Usefulness of Strategy Consultancy models

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Quadalupe
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Usefulness of Strategy Consultancy models

Post by Quadalupe » Fri May 24, 2019 2:55 pm

I've recently read some books on Strategy Consultancy and on how to solve those Case Interviews one gets at McKinsey, BCG etc. My interested was peeked, since the methods employed seem to be a good way to try to quickly get a grip on the main issue in an arbitrary problem, not just business problems. They use techniques like simple visualizations, breaking down problems in smaller parts (issue tree), making sure the problem parts are MECE (Mutually Exclusive Collectively Exhaustive), and quickly generating a hypothesis and trying to falsify it using data.

My main gripe so far is that it desperately tries to reduce complex problems to linear ones. That is, at the end, your recommendation should be to focus on one main issue and no more than three reasons should be given. The motivation behind this is that the average CEO has a limited attention span and even less time available, so you better make the problem & solution easy to understand. Complex interactions between problems area's are often ignored.

Do you have any experience with strategy consulting or with applying this kind of thinking in general? Do you think it's fruitful to try to employ this kind of techniques in your life?

jacob
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Re: Usefulness of Strategy Consultancy models

Post by jacob » Fri May 24, 2019 3:08 pm

Reduction is fine if and only if you avoid Maslow's hammer fallacy AND you capture the underlying structure of the problem with the right model. This implies having a lot of models at your disposal in order to know which one to use. This is the latticework that Charles Munger uses intellectually and also the renaissanceman philosophy I promote in the ERE book on a wider scale (e.g. also social, technical, etc.) So yeah, highly fruitful or at least a rich/interesting way of perceiving the world.

I have no experience with strategy consulting (but lots of modelling experience when it comes to arbitrary problems and not just business problems :) ), but in applying such kind of thinking, one better have something much better than 10 step model of "how to analyze" any and all problems. Try to fit reality to the structure of the wrong model and nothing can save you (square peg vs round hole). Picking the model with the right structure is somewhat of an art form (experiental intelligence).

Another way of saying this is that if you want to treat the world metaphorically, you better have a lot of metaphors on hand, because the real world is both complicated and complex and it's not always clear how to "capture" the most relevant aspect of it. (Sometimes it is not known.)

Suggested reading: https://www.amazon.com/Images-Organizat ... 412939798/

PS: Don't get me started on explaining and selling shit to the average CEO/boss ... it's probably why I don't last long working for others. As such it might not be that fruitful when applied in a business environment ... unless you're the one in charge.

Quadalupe
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Re: Usefulness of Strategy Consultancy models

Post by Quadalupe » Fri May 24, 2019 4:25 pm

Thanks for the recommendation jacob, I'll check it out.

I've read Case Interview Secrets by Victor Cheng, and despite its overhyped sounding title, there are actually some good ideas in there (and explained well). One of them is the #1 mistake new consultants make is to apply case study frameworks (= mental models for business problems) to an arbitrary problem, since this is the only thing they know. They cannot generalize properly or deal with new situations that fit outside their model. I wonder if there is a Web of Mental Models as well...

RE: convincing the boss. I think the boss just wants to know what they/the company should do, never mind the (too complicated) explanations. You can give them a dumbed down, but still *mostly* correct (Pareto), explanation for the correct advice. It's like they've willingly positioned themselves one or two Wheaton levels under their smart underlings in many disciplines to keep enough mental energy available for the Big Picture© stuff. The ultimate Renaissance Man! Or maybe I'm just young & naive. :lol:

RE: mental models and applying them. I like to read and learn about different mental models, but I seldom see a good use case for them. It's like the opposite of Maslow's hammer. Maslow's Well Filled Toolbelt With No Nails/Screws/Problems In Sight...

FBeyer
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Re: Usefulness of Strategy Consultancy models

Post by FBeyer » Sat May 25, 2019 5:03 am

Quadalupe wrote:
Fri May 24, 2019 2:55 pm
I've recently read some books on Strategy Consultancy...
What books are those, and which one would you recommend in particular?

Seppia
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Re: Usefulness of Strategy Consultancy models

Post by Seppia » Sat May 25, 2019 6:28 am

The reasons why people with a good working experience in strategic consulting (BCG, McKinsey and the likes) are highly sought after are, essentially:
- they are trained within a great structure (they are taught to think logically).
- because of the nature of their job, they tend to see many parts of many different companies, hence they gain experience/knowledge faster than the average employee.
- they are used to working significantly harder than regular employees.

Put these three things together and 99% of the time, a 32yo with 6-7 years in strategic consulting, PLUS a couple years experience working for company X will be a better manager than any 45 to 65yo VP lifer.

The two years experience in a specific company are key, because the one weakness of consultants is that they are awesome at seeing the big picture, but (again because of the nature of their jobs) are comically bad at perceiving the nuances/little details.

I’ve never been in strategic consulting (I interviewed for BCG once and understood it was not for me - meaning they didn’t take me lol, but also really it wasn’t for me), but worked with many and I respect them tremendously.
I love their approach as I find it hyper efficient and no-BS, I tried over the years to integrate part of it in my way of working.

Tyler9000
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Re: Usefulness of Strategy Consultancy models

Post by Tyler9000 » Sat May 25, 2019 11:00 am

I have some experience with strategy consulting. While I haven't worked at the big business consulting firms like McKinsey, I've worked at a few smaller companies very similar to the design firm called Lunar that McKinsey acquired. While my focus is on the product development niche, my personal specialty has generally been on what some people in the industry call the "fuzzy front end" of systems-level research, definition, and ideation. Basically, "Hey Tyler. We're kinda good at this and we want to disrupt industry X. What should we do?"

The thing about effective strategy consulting is that you need to have a unique combination of high creativity, extreme attention to detail, rockstar execution skills (to gain and maintain credibility), a very open mind with the ability and willingness to learn new things and challenge every assumption, and advanced communication skills to relate to the motivations of everyone from the janitor to the CEO in a way that you can convince them you can help. Frankly, most people even already in the industry fail at at least one of these things which is why good ones are highly sought after.

In my experience, most of the guys who write about strategy consulting and try to sell discrete frameworks as shortcuts to success are full of shit. They're salesmen trying to reduce the complexities of a truly creative and experienced nonlinear thought process they don't even understand to discrete tasks that can be packaged in price tiers to wealthy clients. The case studies are almost always carefully curated and the super-insightful process or framework they describe is very often written in hindsight after smart, creative people already solved the problem without them. So save yourself the time and money and skip those guys. As a very similar but more actionable alternative, I recommend reading up on systems engineering. Think of it as an inseparable combination of strategy and execution.

All that said, it's absolutely true that the strategic mindset that comes with experienced and accomplished strategy consultants is extremely useful in all aspects of life. I think the one single concept of Jacob's that most resonated with me is the web of goals, as that's strategic design in a nutshell. The key is to not just think about strategy and draw a pretty mind map but to act on it and continuously iterate possible solutions with the determination to succeed.

Seppia
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Re: Usefulness of Strategy Consultancy models

Post by Seppia » Sat May 25, 2019 11:12 am

Tyler9000 wrote:
Sat May 25, 2019 11:00 am
The key is to not just think about strategy and draw a pretty mind map but to act on it and continuously iterate possible solutions with the determination to succeed.
*applause*

Quadalupe
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Re: Usefulness of Strategy Consultancy models

Post by Quadalupe » Wed May 29, 2019 8:08 am

FBeyer wrote:
Sat May 25, 2019 5:03 am
What books are those, and which one would you recommend in particular?
I've read the McKinsey Way by Ethan Rasiel and the other one is Case Interview Secrets, by Victor Cheng. For some techniques to apply quickly, I'd recommend the second one. The first one is more general about the life of a McKinsey consultant, though terms like issue tree, hypothesis testing and MECE are mentioned. The second one is more focused on doing well on the case interview. The skills you learn by doing 'cracking the case' can be applied to other, real life cases as well. He specifically warns against focusing to much on frameworks, as Tyler also mentioned. Then again, knowing *some* frameworks is useful. You don't have to use them, but it can give you a starting point.
Tyler9000 wrote:
Sat May 25, 2019 11:00 am
I have some experience with strategy consulting. [../]

As a very similar but more actionable alternative, I recommend reading up on systems engineering. [...]
Thank you for sharing Tyler, solid points. Do you have some specific books you'd recommend on systems engineering?

Tyler9000
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Re: Usefulness of Strategy Consultancy models

Post by Tyler9000 » Wed May 29, 2019 10:12 am

Quadalupe wrote:
Wed May 29, 2019 8:08 am
Thank you for sharing Tyler, solid points. Do you have some specific books you'd recommend on systems engineering?
Unfortunately, no. But systems engineering is a degree program at some schools so you might see what books they teach from. I've just been lucky enough to work with a few brilliant ones over the years. Imagine being asked to build a unique type of robot that's never been created before -- there's no blueprint, expert, or process to do it. A good systems engineer, even with no direct experience, will figure out all of the different people and tools required to get the job done and make sure all of their inputs work together in the final design. Cool stuff.

Scott 2
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Re: Usefulness of Strategy Consultancy models

Post by Scott 2 » Wed May 29, 2019 12:21 pm

+1 Tyler

Don't confuse the results of an extremely aggressive talent filter for a superior process.

It's not like they can say "We hired the top 10% of the talent pool from the top 10 schools. From then on, it's 60 hour weeks plus up or out career development. Our consultants have a vastly superior intellect and work ethic. The only way they'd ever consider touching your backwards company is for $500/hr. plus expenses."

TheProcess
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Re: Usefulness of Strategy Consultancy models

Post by TheProcess » Thu May 30, 2019 8:04 pm

Great thread.

I worked as a management consultant for the first 6 years of my career. Not an MBB firm, although we competed successfully against them in a number of places. We owned a niche part of a niche business and executed on it very well. (Which, incidentally is a textbook strategic approach.)

Most of the work I did was not the pure classical strategy and I think that is often the case for many of the MBB consultants as well. Instead, it seemed more common to specialize in solving a given type of problem (using maybe a small number of frameworks), and do that over and over. Our firm tended to use more engineering concepts e.g. optimizing the allocation of a finite budget of resources, given certain constraints.

To answer the OP's question, I think that knowing the big frameworks (Porter's forces, Christensen's disruptive innovation, etc.) is in fact very helpful in life generally. In some cases, not in the way you'd expect: I like the Christensen model not necessarily for the problems you can solve with it, but because it shows how companies (people, organizations) can put themselves at a disadvantage even when doing the 'right' thing. This is an extremely valuable and generalizable lesson that's hard to learn.

Much of the value in these frameworks is also not for solving the problem, but for communicating the solution, and giving management simple language to coordinate their implementation of the solution across a big company. It's very hard to get everyone at a big company moving in the same direction, so you need to be extremely, crazy, hyper clear and committed about the direction/goal. It's better to over-simplify a problem in order to get everyone to believe in the answer. Simplifying a problem inherently involves trade-offs, and you need to pick the right trade-offs to be effective. This is the real art, the frameworks just get you started.

I don't think these frameworks are going to matter too much in most careers. Even as, say, a mid-level corporate executive, most of your time is not spent cooking up strategies, it's on leading the people below you to execute on strategies that don't (shouldn't!) often change. I do think the consulting frameworks are useful for some investors (e.g. the Munger thing).

Some additional reading on the subject that I personally found helpful, in case anyone is interested:

Good Strategy, Bad Strategy by Rumelt - Foundational IMO in describing what strategy is. I think it did a good job of addressing the concern above about about being to reductionist and turning a complex problem into a linear one. (the author is a systems engineer by training and worked for the NASA JPL in the 60s!).

What is Strategy by Porter: https://hbr.org/1996/11/what-is-strategy (paywalled...probably available at your library). Emphasizes the way managers can construct the activities in their firm to be mutually reinforcing (which he calls having good 'fit'), thereby building a competitive advantage that is hard to replicate. The parallels with ERE are hard to miss!

https://stratechery.com/ is a fantastic site focused on strategy in the tech/media industries. There is tons of excellent free content in the archives, and the paid stuff is worth subscribing to if you are really interested. There is also a companion podcast (www.exponent.fm) that is a staple of my commute.

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