Listeners following our Strategy Skills podcast channel know that the skill to run a strategy workshop is an essential one, especially when you become a senior strategy person either in a consulting firm or within a corporate.
Strategy EVPs and partners within consulting firms frequently have to run this type of workshops and they have teams doing the input analysis that goes into this. The input, like industry analysis, is important, but not as important as an executive’s ability to tie it all together in this type of workshop. That is why we spend so much time discussing how to conduct strategy workshops, also called visioning workshops.
In this article, and related podcast, we are focusing on industry analysis, one input into a strategy workshop.
And there are two stories here. One is an example of how not to conduct industry analysis and the danger of coasting after leaving a major consulting firm. And the other is about how to complete industry analysis the right way.
What not to do when conducting an industry analysis
Lets start from looking at an example of how an industry analysis should not be done. On a recent study I led, a person leading the industry analysis was an ex McKinsey associate. Being the kind of hands-on micromanaging person that I am when it comes to these issues, because I take work seriously, for me it is a piece of art, I was sitting down with this guy to understand his approach.
He is a nice enough guy. Red hair, freckles, wonderful personality. I am sure he and I would get along pretty well at a bar.
So he is presenting to me how he is going to do an industry analysis. And he basically talks me through these reports he has found, via Google, from an industry research organization. And his plan is to summarize them for the study.
I kept on asking, “Ok, you have got these reports. How are you going to use them?” And he said, “Basically, I will summarize them. It has 5 sections. They are all important. I am going to put it into power point and I think we will have a good industry analysis deck.”
If you were there you would have seen smoke coming out the top of my head. As many of you know when I am upset I ask a lot of questions. So I started questioning this consultant, in my futile hope that seeing the questions I ask and the lack of his ability to answer them would be an indicator to him that he is on the wrong track.
I was upset for a number of reasons. One is, this is not how we do industry analysis.
We don’t just summarize things because Google showed it to us. What if Google will change their algorithm? Does it mean that the new stuff they will now show us just happens to be as important?
No, we have a message we want to communicate. We have a way of building storyboards. We have a message we want to deliver and we figure out how the storyboard is going to convey that message. And then we build the slides to communicate the storyboard.
Every piece of analysis must have a message. It can’t be interpreted by the audience. It is our job to interpret it.
To me this is a real problem with contractors. People who leave major consulting firms, not all of them but the majority, tend to have a mindset of, “Because I have the name of MBB on my resume I don’t have to try hard.” And I cannot tolerate that.
I don’t know why he did this but my guess is he thought, “Well, an industry analysis are not that important.“ Although, I do not know how he cannot understand the importance of such analysis, considering that an industry analysis is such a central part of the strategy visioning workshop. Second, he probably thought he would likely get away with this because client will not know the difference.
This is the difference between people who see themselves as business people and those who see themselves as artists. An artist cares about these things. They put themselves forward and say, “My name is going to be attached to this and I will do it to the best of my abilities.”
So obviously this consultant was moved out very quickly from my team.
This is an example of importance of not coasting on your resume when you leave major consulting firms. You may think you will get away with this but you will always meet someone who has standards you should have and is willing to call you out for it.
This guy lost out on a very lucrative contracting arrangement. Moreover, forgetting about the financial benefit, there was also an issue of him damaging his reputation. Your reputation is what gives you your value.
Once you leave consulting, don’t coast. It will eventually show up, and it will look bad.
The right way to do an industry analysis
The way to do an industry analysis is you need an objective function. For example, for the Corporate Strategy & Transformation study the objective function for the industry analysis was to figure out what is the most prominent trend shaping the region, that client needs to respond to. From there, we said the trend is either going to have an impact on the demand side or supply side, or both. So you keep on breaking supply and demand sides to find out what is impacting the sub drivers of supply and demand.
And then we built a story around it saying, “If you look at big issues impacting supply and demand we believe there are 6 big trends cutting across supply and demand and this is the way they will impact the sub drivers of supply and demand.”
And eventually we summarized the major trends. We went through the high level issues in energy, we went through the supply issues (volatility in supply and trends in supply), we looked at demand side issues, pricing sensitivity and green energy. We then went through sector-wide issues that are emerging, such as environmental pressure, increased volatility in the market, deregulation, the role of diversification, impact of globalization and finally we looked at what is happening within the domestic market.
We did not do this because data was there. We did this because we were trying to analyze the objective function and develop a story that we had.
And, of course, once we did the industry analysis the story changed a little. And that is fine. That is expected.
An industry analysis should include desktop analysis as well as an extensive internal and external interviews. External interviews should be agreed upfront to avoid any potential stakeholder issues. Some aspects that should be investigated during the interviews and desktop research are outlined in the exhibit below.
That is the way you should do an industry analysis. You don’t go in there and just search on Google and find an industry analysis report from somewhere and then plagiarize it. By the way, the plagiarizing part was also an issue. The fact that this person, who has been trained so well, is just not willing to work at even minimum acceptable level is just disappointing. McKinsey wasted their money hiring and training this person because he is not a good ambassador of their values.
When you are conducting an industry analysis know what you are looking for. What is the question you are trying to answer by looking at the trends? Everything starts from the objective function.
Have an objective function. Build out the drivers. Keep on building out the drivers. Develop some hypotheses. Look at the data required to test those hypotheses and then go searching for that data, and that data only, and build your deck bottom up.
Second is, an industry analysis is often done very badly because many consultants believe they can get away with just summarizing a few external reports and repackaging it as their own work. Such an approach is unacceptable. A structured and rigourous approach, briefly outlined in this article and related podcast, should be used instead because you will see things that others did not see before you.
How do you know if your industry analysis is worthy
If you are doing an industry analysis at a client for a study, or if you are conducting an industry analysis as part of the responsibilities within your corporate role, don’t just summarize external reports. Because while people can say, “Wow, this looks good. You did such a great job”, it does not matter as much. In fact, you will miss key insights and you are basically saying you are not smart at all. If you were smart, why would you be relying on someone else’s report? Why would you outsource your thinking?
Great ideas always have come from someone who is willing to do the work versus simply copying others. In this study, the industry analysis gave us a very counter-intuitive viewpoint which changed the entire direction of the company and we took it down a path no one could have predicted. Yet, it worked.
What matters is if the industry analysis you produced change the outcome, and whether you presented the industry analysis in a way that was logical and constructive.
If you take your work seriously and you present very creative and insightful work, it becomes influential. And you should never settle for anything less.
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Case interview resume template used in The Consulting Offer. Offers from McKinsey, BCG, Bain et al.