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What is management consulting?

I was talking to my family recently who know about my diligent preparation efforts to build my management consulting skills and they asked me “what is management consulting?” Although they were aware of my previous career in consulting they did not had a good understanding of what this line of work entails and why I am so interested in pursuing it.

In fact they have never heard about it before I brought it up. I looked back at my own experience and realized that this question, what is management consulting, is not rare and I had to answer it at least few times in my life. In fact, there was a moment many years ago when I asked this very question to myself.

Management consulting is not as well known as law, banking or engineering. Even many of my MBA classmates only learned about this line of work once there were in the MBA program. So what is management consulting?

I would say it is a practice of helping organizations to identify and solve their key problems, and to pinpoint and seize most promising opportunities. If done right, this work is valuable to clients, and deeply satisfying and impactful at a personal level.

In a way though, unless you were exposed to management consulting, it is hard to understand how rewarding this work can be.

This is my 7th post and I hope you are finding it to be useful.

Preparation before the session:

Networking with management consulting partners: This week I met with two consulting partners from two different firms. I met with the first partner for lunch. He suggested we meet for lunch though I only asked for an opportunity to speak, as per Firmsconsulting advice.

We met in in a downtown restaurant and the partner was very professional and helpful. We spoke about his career, opportunities within the firm for experienced hires and my career path up to now. At the end he kindly offered to submit my resume and put me through the process the recruitment process

The meeting with the other partner from another firm was over coffee. Similarly, we discussed his career, his goals going forward, my career progression up to now, my education and he offered to pass along my resume to the right person.

Both partners asked one question: “Why this firm?”

Therefore, my advice is be really prepared for this question. The answer should be specific to the firm. If the partner takes the time to meet with you, you should take the time to learn about the firm and that particular office.

Another observation is, if you are an experienced hire, partners expect you to look at the job postings for their firm and see if there are any positions available that are aligned with your skills and interests. I think this is important because it makes it easier for a partner to pass your resume to his or her recruitment colleagues who are trying to fill in specific available spots.

Building general knowledge: In addition to reading New York Times (4-5 articles a day), I also read McKinsey Quarterly articles and practice reading graphs the way it was recommended by Firmsconsulting. I also read HBR, Washington post, Economist and Wall Street Journal.

The Mind of the Strategist, chapter 6: I continue reading this book, which is a great read for those who would like to gain a deeper understanding of strategy and management consulting engagements in general.

The book is written by one of the most eminent strategists of our time. I am quite excited to be watching Season 2 of The Consulting Offer since it has another great strategist, Kevin Coyne from McKinsey. Hopefully, I can learn everything they are teaching.

This chapter is entitled “Exploiting Strategic Degrees of Freedom”. The author explains in more detail the 4th basic strategy explained in chapter 2, which is business strategy based on strategic degrees of freedom. This strategy places focus on innovation, developing new markets or creating new products.

There are some useful points. Degrees for strategic freedom refer to independent factors surrounding those KFS that the company can control. The question is how much freedom around a KFS does a company have a strategic move.

The author introduces the concept of “objective function”, a variable that one wants to maximize. For example, for consumers of coffee the objective function is often taste. It is important to question whether there are available or imaginable better ways to satisfy customer’s true objective.

It makes sense to segment the market based on objective function of each group of customers and group different segments with the same objective. It is also important to remember that objective function of customers may change with time.

Items accomplished during this session:

Felix’s case interview preparation, session 13, Japanese tire case (estimation case): One adjustment I suggest to make to the proposed solution is to write out one equation for both segments (buy and own) as follows:

Population * % adults * % drivers license * % afford cars * % have cars (will buy (replace) this year or currently own).

After this point, I suggest to segment it. So out of people who have cars, lets say 20% (assuming cars are on average replaced every 5 years) will buy cars this year and 80% own cars. I suggest thereafter continuing the calculation for each segment.

I think another approach could be to look at the % of households who have cars and the average number of cars per household (for those households that have cars), instead of % of adults * % adults with drivers license.

I think it is easier to come up with reasonable assumption for cars per household versus “percentage of adults * percentage of adults with drivers license”.

How Cherry can improve quality of its cars? (Brainstorming case): The key here was to correctly define quality. I defined quality of the car as safety, look & feel and level of prestige.

However, the correct definition was smaller in scope and certainly did not include the level of prestige. Consequently, my analysis included an area that was not supposed to be part of the analysis.

I was surprised that so little emphasis was placed on safety of the car in terms of survival rates during accidents. For me as a consumer this will be a primary factor that I will be looking for when determining the quality of the car.

Audi (Operations, full case): My first level of drivers were as follows:

Facilities (is there sufficient electricity and heating to handle the work),

Equipment (quality and reliability of equipment),

Labor (level of skill, hours they work, motivation etc.),

and suppliers (time to deliver goods and accuracy of items delivered).

My calculations to test if 30 minutes per day of training per employee contributed to loss in production of 4,000 cars per annum was as follows: 1,200 employees * 8 hours per week * 5 days in a week * 12 (for simplicity I looked at production per quarter, assuming they produce the same number of cars every quarter).

We knew that the target production was 120,000 cars per year and therefore 30,000 cars per quarter.

This means that approximately 19 hours are required to produce one car (576K/30K). We knew that 6.25% of the production time was spent on training (30 minutes out of 8 hours day) and 6.25% of 576,000 is 36,000 (hours spent on training).

So 36K/19 = 1.89K cars per quarter could have been produced if workers did not have to do training.

Next we annualize this number, which results in 7.579K cars per year that could have been produced without training. This means that not only is our hypothesis (that training of workers led to decrease in production) correct but it also seems that after training will be completed China’s factory will produce 3.578K (7.579K – 4K) more cars per year versus its German counterpart.

It seems the value of training will pay off in the long term for the Chinese!

Trend in luxury car segment: This is another instance of excellent structure offered for cases with no data and no objective. All candidates like me have to do is to actually use it. Sometimes I forget!

Data cases: I thought this sessions’ data case was the easiest one so far, as it was very straightforward and intuitive and focus was on area that is easy to analyze and understand.

Summary:

Score out of 10: 8

Communication 8

Technical 8

Confidence 8

Strengths: Strong general knowledge and strong business knowledge.

Opportunities: Have to follow the structure and advice. Do not deviate from what Firmsconsulting recommends, as they placed many people weaker than me in McKinsey and I should not try to reinvent the wheel.

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