Listen to the full episode on iTunes (and please leave a rating to help the podcast reach more people): E33: Walter Kiechel: Lords of Strategy (Part 2)
Background: Walter has more than 30 years of experience in the media industry; first as a business journalist, then as an author. Walter has served as the Managing Editor of Fortune Magazine and the Editorial Director of Harvard Business Publishing (which, of course, includes the famous Harvard Business Review). He’s also authored the two books “Lords of Strategy” and “Office Hours: a Guide in the Managerial Life.”
* * *
Strategy consulting is still important because every company has a strategy.
Today, less than 10% of the work performed by strategy consulting firms is strategy.
Strategy consulting firms have diversified into operations management and supply chain management.
However by branding themselves as strategy consultants they can charge higher fees.
Business consulting is necessary because being in an organization can diminish your world view.
For example, when new competitors such as Nissan, Volkswagen and Toyota Corolla popped up on the US automobile market Henry Ford II dismissed them as little boxes of excrement.
This of course turned out to be a big misjudgment by Henry Ford II.
Volkswagen, Nissan and Toyota are now the top 3 car manufacturers in the world.
In addition to giving the company a more accurate world view, consultants can provide technical expertise the company does not have itself.
For example, TIME Magazine needed a better and more sophisticated model to predict the circulation of their magazines however they were not able to build it themselves.
They brought in BCG to build the model and it was a success.
Strategy consulting firms are also useful in integrating different parts of a business.
For example, TIME Magazine has a variety of magazines under its umbrella however these magazines didn’t want to cooperate together on selling advertising.
This resulted in the magazines leaving a lot of potential revenue on the table because big advertisers would advertise more if they get a special deal for advertising in multiple magazines.
Then BCG came in and developed the maxi plan which enabled firms to advertise in all 3-4 magazines and it was very successful.
This wouldn’t have been possible without the consultants coming in and forcing people to “knock” their heads together.
Business strategies didn’t really exists before the 1960s.
One of the early business strategy models was the growth share matrix developed in the 1970s by Bruce Henderson, the CEO of BCG.
Is the growth share matrix still a great model today?
There are better and much more sophisticated models today.
They are algorithms.
However today there isn’t one model that is as central as the growth share matrix was back in the day.
The fundamentals of strategy consulting are the analysis on costs, customers and competitors.
Back in the day, consultants would send in a team of 40-50 MBAs to pour through accounting data so they could identify profit per customer, biggest customers and customer characteristics.
This data collection, analysis and report would be done over a time period of roughly 6 months.
Today, systems will do this for you in a matter of clicks.
Instead of looking at a project time frame of 3-6 months, consultants are often working with time frames of 6 weeks.
In other words, the time-frame has been shortened and the technical workload is much lower, however the consultants are required to come up with a much more in-depth report in this shorter time-frame.
There are 2 types of people: the numbers people and the people-people.
Most strategy consultants who came up with business strategies were numbers people who were trained as engineers.
The only big exception was Bill Bain, the founder of the consulting firm Bain.
To balance out the technical strategy consultants, there were books written by authors who focused on the corporate culture and how to optimize the corporate culture for better results.
When consulting firms are asked about the actual implementation of their strategies by clients they would back away and not answer.
The number was estimated to be less than 5-10%, however Tom Peters, an American author who focused on the corporate culture said it’s not even 5%.
The problem: The companies develop the strategies exclusively from the top.
The strategies are handed over to people lower in the ranks.
Most often, these people couldn’t carry the strategies out because they couldn’t fully understand the strategies or there were obstacles that the top of management wasn’t aware of.
How to build a media career: It’s important to have a fallback skill you can fall back on while building your next media platform or artistic project. E.g. work construction, bartend, work at a restaurant, do personal training or learn how to cook.
3 things everyone should know how to do:
- How to tell a joke.
- To give a speech or presentation. You must learn how to overcome your self consciousness and what others think of you. Overcome those fears.
- Be able to have an argument or heated exchange without taking it personally and seeing the other side of it. In the most successful tech companies the top 10 managers have meetings where they discuss what technology to invest in without taking different point of views personal. Different point of views lead to the best investment.
Face to face communication skills are vitally important.
Behavioral change is extremely hard.
To create a new company culture you may have to replace most people.
For example when a cable TV company wants to become a media company it may have to replace most people except for the top 2-3 people.
Would IBM be a good counter example of a company who didn’t have to fire a lot of people?
IBM used to be one of the best managed companies in the world and its great success was as a mainframe computer provider.
It famously missed the market for personal computers and let Microsoft be the provider of software.
Then they tried to reposition itself as a consulting service company. The work at IBM is by no means finished.
Carl Jung on the shadow personality: There’s a part of our personality that we unconsciously push out of ourself.
Feelings we have that we don’t give any expression.
We work hard to keep them out.
To become fulfilled and successful you have to admit to some of your shadow qualities and make them a part of your personality.
Written by Oskar Faarkrog
Learn more about Walter Kiechel on his website TheLordsOfStrategy.com
We are right now creating the Future Skills Program which will be an online video course covering decision-making and risk management with weekly homework and evaluations.
* Why decision making and risk management? Because better decisions equal better finances, better relationships and an overall better life.
* Decisions are the foundation of everything you do and the outcome you eventually get.