Category: Management Consulting

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eBay/PRTM Benchmarking Study On Internet Software Industry

Pittiglio Rabin Todd & McGrath (PRTM), my alma mater in terms of the management consulting industry, has just released a benchmarking study done jointly with eBay. The study, authored by Director Joe Lo, focuses on uncovering the best product development practices within the internet software industry, and the study is purported to be the first of its kind – it contains a good amount of numerical and factual information about the sector and a functional area within that sector. Note that the internet software industry consists of companies like Yahoo!, Google, and eBay.

Some of the key findings which strike a chord close to me (being involved in the Web 2.0 space):

  • Best-in-class (BIC) companies spend on average 5% more time in the concept/requirements phase and 5% less time in the test/rollout phase compared to worst-in-class (WIC) companies
  • Internet software companies have a tremendous advantage in that they can simply launch new products or features on the website and see how customers react. The companies can track page-views, click-throughs, etc. This is tracking actual usage. If the product does well, invest more. If it doesn’t, pull it from the site.
  • BICs have development cycles of eight weeks, while WICs take 22. Note that eBay has an R&D process that enables the company to launch 80 projects per "release train" (think of the train leaving the station as one release) with 26 trains per year.
  • The study goes further to illuminate that shortening the cycle time has other positive effects not immediately obvious – defects decline by 25%, and worker productivity increases 20%.

The report by Joe Lo is a very nice piece of work. Check it out here (registration required).

So how is your company going to change towards becoming best-in-class? One doesn’t always need a change management consulting firm to accomplish change, but a company still needs that capability and fortitude to improve itself.

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Q&A With Deloitte Consulting On The Industry And Career Guidance for MBAs

This post has been reproduced from my BusinessWeek MBA blog. Comments and trackback only taken over at the original post.

I had an excellent opportunity to phone interview management consultant, Mike McLaughlin, about the overall management consulting industry today and about employment opportunities for MBAs in the field. Mike is not only a blogger at award-winning Guerrilla Consulting but also a principal at Deloitte Consulting LLP and the former Managing Partner for Deloitte Consulting Chicago, where he had market responsibility for a practice of 800 consultants.

Steve: Mike, it’s been awhile since I worked as part of a larger, management consulting firm. Please talk a little bit about how strategy consulting has shifted over the past five years and where things are at.

Mike: Strategy consulting has been the bedrock of the industry. There are some firms, like McKinsey, BCG, Bain, etc. that are branded as strategy firms. The market has been cyclical for other firms that are not branded that way. But there has been a market uptick, e.g., for the former Big Four consulting firms. The difference in the overall industry, however, is that there has been a slight shift. It has to do with what strategy consultants do.

Strategy consultants do more on executable strategies these days – less credenza-ware.

Steve: I like that term. I know exactly what you are talking about, but I’ve never heard a term that evokes such imagery.

Mike: Lots of management consulting firms have negligible implementation capabilities. Clients are looking for the implementation tail and a roadmap of how to execute. As a result, what we are finding is that some of the best strategy teams are those that have a mix of strategy and implementation backgrounds, whether those be in operating roles in companies, IT groups, etc. The successful consultants these days are those that have a good mix of strategy and operations background.

Steve: Consulting seems to be beginning to boom again. What’s your take?

Mike: A handful of reasons come to mind. In the decline phase of prior years, companies were battening down the hatches. Management consulting fell into the discretionary fund pool. Lots of companies got swamped. Many consulting firms were not bringing good ideas to the table. Operating companies got tired of the strategy prescriptions where one or two firms dominate. Now there are a lot of new developments around managing a company, whether this be offshoring, managing a workforce, or fostering an environment of innovation. Management consulting engagements are not coming back as mega projects. Shorter projects. Smaller teams. Plus there was an awful lot of consultants back in the operating company workforce. After 2001, consultants went out into the streets. Many of these people are buying services from consulting firms, in part because they can get high-caliber people. Current growth in consulting now is probably 7%-9% these days as opposed to the 25%-30% growth rates of the wave.

Steve: How would you recommend business school students look at opportunities in consulting versus an operating company? Would the internal consulting arms of operating companies be another good place to look if people like consulting? I saw some of these crop up post some of my engagements in the profession.

Mike: One fundamental question to answer is whether people like industry or professional services. If you like services, then people should look at things like consulting and investment banking. If one is looking at industry, then one should be looking at a functional role like brand management or finance, say. I haven’t seen internal consulting arms work. Maybe one or two companies come to mind that could pull this off. There is a lot of backwater in most of the internal consulting groups in that they either have no budget or are understaffed. Not a high probability bet to go down the internal consulting path.

Steve: What dark sides do you see to consulting?

Mike: None of this is going to be new to you, I’m sure. The upside is that one can make a lot of money in consulting. You can get about tens years of normal industry experience in about two years. You can run the risk of an extensive lifestyle focus.

Steve: You mean travel?

Mike: Travel is a good catch word for something much broader. It’s about where you are living your life. You could have consulting projects in the armpit of the world. Or there could be family issues.

Another dark side is that the longer one stays with a consulting firm, the more important the number game becomes. A drive to sell, execute, make sure that partners get paid emerges. There can be ethical challenges. Not a problem with firms like Deloitte or firms like your past firm (PRTM), but there becomes a point when the interests of the client and the management consulting firm diverge. If you cross the path of not acting in the interests of the client, you’ve compromised yourself, and you are done. No one will work with you again.
 
Steve: Since this post is geared for the BusinessWeek MBA Blog community, can you give some tips for current b-school students on interviewing.

Mike: Consulting firms like Deloitte are looking for talent. We don’t care what course you took. Be yourself. Let the talents come through but not in an arrogant way. We want to see how you think on your feet. How this is done at Deloitte is through the case interview. A decision is pretty much made on the spot. There are diminishing returns for multiple interviews. The importance of using business school frameworks and practicing for the case interview are more for the purposes of freeing yourself so that your talents can show through. Not so much for the process itself.

The other aspect of interview is what I call, "passing the airplane test". This is the cultural stuff. As an interviewer, can I bear to be with this person ans sit next to him/her on an airplane? Can I put this candidate in front of a client?

Steve: How does Deloitte manage to make sure that interviewing does not fall into the trap of the Pepsi sip test, where the short interview and trial does not reflect how the person will actually work out in the long run?

Mike: The trends are way up at Deloitte in terms of only making offers to people that have done internships with the firm. If you didn’t intern with Deloitte, then we will make these candidates jump a higher bar.

Steve: Was great talking with you live for the first time as opposed to exchanging emails. I’ll let people know that if they have any questions, they should feel free to post comments to my blog, and I’ll pass on to you so that you have an opportunity to respond.

Mike: That will work great.

P.S. by Steve: If you don’t use a newsreader, consider using something like NewsGator and add Mike’s RSS feed to your reading list or subscribe using Bloglines. High value and free cost!

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Services Offered

Freelance consultant. Provide both interim management and business strategy, marketing, and operations consulting services to clients. Specialty sectors include high-tech, software, services, and communications/telecom. Sample services include:

  • Outsourced management for growth-phase companies (business development & general management)
  • New business initiatives and product introduction
  • Operational diagnostics and change management
  • US market entry for international ventures
  • Business and marketing plan development

Post updated (March 2009).

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Deloitte Choses Not To Blog And To Go Public

I’ve blogged before about the absence of management consulting blogs. Well it looks like Deloitte is signaling that they will not enter this realm because of risk and lack of clarity on how to legally protect the firm, which is a partnership structure.

From Rob O’Neill at the Sydney Morning Herald (need to register to see full article):

Big four accounting firm Deloitte has put corporate blogging on the back-burner following robust internal discussions about the company’s online strategies.

A proposal to start corporate blogging on leadership issues was put forward by the firm’s director of digital marketing and communications, Ryf Quail. But senior partners were concerned about legally protecting the firm, which is bound by a partnership structure.

I would speculate that by going public on this matter, and since Deloitte is considered to be a market leader in the consulting space, this is signaling 1) to employees that online strategies are a serious matter but need to be addressed appropriately and 2) to competing firms that Deloitte is not moving on blogging (and thus, other firms may really want to follow suit [like car manufacturers do with price leadership strategies of rising prices in a oligopoly-like market structure]).

Hat tip on Deloitte article: Niall Cook.

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Making The Client Cry

This is a bit of a tough post for me to write as it can easily be misinterpreted. There’s probably a slew of management consulting jokes surrounding this one too. Nevertheless, I’ll press on.

In management consulting, I’ve referred to a number of change management techniques, some of the most prevalent being the use of either a stick and driving people to change or a carrot and leading people to change.

I suppose the next technique is an offshoot of the stick variety, and the method can be intense to the point that it makes the client "cry" (not out of happiness).

It involves cornering down line workers and line management and forcing them to work with the consultant until microtasks in an important project are completed. In some client situations, one may find that workers are used to coasting along when change is needed. Attitudes of "coasting along" can come in various forms – they manifest themselves via the worker or manager "creating excuses" or "raising objections" to a course of action without providing or suggesting feasible alternatives. A "coasting along" attitude may manifest itself as a person that has a "Levi’s 501 attitude" … at 5:00pm they are lined up … by 5:01pm they have left the office (be careful not to misinterpret someone who has legitimate time schedule considerations versus someone who is not mentally committed to excellence).

A key to making sure that workers get transitional project things done may involve sitting alongside them and doing the (painful) task with them, whether that task be creating a formal product specification document where none existed before, specifying a new managerial report that they should prepare on a regular basis, completing a portion of a competitive analysis and business plan document, combing through and revising customer survey documentation, etc. Sometimes, without intervention by an outsider or by management, complacency will go on for weeks and bottleneck an important project. In some cases, the consultant try to resolve things by preventing the worker from even leaving the premises until the job is done (e.g., order in food, coffee). A key to balancing things out is frequently by ensuring that the consultant is also doing and contributing to the task at hand versus casting stones – may require management consultant with broad skills.

So the title, "Making the Client Cry" is a bit of a sick joke in some sense. But I’ve seen consultants use this micromanagement technique, and it can be effective when appropriate. Uncomfortable, but effective.

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Are Incubating Initiatives And Running Pilots Specializations?

I would claim that they are. But incubating things … that doesn’t sound like the typical specialization of finance, accounting, sales, or information technology. In fact, have you ever seen a "department of incubating things" in a company? Wouldn’t someone who specialized in such an area get spread too thin?

Valid observation and concerns. To support my claim though, I would make the following anecdotal comments:

  • I never focused much on incubating and running pilots until I cut my teeth at management consulting firm PRTM that had a niche in implementation and execution with high-tech firms (although I worked for a number of operating companies prior to management consulting). Incubation is akin to project management and risk management in an operational context.
  • To orient oneself as incubating something, one needs to be prepared that things could be very rocky at first. Customers will be pissed. Workers will be pissed. Roles won’t be defined. People don’t know exactly what to do. There will be no technology support in many cases. Fraying, fringes, and bad things will be showing all over. To solve these problems, project management, discipline, and cross-functional skills are needed.
  • Incubation tends to attract those with an appetite for variety as opposed to those unable to commit to a steady-state/harvesting-type business.
  • Sometimes the role of incubating things can be found throughout corporate consulting groups, business development, or product management functions. Common best-in-class features in these functional areas include understanding the asset base of the company and figuring out how to create quantitative and qualitative value though combining things or breaking them down. This is in contrast to cost center-oriented functions.
  • More often than not, people discount (or completely ignore) the role of piloting initiatives. Just jump right into deployment and rollout from the unit testing phase of a product. That has got to be the wrong answer at least some of the time.
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The Tao Of Getting Information Technology (IT) Deployments To Stick

Biren recently posed a question to me about how to get technology initiatives to stick based on my experience as a management consultant, user, and technology manager.

Although I always believe that from an execution perspective one should strive for the keep it simple stupid (KISS) principle, describing the Tao (i.e., mastery required) to reach the nirvana state of "IT acceptance" in an organization requires some foundation.

An organization achieves IT acceptance when a habit or addiction with respect to both process and technology has been reached. A habit is created when an organization knows what to do, wants to do something, and knows how to do it. Commitment is frequently started off by getting the organization to collaboratively develop the requirements for the IT initiative as opposed to having an IT project handed down to them.

For IT projects, more often than not, a primary challenge is addressing the want aspect of the habit formation process. Plain an simple. If the system does not serve or incent the end user in some way, there is a high probability that the technology will not take. People have to get some benefit by using the system. Too often I have heard operating managers talk about black hole systems where they feed data in, and mysteriously, headquarters is the only one that cares and uses the data. Big warning flags going up in my book.

To address the want aspect of things you must create movement. Here I find the pecking order of the carrot, the stick, the Chinese professor, and the Jedi mind trick to be key. Two of these techniques are often referred to in change management consulting – I added the other two as off-center techniques:

  • The Carrot – This is using a positive incentive system. Show people the end goal and lead them toward victory. "If we can all get on this system, we can outflank the competition."
  • The Stick – This is using a negative incentive system. Scare them. "If we don’t do this, we’ll all likely lose our jobs."
  • The Chinese Professor – My Mandarin professor was a first generation Chinese. When I didn’t practice enough in the language laboratory, he’d look at me sternly and say, "Why have you disappointed me Xu Bing Hou". There would be long silence for effect, and the guilt would drive me to excel the next time around.
  • The Jedi mind trick – Here’s a bit of a catch-all for framing techniques that stem from organizational behavior and psychology. A bit too detailed to go into here (although I will point to a recent post of mine that draws from broader field of organizational behavior). Suffice it to say, while I do not like to correlate these methods with the notion of using tricks or being manipulative, I will say that if you better understand how yourself and other people process information, all that all one is really trying to do is to engage people the way they want to be engaged.

Carrots tend to work best in my book, but others probably have different experiences.

The final aspect beyond getting a habit and creating movement is tracking initial movement. This is a crucial subdomain of the project management discipline and not taught enough in the field. Since this post is getting long, I will say there a three elements here that are particularly relevant. These are:

  1. Having a project kickoff meeting
  2. Driving and piloting a program (and hand picking winners early on)
  3. Monitoring results regularly and more frequently early on.

Anyway, that’s my Tao.

Steve Shu

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Empathy Versus Sympathy In Management Consulting

I’ve had some interesting discussions on how corporate politics play a role when consulting to clients. Perhaps I have a parochial view here.

My take is that consultants should take no part in corporate politics.

It was a lesson that I learned early on while at the management consulting firm PRTM (a great firm to work for BTW – see Consulting Magazine PDF here).
Here’s the rationale for "no politics": consultants are often brought in to make things
better. Clients pay a premium for consultants for any number of
reasons. One common reason is that consultants are supposed to be
unbiased third-parties. If one gets consumed in politics, there’s not
enough focus on motivating everyone to get to the end goal.

Here’s another distinction (my own wrinkle) as it relates to consulting:

  • In consulting, empathy is the ability to understand what a person is going through.
  • Sympathy goes one step further. One not only understands a person but also agrees with the person on an emotional level.

Sympathy can be the "dark side of the Force". Suppose one is working
within a business unit (sponsored by one of the EVPs) and there are two
VPs below the EVP that don’t get along with one another. You are alone
in the office with one of the VPs that you may like better from a
personal chemistry point of view, and this VP starts to bad mouth the
other VP. If you join into this sort of thing, while you may be
ingratiating yourself with the one VP, you are hurting the client by
participating in politics. Bad mouthing is just not constructive. In
this sort of scenario, you should probably consider something like
letting the VP know that you can understand why he/she might feel this
way but that as a consultant, you can’t have any part in this. Other
good options would be to try to get the VPs to work it out
face-to-face. One may also want to probe a bit with the VP to see if it
is a worthwhile thing to bring things up with the EVP if the
disfunctionality is hurting the productivity of the business in a
significant way. Junior consultants should probably also consult with
their firm’s primary manager for the engagement, especially before
escalating things to the client sponsor level.

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