Strategy consulting is a critical resource for top leadership and their executives to:
- Provide an outside, unbiased perspective
- Uncover blind spots or other strategic considerations to identify core strategic issues
- Reframe problems to be more actionable to solve for teams
- Offer best practices in the practice of strategy
There are management consulting firms such as Deloitte Consulting that focus on management consulting but also compete in specific areas of strategy consulting with McKinsey, Boston Consulting Group, Booz Allen and Bain Consulting. The problem is that consolidation and what is called strategy convergence, when leaders copy other leaders’ strategies- the industry begins to have less differentiation and it is hard to separate the true strategy consultants from the management consultants or functional experts. Strategy consulting firms, quite frankly look too much like general management
So, what is strategy?
An activity View of Sustainable Competitive Advantage…
Much of what we at Valen teach our strategy consultants comes from economic modeling because economics is the decision as to where to allocate scarce resources. This is a critical part of strategy, we follow much of the main activities Michael Porter teaches, which is to determine what choices or trade-offs will be made. Furthermore, that those choices made are aligned toward a unique set of activities that create a sustainable, competitive advantage. You know you have a good strategy because it provides the organization an above-average margin versus competitors. We cannot compare margins across industries generally, but within an industry or more precisely within a defined competitive set.
consulting firms and claim they can help with strategy. How can you sort the top strategy consulting firms and even more importantly, the best strategy consultants? This is what we will explore.
The problem of sorting out the consulting industry and specifically strategy consulting, begins with how the word “strategy” is used. The definition of strategy is a buzz word these days because it is used to mean many different things.
How Should you work with Strategy Consulting Firms?
We think it is important for you to understand what to expect from a strategy consultant. At the Valen Group we find that many of our initial conversations with clients are to really sort out what type of strategy problem it is and the approach to collect the facts to resolve it. When choosing a strategy consulting firm, you should expect that the best strategy consulting firms will:
- Take time in initial discussion to ask questions and understand the situation to frame the problem.
- A scope of work should be outlined. We call this an engagement letter which outlines the objective, major deliverables and provide some sense of effort, team, and activities.
- Provide generalists who know the practice of strategy to lead the efforts or oversee work. This may also include functional experts for specific knowledge and insight into problem solving.
- Follow proven problem-solving methods and logic which means work to deduce the solutions from the facts and ensure the fact support a conclusion and recommendations.
Some traits that you should observe in strategy consulting firm consultants you hire include:
Flexibility to follow the facts. Expect the best strategy consultants and consulting firms to ask for lots of leeway in their analysis because strategy consulting will begin with a hypothesis and like a detective follow the facts to conclusions and recommendations.
Use the hypothesis method. Top strategy consulting firms train their teams to use a hypothesis to guide their work. A hypothesis is critical to the effectiveness of strategic analysis. Most management consultants work from expertise or best practices in the practice of management. The hypothesis method is different because it solves strategy problems where the problem crosses function could reside in anyone’s expertise.
Generalists. Strategy problems are typically across functions or departments and thus require limited bias. Specialists are critical for deep insight, but have difficulty because of lack of experience seeing other patterns. Most of the top strategy consultants are generalists, they know a little about a lot and while they may have grounding and depth in an industry or function, they are able to converse about any function. At The Valen Group, our strategy consulting discusses economics or finance to assess if a company has above average margins and then turn abruptly to assess the brand equity, operational production, or service delivery capabilities to understand how a broad set of a global organization’s activities sum up to the margin in comparison to competition. This strategy discussion covers finance, operations, marketing and more, with a top strategy consultant able to discuss the intricacies of how to create or assess brand equity.
A Trusted Advisor. Top strategy consulting firms are not about the firm itself or the name but rather about the people. A great strategy advisor to management is a transparent communicator who can effectively provide an honest perspective. The best strategy advisors can clearly articulate the issue, determine why the issue exists, and ask a lot of questions to test their hypotheses. Trust is another key element of a great strategy advisor because management should feel at ease that the advisor will speak up if
Spot patterns and the most important facts. Strategy firm top performers simplify complex problems into the essence or working model only including the most relevant levers or factors to consider. Issues that most talk about as black and white, they pull out the gray and deduce the probability of a conclusion or action.
How can we tell what is strategy consulting from management consulting?
- Strategy Consulting focus on the practice of crafting and assessing strategy. They separate corporate strategy (optimizing the portfolio, determining the sharing of activities and knowledge) from business unit strategy (determining competitive market based sustainable advantages)
- Management Consulting focuses on the function, the work is functionally based, best practice based and improve the effectiveness of the organization, function or people.
Good strategy discipline. A valuable strategy is unique, rarely does copying the competition work but the idea is so compelling, counterintuitive and many times, is rewarded in the short-run by investors. Also, because each organization is unique, whether new or very well established, the culture, consistency of decisions by management (or lack thereof) can be easily observed and determine the unique assets and methods for executing, it makes no sense to do it “their way” but rather find your organization’s way to serve our unique set of target customers. This means you will hear “no” a lot in your strategy discussions with a clear explanation as to why that doesn’t leverage the organization’s unique capabilities.