AMERICA RENEWED | Financial servicesLIVE

How do the the leaders of the largest businesses in the world’s largest economy solve their most pressing issues?

3 consultants live-blog a 10 week study helping a Fortune 1,000 bank. The client finances Hispanics starting micro, small and medium size businesses in the US and wants to create a retail presence in the USA serving all low-income entrepreneurs.

Our mandate: validate the market’s attractiveness and, if necessary, identify the optimal market entry option.

This study matters for 2 reasons. First, small businesses drive US job creation but receive little attention. Second, by empowering oft ignored entrepreneurs: immigrants, single-parents, high-school drop-outs and low-income earners, the client is attempting to empower immigrants to take control of their destiny and ultimately minimize inequality.

The study begins on 16 June 2014 and concludes 1 September 2014. The detailed videos and training from this study will premier in Winter 2014.

Click here if you want to Renew America by taking part in the world's first and largest strategy study completed via crowdsourcing.

The live-blog provides hour-by-hour analyses and commentary of this complex study. Firmsconsulting partners will cover the study from the client-site, Toronto and New York City.

Comments

123 responses to Live Blogging Financial Services Market Entry Strategy

  1. The general feedback on the blog, to quote sir Alex Ferguson, is: “Well done”.

    I don’t think that the project had a significant impact on US given the project scope and goal.

    The work though was disruptive to the way strategy projects are delivered:
    – crowdsourcing
    – live blogging
    – running project only with interns
    – making (at least initially) “non star” consultant a manager
    – communicating and updating client and team through blog

    I think the biggest disruption to the client is in observing willingness of Michael to constantly approach strategies in a new way. I increasingly find myself asking: “why am i doing this work? How am i developing by doing this task? Am i just using “best practices” without inventing anything new?” Before becoming a subscriber, just imitating current best practices was a big thing to me. Not anymore.

  2. I agree with Brian. Thanks for sharing the study with the live-blog.

  3. Hi Michael,
    Here are my thoughts:
    Did you have an impact on how strategy is taught? Yes. Being able, in real time, show how and why the process in the strategy study map is applied( and what happens when it is and is not) is a great teaching tool. Reading the blog was like watching the play-by-play and color commentary of a game(Your choice on which game. :-) ). One could not help but get immersed. You did a good job of capturing the teachable moments and explaining why things were done when they happened.

    Did you make an impact in the client’s lives? You definitely made an impact on LAB. If anything, it seems like the impact on what LAB does will be greater than what was expected. I also get the impression that there may be some governmental policy impacts from your study. Hopefully, it will reflect positively on those at LAB.
    I can’t speak for the other members of the FC community, but I was able to get a real sense of the intensity of a study. The life of a tier-1 consultant seems similar to a professional athlete in terms of duration and the level of effort needed just to remain a member of the team. So yes, the study did have an impact on me as an FC subscriber.

    Did the study have an impact on the US? The magnitude of the problem chosen is too large and the time scales needed to assess an outcome is too long to know for sure. Time will tell on this one.

  4. Hi Michael,
    Glad to know that things are better.
    No problem regarding the decision trees. What you said makes sense.

  5. Thanks Brian,
    Yes, I am since learned that red bull and headache pills do not mix. My eye-sight has returned to 2D and I no longer see things in technicolor.
    The use of decision trees will had no value to this analyses. We have thought about it but it actually makes the comparison far more difficult, since each bank is optimizing a different objective function and the trees will look very different.
    Moreover, and this is the big one, this analyses does not lend itself to decision trees.

    Thanks for the suggestion though.
    Michael

  6. Hi Michael,
    Sorry to hear that you are ill. That said, mixing Red Bull and medicine of any type is not a good thing to do.

    My suggestion was to use a decision tree to organize the logic of what the legislation says in order to better understand it ( or even present it). Legislation X says that Bank Y is mandated to do A, B and C based on Paragraphs 1, 2, and 3 of the legislation. I am sure that you guys have done it, but you would get a sense of the “architecture” of the legislation and be able to hone in on the comparisons that you put in the table that we see in the blog.

  7. Hi Brian,

    I do not understand the suggestion about maps and dependencies. Could you explain that in a different way please?

    Michael

  8. Owning a strip mall does not seem like a good investment for the future given the paragraph on shoppers fleeing physical stores.
    When looking at the legislation, could a map linking the dependencies between each article (or the important articles) be useful?

  9. Yes Aylwin, and I see I am the only person in the world who spells chamomile tea without the “h”

    Michael

  10. Seems to me that chamomile tea has a lot of health benefits. Will give it a try!

  11. Aha! I knew it.

  12. You’re in good company: Peter Townshend took chamomile tea on tour.

  13. Thanks Brian, Zander and Aylwin!

  14. I look forward to the study being released as part of the strategy training modules. Its worth the wait! Congrats.

  15. It has been eye opening seeing the study unfold from the blog and quite impressive to say the least. Congratulations to all on the study and to the interns on earning the positions at LAB!

  16. Congratulations on a successful study!

  17. Thank you Aylwin. This is very useful and detailed. We will think about all of this before launching the new study.
    Michael

  18. Hi Michael

    Thanks for the showcase of the finance case studies. It was eye opening to see how a study of such complexity was managed at a broad level. I felt the content was pitched at the right level and knowing the release of the details will come, it affords the opportunity to go through the study once again. Doing so allow us to have a deeper appreciation on the values and implementing the strategy approach.

    The map-format is definitely useful. Since we are use to the map-format in the Technology Study, I would say not to deviate much from that format rather to build upon it.

    With regards to videos above the powerpoint file, yes, I do find this format useful. Probably having a second powerpoint of the slides that have your digital scribbles will help trigger the memory in terms of what was discussed rather than replaying the videos over again. This is just a nice-to-have.

    In terms of the slides themselves, I see a certain structure or flow which leads to more in-depth discussions in future slides. That I would assume is under control and you have a certain style in presenting information and I can adapt to it which helps manage information overload.

    Anything can be done differently, the way Firmsconsulting presents the information, that works for me. Enhancement to the user interface will help. 1) having a “bookmark” to where we stop in reviewing the map. 2) knowing which content was updated since I last logged in. 3) the live-blog – having a better way to filter the blog say by day / week. Even having a RSS link that allows users to link to the blog will help via RSS, and 4) a search functionality within the live-blog.

    Another idea. The “post comment” button and also the comment box, having it at the top rather than the bottom makes more sense, since the latest is at the top.

    Will let you know when more ideas come along. Please keep up the good work. Thanks

  19. Thanks Nauruz. There is a lot of interesting ideas here. We will think about these very carefully.
    Michael

  20. My feedback on the “Is there anything else that you want done differently”. I could probably have taken some time and built more suggestions over a few days, but I also wanted to initiate the discussion so that others get involved.

    1) Create a separate page for feedback, wish list on what we want to see in LAB study roll out?
    2) Keep slides and video format, it’s great because mere text for someone not currently involved in a strategy becomes boring and abstract, plus in videos you cover some other issues not covered in slides, provide anecdotes.
    3) Links to other relevant videos/articles/podcasts on the same page? For example, from the video “The overall approach for strategic scoping” by pressing a link I could go to build hypothesis video in the technology merger section. There should be a way to merge strategy tools and strategy studies, probably videos could go one after another. First is the tool, second is how it was applied in LAB study vs technology study.
    4) Add “viewed” and “save?” options for strategy videos as you have for TCO 1,2.
    5) A quiz for strategy training similar to a quiz for case interview preparations? This would be awesome. E.g. check all options below that explain how top down analysis is different from bottom up analysis etc.
    6.1) Notification of reply – email notifying that someone has posted a comment on top of your comment.
    6.2) Bigger boxes for comments – can’t see more than 3 sentences without scrolling down, inconvenient to view what you are typing, and not possible to view how the text is structured because you really get zoomed in.
    6.3) Options to edit text in comment box, e.g. highlight, bold etc. It looks like you have such option (I see some of your text in bold), the readers don’t.
    7) Create videos on your strategy training as you have developed for TCO 2 where Kevin speaks about rationale of participating, Alice and Michael discuss the program and their biography – high quality videos describing what is this study about and attracting readers who are not familiar to the Firm. Maybe interviews with interns?

    I hope this helps,

    Nauruz

  21. Hi Brian,
    Yes, creating map for TCO may be a very good idea. Thank you for that. We arranged the videos in TCO in the order they should be watch, Prepare > Learn > Practice > Addtional, though maybe that is not so clear.
    The map is similar for operations, though different in some regards since every study is different. Operations and strategy studies are very similar.
    Process studies are a different type of operations study and is more like implementation.
    It would be very different for an implementation study.
    Since there are so many differences, it is best to wait for the maps for those studies to come out. Which will be early 2015.
    Michael

  22. Hi Michael,
    The map would also work well on the TCO side since clients will get a better sense of how the lessons fit together. Additionally, a client should know which video’s to watch first within each session.
    How would the map that you have posted for the strategy study be different for an operations/process improvement engagement.? You mentioned the business case, are there any other areas?

  23. Hi Brian,
    Thanks for the feedback. We also think the map format is very useful. It does not exist anywhere else. However, if you think of ways to make it better, let us know.
    Michael

  24. Hi Michael,
    Maybe it is the technical person in me, but I find the map format to be extremely useful. It is useful to see what the overall process looks like with the map and makes discerning the logic much easier.

  25. Hi Michael,
    Thank you for the clarification. I don’t think I was 100% clear either with my original question.

  26. Hi Brian,
    Sorry, I misunderstood.
    Our job is not to get buy-in as such, nor is it to alienate any of the other bank CEOs. I suppose you could always argue that we should focus on buy-in through the process of conducting the study, but that is not the role we have.
    Once we do sketch out the objective function and our approach to achieving that objective function, it will likely lead to us doing a top-down analyses to see if their is a possibly lack of alignment and the degree of that misalignment. Thereafter, assuming we find there is a problem, the bottom-up study will focus on verifying the issues and finding the solution.
    Finally, the implementation study will focus on buy-in through rolling out the stages.
    The key in any study is setting the right problem statement.
    Just to be clear, irrespective of what happens, buy-in cannot be a part of the top-down analyses since there is nothing to buy in to. We are not developing any recommendations in this phase, simply trying to see if there is a a problem worth analyzing further.
    Michael

  27. Hi Michael,
    You were not kidding when you mentioned that the relationships were complicated. My second question had less to do with analysis than with getting buy-in from the client so that you don’t have infighting between entities over resources. However, that is where how you define your objective function on what “alignment” is comes in to play. To the extent that you can say, am I understanding things correctly?

  28. Hi Brian,
    All the banks are operating under about 4 entities so there are anywhere from 3 to 12 banks per government ministry.
    For your second question we have not yet sketched out the objective function. The question you ask may not fall under this study or any subsequent study. It is unlikely it will even fall into this study.
    The question you ask is more important than the analyses you do.
    We will post more when we sketch out the objective function.
    Michael

  29. Hi Michael,
    Is this a situation where all of the finance banks are operating under one entity so to speak?
    If so, how will you go about structuring things so that each entity realizes they have a role to play and that it is in everyone’s best interest that they play it well? I am sure politics plays a huge role in avoiding a sub-optimal solution in this case.

  30. Hi Zander,

    Yes, we will post more on that. Your observation is very insightful. Very insightful. We will only post more on this study from next weekend when we start to shift our attention in that direction.

    Michael

  31. I hope you will post comments on how you arrive at the objective function for the alignment study. How two organizations are aligned relative to each other is only part of the definition. What they are aligned towards is the other part, so it’s not a simple as a single-valued objective function like market share or a go/no-go decision.

  32. Hi Davor,
    Now I perfectly understand your question. We will post the response as a blog post.
    Michael

  33. Thank you Michael,

    great level of detail in answering and great learning material for readers to expand on business judgement in financial services. Please keep doing it.

    However, one thing is bugging me, and I am not seeing it through. I assume that both DFI and LAB are regulated entities.
    The recommendations made will change the current structure and exposure to some of balance sheet and off balance sheet items (contingent liabilities).

    When the Team presents the recommendations to the CEO soon, I sense the following question coming up: “Given you are recommending to change/restructure my balance sheet and off balance sheet exposure will I be able to maintain the required capital adequacy ratio upon those changes?”.

    Looking through the drill down financial analysis in the initial consideration I am missing this part.
    Namely, any of the changes implemented that affect balance sheet and off BS, will impact different levels of risk weighted assets upon implementation (RWA => balance sheet and off BS positions have specific weighting that go into regulatory capital computation). These will impact the Core Tier 1/Tier 2 capital and the end result => the capital adequacy.

    From regulatory view you stated that the Team looked on interest rate caps etc… but I am missing here the impact of recommendations on core Tier 1 capital and capital adequacy given you will basically restructure balance sheet. I would suggest that the Team spends time to re-check how the recommendations such as focusing business on increased credit guarantees exposure (contingent liability with higher rating in RWA) and other recommended with impact on balance sheet and off balance sheet items impact the post recommendation capital adequacy ratio. This would be one of mine concerns if I were the CEO.

    A friendly suggestions to readers: Maybe to channel energy into understanding the study and answers to the study-related questions given that this is a great opportunity to expand on your business judgement in financial services if genuinely interested in that area, instead on channeling energy into side line discussion on “which mba” or is she better then he for this or that position.

    Thank you

  34. Hi Zander,
    Yes, that is the key video to watch and understand. And yes, back to the study.
    Michael

  35. There is a video in the strategy training library (step 0), “What makes strategy studies from elite firms different?”, which subscribed readers might find relevant after the recent discussion.

    But back to the study.. I am eager to see what the team produces in the final weeks!

  36. Hi Davor,
    Nice to hear from you again after a long absence.

    1 – I think it is too early to examine what could have been done better. The study is not yet over and we will do this not after week 7, when the retail study officially concludes, but after week 10 when Nimisha completely wraps up the study’s outstanding pieces. It would be premature to draw any conclusions now.

    2 – We only examined credit guarantee products for two reasons.

    A) This is a product the DFIs use. They do not use trade finance products like letters of credit.

    That said, a simple back-of-the-envelope estimate will tell you the letters of credit will not work. We initially built a lever and driver tree for profits. This is one of the very first things Albert did. Using that, we could see that if we used letters of credit, the only way it would impact profits is on the interest rate side. But that has the same cap as loans in the USA, so it does not help.

    On the balance sheet side, letters of credit work better since they have smaller contingent liabilities. We have recommended, and it was mentioned earlier, that LAB should not use credit or debt based instruments. Equity based instruments work better for very small loan sizes since the interest charged to clients, causes them to actually default.

    For larger loan sizes, yes, LAB could use letters of credit, but designing the perfect product is not part of this study. We only had to identify the core issues facing the business, and decide on the US market entry. Again, it is key lesson in only doing analyses relevant to the objective function.

    A follow-study is to redesign LAB product portfolio based on our recommendations. There are 2 other follow-up studies as well.

    B) In the top-down analyses we identified that the liabilities from the credit guarantees will soon blow a hole in LAB’s balance sheet. So we wanted to see what was likely to happen.

    In terms of issues, you need to go way back to the focus interviews to see how we used them to validated our initial hypotheses on the issues. We developed our initial hypotheses from reading annual reports and the press.

    In terms of analyzing priorities, that is covered extensively when we reported back on the top-down financial analyses. We list all the analyses done and how we selected the priorities.

    In terms of interactions between products, that was not necessary since the client only had a few products. There was no interaction as such from a portfolio basis. This was not about optimizing a portfolio. This was about resuscitating a portfolio suffering cardiac arrest. Once the business is stabilized, then they can worry about optimizing it. Our job was not to design the perfect bank, but to analyze what existed and simply provide a go or no-go decision. We really over-delivered by moving the study so deep into the retail economics, credit guarantee analyses and alignment study. Remember that everything you do must be tightly driven by your objective function. If it is not part of that, do not do it.

    I am not sure I understand the phrase “how those products impacted risk weighted assets”. We looked at regulations like interest rate caps and so on across the USA and business operations. Again, we prioritized only those issues which had the higher sensitivity, which is the way it should be done. We never analyzed anything just because it was interesting. It had to be a critical driver.

    All of this, including all the slides and analyses, will be neatly arranged when we present the study.

    I hope this helps.

    Michael

  37. Michael & Team,

    1. the week 6 has neared to the end of the Study. If you reflect back, what do you think that each of you could have done better in the past 6 weeks? e.g. Michael you as a partner, and team members?

    2. If possible, you mentioned that the engagement manager made a great analysis of credit guarantees. Have you looked only on portfolio of guarantees, if so why specifically these, or have you given due consideration to any other instrument, used to support trade finance such as letters of credit etc…. I would be interested to hear the steps you have taken in analysing the priorities, approach to deduct issues and how did you understand the interractions among different banking products that support trade finance. Have you also looked on how those products impact risk weighted assets e.g. regulatory impact or was it predominantly business operations.

    Thank you

  38. Good points Brian. In other words, it is what you make of your choices.

  39. Good point Zander. That is a perspective I have not captured above and it is valid.
    Michael

  40. Hi Michael,
    A few things for the community to think about:

    1) Tens of thousands of people apply to a “top” school and less than 10% get in. Given the way admissions committees fill a class, you are essentially entering a lottery. Many people are capable enough to get an MBA; even an ivy-league one.

    2) A great many of our most iconic companies were founded by people who did not have a college degree, let alone an ivy-league MBA. Ford and Microsoft are among them.

    3) Managers with MBA’s are a relatively recent phenomenon. What I mean by recent is within the last 40 years or so. Companies used to train potential managers in house and managers were steeped in the business and culture of the company. An MBA is not necessary to be a good manager.

    4) You do not learn how to manage people in a classroom. An MBA (ivy-league or not) does not teach you how to handle laying off the sole breadwinner of a family, deal with sexual harassment or manage someone with a sick family member. An MBA also does not teach you how to teach others. The ability to teach others takes patience and a deep knowledge of how people grow professionally. This is critical to properly evaluating how someone performs and how do develop subordinates.

    Leadership in anything is about people, not academic degrees nor status.

  41. If someone needs an Ivy degree to get an offer from McKinsey, that’s fine. There is nothing wrong with them. They are typical, average.

    But think about the candidate from a non-target school. Not only did he break into recruiting from the outside, but because he will have less credibility with clients, who have never heard of his state school, perhaps he was held to an ever higher standard in recruiting. The firm certainly didn’t lower the bar.

  42. Michael, thank you, that answers my question perfectly.

  43. Hi Zander,

    We have numerous podcasts explaining the differences between McKinsey, Bain and BCG. They are not at all interchangeable and it is usually very junior or inexperienced consultants who cannot see the differences.
    It is like when my niece cannot see the difference between a Lamborghini or Ferrari. There is a massive difference and they are not the same.
    Since the podcasts cover these points, I will just answer them in relation to Peter and Nimisha.

    Nimisha has a very pleasant and humble personality. She is a genuinely nice person and deeply analytic. She tends to rely heavily on the quality of her work to speak for itself. This is a very BCG-like trait. She also tends to exhibit the usual traits of PhD’s and CA’s. She tends to focus on details, sometimes a little too much. Whichever firm she joins must have the ability to groom her and mentor her on these traits. BCG is very good at training highly quantitative consultants to be leaders.

    Peter demonstrates an exceptional grasp of the fundamentals of management consulting. He understand it is not just about the analyses. It is about the questions you ask and why you ask them. In my long consulting career, Peter rates among the best new hires I have ever seen. Since he is so good at the basics, you can send him anywhere in the world and he will fit in perfectly because he is trained to fit in well. This works with McKinsey’s global staffing model and it sets him up better to display this very unique skill. Beyond that, Peter is similar to Nimisha in that he just leads. He does not tell you he is good at x or y. He just does it.

    There are numerous other reasons but the podcasts cover these in more detail.

    Michael

  44. Congratulations to Nimisha, Peter, and Albert. Earning offers when there was no expectation speaks volumes.

    Can you comment a little more on why BCG is a better fit for Nimisha and McKinsey for Peter? This is an interesting topic because “BBM” are always spoken in the same breath, but there must be significant differences, which start with the fit they look for when hiring.

  45. Thanks Brian,

    The answer to your question is covered in a lot of detail in 2 videos:
    https://www.firmsconsulting.com/strategy-training-videos/step-2-9/
    https://www.firmsconsulting.com/strategy-training-videos/step-3-9/
    Both videos contain detailed maps we use to track and manage the development of consultants.

    Hope that helps.
    Michael

  46. Thanks Zander,

    We appreciate that comment. We do try harder and still believe there is a lot we can do to improve the way we manage ourselves and work with our clients. It is an ongoing process.

    Michael

  47. Hi Michael,
    Given that you were just sick, don’t push too hard.
    As a consultant gains experience, in what order do the skills and competencies necessary to rise to the manager and then partner level develop? I am sure that when you evaluate someone you have a development curve in your head.

  48. Michael,

    I networked with MBB consultants who were being managed out–they were as helpful and professional as anyone, and they were happy to discuss their situation. Even after being declined, a partner was as encouraging and thoughtful as he had been before the interviews.

    My experience with Firmsconsulting before all this set the bar, making it much easier to spot unprofessional behavior, even from MBB, which happened maybe once in all my encounters.

    Honest professionalism is refreshing.

    Zander

  49. Hi Brian,
    I will comment on this more above. These questions are answered in a lot of details in various podcasts so best to look there.
    Michael

  50. Hi Michael,
    I am curious, you seem to have had great cooperation from your client which is a consultant’s dream. How do you handle a hostile client or a client where you have CEO support but not the support of a plant or division manager(a more normal situation)?

  51. Hi Nauruz,

    1 – Most, but not all clients, tend to have a prove-it approach when a firm bids for work. The cost and effort to “prove-it” for a boutique firm can be exorbitant. It can be terrible even for a large firm like Bain or McKinsey. The attitude of the client is not conducive to a true partnership. While LAB has been a very good client in every respect, we made this rule a long time ago and have refused to change it, irrespective of the positive relationships we may have with a client.

    Firmsconsulting must always be invited for anything. We feel proposals are almost a form of marketing and we are against that model.

    And this is not about arrogance. We believe strongly that a firm that just beats out a group of peers does not have the full backing of the executive committee, because not everyone wanted them, and we would not want to be in that position. It leads to a poor study overall.

    The quality of our work should speak for itself. And if LAB feels our quality is not sufficient then they should rightly invite another firm in.

    Moreover, LAB has seen what we can do, so moving to an RFP to test our capabilities is not necessary. That said, we respect their decision to do so, and of course we are doing a lot of things beyond the scope of work to ensure the next firm, whomever that may be, can seamlessly take over. LAB also knows we will disband the interns once the study is done. So it could very well be that we do not have the capacity to take on more work and they are aware of this.

    Yes, we will support whichever decision LAB makes.

    2 – I put up a detailed post on this earlier about why not all loan defaults are equal.

    Michael

  52. Michael,
    Thank you for the previous reply on inflation. It makes perfect sense to me know.

    1) Could you please remind why you don’t bid? Would you have considered doing the study if it didn’t require bidding?

    2) How would you differentiate if a person defaulted because he didn’t have mentor or for any other reason?

  53. You are welcome Echung.

    Michael

  54. Thank you Michael. The explanation was sufficient.

  55. Hi Echung,

    1 – To calculate the real profits for the existing DFIs we used the actual salaries – inflated or not.
    2 – To calculate the modelled profits for the retail branch structure (DFI) LAB could end up running, we used the top end of the salary range used at competitor branches in the US.

    I hope that answers your question.
    Michael

  56. Hi Nauruz,

    Those are great questions. Let me answer them for you.

    1) LAB has a capital funding portfolio of over a $US1B. That is a lot of money. More than most development finance banks focused on entrepreneurs. The markets LAB has targeted have tended to be small. Also, LAB likes to fund a group of borrowers in a region so that it can assign mentors to a region. It has found that when it funds a group of borrowers in a small town or village, inflation goes up since there is basically an injection of cash into the market. The borrowers start paying themselves an income, hiring other employees and, crucially, start paying market related prices for services. Before they received the loans or equity, the entrepreneurs relied on the good will of neighbors and friends for services. After they receive the funding, they feel obligated to start paying for these services. So the entrepreneurs, their employees and increases salaries to their suppliers drives up inflation.

    2) The revised question is: how can LAB gain the maximum profit exposure to the US market or How can LAB extract the most profits from the US market.

    We always list the status quo as an option because sometimes doing nothing is a very viable plan. Yes, the example you provide is one reason but there could be other reasons as well. Maybe LAB needs to make a tiny change to its current efforts to fix the problem. We would consider that a status quo option.

    I hope that helps.

    Michael

  57. Zander,

    Yes, that is a smart way to think about why we need investment in R&D.

    Michael

  58. Michael,

    Thank you for commenting. In my experience, those raised in the US tend to see inequality here because they encounter it in their daily lives, but not consider the difference between poverty in America and poverty in the rest of the world. It’s hard to grasp without travel and first-hand experience.

    This is why we need organizations to develop energy, technology, and health solutions. Our standards of living is constrained by resources, and our population is growing, so productivity is the only clean escape.

    Zander

  59. Hi Michael,

    1) What amount of funds LAB could deploy to cause inflation? Is it a general inflation or inflation in a specific industry/country?

    2) Wrt options available to LAB, what is the revised goal/question the study aims to answer? Is status quo an option that would satisfy this goal? In other words, is it the situation when e.g. you have to increase revenues, and you can do nothing because market is growing and your revenues will grow at market rate.

    Thank you,

    Nauruz

  60. Michael,
    How did you control for possible distortions in DFI accounts, including improper business expenses, owners inflating their personal salaries, and owners employing family members at above-market salaries when calculating profitability? I recall you noting the absurdly high salaries for DFIs in a previous post.

  61. Zander,

    In an ideal world, you are right, we should measure this. But we really cannot.

    In fact, Americans are getting wealthier in absolute terms, but declining in relative terms. The problem is our definition of poor has changed. As you say, their is rising inequality but people overall are better off.

    The problem is that people cannot compare their current situation to the hypothetical “where they would have been without the trickle down effects of a few creating vast wealth” and end up comparing their current slightly improved conditions to the vastly improved conditions of a select few creating vast wealth.

    In that comparison, things always look worse off.

    I am not saying that millions cannot have a better life in the US, but are things really worse today than 20, 30 or 40 years ago? I do not know. It would be ridiculous of me to pretend to know the plight of people in the inner cities or rural areas just because I have analyzed some of the data. It could be worse or it could be better.

    I do however know that the rest of the world was much worse off during that time while the US was relatively prosperous. So, what we are seeing is a fragmentation. As the US lead erodes, which is only natural, citizens around the world benefit, while US citizens suffer a little.

    Now the real question is: are American’s willing to make that trade-off? Probably not, but can they reverse it? Extremely unlikely?

    That said, every prosperous state from Athens to Rome to England, Netherlands, Portugal, the Ottoman Empire and even the old Russian Empire attracted all manner of people to seek their fortune. There is no precedent for a all powerful state where every citizen lived well and equally. By its very virtue, a rich country will always attract the less fortunate.

    That does not make it right nor does it mean it has to be this way forever. The point is that poverty is a relative term. We will not eradicate it, because its is marked on a curve.

    Michael

  62. Michael,

    WhatsApp was productive–a handful of people made a stunning $19 billion, which surely impacts inequality–but on the other hand, 200 million people use WhatsApp to communicate quickly across the world. Are we better or worse off overall in the end?

    We should balance allowing economies to generate relative growth (inequality) against absolute growth (standard of living). For example, if everyone’s live improving, we might be accept more inequality than we would if the poorest were getting poorer in absolute terms.

    Of course, where to place the balance is a tough question.

  63. Thanks Brian. This is excellent. I trust readers will have a look at this.

  64. Hi Michael,
    Here is where I found the statistic.
    http://fivethirtyeight.com/features/lessons-from-brazils-war-on-poverty/
    Here is the paper the income graph is based on:
    http://elibrary.worldbank.org/doi/book/10.1596/1813-9450-6259

  65. Thanks Brian,

    That is an unbelievable statistic. I recall taking a boat cruise once on the Bangkok river delta. I was trying desperately not to rock the boat and fall into the water since there were crocodiles (or alligators?) trailing us.

    Anyway, I recall seeing these very happy teenagers waving to us from these pretty terrible homes built on the water.

    Yes, poverty is relative. That said, you can never feel good about your circumstances if you have not experienced anything worse.

    We just have to fix our version of poverty.

    Michael

  66. Hi Michael,
    I was being simplistic regarding my question and you are correct on all counts. I don’t know if you had it or it was posted on Bloomberg or the Five Thirty Eight Blog, but the bottom 2% of income earners in the US is at the 55th percentile of income earners globally. Poverty is a relative term and we in the US do not know what absolute poverty is.

  67. Hi Brian,

    You are indeed correct. That is why we added this quote:

    “Loans are difficult to assess because of a lack of personal history to apply behavioural scoring to, a lack of equity resulting in finance being used for individual survival , a lack of collateral on the individual’s part, and a lack of individual competency assessment.

    How do we know if a mom living in a trailer in rural Texas, earning $600/month waitressing and with shot credit is in that position due to bad luck or because she is not worthy of credit? How do we decide this mom is different and worth funding with a small business loan? ”
    CEO of a LAB DFI in Texas, USA

    We do know that not everyone is poor for the same reason. And it is not just about costs and income. Costs and income are outcomes of decisions we make and our circumstances.

    Yet, to LAB in the US, it would be irrelevant. Why someone is poor and unable to repay their loans does not change the fact that they cannot repay their loans. That is a distinction we have to make. In Latin America, LAB would worry about this and try to subsidize early losses to train borrowers to improve in the long term.

    In the US it is chasing profits to subsidize losses in its home market.

    So I hear your point and it is 100% valid. But it is not for LAB to manage that, purely due to LAB’s current situation.

    That said, wait for our recommendations because they will surprise you. This is ultimately an economic decision and good economics should be good for consumers.

    Michael

  68. Michael,
    If you are poor, is it because you are spending too much or earning too little? Blanket statements like “Poor people are bad with money” seem to suggest that poor people can easily get out of their situation. They more often than not can’t.

  69. No reason to apologize Brian.

  70. Hi Michael,
    Sorry about that. Not trying to jeopardize anything.

  71. Hi Brian,

    If I explained it now it would be unprofessional to the client who has not yet seen our recommendation. That is why we will wait to explain it a little later.

    Michael

  72. Hi Michael,
    The only commonality I see between the two is the use of the hedgehog defensive concept. Are you using DFI’s(?) as hedgehogs? I am sure there is something I am missing here.

  73. Good points Brian. Yet, there is a tactic used which you have not isolated. We will discuss this more from next week as we start to piece the findings together for the recommendations.

  74. Okay, I am going to bite on Dien Bien Phu and the Siege of Moscow. Both were sieges. Both dealt with a foreign army on home soil . The difference is that the VietMinh were the attacking force on home soil so they could afford to engage in a battle of attrition. In the siege of Moscow the roles were reversed in that the Russians were on home soil and the besieged. Their attacker(Germans/French?) had to contend with the Russians as well as the Russian winter so time was not on their side. So why engage in a battle of attrition (the worst form of warfare)? Why not find a way to use maneuver to your advantage?

  75. A reader sent me this note and gave us permission to publish it. I think it offers some useful insights and lessons into the struggles students at community colleges face. Somethings we take for granted given that the majority of our clients come from fairly stable backgrounds:

    Hi Michael,
    What happened to you at the restaurant bothers me to the core.

    I am Hispanic so I have dealt with racism on numerous levels. I also can understand why you did not respond back. He who gets angry and shows it, loses. In my mind, success is whatever you define it to be. Period. Some people chase money or status. Others try and make a difference in the world. Conforming to what others view as success is a fool’s errand. You are certainly a success, Michael, and all I know of you is what you write and say on this website.

    Bias is not just about skin color. It is also about education, and wealth. Wealthy students have greater access to resources, have role models, live in districts with good schools and are expected to excel. Poor kids end up getting left behind and get treated as inferior people because they did not have the resources necessary to get into a Harvard or Yale.

    The students at the community college where I teach are treated as inferior students because they go to a community college. It does not matter if they attended to save money, because they were immature, or because they were the recipient of a substandard high school education.

    Many of the teachers don’t expect much of them so they don’t get the rigorous courses that they need to transfer to a ”good” 4-yr school. A lot of them struggle to afford books as well as the increasingly computer driven course materials needed to pass their classes. A lot of them end up dropping out. It is sad.

    I wonder sometimes if organizations like Bain, BCG, McKinsey and others such as Goldman Sachs also perpetuate a culture of bias. Granted, I know why the tier-1 consultancies and investment banks hire like they do, but do you really need to be between 25 and 35 with a degree from a top tier university, a 3.6+ GPA and no personal setbacks to succeed at strategy consulting or investment banking?

    The avg. GPA from an elite institution is a 3.4 which doesn’t make a 3.6+ GPA the accomplishment that it should be. Given the number of applicants, getting into an elite institution is as much luck as merit. Someone over 40 can still learn new things. People have professional failures. It is my experience that people who have never seen adversity nor failure have a hard time relating to others and tend to think of others as inferior. If you have an organization full of people like that, what happened to you this weekend is sometimes the result.

    I know that I am ”preaching to the choir,” Michael, and not all MBB consultants have led charmed lives on their way to becoming a consultant or lack values. This has been bugging me for a few days and I just had to get this off my chest. Please forgive the long email.

    Regards,
    [Redacted]

  76. Michael and Zander,
    Netflix is an interesting example since they affected by what is going on with Net Neutrality. Do cable and phone internet providers who effectively control access become the modern day versions of OPEC or highwaymen?

  77. Hi Brian and Zander,

    You are both correct and observant. The other parts to mention are equally important and have little to do with piracy:

    1) Channel delivery costs are basically zero to the software provider. In this model, the consumer covers the channel costs. So for example, Netflix costs $7.99 only in a naive way. Your internet streaming bill is much higher and that is the true cost.

    2) These streaming models work best where consumers no longer see ownership as a badge of success. So, in societies with small middle-classes were ownership still defines success, you see less of a streaming model.

    3) On your point Zander, yes piracy is a massive issue, but more important, we can rapidly update content this way. For example, if you needed to download everything, then every time we update content we need to send it to you. In this model, we actually update content daily – we make about 20 to 30 updates a day. There is no need for a version 4.0 since there was never a version 1.0. Change is continuous and we can control that.

    4) This allows fractional ownership like a Netjet. Buying the library would cost thousands and we likely would not build it for just a few wealthy clients – it would cost too much to do. But renting it when you need it, is more effective, since you do not always need it. And unlike a jet which shows signs of wear and tear, software does not. So the factional ownership model works very well.

    5) We are trying to wean clients of the belief that having the content matters. We want them to create value from using the content. We found clients used the material much less when they owned it, since they assumed it was always there. This model creates a deadline to get them to review it, and that deadline occurs every month. Moreover, the content updates creates more incentive for them to check back often.

    6) Many companies like setting up passive income streams. We are not doing that. We actively update the content all the time. So we are trying to create a global best-practice hub. And hubs are best shared.

    As you can see, a lot of thought went into the shift in the way we run FC.

    Michael

  78. Brian, it’s an interesting phenomenon, and I think it’s appropriate in a digital economy where the marginal cost of production is zero, and it’s practically impossible to prevent bits from being replicated and either resold or given away for free.

  79. Come to think of it, even the strategy and TCO training on this site is based on a rental or “training material as a service” model.

  80. It is interesting to me how we are transforming from an “ownership” model of commerce to a “rental” model of commerce. You see that in the software industry with “Software as a Service” model via the web rather than buying a a copy of a physical disk.

  81. Hi Zander,

    Yes, you are correct.

    There are two reasons I did not write more it. First, it would seem as if we are deliberately hyping the situation to block that firm from taking the studies we are helping LAB set up in the future. So anything we say, comes across as biased.

    Second, since Guillermo was there and was a beneficiary of this behaviour, I am fairly certain there will be consequences for this firm. In fact, that is now winding its way through LAB. I will post more about this, but I first want to confirm that we are allowed to discuss it on this live-blog.

    As well, to me and Firmsconsulting, what matters more is how we behave when we stand to gain nothing. And I feel these consultants showed a pretty dark side, but to be fair, quite a few consultants at MBB are like this. They only behave when they stand to gain something, be it the support of the firm or a promotion, or just getting the job.

    How you act when you think there are no consequences is the true test of values? It truly surprises me they would act this way, given they were in suits and representing the firm. If the engagement manager was in that group, he/she should be dismissed for allowing this behaviour and so should the entire team. When I was a partner, people would be counselled out for lesser transgressions, since our value system is so strong..

    But isn’t that the point of having no values. It’s why many people are rude to beggars on the street. They assume there will be no consequences to their actions, because they assume the person they are belittling has no recourse.

    Michael

  82. Michael,

    Your post a few days ago about the patio incident has been bugging me. If someone treats people who don’t matter poorly, and doesn’t act on their values when there is no reward or punishment, how can they be trusted with responsibility at the client, when they will be pressured and tempted from many angles?

  83. Yes, Zander. That is correct.

    We do however use Monte-Carlo simulations extensively in corporate finance studies when we are particularly looking at helping clients analyze risk and and return.

    These types of analyses are common to finance, but not common to the type of finance 99% of consultants would need to apply to 99% of studies.

    If you know nothing about finance, Monte Carlo simulations etc., you can still be a very prominent partner. Coyne, Barton etc., probably know little about these things beyond what they probably learned during their MBA’s. I am speculating here but likely not off the mark.

    And if I am not mistaken, both completed their studies before Markowitz, Merton, Black, Treynor and Sharpe’s work had entered mainstream literature.

    Even a McKinsey partner as prominent as Lowell Bryan, who basically made securitization a strategy on Wall Street and Main Street, probably does not understand the technical aspects of this. He does not need to.

    His value is in determining what the team will do with the analyses once it is done, and think about the value it can add to the study. In fact, that is much harder to do than the actual modelling work.

    Michael

  84. Yes, thank you.

    I have experience with Monte-Carlo simulations, but they are physical processes which are easier to model than business data, which is essentially economic data, which is the result human behavior. Modeling behavior at that level is the realm of multi-year PhD dissertations, not 8-week strategy studies.

    Time on a study is precious, and any time spent modeling more that what is needed is time that has been taken away from another task and wasted.

  85. Hi Zander,

    To answer your questions:

    (1) Inputs. Do you model the variations or missing data, for example, by treating components as random draws from a stochastic process, or does this over-complicate the modeling and get in the way of insights?

    Yes, that just dramatically over-complicates things. When I hear an associate talk about stochastic processes or Monte-carlo simulations in a general strategy study, I know they are in over their heads. We have to treat data to remove variations like seasonality and so on, but beyond that, all the fancy stuff introduces even more problems. Models are meant to be simple and answer very specific questions. Any you do to a model, beyond this, is wasting time and effort.

    I know many firms have actuaries etc., running modelling units to produce incredibly complex analyses. However, that is because most consulting firms miss the point of a strategy financial model. It is never going to be very accurate because we are forecasting things 3 to 4 years into the future and we have little ability to predict trends. No one can do that.

    The aim of a model is to give the client enough information to act on the advice. That is a very different objective and fancy stuff just gets in the way of that. No McKinsey or BCG model is doing complex financial modelling on a general study.

    That is not why we become elite firms. That is not why clients pay McKinsey or BCG so much money.

    (2) Outputs. Does the model produce single values, ranges, or distributions of results, and how do you decide which kind of output is appropriate?

    It must be a range. There is no way we could so precise with the inputs that the outputs would be exact. We may pick a mean from the range, but it is a range.

    When you say distribution, you imply a Monte-Carlo simulation. This may upset many readers but I have yet to see anyone do a Monte Carlo simulation correctly because they universally mess up the co-variance limits between variables. @Risk and CrystalBall software have not fixed this problem. So the distribution looks pretty but is basically meaningless.. On the corporate finance studies I have led, we have always had to manually code in the fix this error.

    Corporate finance is different in unique cases. We sometimes build fairly complex models. But that is also rare.

    Hope that helps.

    Michael

  86. To follow-up your comments on accuracy–how do you handle uncertainty?

    (1) Inputs. Do you model the variations or missing data, for example, by treating components as random draws from a stochastic process, or does this over-complicate the modeling and get in the way of insights?

    (2) Outputs. Does the model produce single values, ranges, or distributions of results, and how do you decide which kind of output is appropriate?

  87. Hi Nauruz,

    These are great questions and suggestions. This is what we will do:

    1) Yes, we will do this, but only at the end of the study once we have completed it and signed it off by the client. We will use a chronological approach. Similar to the maps for the corporate strategy. There will be differences though since we want to find a way to link the blog postings to each file.

    Access to the files will only be made available to subscribers.

    2) Yes, we will describe more about the model and business from the end of week 3 onwards. In fact, from week 4 onwards it is just about the team using the model to test hypotheses, and then physically validating the benefits depicted in the model.

    We may make the model available to subscribers. Almost a 80% probability of that.

    3) Data accuracy is tested in a number of ways:

    1 – Does it make sense with what we would expect to find?
    2 – Does the client agree with the data?
    3 – Is the source credible?
    4 – Does the model produce reasonable output with the data?
    5 – Is this similar to what we see at other banks?

    This is ultimately a judgement call, which means the partner, me, needs to think very carefully about the output, since the I am not close to the input.

    Michael

  88. Thank you Michael!
    I’m going back to your question on things we want to see in the financial analysis and else.

    1) As you move ahead with analysis, it could be helpful to have key documents (charter, timeline, project logic behind your approach to study etc.) pinned somewhere to the left or right side of the live-blog page. The work is moving fast, and posts are quite deep. Having those documents available for new and current readers could help see the big picture behind your activities.
    2) Wrt financial model Albert is building, I’m interested to see the model architecture, inputs and outputs, and assumptions. If this sounds like” in the model I want to see the model”, may be you can elaborate on the logic behind the model, what you are trying to test in general.
    3) You put “data accuracy” in your charter, KSF section. How would you know if the data you have is accurate?

    Hope you are getting better,

    Waiting for promised updates,
    Nauruz

  89. Aylwin,

    Invictus is a good for another reason too. It shows that is sometimes better to unite your enemy versus the Machiavellian approach of dividing and conquering.

    An enemy that realizes you will allow them to unite and prosper becomes your friend. This is a key rule of warfare. Never have two active battlefronts.

    Michael

  90. Hi Nauruz,

    Yes, Peter is performing better but you are hearing much less about him for several reasons:

    (1) His current work is not taxing. Therefore he is doing well but not really being tested as much. He and I will work more closely from the end of next week when I work with him to extract the findings from him focus interviews. I will post more then.

    (2) He is not yet in any leadership position. He will have to plan, lead and consolidate a workshop with the LAB leadership team in a week or 2. That will be the first major test of his leadership skills.

    (3) I do not work with him as much. So I have less to talk about him.

    (4) I tend to write less about him in general since he is doing well, so far anyway, and there is not much lessons to be gained from someone who has not failed. What can you analyze there?

    This is a very objective assessment. If it was merely motivational we would not be mentioning all the mistakes the interns are making. We never give feedback for the sake of any other reason beyond helping a candidate improve. If an intern cannot handle the feedback, we would not have placed on the study.

    We have a reputation for direct, honest and sometime painful truths. We tell the truth as we see it. Period.

    Michael

  91. nvictus, the movie is very inspiring. Using rugby to unite a nation that came out of apartheid, a strategic political move never thought off. The aspect of “in the clients best interest” is also conveyed through the movie. A strong team, with tools and tactics, but without the proper values will only be second best.

  92. Hi Nauruz,

    You raise some good questions. The answers are clear to me, but let me think about the best way to convey them.

    Expect a lot of updates this weekend. Have a good weekend.

    Michael

  93. Michael,

    I’m curious, why we hear so little about Peter than Albert and Nimisha? He has the highest performance scores. I don’t even remember you blogging potential areas of his improvement.
    Can I assume that because he is a better performing intern (1), there is less that blog readers can learn from his mistakes(2), and hence he is getting less coaching from you(3)?

    Also, to what extent should we take your performance feedback as an actual objective performance metric than a tool to motivate interns?

    Thank you,
    Nauruz

  94. Hi Brian,

    It is connected to “LAB can take over existing struggling loans from banks”.

    As you can see, this is an orphan hypotheses. It does not directly fit into our objective function of “Should LAB enter the US retail banking market.”

    We added it because, even though it was out of scope, we felt restructuring the credit guarantee scheme, and taking over these accounts to do it, was going to become a big issue in the future and we put it into these planning slides.

    You will see the other planning slides have 2 or 3 orphan issues.

    We still think restructuring the credit guarantees will be a massive issue. We now just need to prove it so that LAB can make that a new focus for their business.

    Michael

  95. Hi Michael,
    Which L1 hypothesis is “Finance for the buy out of existing entities is required” supposed to be connected to? It looks like it is connected to the last two L1 hypotheses is that correct?

  96. Aylwin,

    That is New Zealand. It got cut off!

    Michael

  97. Hi Michael. Referring to the chart showing US entrepreneurs pursuing entrepreneurship, the country between Brazil and Argentina is which “New” country?

  98. Hi Brian,

    That is exactly it, with a slight twist. It is about Porters definition of competitive advantage. “Competitive advantage is not one thing you do well, but the way you integrate everything, even seemingly mediocre aspects, to produce an overall organization which generates a superior result.”
    So what is the slight twist. The (1) culture allows us to deploy an approach/process. The (2) process leads to the (3) analyses we need to do. And then we extract the (4) insights.

    Most firms try to copy just the analyses and they get the same mediocre results.

    Your comparison to Toyota is a good one because Porter also uses that to explain why GM was never able to catch up to Toyota. GM tried to copy the one thing that Toyota did well. But it was not just one thing. It was the way everything was put together.

    Michael

  99. The best phrase I could use on how you guys have been able to accomplish all you have done so far,and I am not a strategy training subscriber yet, it would be “It’s the process.” You’ve managed to instill a learning ethic within the team and have the structures in place to ensure success(at least as long as people utilize them). I can see why other firms would have a hard time duplicating something like this. This is a lot like companies trying to adopt the tools that Toyota uses (Lean Methods) to build automobiles and then wonder why they still put out GM quality products. You can’t have the results without the culture behind it.

  100. Hi Zander,

    Yes, it plays a massive role in building our credibility when you don’t fall into the trap of pretending to know everything. We need to remember that a strategy consultant is not appointed due to our content knowledge, but rather due to our unique strategy approach of solving problems.

    Michael

  101. Re: A stupid myth about management consultants

    Expertise should go hand in hand with humility. Experts who do not know or cannot communicate their limits can do damage, at least until they lose their reputation and everyone stops listening.

    Humility must be real, but it doesn’t undermine confidence, and it’s not just image.

  102. Thanks Brian. It may very well be connected, but the issue is that I am not familiar enough with Lean/Agile methodology to see the connection. Most consulting concepts are very closely related though different firms use different language to describe then and emphasize different points.

    Michael

  103. Hi Michael,
    Yes. you are correct. I was trying to connect how you were describing things with what I know of the Lean/Agile methodolgy. It did not quite work as intended.

  104. Let me qualify my previous statement. Building a financial or any other type of mathematical model is more like building a house than developing a brand new piece of software or new product.

  105. Hi Brian C,

    I am sure that makes perfect sense – it sounds like what I am advocating.

    Michael.

  106. I wonder if Albert has misinterpreted some of the Agile methodology a little bit. Yes, you want a “potentially shippable product” at the end of an specified period of time, but the point is to only commit to the functionality that you can complete in that period. You do that by breaking things down into tasks that are small enough (e.g. A working demand module). In any case, by breaking the model down into modules, you still can apply a fail fast methodology to each piece and you are limiting the number of spreadsheet cells you have to audit. Building a financial model is more like building a house than developing a brand new piece of software or a new product.

  107. J, see my response above.

  108. J said on June 29, 2014

    Again, thanks so much for your detailed response Michael. I thought your fourth point about signalling was particularly interesting – as a boutique, I’m guessing you’re either going to be perceived as either: a second-tier and cheaper alternative, a subject matter expert or an elite. The latter positioning requires a coordinated effort across marketing materials and importantly, as you mentioned, the selectiveness (and quality) of work you do. Making the transition in an organic, believable way from second-tier to elite is the challenge though – which is something I’m trying to rally my firm around. Most of the other points (willingness to walk away, putting the clients first, having high standards, not disparaging other firms) appear to be culturally/values driven, but I guess reaching parity on analyses (specifically access to benchmarks and databases) might be difficult unless you have scale (i.e. Deloitte S&O and Roland Berger).

  109. J said on June 29, 2014

    Thanks so much for your detailed response Michael, that was exactly what I was looking for! Looking forward to going through the strategy training videos in depth.

    Thanks,

    J

  110. Hi J,

    I will answer your question above as a blog post.

    Michael

  111. J said on June 29, 2014

    Fascinated by what you’re doing here Michael. Like one of the previous commenters, I’m also very interested in how Firmsconsulting became the preferred consultant for this study. In your blog you mentioned that Firmsconsulting never pitches for work and I recall in one of your podcasts you recounted being hired for a study through giving free advice and demonstrating competence to someone who ultimately referred you to the Board. What I’m really asking is, what are the processes that a boutique strategy firm needs to put in place to translate the requisite values, intent and standards into work flow? Thanks so much for your wisdom and access – your mindset is an inspiration.

  112. Thanks for the comment Zander. That was the purpose we had in mind when we decided to put this together.

  113. The strategy and analysis of LAB is interesting, but the window into how a partner manages himself, his team, and the client is just as compelling–it shows the culture and values in action.

  114. Hi Sophia,

    All your questions are covered in exhaustive detail in this live-blog and in the corporate strategy study which explains how we differ.

    You are asking the wrong question: it is not 5 or 10 differences. There is only one difference. We absolutely and fundamentally maintain a culture and values where the clients needs come first. Everything else flows from that.

    This is also not about being ex-MBB, we would never get a study of this size and stature just by being ex-MBB. I cannot think of many ex-McKinsey associates, managers or partners who would be awarded a study such as this given the scale needed to deliver it. One person cannot do this. So it is not that. There is something which distinguishes McKinsey and BCG from the others, and that same element distinguishes between alumni of MBB. Because, I can assure you that standards, values and intent drops off dramatically when people leave the firm.

    Again it is about that one difference I mentioned above. Even the language we use is different. I would never say we “won” the work. It just sounds horrible.

    Again, the data bases etc., are not different from what Deloitte, boutique firms can access.
    We do two things differently. How we use it and what we mine from studies we do. We build massive proprietary databases capturing benchmarks from all studies. We spend more time on a study after it is done than you can imagine.

    So, I think you are asking all the wrong questions.

    Michael

  115. Hi Michael,
    This is a great live blogging study. Well done for being so open and honest.

    Michael, what do you think the five main differences are between the Tier 1 and Tier 2 firms?

    How are the Tier 1 firms getting all of the big business (you managed to get a good size of the pie for this one)?

    What databases and subscriptions do the Tier 1 and yourself subscribe to to get the market data and other data required for your analyzes?

    Thanks

    Sophia

  116. Thanks for the question Brian. We will discuss in more detail tomorrow.

  117. Given your interest in strategy, you may want to look at what John Boyd has written on the subject. He was driving force behind the F-15, F-16 fighter planes as well as the A-10. He managed to do this despite the USAF brass wanting to kill the projects every step of the way. In terms of strategy, he was best known for the ”Observe-Orient-Decide-Act” loop. In his thinking, survival is about orienting your self to the outside environment and acting on what you observe at a faster rate than your opponent. He, like Ohmae, also spoke about strategy in terms of analysis then synthesis(He called it ”building snowmobiles”).

    The best place to learn more, if you are interested, is the Slightly East of New blog written by Chet Richards who was one of his ”acolytes.”
    Here is the website: http://slightlyeastofnew.com/. Boyd’s presentations are on the Articles page. If you are already familiar with what he’s written, please let me know.

    Also, since you mentioned it in the live blog, how do you prevent yourself and your teams from succumbing to cognitive bias or being deceived/manipulated by a client?

  118. Hi Zander,

    That is absolutely correct.

    It is very easy to choose to include everything. It is also lazy. When we include everything in a presentation we are leaving it up to the client to decide what is important.

    As a management consultant, it is our job to tell the client what is important.

    Good luck with the application essays.

    Mchael

  119. Michael Boricki said on June 25, 2014/06/25 at 15:26 Re: CEO presentation:
    > all that hard work has been boiled down to just 6 slides.

    The reward for weeks or years of hard work is the chance to think, summarize, and speak concisely to make an impact. Each of these moments is an opportunity to reflect, think through the implications, and prepare to share the results. They should be savored.

    Woodrow Wilsonn is reported to have said, “if it is a ten-minute speech it takes me all of two weeks to prepare it; if it is a half-hour speech it takes me a week; if I can talk as long as I want to it requires no preparation at all. I am ready now.”

    Presenting analysis concisely is hard, and consultants (especially consultants) should constantly striving. At work I just boiled 4 weeks of modeling down to 2 slides, and now I’m writing MBA application essays, where the budget is a few hundred words. The tighter the constraints, the more fun the task.

    I imagine this is what ten minutes with the CEO is like.

  120. Thanks Brian – some interesting ideas. My only issue is that it seems a little too “processy” and I wonder if it would work for a creative strategy study? The issue maps are not really about tracking processes with precision but more about giving a visual indicator of things, even it is up to 30% off.

    Michael

  121. You are welcome, Michael. There are quite a few ways of using Kanban boards in projects. One way to use the board would be to map each issue or hypothesis on the vertical axis and your workflow (To-Do, In Process, Done) on the horizontal axis. Then place the tasks needed for each issue/hypothesis in the To-Do column in order of priority. Each person responsible then pulls a task(most important first) and places it onto in the In-Process column. When they finish with a task, it is moved to the Done column. What this enables you as a partner to do is see the flow of tasks for the project as they are completed at a glance. If you see a queue forming in the In -Process column (In the Kanban system you limit work in process) you know there is a problem. I have used Kanban boards to help me keep track of my own work and it has helped me out. I am sure you have colleagues in the IT world who could explain Kanban/Scrum boards(and the methods) in detail to you better than I. There is also a ton of info. out there on the subject. Could they be used to help run strategy projects? I would think so. The devil, so to speak, is in translating an IT development method the consulting world. Good luck with the project launch and, by all means, get some sleep.

  122. Thanks Brian. I have never seen or heard of those but it is very possible corporate strategy consultants simply adopted and adjusted them from other disciplines.

    Michael

  123. Those issue maps look a lot like the Kanban/Scrum boards used by Agile teams in software development. What is nice is that these can be scaled up for multiple projects or down to the individual level (Personal Kanban).

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