senior graduates from MBBs who have got tired of the lifestyle or individuals from strategy divisions in the Big Four audit firms). These provide top or sometimes second-tier consulting.
These firms don’t differ much in price. So be ready to shell out a minimum of seven figures for a one-off contract or — if you want BSaaS or year-round access to a four-person team — prepare to shell out eight figures per year.
For some organizations, the trade-off of having BSaaS versus BS in-house is worth it. The reason is this: you cannot expect to get the same level of output when you recruit a team in-house. In addition, the team would lack access to the greater organizational resources that the big consulting firms provide. Though for most companies, an outsourcing strategy is not an option.
Yet the last thing these companies should do is procure a Tier 3 consulting service from consultants who are not specialized in strategy. Many inexperienced executives turn to management consulting firms for strategy advice, only to realize later that the money they spent didn’t provide them with the product they expected. And that’s where the industry gets its bad name.
Unlike many aspects of business, the quality of one’s business strategy is black or white. It’s either good or bad; there is no in-between. People often think that by knocking a zero or two off an MBB contract, they have a better chance of getting their money’s worth — but the results, if they don’t get the best, are usually garbage. That is why, in my view, a Tier 3 shouldn’t exist in strategy.
The Problem with Consultants
While strategy consultants can add tremendous value, as can other professional services such as lawyers, investment bankers, brokers, etc., there is a major principal-agent problem at play; some strategy consultants have no “skin in the game.” In other words, their advice and recommendations come with little or no consequences for themselves. Except for a few boutiques, Tier 1 firms like Partners in Performance (PIP), it is difficult, and possibly detrimental to the continued existence of these firms, to take the fall along with their clients when the latter make bad decisions. This is why strategy consulting is no different from other advisory services such as financial services. That is why we keep having financial crises like those in 1997 and 2008.
BS that Needs Fixing
In my opinion, there’s a real need for the professional services industry to reform. A good example is how private equity is managed by the firm’s general partners, who allocate most of their personal wealth to the funds they manage before seeking out other investors.
There’s no silver bullet for adding skin in the game to professional advisory services. This is why — at the firm I founded after I left the big ones — I established several pricing schemes that, as much as possible, add “skin to the game.” I introduced several options our clients can choose from — where to share risk with us, from offering money-back guarantees to discounts for upside, as long as our clients accept and implement our recommendations.
If you enjoyed this article about business, step into the world of management and learn how to best go about it. Here are a few links to my other articles: