{"id":8108,"date":"2018-04-20T22:24:36","date_gmt":"2018-04-21T02:24:36","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/bcg-disruptor-or-disrupted\/"},"modified":"2018-04-20T22:24:36","modified_gmt":"2018-04-21T02:24:36","slug":"bcg-digitally-disrupting-or-disrupted","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/bcg-digitally-disrupting-or-disrupted\/","title":{"rendered":"BCG: Digitally disrupting \u2026 or disrupted?"},"content":{"rendered":"

In order to understand how the emergence of digital technologies will impact the management consultant companies, first let’s take a look at the value they seek to provide to their clients (aside from making them feel good, as illustrated in the Dilbert cartoon below).<\/p>\n

Management consultants according to Dilbert<\/strong><\/p>\n

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Source:\u00a0http:\/\/www.cominvent.com\/comics\/<\/h6>\n

What is it really that management consultancies like BCG, McKinsey, and Bain do anyway?<\/strong><\/h3>\n
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  1. Information access:<\/strong><\/span> A client can benefit from using consultants to obtain specified information that is hard to obtain internally. This includes data that is hard to come by<\/strong> (e.g., customer preference analysis) and topic expertise\/knowledge of industry best practices<\/strong> that the management consultancy has built up over time by working with other companies in the industry (e.g., post-merger integration for a company that has not merged before) [1].<\/li>\n
  2. Diagnosis and recommendation:<\/strong><\/span>\u00a0<\/strong>Some clients face challenges where they can’t solve the problem by requesting information, because they are uncertain how to define the problem in the first place. In this case, management consultants bring value by using past experience across industries and specialized analytics capabilities to better diagnose<\/strong> problems<\/strong>\u00a0and likely consequences of each possible solution to better form a qualified recommendation,<\/strong> by being able to provide an outside 3rd party objective opinion<\/strong> on major decisions without the biases a company would have (e.g., to enter a new market to grow sales) [1].<\/li>\n
  3. On-demand brains:<\/strong><\/span>\u00a0A client can find a lot of value in being able to quickly deploy a dedicated team of smart and unbiased people to deeply focus on one issue. The types of people can be hard to hire internally<\/strong> and\/or expensive to retain continuously<\/strong> if needed only for specific, temporary tasks (e.g., a due diligence for a private equity firm) [2]. Finally, an external team is useful if embarking on a highly sensitive and\/or\u00a0confidential project<\/strong> (e.g., an organizational change).<\/li>\n<\/ol>\n

    What are the challenges caused by the digital wave?<\/strong><\/h3>\n

    AI process in steps and how consulting could fit in<\/strong>
    \nColored by level of threat from AI to consulting business
    \n\"\"<\/a><\/p>\n

    Source: HBS DIG IT course wrap slide (Apr 20, 2018) – modified by author<\/h6>\n

    The first value-add to be threatened is #1 information access<\/strong> starting with the information that is easily quantified and thus easily shared digitally (e.g., market share data or analysis of product line profitability) [3, 4].\u00a0Before the emergence of the internet, consultants spent most of their time gathering data [3]. Now, this is outsourced to companies like GLG (controlling a network of subject matter experts), Euromonitor, and IMS Health that are easily accessible directly to the clients. Best practices are rapidly spread as information flows more quickly across regions and countries.<\/p>\n

    \u201cThe Googles, Amazons and Microsofts of the world may take over from the McKinseys, Boston Consulting Groups, and Bains … Consultancies are built for two-by-two matrices. AI\u2019s matrices are a million by a million.\u201d
    \n<\/em>–\u00a0Roy Bahat of Bloomberg Beta [8]<\/p>\n

    Second, AI is becoming being better than consultants at analyzing information <\/strong>to build predictions<\/strong>. Much of the work of consultants do is to gather, clean, process, analyze, and present information gathered externally and inside the client’s organization – work that AI can do much faster and is already performing in the financial services industry [4]. Once AI becomes more advanced moving from information gathering to providing advice based on synthesis data, “prediction” or\u00a0value-add #2 diagnosis and recommendation will be threatened too<\/strong>. The more easily quantifiable problems will first be taken over by AI (e.g., “Alexa, how should I allocate my marketing spend to maximize ROI?”<\/em>) [4].<\/p>\n

    When a diagnosis and recommendation task occurs frequently on routine, client’s will have a larger incentive to invest in a software provider<\/strong>\u00a0because #3 value-add (on-demand brains) falls away.<\/strong> For instance, Salesforce.com to continuously update the customer relationship strategy in software the employee’s invest in learning to operate rather than have a team of management consultants visit once a year to revise the strategy. New specialized software providers <\/strong>are threatening the generalist management consultancies by providing software that integrates with the client’s business and can be used continuously – also after the consultants leave. For instance, Salesforce.com provides analyses and recommendations on customer relationships [5], IBM’s DemandTec analyses the client’s data (feeding directly from their data warehouse) to provide recommendations for their pricing strategy [6], GE is developing software embedded in its hardware to provide optimization recommendations, e.g., in operations and manufacturing [7], and even Google recently launched “Advanced Solutions Lab”, part consulting service part tech bootcamp, to help clients who can send a whole team for several weeks to work alongside Google engineers to build and operate customized cloud solutions for the client [8].<\/p>\n

    Opportunities ahead and how BCG is responding<\/strong><\/h3>\n

    While both information access and prediction capabilities are likely to threaten the consultancies,\u00a0information and diagnoses requiring qualitative data is more likely to stay a value add for management consultants. <\/strong>Alexa could tell you how to allocated your marketing spend, but it will be a harder problem to solve algorithmically questions such as “Alexa, how does my company do a successful post-merger integration?”<\/em> or “Alexa, what is the best strategy for my toothpaste to enter the Indonesian market?”.\u00a0<\/em>Consultancies\u00a0can better deliver on these questions due to the difficulty in quantifying this data and the consultancies’ advantage in drawing on experiences with multiple players across the industry (which AI installed at a given client would not be able to gather from others) and their broad experience in handling the “soft factors” (like how to influence people) in the action step on the chart above (aka implementation).<\/p>\n

    Even if we envision a future where AI can do these things as well, companies first need to transfrom to acquire these capabilities (… until AI becomes intelligent enough to advise on its own implementation). This provides an opportunity for BCG, which is well-positioned to guide clients in their digital transformation<\/strong> due to their (strategy and implementation) experience with companies across industries. Clients will benefit from using a management consulting company over the supplier itself (e.g., Google, AWS, SAP) because the management consultancy can provide objectivity, linking digital transformation to overall business strategy, and knowledge of how other firms in the industry have transformed digitally (across solution providers). BCG has invested in building these capabilities:<\/p>\n

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    • Advising companies on digital transformations:<\/span>\u00a0<\/strong>BCG has capitalized on the need for large companies to react to digitization themselves by offering consulting services on how best to transform digitally.\n
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      • Technology Advantage practice area: <\/strong>BCG has a consultant team dedicated to helping clients transfrom to the digital age and develop a digital strategy [9].<\/li>\n
      • BCG Platinion:<\/strong>\u00a0IT architecture and solutions unit that covers the more technical side of a digital transformation, like implementation of large IT systems [10].<\/li>\n<\/ul>\n<\/li>\n
      • Helping clients build new digital businesses:<\/span><\/strong> For clients seeking to re-invent their businesses digitally, BCG is building business units that focus on exactly that in a start-up environment.\n
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        • BCG Digital Ventures:<\/strong>\u00a0In 2014, BCG launched “BCG DV” to help client companies incubate new digital companies, innovate, and also invest in new businesses [11]. In 2016, BCG DV and Starbucks co-invested in a joint venture together called “Takt” – a personalization based platform for consumer-faced businesses [12].<\/li>\n
        • MAYA Design:<\/strong> In July 2017, BCG acquired Maya Design to add human-centered UX and UI design and R&D to its portfolio of capabilities [13].<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n

          BCG Technology Advantage practice area video<\/strong><\/p>\n