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Lecture Notes Strategy Consulting, MSc Business Administration UvA
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LECTURE NOTESStrategy Consulting
Amsterdam Business School | University of Amsterdam
May 2020
Table of contents
Lecture 1. Defining management consultancy and the industry ……………………………………………….. 02
Lecture 2. Managing the consulting firm …………………………………………………………………………… 11
Lecture 3. Structured problem diagnosis …………………………………………………………………………… 18
Lecture 4. Structured solution development …………………………………………………………………………… 23
Lecture 5. Strategy analysis toolbox I …………………………………………………………………………… 32
Lecture 6. Strategy analysis toolbox II …………………………………………………………………………… 40
1
, LECTURE 1 | Defining management consultancy and the industry
1.1 + 1.2 Introduction and what is management consulting?
When does management needs consulting?
- for high value decisions
- in complex situations
Narrow vs broad definition:
- narrow: advice on the solution
- broad: advice on the solution and the implementation
Management consultancy is a knowledge-intensive service which independent business professionals
provide to managers of client organizations, and consists of objective advice on management’s
decisions regarding the solutions to the client organization’s problems and opportunities (narrow
definition), and may, in some cases, also consist of assistance with the management’s task regarding
the implementations of these solutions (broad definition).
(Baaij, 2014, p.17)
Do these domains fit in management consultancy?
- Accountancy not, mainly finance, not advising management
- Venture capitalists not, may advice management but are not independent: equity relation
- IT consulting not, is about non-managerial tasks regarding implementation, more business consultancy
Two perspectives on management consultancy:
1. Functionalist perspective
- Consultants as doctors, curing problems and improving processes, also creating value for society.
- Management consultants are doctors/professional helpers:
- Consultants create value for their clients
- Consultants create value for society
- Knowledge-broker; knowledge is up-to-date through many client organizations
2. Critical perspective
- Questions effectiveness of management consultants, viewing them as creating managerial needs for
reinsurance.
- Management consultants as witchdoctors:
- Knowledge consists of fads/fashion
- Consultants use persuasive power
- Effectiveness of management consultancy is questioned
Different roles, in two categories these would be formal and informal. (See table)
Role Client-consultant relationship Description
Formal Provide knowledge to solve problem (defined by
Expert Cilent purchases expertise
client)
Doctor Docter-patient consultation Identify and solve problem for client
Process consultation (do-it- Provide process which client can use to identify and
Facilitator
yourself by client) solve a problem
Informal Provide temporary capacity for client, not related to
Hired hand Temporary staff for client
specific client problem
2
, Provide legitimacy to a client’s solution which other
Legitimator Recommending client’s solution
stakeholders oppose
Political Provide arguments for client’s position in a political
Political ally of client
weapon fight
Client hides between back of Take blame for a client’s solution that is not in the
Scapegoat
consultant interest of other stakeholders
Is management consulting a profession? It is not. It is not an official title. If you want to know why, check
out page 34+35 textbook.
- A profession is defined as a business activity that is accompanied by a formal, legally enforced
institution that protects the interests of the public and the professionals involved…
- Doctors, lawyers and accountants are legally enforced professions
- However, anybody may call him/herself a management consultant !
Next to organization in trouble, healthy organizations hire consultants as well. It is not just to find solutions
but also about finding opportunities. Responsiblilites of the client firm is providing good data. Internal as
well as external consultants give both good advices, but the advantage of hiring an external constultant is
their wider knowledge base and high independency.
1.3 The origins and developments in management consulting
Fields of consultancy:
1. Operations consultancy (from 1870) —> second industrial revolution
- mass production became increasingly important
- ownership and management became separated
- -> the first managers faced difficult efficiency problems
- Production of steel became cheaper
- More infrastructure (bridges, railroad)
- Urbanization
- Huge growth of firms
- High capital requirements
So, improving factory operations became the first field of management consultancy. The first services of
management consulting were based on the principles of scientific management:
- improves factory operations by studying and improving each individual part of a business task.
First management consultant ever: Frederick W. Taylor. Stood behind the ‘stopwatch’ as mean of
improvement for America’s economy.
- Industrial revolution gave rise to separation of ownership and management which led to the
professional manager
- Challenged by new technologies and large scale operations, these managers sought to increase
efficiency (ROI)
- Frederick W. Taylor developed scientific management: decomposition into simple tasks and optimize
each task
- Prominent firms: Arthur D. Little, Bedaux Consultancy
2. Organization and strategy (from 1930) - response to regulatory changes: US Anti-trust legislation
management audits
- Wall street crash
- Overproduction of agricultural products, excessive speculation, and consumer debt led to the ‘great
crash’
3
, - 10 million people lost jobs
- 12.000 unemployed daily
- 20.000 companies bankrupt
- 1500 banks bankrupt
Regulatory change:
- 1933 Glass-Steagall Banking Act forced independent advice from banking activities
- 1933 Securities Act: due dilligence by independent consultants before financing
- bc management audtis had a conflict with management audits: independent consultants, known as
management engineers. Where the first field of management consultants worked for factory
management and focused on blue colour productivity, the consultants in this new field worked for
executive managers and focused on organizational problems.
- 1936 legislation forbade accountants and lawyers to advise while performing financial audits
- Subfield of organization consultancy: could profit from the rise of the corporate form: as firms grew
bigger, they wanted to adopt the Multidivisional form (M-form) in 1940-50, but how were they going to
implement this? Managers from this second management consultancy field took the opportunity
(McKinsey, Booz Allen Hamilton)
- Subfield of strategy consultancy: with the rise of M-form, the need for advice on corporate portfolio’s
arose, leading to this subfield, dominated by the Boston Consulting Group/BCG (known for the growth
share matrix and learning curve). Other prominent firms were Bain and Roland Berger.
- 1960s: diversified organizations struggled with coordination
- Demand for portfolio management, or corporate strategy advice:
- Where should we compete and how do we coordinate?
3. IT consultancy (from 1950) - development of mainframe computer
- spreads of mainframe computers in large corporations lead to an increasing demand for consultancy
services.
- however, IBM and other manufacturers were not aloud to enter the field of IT consultancy by the US anti-
trust regulations.
- this opportunity was taken by IT-specialists and accountants such as Arthur Anderson
- 1950s: mainframe computing became popular
- IBM is the first to mass-produce mainframes
- IBM and a few others were under anti-monopoly leglislation... until 1982
- Accounting firms entered IT consultancy (which was not under the effects of 1930s regulations)
- Prominent firms: Arthur Anderson, CapGemini
Management consulting firms that were leaders in one field found it difficult to enter another field. This
can be explained by different business models. Each field targets another group of clients, required
4
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