Differences Between Implementation, Strategy, and Operations Consulting
One concept is consistently misunderstood in management consulting and that is the differences between strategy, operation, and implementation. Here are the common misinterpretations:
- McKinsey only does strategy work.
- Deloitte and other accounting firms are great at implementation.
- Implementation consulting is the same as operational strategy consulting.
We are going to explain the key difference and which firms are good at each type of consulting.
Strategy consultants help senior executives determine the overall direction in which they will take the business. It is about taking a top-down view of the business and looking at the allocation of scarce resources. Strategy consulting is difficult. It requires deep analytical skills and the application of strong and disciplined problem-solving skills. Principles like decision trees, MECE, and hypotheses-led research are used.
What Do Strategy Consultants Do?
Examples of strategy work include:
- What should be our long-term vision?
- Should we retain the same portfolio of businesses?
- Should we enter this market?
- Do we have a competitive advantage?
- What is the best way for us to extract value from our SUV division?
At the end of a strategy consulting engagement, the client is given detailed market research outlining the exact market shares, pricing, volumes, business models, and other conditions under which the recommended strategy will work. The end of a strategy consulting engagement must be a report. That’s because a strategy is a plan that helps you gain insight as to what the next step should be. And before you implement anything, you need a plan.
Strategy consulting engagements tend to involve long hours; they are high intensity and involve senior client engagement. Throughout the engagement, strategy consultants must work with the most senior executives of a firm. Proper strategy consulting can only be done for the most senior executives. They are after all the management involved in decision making.
The top firms in strategy work are McKinsey, BCG and Bain. Other firms like Roland Berger are good at strategy in selected markets and sectors. However, their standards are generally not as high compared to other firms.
Operations consulting services are very similar to strategy but are not implementation work. In operations consulting projects, the operations consultants usually work for senior executives to determine how to extract value (e.g. how to extract more value from a facility, plant, mine, supply chain, or division). The role of an operations consultant is to offer specific solutions to certain challenges. They are also involved in continuous improvement techniques, indirect procurement operations, and developing new operating models.
Operations consultants apply the same approach to solve problems as strategy consultants. MECE, decision trees, and hypotheses lead the research.
Operations Consulting Services
Examples of operations consulting services include:
- How do we increase the throughput of this plant?
- How do we reduce costs in this facility?
- How do we minimize the costs of raw materials?
- How do we increase productivity in this factory?
- How do we reduce bottlenecks in this plant?
Here is a crucial similarity between business operations and strategy engagements. At the end of an operations consulting project, the client also will receive a detailed report outlining metrics, benchmarks, and a laundry list of changes to improve business operations. At this stage, the client and operation consultants have not yet implemented the recommendations.
Operations and strategy engagements use the same highly disciplined problem-solving processes, but they apply them to different parts of the business processes. This is a very important point. The role of operations consultants is just as tough, just as intense, and just as appealing as that of strategy consultants, provided it is done correctly.
The top firms in the operations consulting market are still McKinsey, Bain, and BCG. To this list, you can also add AT Kearney. In some areas of operations consulting, firms like Deloitte, PWC, E&Y, KPMG, and Mercer also do well. The accounting firms tend to be good at financial processes, functional business processes, supply chain management, and business process management. The latter firms are not consistently good across all sectors and markets.
Implementation consulting is totally different from operations and strategy consulting. The consulting skill sets are different, the hours are different, the type of work is different, and so is the profile of consultants and fee structures. In an implementation engagement, the consulting team must take the recommendations from the strategy and operations engagement and help the client realize the targets. Let’s assume Bain advised an airline to set up a new low-cost airline division. The strategy calculated that doing this would lead to the airline saving $100 million over 3 years.
The implementation consultants need to determine the pieces of activity required to take all the existing employees within the airline, create a new division, brand it, set up the operating structures, and move the employees to the new division. They need to also get involved in asset management, performance improvement, and customer relationship management where they develop strategies to enhance customer experience and ultimately improve customer satisfaction. Although the implementation consultants will not do everything, like branding where a brand specialist firm would do the work, they will manage everything.
Here are some of the things involved in doing this:
- Setting up the new division
- Transferring employees and making adjustments to their employment contracts
- Creating a new profit center
- Setting up a new accounting system and adjusting SAP
- Setting up back-office processes
- Assisting in deciding if the low-cost fleet will be leased or bought
- Creating a new organizational structure in micro-detail
- Set the start date for the new division and begin migrating process and employees
- Set up a trial run for the new division
- Determine the go-live date
- Manage the labor unions
- Perform advanced analytics
You get the picture? Implementation consulting is not just for the smartest MBAs. It’s for smart people who can roll up their sleeves and work alongside a client to solve countless tedious problems and march towards a common goal.
A person with below average abilities who can make things happen is a far more effective implementation consultant than someone brilliant with the best solution that is never used.
Implementation consultants also only use the strategy or operations practices as a guide. No matter how good a firm is, it can never predict all the problems with implementing a strategy. The implementation team will need to find a way to make the strategy work.
Implementation consulting projects also have less stressful work hours. Since the team is working hand-in-hand with the client, they generally need to work to the clients’ schedule which slows down implementation projects. There is also a need to blend in more closely, use processes that can be used by everyone and focus more on transferring knowledge.
In our experience in the consulting industry, despite the countless adverts, not many firms do implementation well. Capgemini used to be good at implementation through their United Research team. Accenture is great at technology implementation. E&Y is quite good and so is IBM. The rest have poor records. Of course, there are also regional and sector specialists.
So the next time someone says McKinsey only does strategy, know they are wrong. McKinsey does plenty of operations work which is just as rigorous as any strategy engagement, as well as implementation work.
Image from Jon Herbert under cc.