Introduction

Over the last few months I’ve been analysing the competitiveness of strategy consultants in the UK. I’ve been using my proprietary techniques for analysing numbers (the past) and words (the future). This article really needs to be read in the context of the whole exercise which shows:

1. each company’s overall competitiveness rating

2. their competitiveness for staff, investors, partners and customers

3. one line descriptions of each company

4. an analysis of what they do, how they do it and why

6. their differentiating claims 

And of course the starting point – 22 Strategy Consultants, 2 Big Questions.

Now we’re nearing the end of this journey. My aim has been to provoke and inform. Thanks to the thousands of people who have visited this site – you have encouraged me to dedicate the considerable time it takes to provide high quality analysis.I’ll endeavour to carry out over the same period next year.

Companies Covered

ATKearney, Bain and Company, BearingPoint, Boston Consulting Group, Cap Gemini, Collinson Grant, Dunn Humby, Everystone, Inforte, Inzenka, KAE, L.E.K, Marakon, Mars and Co, McKinsey, Mercer, Monitor, OC&C, PA Consulting, Parthenon, Phrophet, PRTM, Quest World Wide, Roland Berger, SDG, Spectrum, ZS Associates. 

Throughout this series of articles I’ve concentrated on the UK strategy consulting market. Some of the companies are strategy pureplays, others come from a marketing perspective, a few from technology. They all share the basic language of strategy consulting – that’s how I identified them in the first place – which could be used by a prospect to identify a potential partner.

The Ego Index

The Ego Index has been created by classifying the analysis of what a consulting firm claims makes it different and how it claims to carry out its work. What does it talk about? Itself (high ego), or its clients (customer focus?). The classification is based on the following scale: 

input –         our people              =very high ego        

input –         our company           =high ego

neutral –       our process            =neutral        

output –       your benefit           =client orientated   

output –       your issues             =client focused

It has been illuminating to see how the natural egostism of the intellectually bright permeates many of the corporate cultures of the consultants. When this spills over to their prospect offering you can be pretty certain that business has not been difficult to come by. Little has been learnt by many about the cyclical nature of their market. At the same time there are some exceptions, most notably McKinsey, where there appears to be little sense of self-importance expressed despite their market share dominance. The index is as follows:

154   Monitor Group 

132   Bearing Point

132   Collinson Grant

132   Inforte

132   OC&C 

121  ATKearney

121  Boston Consulting Group

121  Inzenka

121  Roland Berger

110  Everystone

110  PA Consulting

110  Quest World Wide

110 SDG Europe

99   Dunn Humby

99   KAE

99   LEK Partnership

99   Mercer

99   Phrophet

88   Cap Gemini

88   ZS Associates

77   Marakon

77   Parthenon

77   Spectrum 

66   Corporate Executive Board

66   PRTM

55   Mars and Co

55   McKinsey

44   Bain and Co

There is no significant correlation between the companies overall relative competitiveness in the last full year and their degree of egotism. What this analysis does not do is examine how relevant the consultants’ propositions are – the only way to determine that is by talking to their customers and prospects. However, as a postscript to a long series of serious analysis there are some insights to be had. I still believe that companies compete with words and that not nearly enough analysis and effort goes into word analysis and ownership. 

In answer to my original two big questions:

Are the best strategic minds strong competitors themselves? There are some big brand names in serious competitive difficulty. This is during a period of considerable market growth.But on average margins are very poor. Thinking and business models are entrenched, driven by ease of new business gaining and a recruitment process that proactively promotes stereotypes and rejects fresh ideas not generated from internal ivory towers. The Oxbridge bias, responsible for the near death of British owned City institutions, is alive and kicking in management consulting. It seems that what you achieve at 18 is critical. Either that or get into a big brand business because it will get you into other big brands who are keen to recruit similarity rather than diversity.

Is strategy a commoditised offering driven by who you know, or are strategy consultants strongly differentiated? It’s not been possible to uncover obvious differences in process, although analytics is an area highlighted by several top performers. Relationships are undoubtedly one reason that recruitment is driven internally to the industry. But I’ve actually been surprised by the level of differentiation revealed by the text analysis I’ve carried out. It’s considerably better differentiated than UK advertising, for example, for which I also have the statistics.

What is clear is that many of these companies are extremely vulnerable to the new era of competitive transparency. If I’ve demonstrated one thing I hope that it is that companies can no longer control their communications and that competitive contradictions will be ruthlessly exposed. 

Thanks for keeping posted over the last five months! If you would like to contact me, you may do so via luke423@amajorforce.com.

© Luke 4:23 The analyses and comment in this blog are designed to stimulate discussion about the effectiveness and competitiveness of strategy consulting in the UK. My competitive perceptions and methodologies are up for additional peer review. However, the content is not to be distributed, reproduced, edited or quoted for commercial purposes without prior written consent. Blog links, however, are welcomed

Background

I’ve been analysing the competitiveness of UK strategy consultants by checking out their published numbers using my proprietary analytics.

It’s been a while since I’ve published but since that time I have spoken to several consultants. In answer to the question ‘does this analysis reasonably reflect the market that you know well?’ there has been a unanimous yes. Yet the methodology is entirely independent of market knowledge. My techniques can be used on any market provided there are published numbers and a digital presence.

Check previous entries on winners and losers for the numbers analysis. More recent articles are about the language strategy consultants are using to compete.

Companies Covered

ATKearney, Bain and Company, BearingPoint, Boston Consulting Group, Cap Gemini, Collinson Grant, Dunn Humby, Everystone, Inforte, Inzenka, KAE, L.E.K, Marakon, Mars and Co, McKinsey, Mercer, Monitor, OC&C, PA Consulting, Parthenon, Phrophet, PRTM, Quest World Wide, Roland Berger, SDG, Spectrum, ZS Associates.

What became obvious is that there is a wide variation in the claims. This is a sector not short of egos. Intellectuals are brought up on sparring. But it is a significant mistake when ego dominates the market messaging.

Claims of Difference

Having dissected these companies reasons for existence and how the claim to do their work we’re now getting to the bone. What makes company X different from the rest?

Most of the claims are overt. In a very few cases it is implied. The most notable case is McKinsey. My reading of their claim is the most questionable of this peer group. I’d be interested to hear your opinions. 

Here are the claims (and my facetious comments in brackets)

ATKearney no other top tier consultancy has our resources

(based on definitions of top tier or a side swipe at Mercers?)

Bain and Company our clients outperform the S&P500 by 4x

(very good at consulting or recruiting successful companies?)

BearingPoint  we will capture market share from our competitors

(shame you’re losing money on it then)

Booz Allen Hamilton deep expertise in both technology and strategy

(wake up at the back please)

Boston Consulting Group  we have more idea

(and the competitive performance for me to believe it)

Cap Gemini we have in-depth knowledge of client industries and processes

(not a bad start for a process driven business)

Collinson Grant we have diverse skills and collective experience

(good for you)

Corporate Executive Board shared experience avoids reinventing the wheel

(undeniably true)

Dunn Humby leading with a new approach called relevance marketing

(until now it’s all been irrelevant?)

Everystone marketing creativity with management consulting rigour

(it’s definitely working for this top competitor)

Inforte deep capabilities in analytics, BI, CRM and strategy.

(take 4 deep breadths…)

Inzenka a specialist core team and backed by an industry specialist network

(you don’t get much more ’special’ than that…)

KAE combining the best elements of strategy consultants and NPD boutiques

(hard on the heels of Everystone?)

L.E.K  our expertise results in 90% repeat business

(thereby extremely impressive returns to investors)

Marakon world’s leading authority on value creation

(ridiculous – just look at the state of YOU)

Mars and Co we guarantee not to work for your competitors

(their whole site swipes at BCG)

McKinsey you know who we are and we have no need to boast

(oozing with confidence  - have Mars found the weakness?)

Mercer our proprietary techniques are backed by a huge group

(not a bad place to be)

Monitor we attract and retain talented individuals

(hope your retention rates are better than the dreadful industry averages)

OC&C we like working on exciting strategic problems

(…hope my problem is exciting enough for you to consider working with me)

PA Consulting we are as good as the best

(good old British modesty)

Parthenon a boutique that pioneered risk-based fees

(putting their money where their mouth is)

Phrophet more effective marrying of brand, market and business strategies

(not sure if I’m the marrying kind)

PRTM we make a lasting difference for our clients

(positive we hope given pay levels at the firm)

Quest World Wide  we have a country house where events are hosted

(other companies have partners who live in theirs)

Roland Berger we’re a big European firm recruiting the best people

(well you’d better get them working on your poor competitiveness then)

SDG Europe decades of experience enable state of the art approaches

(and the ability to speak entirely in ‘leading edge’ clichés?)

Spectrum we provide outstanding service to the media sector

(the reason for being taken over rather than the balance sheet?)

ZS Associates we deliver customised solutions

(zzzzzzzzzs associates)

Conclusion

This article really needs to be read in conjunction with the previous one which breaks down what, how and why each company does. What this piece shows is that there are a few companies with highly compelling claims of difference. But only a few. And if these are vulnerable to attack, eg Marakon, they are best returning to the blandness of their peers. In order to gauge the level of egotism v client focus I’ve used a 5 point scale to score 3 factors including the claims for difference. The scale, where 1 is low and 5 is high:

input – our people =1

input – our company =2

neutral – our process =3

output – your benefit =4

output – your issues =5 

Next week I will publish this Ego Index. 

Keep posted! 

© Luke 4:23 The analyses and comment in this blog are designed to stimulate discussion about the effectiveness and competitiveness of strategy consulting in the UK. My competitive perceptions and methodologies are up for additional peer review. However, the content is not to be distributed, reproduced, edited or quoted for commercial purposes without prior written consent. Blog links, however, are welcomed

And What Do You Do Exactly?

Many conversations contain a question similar to the above. And the way the answer is phrased can make a significant difference to the views of the person asking it. There’s a thin divide between a barrier being raised, “Oh that means that you…” to exploration being invited, “Oh right…how do you…”.

Corporate communications are often the first part in a conversation with various stakeholders – potential clients, employees, investors and business partners. The explanations of what a company does, how it does it and why are also central to the delivery of the brand from existing employees to existing customers.

So words are critical in competing. They need to be crafted within a competitive context. What makes this company different from the rest? Unless every person in the company knows the answer and communicates it consistently the company is not thinking competitively.

The Few

Tight writing and proposition development is a rare skill. In general people tend to obfuscate, substituting ‘comprehensiveness’ for conciseness. Too many words is usually evidence of;

1. lack of clarity of thought
2. insufficient thinking time applied
3. poor focusor any combination.

Whilst this is inevitable amongst private individuals there is no excuse at corporate level. Corporate communications cost money. They are critical to competing. So at company level the above three evidence elements become cardinal sins.

The Marketing Problem

As an illustration I’d like you to explore the marketing problem. Namely, what is marketing?

A simple enough question, but one which returns complicated answers. Answers from marketing professionals in my experience have ALWAYS shown evidence of the 3 cardinal sins.

Ask your marketing people the question. Expect a pause (as the Kotler texts flash before their eyes?) and then lots of words, few of which will match the next explanation you receive. Yet this is a subject that sees itself as a central business function. It’s inexcusable.

And I take the same harsh view of poorly thought through propositions – especially from business advisors.

Strategy Consultants’ Proposition Foundations

In the previous article I stripped a number of strategy consultants’ web sites down to one line.

This time I want to show you a little more about their propositions. These consist of some foundations:

1. what you do
2. who you do it for
3. how you do it
4. why you do it

In my process I use web stripping and text analysis tools. I also identify a primary and secondary ‘how you do it’ element. For the sake of brevity the primary only is illustrated in this article. I’ve also dropped the ‘who you do it for’ answers. Many of these consultancies claim to work for “leading” companies or business leaders themselves. Some have vertical market expertise but many do not make specific reference to their targets.

The results are as follows:

                               What?               How?                            Why?

• ATKearney
  • Problem solving. Breadth of resources. Competitive advantage 
• Bain
  • Help big decisions. Results delivered. Value creation                    
• BCG
  • Breakthrough ideas, New ideas, Competitive advantage
• BearingPoint       
  • Strategy and systems. Challenge consultants. Value creation
• Booz Allen           
  • Problem solving. Deep expertise. Competitive advantage
• Cap Gemini        
  • Transformation. Collaboration. Economic performance
• Collinson Grant   
  • Restructuring. Straight talking. Sustained improvement
• Corp Executive Board 
  • Education. Shared experience. Executive improvement
• Dunn Humby       
  • Brand value. Relevance marketing. Margin protection
• Everystone         
  • Marketing-led change. Creative acumen. Business change
• Inforte                
  • Strategic technology deployment. Strategic insight. Customer acquisition
• Inzenka              
  • New propositions. Expertise network. Growth
• KAE                    
  • Develop propositions. Focused creativity. (No clear definition).
• L.E.K                 
  • Problem solving. Experience. Better decisions
• Marakon              
  • Advice provision. Unique understanding. Value creation
• Mars and Co         
  • Battle planning. Delineate battlefield. Competitive leverage
• McKinsey             
  • Practical  recommendations. Fact-based analysis. Improve performance

• Mercer (Marsh McLennan)                
  • Business design. Proprietary methods. Raise business value       
• Monitor 
  • (No clear definition). Talented people. (No clear definition).
• OC&C                  
  • Transforming strategies. Partnership. Value via growth
• PA Consulting      
  • Strategic marketing solutions. World class execution. Shareholder value
• Parthenon           
  • Strategic advice. Close partnership. Value creation
• Phrophet             
  • Breakthough brand ideas. Creative techniques. Better ROI
• PRTM                   
  • Operational strategies. Accountability. Top line growth
• Quest                   
  • Change management. High impact events. Improve performance          
• Roland Berger      
  • Advice provision. Analysis. Improve business
• SDG 
  Europe                  
  • Creative strategies. Clear assessment. Shareholder value
• Spectrum             
  • Commercial strategy. Outstanding service.  Expansion & improvement
• ZS Associates        
  • Marketing transformation. Customised solutions. Sales success

Groupings

Some clear groupings emerge. Inputs, ‘what we do’, cluster into

1. Strategy

2. Change

3. Advice/problem solving

4. Ideas/propositions.

The outputs ‘why we do it’ cluster into

1.     Value creation (by far the largest grouping)

2.     Top line growth3.     Performance improvement4.     competitive advantage 5.     Executive improvement/decision making. 

I was pleased to see 4 companies dealing with competitive advantage – ATKearney, Booz Allen Hamilton, Boston Consulting Group and Mars and Company. As far as I’m concerned competitiveness is the name of the business game.

Competitive Clusters

By cross-referencing the ‘what we do’ with the ‘why we do it’ factors, some competitive clusters emerge.

Strategy for Value Creation: Bearing Point, PA Consulting, Parthenon, SDG
Europe.

Change for Value Creation: Cap Gemini, Collinson Grant, Mercer, OC&C.

Strategy for Growth: Inforte, PRTM, Spectrum

Problem solving for competitiveness: ATKearney, Booz Allen Hamilton

Advice for Value Creation: Bain and Company, Marakon.

Conclusions

In this word-based part of my analysis of
UK strategy consultants I have discovered that there are companies making significant claims for difference in terms of how they carry out their business. Although there are common clusters, such as value creation as the raison d’etre, there are generally separate philosophies across the companies. However, much more work should be put into expressing them succinctly.

However, there appears to be very little proprietary process claimed. Something that clients and prospects can point to and say ‘that works’ and it’s unique to company x. Where’s the IP?

Next I will show you the answers to the key question – why should a client employ one company rather than any other? I’ve extracted the value proposition for each company.

During this analysis it was clear that there are some deeply egotistical companies. I’ve developed an index to measure the client v self centredness and this will also be in the next article.

Keep posted!

© Luke 4:23 The analyses and comment in this blog are designed to stimulate discussion about the effectiveness and competitiveness of strategy consulting in the
UK. My competitive perceptions and methodologies are up for additional peer review. However, the content is not to be distributed, reproduced, edited or quoted for commercial purposes without prior written consent. Blog links, however, are welcomed.

This article is part of my search to identify the competitiveness of, and competitive differentiation between, strategy consultants in the UK. It should be read in conjunction with previous articles but in particular 22 Strategy Consultants  - 2 Big Questions. 

You Compete For the Future With Words

In previous articles  measured and ranked relative competitiveness based on reported numbers. But competing for the future is about words.

Value propositions to customers, strategic intent to investors, vision to staff and negotiation with partners – it’s all about what people say. But this is often looked down upon as some sort of spin or marketing bullshit.  Nothing could be further from the truth.

A company that speaks with one voice, using largely the same vocabulary, is focused – its operating functions all heading in the same direction. Every day every company sends out a mass of messages. Most of these are verbal – planning and implementation, employee reviews, meetings with prospects or partners, negotiations, projects, busioness cases, introductions, presentations… 

How many contra-dictions do you think there may be in your organisation? 

What Do Strategy Consultants Do?

I’ve used text analytics to understand what these consultants are saying about themselves. Generally they say a lot. And generally the more they say the less it means. It takes competitive analysis, planning and discipline to reduce.   

Over the next few weeks I’ll be revealing the key themes of their sites and showing you what they do, how they do it and who they do it for. But before we look in detail at this analysis let’s start off by asking them what they do.  

In as few words as possible please!   (Italics in body copy denote my paraphrasing as opposed to definitively stated text). 

ATKearney

No other top-tier management consulting firm has our resources, breadth and passion to help big companies solve problems and transform operations. 

Bain and Company

We’re the elite of the elite and work with big clients who want change and delivered results that build value.

Boston Consulting Group

We’re thinkers and ideas people that help the biggest organisations sustain competitive advantage.

Bearing Point

We do everything but basically we’re BI systems integrators for very big companies whom we seek to empower.

Booz Allen Hamilton

We’re a global strategy and technology consulting firm that works with clients to deliver results that endure.

Cap Gemini

We contribute to business transformation and economic performance based on in-depth knowledge of client industries and processes. 

Collinson Grant

We’re successful because we’re straight talkers who employ diverse people to do different types of consulting work for both small and large companies.

Corporate Executive Board

We create an environment where members can learn from each others successes and failures.

Dunn Humby

We have a unique approach called Relevance Marketing which protects and enhances your brand.

Everystone (WPP)

We work at board level practicing marketing-led business change, combining marketing creativity with management consulting rigour.

Inzenka

We create new propositions and businesses for FTSE 100 companies who want growth.

KAE

We provide a comprehensive new proposition development service that combines marketing creativity with consultancy rigour and analysis.

LEK Partnership

We are a big company with the expertise and analytics capability to give executives the answers they need to make critical business decisions.

Marakon

We are world leaders in value creation and work for some of the world’s best known companies.

Mars and Company

We are a battle planning strategy consulting firm of Boston Consulting Group standard with the exception that we won’t work for your competitors.

McKinsey

You know who we are so we don’t boast, but we partner with leaders, rely on facts and deliver superior results and service.

Mercer (Marsh McClennan)

We’re a premier strategy and operations firm; part of a much bigger group, with proprietary techniques focused on value growth.

Monitor Group

We are successful merchant bankers who have moved into management consulting successfully because we attract and retain talented people.

OC&C

We partner with big and small companies for all sorts of strategic work based on our belief that profitable growth is the best route to shareholder value.

PA Consulting (strategy practice)

We deliver excellence in strategy and marketing solutions, world class execution and innovative approaches to solving business issues.  

Parthenon

We are a strategic boutique and investment firm, pioneers of risk-based fees, working with senior executives in leading companies to create long term value.

Prophet

We help senior marketeers make their budgets work harder by combining analytics with creative techniques to grow their brands.

PRTM

We make a lasting difference for our clients by delivering operational strategies, with high ethical standards, that challenge convention.

Quest World Wide

We work globally from our country Manor House addressing key business issues to deliver change.

Roland Berger

We are a big European firm that has grown globally by attracting the best analytical and creative minds.

SDG Europe

We deliver creative strategies, based on decades of innovation, that help clients build internal competencies and face competitive challenges.

Spectrum (Value Partners)

We provide outstanding service to well known clients in digital broadcasting
and telecoms who need help with commercial strategy.

ZS Associates

We are a global company that delivers customised consulting solutions to clients who need successful transformation of their sales and marketing. 

Did you notice anything?

There are some patterns in there. I’ll show you what they are in posts to come.

Competitive Transparency

There is something that needs pointing out about Marakon in particular.

They make a very bold claim about world leadership in value creation. This is not just a claim for expertise – it’s a claim for the crown. And, in the UK, at least, this is at serious odds with the company’s poor competitive position. Their liabilities outweigh their assets. Their financial health has declined four years out of the last 5 (Source: Company Watch).

Social media means stakeholders can circumvent the company to talk directly. In a competitively transparent world communication contradictions are ruthlessly exposed. Companies are losing control of their external communications. This is partly why competiveness is now about the whole of the business.

Because the whole of business is about competitveness.

Keep posted!

© 2007 Luke 4:23 The analyses and comment in this blog are designed to stimulate discussion about the effectiveness and competitiveness of strategy consulting in the
UK. My competitive perceptions and methodologies are up for additional peer review. However, the content is not to be distributed, reproduced, edited or quoted for commercial purposes without prior written consent. Blog links, however, are welcomed.

Look Beneath the Headlines

The reasoning behind this analysis of strategy consultants is contained in the first posting: 22 Strategy Consultants – 2 Big Questions.

The competitiveness rankings in this article are the aggregation of 8 separate measurements that reflect the four competing arenas of:

Staff            

Customers

Partners

Investors

By reading the separate articles you will see the specific competitive strengths and weaknesses of these companies: A T Kearney, Bain and Company, Bearing Point, Booz Allen Hamilton, Boston Consulting Group, Corporate Executive Board, Collinson Grant, Everystone Group (WPP), LEK Partnership, Marakon, McKinsey, Mars and Company, Mercer (Marsh McClennan), Monitor Group, KAE, PRTM, Quest Worldwide, Roland Berger, SDG Europe, Spectrum (pre-merger) and ZS Associates.

The measures are statistically independent of one another and are part of my

COSAWs © Competitive Strengths and Weaknesses System. This has been developed with colleagues over the last 3 years to promote meaningful benchmarking of competitiveness. It can be used for peer groups and sectors – even whole countries.

Think Competitively!

When you look at company performance you should be thinking competitively. This means that you need to relegate absolute internal measures and promote relative external measures.

What does this mean? Well, if you were to look at absolute measures of success in competing for customers, for example, McKinsey and LEK would stand out. McKinsey for sales levels and LEK for operating margins. But when assessing winners and losers it is the relative change not the absolute value that is important. When looked at from a competitive perspective McKinsey ranked 7^th in sales and LEK 9^th on margins, based on reported figures full year 04/05.

What this suggests is that when you are very successful competing becomes more difficult. Have a think about it and post your thoughts. I’m here to learn.

It also means that very often companies are rewarding failure. For example, if Company X builds sales by 12% year on year but its markets have grown 15% it has lost share. Equally, in a more difficult market Company Z’s sales fall 5% while maintaining margins. But the market has shrunk by 10% and margins have been eroded – what a success story! But if you were a sales person looking for a decent bonus which company would you want to be working for?

The Competitiveness Index

So, bearing all the above in mind, here are the overall competitiveness rankings with the results indexed. The index shows you the relative distance between each company:

241              Everystone (WPP)

206              Boston Consulting Group

145              Mars and Company

141              ZS Associates

136              ATKearney

135              SDG Europe

124              KAE

113              McKinsey

112              L.E.K Partnership

109              Corporate Executive Board

109              PRTM

102              Mercer (Marsh McClennan)

100              Monitor Group

98                Collinson Grant

90                Bain and Co.

84                Roland Berger

79                Spectrum

74                BearingPoint

73                Booz Allen Hamilton

69                Quest Worldwide

67                OC&C

65                Marakon

So Everystone and Boston Consulting Group were over twice as competitive as Monitor, which achieved the average position. Rather than repeat the background to these performances you can explore them in the previous articles. These can be used to determine each management team’s competitive agenda – either being successfully addressed, or in some cases, apparently ignored.

Quartiled Performance

We can use these ranking more simply by quartiling the performance:

Q1              

Everystone (WPP)                  
 

Boston Consulting Group                  

Mars and Company                  

ZS Associates                  

ATKearney                  

SDG Europe

Q2              

KAE                  

McKinsey                  

L.E.K Partnership                  

Corporate Executive Board                  

PRTM

Q3              

Mercer (Marsh McClennan)                  

Monitor Group                  

Collinson Grant                  

Bain and Co.                  

Roland Berger

Q4              

Spectrum                  

BearingPoint                  

Booz Allen Hamilton                  

Quest Worldwide                  

OC&C                  

Marakon 

As someone with experience in fund management I like quartiles.

Getting a balance between risk and reward is about making more right decisions than wrong. As an investor, customer, partner or employee I’d prefer to be dealing with a company in the top two quartiles unless the reward justifies the additional risk.

This is not a prescriptive point – you must assess a particular perspective and look at the competitive trends. What I’m doing here is introducing my thinking backed by analysis and demonstrating the very real phenomenon of competitive transparency.

Competing For the Future

Analysing past competitive results is a valuable exercise in suggesting likelihoods for the future – particularly using time series analysis to spot trends. This can be built into the COSAWs © methodology.

Past results are delivered in numbers. However, the future is largely competed for in words: value propositions to customers; strategic intent to investors, vision to staff and negotiation with partners.

So in the next article I’m going to start showing you how these companies present their value propositions. What are their differences? Why do business with one company over another? Are there any contradictions between what the numbers and the words say..?

Keep posted!

© Luke 4:23 The analyses and comment in this blog are designed to stimulate discussion about the effectiveness and competitiveness of strategy consulting in the
UK.  My competitive perceptions and methodologies are up for additional peer review. However, the content is not to be distributed, reproduced, edited or quoted for commercial purposes without prior written consent.

Business is all About Competitiveness

In my view the whole purpose of business is competing. And therefore the whole of every business should be competitive.

The basic premise of my competitive analysis is that all companies operate in four competitive arenas: customers, staff, partners and investors. I’ve developed a series of competitive analytics tools to measure competitiveness. What I’m revealing here, to some extent, is my COSAWs© methodology (Competitive Strengths and Weaknesses), which uses financial proxies to identify and track competitiveness.

The subject of this particular COSAWs © analysis is UK strategy consultants – the reasons for this focus are outlined in the introductory article ‘22 UK Strategy Consultants – 2 Big Questions’.

This article is one of a series and should be read in conjunction with previous articles covering customers, staff and partners.  The companies analysed are: A T Kearney, Bain and Company, Bearing Point, Booz Allen Hamilton, Boston Consulting Group, Corporate Executive Board, Collinson Grant, Everystone Group (WPP), LEK Partnership, Marakon, McKinsey, Mars and Company, Mercer (Marsh McClennan), Monitor Group, KAE, PRTM, Quest Worldwide, Roland Berger, SDG Europe, Spectrum (pre-merger) and ZS Associates.

Measuring Competitiveness For Investors

The proxies used reflect any company’s ability to compete for capital in two forms – shareholders funds (the net worth of the business) and loans. Loans are important in gaining funding to gear up activity or to deal with cash flow issues. The stronger a company’s asset base the lower the risk to the lender and the cheaper the cost of capital to the business.

Even if a company is not public its ability to return value to shareholders can be measured. It’s been suggested that this may not be valid in a partnership structure, but I’ve found little evidence in support. In any case, I have assessed the value propositions of 28 strategy consultants and value creation features heavily as a main purpose for their existence. So let’s see how they stack up in delivering value for themselves…

Winners and Losers For Returns to Shareholders/Value Creation

The figures below are indexed against the returns for the whole peer group. The companies in green are the winners. Those in red the losers:

895          L.E.K Partnership

347          Boston Consulting Group

214          Everystone (WPP)

151          KAE

150          PRTM

121          ZS Associates 

 87           McKinsey

 74           Corporate Executive Board

 72           Mars and Co

 61           SDG Europe

 16           Collinson Grant

-23           Mercer (Marsh McClennan)

-54           Spectrum (now merged with Value Partners)

-102         OC&C

-128         Bain and Company

-280         Booz Allen Hamilton       

© Luke 4:23 Source: Luke 4:23 and Company Watch. Full year 04/05 figures. 

The performance of LEK in delivering return on net worth is so competitive that everyone else looks poor in comparison. They are 9x more competitive than the average. This is the essence of a CPI – Competitive Performance Indicator- your own performance is judged entirely on its competitive comparison. This is the future I am looking to deliver using these benchmarking techniques.

Where Are the Missing Companies?

6 companies could not be indexed because they have negative net worth. Their liabilities are greater than their assets:

ATKearney, BearingPoint, Marakon, Monitor, Roland Berger and Quest Worldwide.

An important distinction needs to be made between companies in this position. They could be in dire financial circumstances OR they could have been successful in securing new business in huge quantities – their obligation to provide contracted services is listed on the balance sheet as a liability. Take a read of my previous articles and I think you can make an informed decision as to which is which.

It is worth reiterating that these have been very good times for strategy consultants with market growth nearing 20% in the time period analysed. COSAWs© is ruthless in exposing deficiencies.

Winners and Losers Competing for Loan Capital

Again; winners in green and losers in red.

233          Mars and Co

166          Collinson Grant

158          ATKearney

143         Mercer (Marsh McClennan)

143         ZS Associates

136         SDG Europe

121         Everystone (WPP)

121         KAE

113        Spectrum

105         Boston Consulting Group

105         PRTM

98          Bain and Company 

98          Corporate Executive Board 

90          L.E.K Partnership 

90          McKinsey 

83          Booz Allen Hamilton

75          Monitor Group 

68          OC&C 

30          BearingPoint 

23          Marakon 

15          Quest Worldwide 

15          Roland Berger

© Luke 4:23 Source: Luke 4:23 and Company Watch. Full year 04/05 figures indexed. 

In theory each company would have a stronger competitive negotiating position for loan capital than those below it, and weaker than those above. This could have a significant effect on profitability.

Competing For Investors: Winners and Losers Benchmark Ranking

Now let’s combine the analyses, ranking the winners and losers in competing for investors:

1.            Everystone (WPP)

2.            ZS Associates

3.            Mars and Co

4.            KAE

5.            Boston Consulting Group

6.            Collinson Grant

7.            L.E.K Partnership

8.            PRTM

9.            SDG Europe

10.          Mercer (Marsh McClennan)

11.          McKinsey

12.          Corporate Executive Board

13.          ATKearney

14.          Spectrum

15.          Bain and Company

16.          OC&C

17.          Booz Allen Hamilton

18.          Monitor Group

19.          BearingPoint

20.          Marakon

21=          Quest Worldwide

21=          Roland Berger

Conclusions

This COSAWs© analysis has exposed some serious fault lines in a business that makes significant claims to deliver economic and shareholder value. This is a good example of competitive transparency –part of the new era when wishful brand communications are unsustainable in the face of widely available evidence.

The next article will aggregate the results of the four competitive arenas to give you a definitive run down of the best and worst competitors in strategy consulting in the UK.

In the meantime you might want to investigate which of the companies looked at in this article claims to be ‘a world leader in value creation’. For their UK business at least this claim seems absurd in the face of the evidence (not just from the investor point of view) and unsustainable if their competitors pick up on it.

if you would prefer to wait I’ll be showing you the value propositions of all of these companies as well as those of: Cap Gemini, Dunn Humby, Inforte, Inzenka, PA Consulting, Parthenon and Phrophet.

Keep posted!

© Luke 4:23 The analyses and comment in this blog are designed to stimulate discussion about the effectiveness and competitiveness of strategy consulting in the
UK. My competitive perceptions and methodologies are up for additional peer review. However, the content is not to be distributed, reproduced, edited or quoted for commercial purposes without prior written consent.

Introduction

This article is one of a series and should be read in conjunction with previous articles. It uses both short and long term analysis of strategy consultants’ financial health (used to determine credit ratings). It is highly revealing of a malaise within the industry.

Of the 20 companies with 5 years of data published there are

• 2 ‘high lifers’
• 3 ‘rising stars’.
• 5 ‘up-turners’ recovering from previous falls in overall financial health.
• 1 down turner.
• 5 ‘falling stars’ (in a rising market)
• 4 ‘low lifers’ – companies living continually on the verge of financial restructuring or failure. How can they help others run their businesses?

The companies analysed are: A T Kearney, Bain, Bearing Point, Booz Allen Hamilton, Boston Consulting Group, Corporate Executive Board (2 years of figures only), Collinson Grant, Everystone Group (WPP), LEK Partnership, Marakon, McKinsey, Mars and Company, Mercer (Marsh McClennan), Monitor Group, KAE, PRTM, Quest Worldwide, Roland Berger, SDG Europe, Spectrum (pre-merger) and ZS Associates.

Which classification do you think each of these companies falls into?

Competing Is Too Important To Leave To Marketing

Marketing is a solid discipline in many ways (I was an early adopter of marketing myself so my early rejection has some foundations). At its best marketing helps companies become competitive for customers. But competitiveness is much more holistic. Companies don’t just compete for customers they compete for investors, staff and partners. Marketers certainly know about competing for some partners, such as marcomms agencies and distributors – who are partners as much as suppliers.

But fundamentally, competitiveness is currently siloed.

My mission is to isolate and centralise competitive best practice and to produce new insights through Competitive Performance Indicators (CPIs). This article is one of series based on a proprietary Competitive Strength and Weakness system (COSAWs©).

Competing for Partners

Strong companies attract strong partners be they suppliers or distributors. And in the competitive revolution it is possible for very small businesses to attract and engage with large businesses. But ultimately in the longer term opportunities and the terms of business will be largely driven by financial health. This is a good fit with the Michael Porter’s 5 force model. It also complements the partner building ethos championed by Hammel and Prahalad.

The Financial Health of UK Strategy Consulting Businesses

In my first article I revealed that it is easy to lose money in strategy consulting. For this stage of the analysis I’ve used credit ratings produced by Company Watch – an excellent 7 stage assessment of a company financial health which they term the H-Score. This is a single score output used by many major supply chain, investment and financial advisers. I’ve worked closely with the company and I recommend their analysis and user interface. (www.companywatch.net).

In general strategy consultants are not financially healthy. The average Health Score falls into 3^rd quartile; ie between 25-50%.

The winners (scores above 100) and losers (scores below 100) when competitively compared in the last full reported year are:

193          ATKearney

184          LEK Partnership

180          Mars and Co

178          Everystone (WPP)

176          KAE

167          SDG Europe

161          McKinsey

152          ZS Associates

145          Corporate Executive Board

135          Boston Consulting Group

108          Monitor Group 

95          Collinson Grant 

78          PRTM 

65          Spectrum 

52          Bain and Company 

39          OC&C 

33          Mercer (Marsh McClennan) 

33          Booz Allen Hamilton  

 9           Roland Berger  

 7           Marakon  

7            Quest Worldwide  

4            Bearing Point 

(Source: Company Watch/Luke4:23.These scores are indexed, not the actual H-Scores quoted by Company Watch).                 

Longer Term Analysis

Every company can have a bad year – one-off restructuring costs, loss of a major client, legal provisions – there are many potential reasons. But studying these companies’ financial health over a 5 year period demonstrates that there is a clear divide between companies who are consistent (either winning or losing the battle for partners) and those whose fortunes fluctuate.

If you are looking to build a partnership with a strategy consultant look at the groupings below:

High Life (consistent brilliance)                    LEK Partnership, Mars and Co

Rising Stars (consistently building up)            KAE, SDG Europe, PRTM

Turned Up (decline arrested)                        BCG, McKinsey, ATKearney, ZS Associates, Everystone

Turned Down (increase arrested)                  Booz Allen Hamilton       

Falling Stars (consistently declining)              Bain and Company, Marakon, Spectrum, Collinson Grant, Mercer.

Low Life (consistently problematic)              Roland Berger, OC&C, Quest Worldwide, BearingPoint.

(Source: Company Watch/Luke 4:23)             

Conclusions 

Brand names continue to attract good partners. But a look below the surface at the financial health of a company is revealing – especially when it is looked at longer term to establish if there are any trends.

On this basis LEK and Mars can legitimately claim to be amongst the best of all very well run businesses – an impressive feat in a cyclical market. On their heels are KAE, SDG and PRTM who are consistently increasing their financial health.

Others suggest that they may float on the tide of market cyclicality. Maybe McKinsey, Boston Consulting Group and ATKearney are difficult to turn fast enough due to their size? Everystone looks like a company in a turnaround.

Perhaps Booz Allen Hamilton just had a bad year when the market was doing well. But there will need to be some good excuses from Bain, Marakon, Collinson Grant and Mercer who are heading downwards in terms of financial health – and have been for 5 years. Spectrum’s recent merger with Italian consultants Value Partners may have had a connection to their inability to improve their financial health alone.

The 4 companies who are ‘low lifers’ are struggling for financial health – and have been for some time. It will take a break from history for them to turn it around. And the chances of them attracting quality partners are thin. The likelihood is that they are finding it hard to gain any favourable credit terms, at least based on the Company Watch model.

Next Up

Next I’ll show you how well these companies compete for investors – the true test of their abilities of value creation (often quoted as their raison-detre) and liability management.

After that I’ll be revealing the total competitiveness measurement of all 22.

Keep posted!

© Luke 4:23 The analyses and comment in this blog are designed to stimulate discussion about the effectiveness and competitiveness of strategy consulting in the
UK. My competitive perceptions and methodologies are up for additional peer review. I encourage you to question the approach, much of which is not shown here.  

The content is not to be distributed, reproduced, edited or quoted for commercial purposes without prior written consent.

Competing for Staff Put into Context 

This article is part of an holistic assessment of competitiveness within the strategy consulting industry in the UK. It should be read in conjunction with the previous blog entries on strategy overview and competing for customers, (and with those to follow). The next two articles will show you the winners and losers in competitiveness for investors and partners.

The reason for this analysis is to assess the degree of competitive differentiation within UK-based strategy houses. Later instalments include a full assessment of value propositions and competing themes for the following companies:

A TKearney

Bain and Company

Bearing Point

Booz Allen Hamilton

Boston Consulting Group

Cap Gemini

Corporate Executive Board

Collinson Grant

Dunn Humby

Everystone Group (WPP)

Inforte

KAE

LEK Partnership

Marakon

McKinsey

Mars and Company

Mercer (Marsh McClennan)

Monitor Group

OC&C

PA Consulting

PRTM

Parthenon

Phrophet

Quest Worldwide

Roland Berger

SDG Europe

Spectrum

ZS Associates

(Green highlighted companies are examined in this article on staff). 

Using proprietary COSAWs © (Competitive Strengths And Weaknesses) methods I’ve examined the financials of 22 UK consultants to benchmark their competitive performance in 4 different arenas – customers, partners, staff and investors. COSAWS © measures and maps Competitive Performance Indicators (CPIs). 17 of these companies reported employee costs (they are highlighted in green) enabling me to rank their competitiveness for staff. I also looked at each company’s ability to provide bonuses.

This is not a specialised remuneration survey – if this is your need then check out Top Consultant’s salary survey at http://tinyurl.com/2yjjuy  or  the US-centric  staff surveys at The Vault http://tinyurl.com/yogq23. However, if you’re interested in competitive winners and losers in strategy consulting keep going. 

Many of the people who are reading these articles find them by searching for details on salaries. This is illustrative of the new competitive transparency and explains why I believe competitiveness is an holistic approach to business requiring proper analysis and measurement.

Do Great Minds Think Alike? 

It’s a fundamental part of the consulting business model to hire and rent out intelligent people. By taking them on they reduce competition from client internal resources. But these are costly people when they are not on chargeable projects, which may help explain why returns are generally unimpressive in this business (see previous articles).

At first hand I saw the City of London lose practically every British competitor as the old boy network collapsed in the face of Teutonic and American meritocracies. Yet I’ve still been told that an Oxbridge degree is a pre-requisite for many ‘top level’ consulting firms. If you got in at 18 you get on. Experience in one of the large companies is a regular requirement for getting a job in another. Great minds thinking alike and avoiding challenging or disruptive ideas is unlikely to be the best structure to deal with the competitive revolution facing business in the 21^st century.

Best Minds Provide Innovation Potential 

Innovation tends to fall into two broad areas of process and product offering (service offerings may marry elements of both). Machines don’t innovate, people do. If we accept that the brightest people have the greatest potential to innovate it means we could use competitiveness for staff as a proxy for innovation potential. (Thanks due to past colleagues for making this apparently simple and therefore important connection). Clearly the realisation of this potential is a function of the processes and culture of the organisation. But that is determined by the leadership which should be the best talent available. 

Productivity and Technology 

The underlying driver for these articles is the continuing poor state of UK productivity. Amongst other reasons this is often attributed to low or late take up of technology. Credence is given to this belief by the fact that the US authorities actively pursue and protect technology leadership using its massive military spend – not conspiracy theory, anyone in a similar situation would do the same. A prosaic but illuminating example is the fact that the Google enterprise server was available to US companies for a full two years before it was sold abroad. Their explanation was that the product needed testing first but you don’t test your product wholesale in your most important market.

One would expect strategy houses, highly paid and therefore with great innovation potential, to be innovators in technology-driven processes and services as they try to leverage their brain power. This would allow them to continue to pay highly and reduce down side exposure to falling chargeable hours. So we may be able to correlate competing for staff with competing for customers (see previous article) to measure the most productive strategy houses…

OK, OK, Let’s Get to the Money… 

Remember these figures are for all declared employees, not just consultants. Here are the figures from top to bottom indexed against the average of the group ie 150 means the company pays 50% more per employee than the average of the group as whole:

Pay per head indexed:

(Last reported full year figures 04/5) © 2007 Luke 4:23

McKinseys, ZS Associates, Bain, Marakon and SDG Europe do not report their employee numbers and costs. PRTM pay practically twice the average of the group as whole. They had a mediocre time competing for customers in the last reported year, indeed their record on margins is uncompetitive relative to their peers (see previous articles). Are they lacking Innovation and efficiency or is this a planned business strategy yet to demonstrate delivery? It’s certainly worth remembering that in examining reported results we are looking at the past. My analysis of value propositions and key competing themes will be a more forward looking analysis.

Initially L.E.K looks a very poor payer – is this the secret of their incredibly impressive margins? In the last article, competing for customers, L.E.K were lauded. But the Competitive Strengths and Weaknesses COSAWs © system can be brutally exposing. Who is working on the L.E.K jobs if there is no external suggestion that systems and analytics are enabling senior people to be engaged? Or maybe it’s just an overweight infrastructure? These are simply questions and most definitely not a suggestion that these may be true.

In fact it may just be the basis of their reward system because a company’s ability to reward its employees is dependent upon results. In fact my best guess, given the clear rigour of the L.E.K business and the following table, which measures these companies ease of providing bonuses, is that this would be the case.

‘Bonusability’ indexed:

© 2007 Luke 4:23 based on last full year reported figures 04/05

L.E.K are in a league of their own in terms of their ability to reward people for performance – 8 times the average of the group as a whole. If, like me, you are happy to take heavily bonus-weighted packages then it is easy to spot those companies with the potential to offer them.

There is a clear indication of productive v non-productive companies in the above table, at least over the relatively short period of 12 months. But remember – their market grew 20% in the same period.

Competing for Staff – Winners and Losers 

The following ranking aggregates the position of these companies in both declared employee remuneration and ‘bonusability’ in the UK. It says nothing about the quality of the work experience – this is a strategic analysis and a competitive benchmarking exercise not an HR survey. It needs to be seen within the holistic competitive context that these articles are revealing; but nevertheless it is a valid external analysis of potential winners and losers in the ability to compete for staff.

1.       Boston Consulting Group

2.       Mars and Co.

3.       Everystone (WPP)

4.       PRTM

5.       Roland Berger

6.       Mercer (Marsh McClennan)

7.       ATKearney

8.       LEK Partnership

9.       Monitor Group

10.     Booz Allen Hamilton

11.     Spectrum

12.     Bearing Point

13.     KAE

14.     Collison Grant

15.     Corp Exec Board

16.     OC&C

17.     Quest Worldwide

BCG and Mars are clear winners as they are the only two companies that were in the top quartile for both pay and bonusability. This also suggests that BCG and Mars people are rewarded well for delivered results.  I was very surprised to see LEK so far down the payment league given their exceptional returns. Is that situation sustainable? COSAWs © can be loaded with historical data to track and animate changes in competitiveness. It’s at this point that the past can be used productively to analyse trends.

Conclusions

Competing for staff is a core requirement of the strategy consultant business model. The COSAWs© system can be loaded with all company data to demonstrate the sector competitiveness v all other companies, whereas I’ve only demonstrated a peer group analysis in this instance. On these measures it can be said that smaller companies, such as Everystone and Roland Berger, can be as capable as competing as effectively for staff as the likes of BCG and Mars. Competitiveness is not necessarily a function of size.

Maybe this analysis has asked more questions than it has answered. If this sector recruits the brightest strategists why are its returns so poor? What tools are being used to drive productivity by scaling the brainpower they have available? Is there genuinely a culture of self-reinforcement, connections and non-disruption reminiscent of the demised City old-boy network? How will these companies deal with the next trade cycle downturn – simply by shedding staff as quickly as they are recruiting them now?

What’s your view?

Next I’ll show you how effective these companies are at competing for partners.

Keep posted!

(C) 2007 Luke 4:23. The analyses and commentary in this blog are designed to stimulate discussion about the effectiveness and competitiveness of strategy consulting in the UK. My competitive perceptions and methodologies are up for additional peer review. However, the content is not to be distributed, reproduced, edited or quoted for commercial purposes without prior written consent and consequent attribution. You are welcome to link to this site.

The UK Strategy Consulting Market – It’s Tough

As part of my analysis of the competitiveness of UK strategy consultants I’m going to show you how well they compete for customers. I’ve already demonstrated (see previous blog entry) that generally margins are low (close to 4%) but that sales have been booming – up nearly 20% in the last full reporting years.

Consulting is not business a where low margins are supported by rapid asset turnover. Projects take time and effort to deliver, and while talented people can deal with a number of concurrent assignments they cannot work on more than one project at exactly the same time. It’s a boutique business not a supermarket.

Proprietary analytics and benchmarking services can, and should, help address the productivity issues of these companies. My key issue is that if the best minds cannot be productive and successful how can they solve the UK’s underlying productivity issues? Is it their job to do so? In my opinion a failure to address such a profound business problem would be a negation of social and economic duty – as well as ignoring a significant business opportunity.

Can US Firms Solve the UK Problem?

It is also a business geared with the trade cycle – at least that’s what I said in the last time entry. It seemed a sensible interpretation of the data but if, as I will show over the next few weeks, so many of these groups are doing badly in very good times was I wrong to do so? How will they survive in the next downturn? Is this just a symptom of problems with the UK parts of these companies (most of which are American)?

Are any of these businesses actively focussed on solving the structural problems of UK productivity or are they just following a US agenda which has little interest in helping its competitors? Can Michael Porter head up both the competitiveness drive of both the United States (see blogroll) and the UK? Hmmm.

I can certainly show you some sound analysis about the competitiveness of these competition advisers, but the bigger picture has some bigger questions. More thinking and a revisit needed.

What are your views on these issues?

Companies Examined

Using proprietary COSAWs © (Competitive Strengths And Weaknesses) methods I’ve examined the financials of 22 UK consultants to benchmark their competitive performance in 4 different arenas – customers, partners, staff and investors. COSAWS © measures and maps Competitive Performance Indicators (CPIs). 20 of these companies reported in concurrent years enabling me to examine year-on-year financial proxies. These companies are all strategy-led businesses whose figures relate to UK unit results:

ATKearney

Bain and Company

Bearing Point

Booz Allen Hamilton

Boston Consulting

Corporate Executive Board

Collinson Grant

Everystone Group (WPP)

LEK Partnership

Marakon

McKinsey

Mars and Company

Mercer (Marsh McClennan)

Monitor

PRTM

Quest Worldwide

Roland Berger

SDG Europe

Spectrum

ZS Associates

What Makes a Winner?

A winning competitor for customers grows both its revenues and its margins. Reducing margins can stimulate revenues – a reasonable strategy in some cases, but not if the competitors are growing both.

L.E.K and McKinsey? Absolutely, yes… 

In looking at the absolute margin and revenue figures it appears that there are two obvious winners.

With over 30% of the market McKinsey dominates the revenues of this competitive peer group. One can only admire McKinsey’s consistent ability to hold onto its market share, given the obvious attack point of such a position. Are their competitors simply not competitive enough?

L.E.K  is the stellar performer in terms of margins – attaining nearly 43%, a truly impressive performance. At the other end of the spectrum are Marakon and BearingPoint. Marakon’s sales collapsed by a third, in a growing market. As well as the reduction in sales their margins also disappeared - so there is no claim to have increased value by becoming smaller. And BearingPoint – it’s enough to make you wince – appears to have lost, on average, nearly 38% on every piece of business. They actually had a very impressive increase in revenues year on year, nearly 50%, but until the margins are sorted out this is simply accelerating towards a brick wall.

…BUT Competition is Relative, Not Absolute 

The core of competitive thinking is that Competitive Performance Indicators are not absolute and internal (the gripe with most KPIs) but relative and external. So if a company distributes bonuses for a 15% rise in sales when their market increased by 20% they are rewarding failure. (Unless of course margins improved at above the market rate).

They need a COSAWS© type approach to ensure that rewards, literally, are competitive. Of course there are potential issues in time delays if rewards are to be suitably motivational as well as just. But ‘blind’ performance benchmarking research, industry bodies and proper competitive intelligence gathering provide potential answers.

9 Margin Winners

9 companies delivered competitive margin improvement. They were:

Roland Berger

Everystone (WPP)

ATKearney

ZS Associates

Boston Consulting Group

McKinsey

Monitor Group

Quest Worldwide

L.E.K Partnership

Roland Berger finally turned around several years of loss. Their task will be to demonstrate that this is not just a flash in the plan (sic). L.E.K deserves a special mention here. It can be very difficult to achieve relative returns when you are already the leader in absolute terms. Think about Tesco – growth becomes more difficult the more dominant you are.  But L.E.K clearly has a strong focus on margins as shown by strength in its absolute and competitive performance. That’s not by accident. COSAWs © is a good device for isolating competitive strategies within given peer groups.

8 Sales Winners

The competition for customers’ revenues was driven by above average performance of 8 of the 20 companies. They were:

Everystone (WPP)

Boston Consulting Group

ZS Associates

BearingPoint

Monitor Group

Corporate Executive Board

McKinsey

PRTM

Marakon and Mars were the big losers. In absolute terms, and in the medium term, Mars has been able to generate L.E.K type margins – but they have not delivered the consistency. Everystone turned in a dramatic improvement in sales, back to previous levels after two very poor years, as well as ranking high on margin competitiveness. Everystone deserves congratulating for its renewed ability to compete very strongly for customers. Of the larger groups Boston Consulting Group and ZS Associates put in extremely strong sales performances as well as delivering on margins.

Competing For Customers: Winners and Losers Ranking

To simplify the distinction between the companies, and to show a benchmark figure that could be used as a Competitive Performance Indicator, here is the ranking:

1. Everystone (WPP)

2. Boston Consulting Group

3. ZS Associates

4. Monitor Group

5. ATKearney

6. McKinsey

7. Quest Worldwide

8. The Corporate Executive Board

9. BearingPoint

10. Roland Berger

11. PRTM

12. Collinson Grant

13. SDG Europe

14. L.E.K Partnership

15. Bain and Co.

16. Spectrum

17. Mercer (Marsh McClennan0

18. Booz Allen Hamilton

19. Mars and Co.

20. Marakon

© 2007 Luke 4:23Last Full Reported Year (04/05) 

Conclusions

By looking at external and relative Competitive Performance Indicators (CPIs) a true competitive landscape is revealed. It exposes competitive reality, often illuminating company strategies and, critically, it can expose huge contradictions between what a company says and what it does. (One company in particular will be exposed later in this blog – that’s the nature of competitive transparency).

Later I’ll be revealing the value propositions and key themes of all these companies plus a few additions (see previous entry for their names). But next I’ll show you how relatively competitive these strategy companies are in the market for staff. You are welcome to drop me a line before then, of course.

Keep posted!

© Luke 4:23 The analyses and comment in this blog are designed to stimulate discussion about the effectiveness and competitiveness of strategy consulting in the
UK. My competitive perceptions and methodologies are up for additional peer review. However, the content is not to be distributed, reproduced, edited or quoted for commercial purposes without prior written consent.

Over the last few years I’ve spent a lot of time studying explanations for the continuing productivity problems of the UK economy.  

Over the last few months I’ve spent a lot of time studying those companies that should be expected to drive productivity change.  Over the next few weeks I shall be demonstrating the competitive abilities of UK strategy consultancies. 

They attract the brightest, pay them handsomely and rent them out to those who did not have the resource, foresight or culture to compete for the best talent themselves.  They are the mappers of business dynamics; the predictors of competitive change; the analysts and evidence-driven value creators.  They are the friends of the focussed, guides to the directionless and saviours of the lost. Are strategy consultants good at creating and delivering value?  Do the strategists have strong business strategies? 

Two BIG Questions: 

1. Are the best strategic minds in the UK strong competitors themselves?
2. Is strategy a commoditised offering driven by who you know, or are strategy consultants strongly differentiated?

I’m a competitive strategist myself with a track record in analytics and competitive differentiation. My external exposure to these companies suggested that they were surprisingly conservative with little interest in change or challenging people. So is this true? First, by measuring how successful the industry has been at competing in the past I could work out whether change is needed or not. If strategy houses deliver consistent value for themselves why change?  Secondly, by assessing competitive propositions I could assess the level of differentiation in competing for the future. We are in the middle of a competitive revolution – is it having any impact on those who should be advising businesses on how to rise to the challenges and exploit the opportunities? 

Methodologies

Using the COSAW© System (Competitive Strengths And Weaknesses), developed by me and my associates, I analysed the financial results of 22 companies accounting for £576m of revenues. COSAWs© ranks and maps the relative competitiveness of the companies in 4 key competitive arenas: customers, partners, staff and investors, using financial proxies. I’ll reveal the winners and losers in each arena and then rank them by their overall competitiveness.  To analyse differentiation I used text analytics software to isolate the key competitive themes of over two dozen strategy consultants. I have summarised their websites and also worked out their value proposition. In many cases there was no overtly defined value proposition – it had to be extracted and précised.  Differentiation appears to be very low on most strategy consultants’ agenda – unless they are keeping quiet about proprietary methodologies. In which case they are weak on IP protection. In some cases there is a chasm between their claimed expertise and results delivered for themselves.  

22 Companies Examined

The 22 were selected as a control group of UK-based businesses leading on a strategic offering. Transformation or technology consultants with strategy practices are not included in the COSAW© analysis as strategy is a subsidiary offering. Neither are corporate due diligence specialists such as CIL and Burlington (Deloittes) – because despite their comparable skill set they tend to work on market validation rather value creation.  

ATKearney

Bain and Company

Bearing Point

Booz Allen Hamilton

Boston Consulting Group

The Corporate Executive Board

Collinson Grant

Everystone Group (WPP)

KAE

L.E.K Partnership

Marakon

McKinsey

Mars and Co

Mercer (Marsh McClennan)

Monitor Group

OC&C

PRTM

Quest Worldwide

Roland Berger

SDG Europe

Spectrum

ZS Associates

Most of these companies are traditional management consultancies. Some, like KAE and Everystone (part of WPP) lead on marketing; they are all shapes and sizes, but the commonality is strategy. The value propositions of all of the above companies will be revealed as well as the strategy propositions from the following companies that are not included in the initial COSAWs © analysis: 

Dunn Humby

Cap Gemini

Inforte

PA Consulting

Parthenon

Phrophet

Is the Strategy Consulting Market Successful?

To lay the foundations, let’s look at answering this question using the 22 as a proxy. Not perfect, but, as they accounted for sales of £576m between them in 04/05, not a bad starting point. The market itself has been volatile. Over the last four full years this group’s sales have changed like this:  

1. up 20%
2. up 2%
3. up 11%,
4. down 25%.

(Source: published accounts/luke4:23) 

This could be called ‘geared cyclicality’ – the macro-economic data would reveal whether this is true, plus any delay period. These businesses must all pay very close attention to the trade cycle and try to develop offerings that reduce their upside dependency/downside exposure.   

Market Structure

Have there been any major changes in market structure as a result of this volatility? Here’s how the Top 10 looks like now, halfway through the trade cycle, versus 4 years ago: 

(Source: published accounts/luke4:23) 

Despite the significant decline in share of ATKearney the top 4 companies have remained the same. In fact there are only 2 changes in 4 years – Mars and PRTM have dropped out of the Top 10 (they are now 11^th and 15^th respectively) as Marakon and BearingPoint have entered.  There is some evidence of potential fragmentation. McKinsey will be happy that they have essentially maintained market share while those of their nearest 4 competitors combined has declined from 41% to 34%.  

Sales and Margins

If the market is volatile you may expect years of loss as revenues become scarce but the cost base takes time to adjust. Given the skills and longevity of these businesses you may expect them to be able to deal with ups and downs and still come out with positive net sales. Especially as over the last full four years there have been 3 years of market growth. Here are the net sales/losses for those companies reporting over the full period:                               

£m

27.8   ATKearney                          

23.8   L.E.K                               

17.6   Mercer                                

8.6    Bain and Co                          

4.4    Boston Consulting Group                                  

2.2    Spectrum                              

2.0    ZS Associates                          

1.5    Booz Allen Hamilton               

1.1    Collinson Grant                       

0.7    PRTM                         

0.7    Corporate Executive Board      

0.5    SDG Europe                           

-0.2   Quest World Wide                   

-1.3   Everystone 

-3.5   OC&C        

-4.4   Roland Berger 

-5.2   Marakon 

-8.6   BearingPoint 

-9.3   Monitor Group

-20.3  McKinsey 

(Source: published accounts/luke4:23) 

The overall sales position was a net figure of £156.8m over 4 years. Perhaps a better method of assessing performance is to look at operating margins averaged over the same period: 

 % 

41.4   Mars and Co

26.6   L.E.K 

23.0   Mercer 

10.5   ATKearney 

9.2    Spectrum 

5.3    SDG Europe   

4.8    Collinson Grant  

4.2    Bain and Co   

4.1    Booz Allen Hamilton  

4.0    ZS Associates 

3.1    BCG 

2.9    Corporate Executive Board 

1.1    PRTM  

-3.3   McKinsey

-3.9   Quest Worldwide 

-5.5   Marakon

-10.0 Monitor Group  

-15.3 Roland Berger

-18.4 Everystone  

-21.1 BearingPoint 

-50.1 OC&C  

(Source: published accounts/luke4:23) 

The average margin over the period was only 0.13%.  The average margin in the last full year – with revenue growth of nearly 20% -  was 4.19%. 

Conclusion

It is very easy to lose money in strategy consulting. I’ll spare the blushes of the:

• 5 companies that made operating losses last year
• 6 companies that have negative net worth (though this may be due to deferred revenues rather than a cash liability).
• 5 companies that produced negative returns on shareholder funds last year ie they shrank in a growing market.

It is easy to assume that partnership structures are taking the value out of the businesses in salaries – but I have figures that suggest this is certainly not a market norm. And value creators need to demonstrate value creation.  This is not a market so successful that competitive differentiation can be ignored. So the next step will be to show you how competitive each company is versus its peers in all the 4 competitive arenas.  I’ll show you one by one, starting with competing for customers.

Keep posted!