Why Strategy Consultants Bite

March 12, 2012
Read this before you spend money on an expensive advisor

About a year ago one of the worlds largest technology firms decided it was underutilizing its patent portfolio. The senior executive team hired one of the best known, most prestigious consulting firms to help figure out where to leverage all those assets and six months later, after spending well into seven figures, they had a list of recommended markets. Once the operating teams dug into the recommendations a bit further, they realized not a single one was viable. Dont you hate it when that happens? Arent you glad you didnt hire those consultants!

Bummer about the wasted time and money, right? The real drag is that this story plays out every day in companies of all sizes. The global entertainment company looking for help with their rebranding strategy, the mid-size consumer electronics firm in Pennsylvania looking for some direction in product innovation and the small, West Coast manufacturer deciding whether to extend their product line all hired strategy consultants and all learned a painful lesson: left to their own devices, strategy consultants get it wrong more often than not.

Are all consultants fodder for mockery on cable TV shows? No, of course not. Should you avoid using consultants for strategic questions? Perish the thought. Properly hired and used, a strategy consultant can actually produce a handsome ROI and set your company on a much more profitable trajectory. This article will start you down the primrose path of successful strategy projects.

First, in accordance with the consultants creed, I must regale you with the obligatory paragraphs of theory: If you recall, there are only three outcomes of any value on any consulting project: an area of focus, a plan for implementation and actual implementation. (See Great Shot, Wrong Target) Strategy consultants help with the first outcome: an area of focus. I call them detectives because their strength is sifting through evidence. They answer questions such as: Should we close the Wichita distribution center? What market should we target? What should we look at to reduce manufacturing costs? How can we increase profitability of the Carlisle division? How can we attract new customers? Each of these questions results in an area of focus.

Sometimes a strategy consultant will say they can help with the implementation plan as well, which you should take with a healthy grain of salt; if they are great at developing a certain type of plan then they will be biased in their assessment of what should be done. Alas, many consultants assert that they can deliver all three outcomes strategy, plan and execution, which is a sure sign you should flee from them as quickly as your corporate legs will allow.

The problems with strategy consultants, whether they are big name consultancies with fresh-faced, Ivy-league graduates or local business coaches with grizzled, salt-of-the-earth veterans, are threefold:

  • They jump to conclusions. Strategy consultants like to show off their smarts and break the back of a problem quickly. As a result they will often rush to a solution before all the evidence is in hand. The CEO of a multinational company confided in me about a strategy consultant he hired to determine why one of the product teams was floundering. The hired gun started firing off recommendations within days of interviewing the U.S. employees, before hearing the first word from team members around the world. How sound do you think those recommendations were? Not very, as the CEO confirmed.
  • They often dont have relevant operating experience. The consultant who pointed a security company toward mining customers had not worked a single day in the mining industry or sold a dollar worth of products to any of the customers they held up as ripe for the taking. The innovation expert who delivered beautiful drawings of a wearable computer to a technology client had no clue about the manufacturing requirements. Neither project ended well.
  • They notch up another successful engagement even if their recommendations hold water like a sieve. The consultants who gave the entertainment company a rebranding plan considered themselves successful even though their deliverable quickly met the dustbin.

With the problems clearly articulated, its apparent how you can design successful strategy projects with hired guns: First, dont ask for early indications or preliminary answers. Thats an offer of candy to the sugar addict and an invitation for a disappointing outcome. Once a highly compensated strategist publically offers an opinion, they are automatically invested in it. Putting the early rush to judgment aside, you have three options:

Option 1 is to forego the strategy consultant and, instead, hire an expert who can give feedback on the area of focus you are evaluating. For instance, if you are considering re-designing the workflow at the Kalamazoo facility in order to reduce the costs of manufacturing, then hire an expert in workflow redesign to tell you whether or not that will meet your goals. If she says its unlikely, then you can shift your attention to a different area of focus perhaps raw material purchasing or energy utilization and hire a different expert.

Option 2 is to make sure the strategy consultant has a sufficiently robust process and a multitude of successes before you hire them. Sufficiently robust means they tap into outsiders to get real-world, experienced, been-there-done-that insights into every area they are recommending. This means they have enough ego strength to admit they will/must source critical insights from people outside their firm to ensure you get the best result. When a strategy consultant assures you all the expertise you need can be found rattling around their big brains, give them the boot.

Option 3 is to stack the project team with operating people from your company and vest them with the authority and responsibility to push back on the consultants ideas. This option will only work if the consultant knows beyond any shadow of a doubt that they cant simply step over the team members and appeal to the real decision maker.

No matter what path you choose, the onus is on you to find a stellar consultant and set the project up for success. Strategy consultants are prone to the problems outlined above, so you must design the project and the project team for success.

For example, after their initial project failed, the West Coast company with the portfolio expansion project reconstructed their team, hired new consultants and went on to enjoy double-digit sales growth. The bottom line is engaging a strategy consultant can be a total waste of money or a route to riches. The difference is in who you hire and how you manage them.

David A. Fields helps companies find, hire and get great results from outside experts. His book, The Executives Guide to Consultants, will be released by McGraw Hill in fall 2012. Contact him by e-mail at [email protected] or call 203-438-7236.

See also:

Could Your Project Be a Dud?

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