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
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
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
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.
Hallelujah! I managed to get myself onto an Bain operations engagement, but as you probably guessed, I am still stuck in the airline sector. At this point I have resigned myself to accepting that this sector is so important and growing so fast that Bain would recognize my efforts here. I would not be punished for not having more diverse experience. My end of project performance review for the Eastern European airline project went very, very well. I needed to continue maintaining that momentum. Yet, that was proving to be difficult largely due to my own poor planning.
The fatigue was starting to creep up on me and I was getting a bit more tired more often. Heck, I thought I was too young to worry about this. So far my career was going well despite a very wobbly first project.
Some of my Bain colleagues had a rule of taking about 5 days’ vacation after every 2 month or 3 month project. It helped them relax after the project stresses. I had been at the firm for 18 months and I was still not taking any time away. Between projects I was working on knowledge capture work and internal assignments for partners. The fatigue was starting to creep up on me and I was getting a bit more tired more often. Heck, I thought I was too young to worry about this. So far my career was going well despite a very wobbly first project. I needed to push through and build my career while I had the momentum to do so.
***
My next project was going to be different. We were going to Asia to help a leading air carrier split out part of their fleet to create a new low-cost carrier to compete in this lucrative space. Low cost airlines were starting to post consistently large profits and eating into incumbents’ territories. The larger, established carriers needed to respond and one believed creating a separate low-cost carrier could do the trick. Bain had been awarded the strategy assignment which recommended the separation. Now Bain was also going to be tasked with preparing the blueprint for separating the operations and helping the airline with the first stages of the implementation. What made this project so challenging was the way the separation would take place. It was a formula which would form the blueprint for many low-cost carriers around the world.
• The parent company wanted the low-cost carrier to be branded differently and appear to be totally independent to the public.
• However, critical behind-the-scenes operations and functions would be merged to drive economies of scale.
• Other critical operations which needed to be separated like check-in, baggage handling and so on would need to be managed separately.
• The airline would be moving all 4,000 of its current employees who worked on the low-cost side of the business into the new company.
Over the next few years we saw many airlines adopt the same model in creating low-cost alternatives to fight against pure low-cost competitors. A couple of things made this a fairly interesting project:
• This was all happening at a time when the airline and unions were locked in vicious salary and benefits negotiations. The unions were suspicious that the creation of a new low cost airline was a tactic to separate the poor performers into a poorly performing unit which would be allowed to collapse into bankruptcy. You must remember this was before the low-cost airlines started dominating air travel and their economics were not fully proven.
• The airline had already communicated a go live date which was about 9 months away. Since this date was already out in the press, there was no way they could change the date without looking totally unprepared.
• At this same time the parent company was going through some of its own major shifts. It had decided to expand into several adjacent markets and industries like catering and engineering. The airline was also preparing for a major switch to an Airbus fleet. All of these changes were sucking up resources and talent. There was a concern the low-cost fleet would be left with the scraps.
• The low-cost airline was deliberately being pitched as the anti-establishment airline. It was meant to be the cool place to work and the cool airline to fly. This created animosity between employees of the parent and low-cost airline, although they were both technically employed by the same company.
Over the next few years we saw many airlines adopt the same model in creating low-cost alternatives to fight against pure low-cost competitors.
***
I had a very, very interesting role. I had to work with a team who had to create the new organizational structure for the low-cost airline. It was a very exciting role. It was totally new type of work and I was not even sure where to being. Unlike a business-case type of assignment where the next steps were relatively clear, I could not even begin to think this one through. I spent a lot of time talking to Bain organizational design experts to build an approach we could use. It was like being back in university. I needed to go right back to the beginning and learn how to learn a new field. Two of the concepts that were drummed into my head by the senior partner specializing in organizational design were that:
• Structure follows strategy.
• Think of the structure as the element which mops up deficiencies in the strategy.
This turned out to be very useful advice. Using these as the pillars for my thinking, I decided the team would spend the first 2 weeks with the strategy team really understanding and splitting apart the strategy. We needed to perfectly understand what the strategy wanted to achieve and the best way for the organizational design to help achieve this. We also needed to find any possible flaws in the strategy and how the organizational design could mitigate this.
Structure follows strategy.
Differences between strategy, operations and implementation. By the time we had come in, the strategy team was winding up their work. Like all companies going through change, rumors of the recommendations were already sweeping through the corridors. We arrived just at that point in time when the operations needed to start executing the strategy. What you learn in operations and especially in implementation work is that things operate according to an entirely different set of rules from the relatively structured pace of strategy engagements.
Implementation is not about analyses. Sure, you need the correct analyses and it must lead to the correct recommendation. However, the correct analyses will not go very far. I cannot tell you how many hours were spent listening to the concerns and questions of the employees. They saw the analyses, but they did not what it meant or how it would work in the real world. Sometimes, and this was usually the case; they just wanted their concerns to be heard.
For example, during an implementation project, when the CEO miscommunicates or poorly communicates changes, the consulting team feels the brunt of the resistance. For example if the CEO is not clear about the pace of change needed, or is unwilling to create urgency, then the operations staff the consulting team engages is sometimes unwilling to work with us. That is very, very common. Implementation is not about analyses.
Sure, you need the correct analyses and it must lead to the correct recommendation. However, the correct analyses will not go very far. I cannot tell you how many hours were spent listening to the concerns and questions of the employees. They saw the analyses, but they did not what it meant or how it would work in the real world. Sometimes, and this was usually the case; they just wanted their concerns to be heard.
Therefore, most of our time was spent listening to employees and placating their fears. It was a far cry from my previous strategy work when I would spend most of my time analyzing data and developing recommendations. In this project I was spending the majority of my time in meetings and discussions. My objective was to get the employees to start moving forward and building momentum. At the start of the post, I celebrated because I thought I was on an operations project. This was not operations project. This was a mix of operations (analyzing the operations to present a recommendation – organizational design) and a lot of implementation (helping the client achieve the benefits) work. In hind-sight I think that many firms confuse the two. An operations assignment is not implementation work and vice-versa. They are very different.
I found this project to be hugely draining. While we were developing the organizational structure, the rest of the organization was moving head first into meeting the live date target. Therefore we had to provide advice before we had completely verified our findings. This was frustrating and difficult. We needed to ensure that we gave guidance which would allow us to change direction later if needed.
***
On paper the project was designed to be led by strategy who would hand over to the organizational design team who would work with the systems and processes team, and human resources group. The systems and processes could only be designed once the strategy team decided how the two companies would interact and organizational design sketched out the points of interaction. Human resources should not be doing anything until a skills audit was complete and we were sure who would move across, how this would affect their salaries and benefits, and when they would move across. All of this needed to be timed to work in concert. Although Bain was appointed to lead this process, we found that all parts of the organization were scrambling to get things done:
We could clearly see the chaos that was erupting. We wasted no time in communicating this to the senior Bain partner along with a string of recommendations which were implemented.
• The HR director would remain in the parent company. Knowing this, and wanting to keep the best employees, he had assigned his team to find the top performers and “lock them” into the parent company.
• The engineering crew and already realized they were losing about 50% of their Airbus technicians. To ensure they did not waste any training budget on the wrong 50%, they took matters into their own hands and split the crew. We found engineers sitting in limbo not sure what to do.
• The team leading the SAP implementation where bounced of the executive committees update meeting agenda as more pressing matters crept up. Feeling as if they were losing importance, they doubled their work rate. This would have been fine, except for the fact that they went ahead and redesigned key processes and automated them without checking if they fitted in with the new organizational structure.
• Poaching of talent was taking place in all parts of the organization. Knowing that a staff split was on the horizon managers where trying to retain their best people rather than letting the business needs dictate staffing.
The good thing about this project is that we were working right next to the strategy guys and needed to have oversight over everything else. We could clearly see the chaos that was erupting. We wasted no time in communicating this to the senior Bain partner along with a string of recommendations which were implemented.
• We needed to rapidly escalate the sharing of information and connection points. Limited information in the company meant that employees were imagining scenarios and responding to them. Their imaginations always created worse situations than reality. Friday’s were set aside whereby the team leaders for each part of the transition would get together, debate progress and reach decisions.
• The CEO needed to take a tougher stand and stop the bad behavior. After a few months of hand-wringing he eventually did. He replaced the HR director and replaced the Operations Director. The tone dramatically changed with these actions. He also asked the new HR director to ensure metrics measuring the ease of the transition was built into everyone’s performance evaluation.
• The company embarked on a massive communications exercise so everyone knew exactly what was happening and when.
• We were also much more brutal on separating areas where decisions where outstanding from the operations and strategy analyses, and where the implementation teams could move along. This worked really well. Especially after spending 3 full working days to prepare a critical path for the creation of the new low-cost airline.
• The part which came back to almost derail the project was the tax implications of transferring assets, pension funds and other liabilities. We spent a few long and tense meetings to nail these down.
I realized that while strategy projects have this image of superiority, implementation projects are a little like driving a car at high-speed around a circuit on which you have never trained. Rather than instructions being radio-relayed through your helmet, you also have to watch for clues from the pedestrians. It is tough and there is much room for mistakes and spectacular crashes.
Our days were long and tiring at first. To get the organization to start moving we needed to run a project which generated lots of momentum. You cannot generate momentum by sitting in your office running analyses, emailing requests or via phone calls. Our evenings were spent running the numbers and our days were spent meeting key operations people to provide updates and help them move along. We sometimes had to meet key people three times before they did anything. Therefore the first few months were packed with these meetings and setting up the processes for the project to move ahead as we scaled down our involvement. I can safely say that only after three months did the momentum really pick up from the clients side. We still faced some big obstacles but the organization was moving in the right direction.
***
This project was important for one reason. It finally showed me how important operations and implementation consulting were. Like most consultants I had been enamored with strategy consulting. While that was certainly exciting and I enjoyed the few projects I had done, I was starting to see that operators kept the cash register ringing. You could have the grandest vision of bringing together two great companies, however, to make that work; you needed to actually make the deal work. Strategy was just as important as operations and implementation. I started talking to some of the London partners about interesting operations projects they were about to start.