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Bake-off

I had the chance to have lunch with a senior partner at my firm yesterday, and got a “in the trenches” feel for the competitive landscape of management consulting.

There are, of course, a large number of management consulting companies. There are the traditional “big three”, Bain, BCG, and McKinsey. There are also other large players such as L.E.K., Mercer, Katzenbach, Accenture, A.T. Kearney, Booz Allen Hamilton, etc. And, there are a lot of niche players — healthcare specialty firms, technology specialty firms, IT specialty firms, finance consulting groups, etc.

What this means is that, although there are certainly industry leaders in specific segments of the consulting market (i.e. a dominant firm in a region, a firm that has a great deal of experience with one particular sector [e.g. Booz Allen Hamilton and Wargaming]), there will usually be some competition between firms for specific projects.

While a big chunk of projects are sold on the grounds of a partner leveraging his or her network of connections, or sold on top of a prior successfully conducted case (i.e. LEK selling a European customer service center overhaul project after successfully helping the company cut costs in its Asian call centers), there is still ample room for consulting firms to engage in what is called a “bake-off“.

It sounds like some crazy hybrid between a bake sale and a dancing contest, but what it actually involves is the major competitors for a specific consulting project making presentations about why they’re the best for the job (so definitely more like a dance-off than a bake sale). In doing so, the various firms attempt to leverage:

  • Their brand strength/prestige (i.e. heavily relied upon by top players Bain, BCG, and McKinsey)
  • Their unique competitive strengths (i.e. specialty practice areas)
  • The experience and credentials of the relevant partners and team managers/leaders (i.e. resumes and biographical sketches get passed around)
  • History/Background (i.e. “we have done 50 cases on that just this past year, and we’ve always been right!”)
  • Overall firm strategy (i.e. “we create a strong working relationship with the senior management”, “we are dedicated to solving your problem!”)
  • Innovative thinking (i.e. “we’ll present some cool slides showing how we think ‘out-of-the-box'”)
  • Cost (self-explanatory and shouldn’t even warrant this parenthetical)

The deciding factor is usually not cost except when a large, experienced player attempts to break into a market or gain a foothold into a potential flagship client (i.e. a new BCG or Bain office breaking into McKinsey territory will “typically” charge lower fees), but usually revolves around the experience/credentials of the people involved and the background of the firm in that particular area. This is not surprising given that most of the other factors do not help in differentiating companies (who isn’t going to at least pretend like they’ll create a strong working relationship with senior management).

 

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