Why relying too heavily on your McKinsey/BCG past employment is a trap

The parity trap: if your claim to fame is that you are ex-McKinsey, you can never build a firm to overtake McKinsey because you need McKinsey to be stronger than you, for you to have any credibility.

Strategy Study W0 7

Cool vs. Right

I need to think about how I will manage the engagement manager and how she will manage the team.

For obvious reasons, this is not a typical banking study. The team will have little consulting experience; though some have interned at the elite firms, and will also have a full-time partner on the study.

Senior partners like myself are never assigned full-time to work on a study. That is not our role.

Do I serve as the de-facto manager or do I empower the engagement manager? What will be our plan for engaging the client?

Moreover, how do I balance the need to be hip and cool, versus the need to be right?

Fixing social issues like housing, banking, access to services etc., are very popular are very popular right now and many people try to be trendy by making bad investment decisions when these themes are involved.

The danger with trying to be trendy is that people, including executives, try to fit in without thinking through the full implications.

We need to be sure that the bank’s strategy to enter the US market is economically sound and the best plan for them. It may very well be a great opportunity, but just not for this banking client. The last thing we want is for the bank to be celebrated in the press for its noble aims, but end up bankrupt in 3 to 6 years because the economics just do not work.

In some ways, we may end up being the only intellectually sober people at the banking client. We need to let the economics speak for itself, and if the economics are not great, offer suggestions on how to improve them.

If they cannot be improved, then sometimes a client needs to walk away from an opportunity.

Every market is financially viable. It may, however, not be viable for every company’s cost structure and competitive advantage.

Given this angle we are taking of challenging the client’s deepest beliefs, how are we being perceived at the client? Do we have the credibility to challenge the client?

 The parity trap

LAB employs many ex-consultants and maintains a very large ISU. It’s like a big retirement community for consultants who could not make partner and need someone to overpay them to compensate for the stinging rebuke from the partnership.

And the one worse thing than consultants are ex-consultants who have been managed out and now try to prove they are smart and their ideas are useful. Even, if it means doing something not smart.

How would they perceive a team of ex-consultants, irrespective of their pedigree?

The reality is that to them, we can only have parity to their skills. If they think, that we think, our prime value is that we are ex-consultants, then they will simply see us as being no better than they are.

This is known as the parity trap. Once the parity trap snaps shut on us, you can expect the bank’s employees to challenge us.

This is why so many ex-consultants try to specialize in a sector or area: to avoid the parity trap. Since the ex-consultants’ seemingly greatest advantage is his/her previous employer on his/her resume, he/she will have no apparent competitive advantage among other alums of his firm.

They try to build a new competitive advantage via specialization. That is so many ex-McKinsey consultants end up specializing: with 50,000 MBB alumni prowling – some of them also lurk – around for work.

Being just another alum is not enough in the long term.

In fact, why hire the ex-consultant when you can hire the firm? Unless they are really cheap. Which they almost always tend to be.

The bottom line is that we will receive a frosty if not hostile reception, even from alums from our own firm.

We will have to develop a plan to overcome the parity trap.

How McKinsey avoids the parity trap

When McKinsey arrives at a client and wants to present a recommendation, it may get challenged at times, but by and large, they will get away with most things most of the times. The same applies to BCG.

I am going to use a military analogy but please do not treat your client as the enemy.

In many ways with McKinsey, we can see McKinsey’s intellectual army. It shows you it’s overwhelming intellectual superiority so that it will never be challenged: alums, publications, awards, influence etc.

That is why both BCG and McKinsey invest so much time in these things.

In military terms, this is called the Powell Doctrine. It means deploying such overwhelming resources to a situation that the enemy capitulates just by looking at what they are up against. And if they do not give up, then there must be sufficient resources to overwhelm them and achieve a clear objective.

The Powell Doctrine does not mean going to intellectual war, or any war for that matter. It is showing the opposing side that they should not even consider an attack.

What happens when you are a boutique firm of ex-consultants? If no one knows you well, how can they know the advantage you have? How can they know the army you have behind you?

It is a little like a schoolyard. You will be picked on until you show the bully not to pick on you.

QUESTION(S) OF THE DAY: Have you experienced a situation where a client challenges you since they perceive you to have a weaker background? How do you manage this?

We answer this question, additional reader questions and discuss more issues raised in this article on the accompanying episode on the Strategy Skills podcast channel on iTunes, Spotify, Acast and Google Android Podcasts. This is the world’s #1 ranked business strategy podcast channel.

If you have a question, please post it as a comment on iTunes and we will respond in a podcast.

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