Patrick Bet-David explains why the business of consulting is a trillion-dollar industry today. PBD goes through the history of consulting and how companies like McKinsey, BCG & Bain influence global business. Most importantly, how anybody can become a consultant today!
Consulting is now estimated to be a trillion-dollar per year industry. Verizon alone gave McKinsey & Co. $120 million over the course of two years. Consulting firms regularly produce alumni that go on to become world leaders and entrepreneurs. What is consulting and why is it becoming an increasingly lucrative industry even for individuals that are not part of a firm?
Many consider McKinsey the most influential company in the world. It has offices in more than 130 cities and more than 65 countries and has advised some of the biggest entities in the world such as Coca-Cola, Microsoft, Disney, U.S. Department of Energy, the Food and Drug Administration, the U.S. Postal Service, and the Bill and Melinda Gates Foundation. Since 2008, McKinsey has obtained roughly $940 million worth of federal contracts, with the Department of Defense being its top client. It has advised Russian weapons company Rostec and Chinese communications and engineering firms such as the one that built islands in the South China Sea. In 2016 it simultaneously had 64 contracts with the U.S. government and 137 projects with Saudi Arabia. It also advised opioid makers Purdue Pharma, Endo Pharmaceuticals, Johnson & Johnson, and Mallinckrodt to help them increase sales, deal with regulators, and secure approval for new products between 2004 and 2019. McKinsey has also worked with e-cigarette company Juul and British American Tobacco, Imperial tobacco, Japan Tobacco, and many others.
With a client list like this, one would like to know what secrets they are revealing.
Management consulting advisory firm My Consulting Offer argues there are three categories of consulting firms: the MBB (McKinsey, BCG, Bain), the Big Four, and Boutique. The MBB firms are the “pure play” firms that have a strong focus on strategy. The Big Four (Deloitte, EY, KPMG, PwC) provide strategy along with several other kinds of service.
Boutique firms (also Tier 2 and Tier 3) like Oliver Wyman, L.E.K, Roland Berger, and PA have more specialized expertise and may be less international.
But Pat points out that the fourth group is You. The “general population” is not general at all when you break everyone up into individuals. You may know valuable information about how to save a marriage, or how to work artificial intelligence, or any number of things, and there are many out there that would be willing to pay top dollar to listen to you speak.
The right advice can make or break a company and change your personal life. You don’t know what you know. To be a great consultant, one must be curious, conceptual, resourceful, and credible. Skills that people might need advice on include video editing, data analytics, software development, graphic design, copywriting, content writing, and any number of professional prospectives from careers in accounting, law, technology, and the medial field.
History
Management consulting has its origins in the 1800s, when industrialists began to study their workers to figure out how to speed up production processes.
With the heightening demand for production and speed, manufacturers in the early 20th century welcomed consulting for the optimization it brought.
Demand for financial advice rose after the Great Depression and the resultant split between commercial and investment banking.
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Then came the wealth surplus 1960s and 1970s, following the post-War boom. There was little international competition during these times, as Europe was still in recovery and much of the world was dominated by the Soviet Union. But when recession and the oil shock hit in the 1970s, the need for strategy was recognized.
As Pat explains, people get cocky when times are good, but when times are tough and competition returns they are eager to hear advice which becomes invaluable. This recession era also gave birth to many business gurus and new consulting philosophies, such as Bruce Henderson’s “Growth-Share Matrix” which aimed to help companies allocate cash among their departments and units.
IT consulting took off in the 1980s and 1990s, and demise of the 60s-70s era consulting philosophies resulted when managers realized that specialist approaches on a case by case basis were needed for the increasingly complex world. The Big Four firms expanded their services to encompass the IT consulting market and surpassed the rest in size.
Consulting only continues to grow. With the decentralization of information caused by social media, consulting will likely have a future online beyond the big consulting firms.
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