What Happened to Strategy Consulting since the 1980s?
As a follow-up to the February 16, 2022 post a reader asks: “I am curious, what happened to strategy consulting since the 1980s?”
“The Lords of Strategy”
Walter Kiechel III wrote a history of strategy consulting - published in 2010, titled “The Lords of Strategy”, and based on his personal experience with the principal actors.
Source: Kiechel III, Walter (2010), The Lords of Strategy, The Secret Intellectual History of the New Corporate World, Harvard Business Press
Kiechel’s book covers the development of strategy consulting from 1963 up to 2009. This adds nearly 25 years to E.J. Kahn Jr.’s book “The Problem Solvers”. It also expands the reader’s view from a history of Arthur D. Little to a history of the strategy consulting industry.
Source: Kahn Jr, E. J. (1986), The Problem Solvers, The inside story of Arthur D. Little, Inc., the company that helped industrialize Puerto Rico and developed antiknock gasoline, a Bloody Mary mix, buffered aspirin, a stalking clock, charcoal briquettes, and …”, Little Brown
Finally, Mark Scott’s 1998 cross-sectional study of the Intellect Industry extends the historical perspective by placing strategy consulting in the context of all other types of professional services firms.
Source: Scott, Mark C. (1998), The Intellect Industry, Profiting and Learning from Professional Services Firms, Wiley
The “Genuine Consciousness-Transforming article”
Kiechel places the development of strategy consulting in the context of its evolving client environment. He characterizes this environment as a continuous fiercening of corporate competition, first in the U.S., then globally. Finally, he shows the evolution of the clients from manufacturing corporations fearing New Deal laws against market dominance to the service economy that drove the financialization of the global economy.
He sees strategy consulting as the “genuine, consciousness-transforming article”, because it provided “the framework by which companies understand what they’re doing and what to do, the construct through which and around which the rest of their efforts are organized, eclipses any other change worked in the intellectual landscape of business over the past fifty years.”
Strategy consulting gave people new words, and new frameworks to understand the nature of their day-to-day work. These words and frameworks have lasting power because they were grounded in “muscular empiricism”, a level of real-life detail, data gathering, and analysis previously absent in the business world.
Mapping Strategy Consulting “Products”
The chart shown below maps the key “products” of the strategy consulting industry.
Kiechel shows how strategy consulting frameworks evolved over time from analyzing costs, to positioning competition, to reengineering business processes, and to managing implementation through business cultures, as shown on the horizontal axis of the chart.
This evolution in products also reflected an evolution in purpose from prescriptive experience curves, to descriptive competitive positioning, and to predictive technology S-curves.
The vertical axis uses two key ideas from a previous post, see link below, to differentiate the strategy consulting “products” over the course of their evolution as follows: (i) the mathematical models based on the empirically known & knowable (e.g. cost accounting), and (ii) the reference narratives (using John Kay’s ideas) - aka narrated heuristics (using Gerd Gigerenzer’s ideas) - based on the unknown & unknowable (e.g. shared values).
Mathematics has a stationary structure that matches stable observables in physical reality. This represent the reality of Leonard Jimmie Savage’s “small-worlds” where risk can be measured, and probabilities calculated, in order to make decisions based on mathematical models.
Language has a self-referential structure that matches the self-reflecting observers in social reality. This represents the reality of the “large-world” where radical uncertainty cannot be measured, probabilities are non-sensical, and decisions best based on the basis of reference narratives.
The strategy consulting products based on mathematical models include the experience curve, the share-momentum graph, the growth-share matrix, the Business System, Technology S-curves, and the mapping of industry, company, and technology networks.
The strategy consulting products based on reference narratives include the implementation of Greater Taylorism (a Kiechel expression) by the leverage buy-out companies, and later by the private equity firms. These products also include the various nine-box, five-forces, and seven-esses frameworks, as well as the concepts of value-chain, and core competencies (including those required for entrepreneurial behavior).
Both types of products moved from an initial focus on accounting costs, to competitive positioning, to process management, and finally to agent-based evolution and adaptation.
Strategy consulting developments since 2009 show two diverging trends:
- The macroscopic globalization of clients & service providers, and
- A microscopic engagement focus requiring domain-specific knowledge & experience (industry as well as technology) to implement industry, organizational, and even market changes through technology.
What ‘s Next?
Kiechel shows that strategy consulting moved its clients’ views from the statically comfortable based on the assumption that all competitors shared the same costs, to the continuously evolving based on the understanding that the competitive treadmill never stops. Thus, requiring consulting engagements for never-ending:
- cost improvement programs to keep-up with competition,
- development of new competitive advantages from differentiation,
- re-engineering of business process for time advantage, and
- management of short-lived human networks and connections for cultural & customer excellence.
He also shows the fiercening effect of the deliberate increase in competition and deregulation during the 1980s as the method that brough the inflation of the 1970s under control. These observations bring up two important insights about our own future:
- The “Culture”-as-people stage of strategy products, and its focus on individuals suggest that this fiercening of institutional competition may have become a fiercening of individual competition, and
- The current, high-watermark beating inflation may return policy to reopening competition in protected industries, and an overall deregulation of the economy.
Finally, Kiechel observes that the formalization of consulting products also means their commoditization, closing the circle on the consultants by placing them on their own continuous treadmill of competition and re-invention.
Hannah Arendt would then likely observe that while knowledge can become formalized into a commodity, individual “two-in-one mind” thinking - the nature of common sense - may not be so common, but is nevertheless commonly available to all as the always unique and surprising spring of freedom and invention.
“CTRI by Francois Gadenne” connects the dots of life-enhancing practices for the next generation, free of controlling algorithms, based on the lifetime experience of a retirement age entrepreneur, and as the co-founder of CTRI continuously updated with insights from Wealth, Health, and Statistics research performed on behalf of large companies.