Interesting perspective. I agree that consultants get to charge huge fees to bring internal coherence rather than to drive new thinking. As they say " they take your watch and tell you the time". But it is the way they do it - slick presentations and models - that enables better understanding that earns them their position.
I have a different view to the AT & T situation which resulted in them making Craig McCaw a rich man and paying $12.6B to get into the cellular business.
1. In 1983, the cellular business was in its early stage startup phase. AT & T focused on what they did best - long distance fixed line communication. They effectively allowed Craig to lead the development of the cellular business in the US which took significant effort and capital.
2. In 1993 - the cellular business was ready to take off. AT & T stepped back into the ring to buy the now established winning business and focused on what they did best - scale the business to its current state.
3. Do note that in 1993 they bought the business for stock - no cash payments were made. Since then this investment has paid back to A T & T shareholders multi-fold. It is possible that AT & T might have driven the cellular business growth as a new product line internally. My assessment is that this would have taken more than a decade and a significantly larger cash investment than the $12.6B.
What if cellular business had died in its infancy and Craig had failed - AT & T would not have lost anything - in fact, we would not be writing about this now!!
Was the decision to focus on what they do best the right strategy for AT & T? Is it not better to allow innovation to happen in the hands of a gritty, no holds barred entrepreneur like Craig that beat the barriers down to create a winner? Did A T & T do well at scaling the infant business and making it a giant winner??
I think I agree with you here. Predicting the future is a dangerous business anyway, and a few specific failures of prediction can't be used as evidence of something more sinister.
Interesting. I'm a philosophy PhD student and you seem to be cognitively inclined in that direction. Your posts are extremely long but I look forward to plumbing through them!
That's what I would've done in a world where I wasn't actively being steered away from it. I hope you're enjoying it enough!
But very kind of you to say so! I try to be short but sometimes life takes you the long way. I started the blog with my philosophical manifesto but quickly ended up exploring the world. It's fun :-)
Google most definitely uses tons of consultants. Not only hiring MBB directly but also to staff its in house consultancy teams almost exclusively. I would be comfortable betting that these consultants opine regularly on the strategy for search.
True MBB doesn't guide Google on what their technical team should research next for search. But I bet you a consultant has looked over the cost structure and org design for the search team.
Pressed post too soon. So the consultants who do look do things like where to localise more next (find biggest country/ locality to focus), or org structure. But even that's more led by their BizOps team.
I did help build a model when I was at mck to help an oil major figure out where to drill FWIW. But it's normally not for the #1 player, it's the #5 player who wants to become #2. But it's a fair distinction to make - I should've been clearer on which mgmt decisions are routinely relegated (and what type of company relegates them) vs making it sound like it's a more generic decision delta.
This was super insightful, I work in a large company transitioning from startup phase into a large mature company now 2k plus people and have little internal coherence and are missing out on the innovation in the industry that is important to our long term success. Thank you for this post!
> Microsoft is my favourite here. They bought Skype for $8B, did barely anything with it. They bought Motorola, and skipped the entire mobile revolution.
Fantastic article Rohit.
I worked in consulting for a short period and still didn't understand why they got paid like they did😅.
Interesting perspective. I agree that consultants get to charge huge fees to bring internal coherence rather than to drive new thinking. As they say " they take your watch and tell you the time". But it is the way they do it - slick presentations and models - that enables better understanding that earns them their position.
I have a different view to the AT & T situation which resulted in them making Craig McCaw a rich man and paying $12.6B to get into the cellular business.
1. In 1983, the cellular business was in its early stage startup phase. AT & T focused on what they did best - long distance fixed line communication. They effectively allowed Craig to lead the development of the cellular business in the US which took significant effort and capital.
2. In 1993 - the cellular business was ready to take off. AT & T stepped back into the ring to buy the now established winning business and focused on what they did best - scale the business to its current state.
3. Do note that in 1993 they bought the business for stock - no cash payments were made. Since then this investment has paid back to A T & T shareholders multi-fold. It is possible that AT & T might have driven the cellular business growth as a new product line internally. My assessment is that this would have taken more than a decade and a significantly larger cash investment than the $12.6B.
What if cellular business had died in its infancy and Craig had failed - AT & T would not have lost anything - in fact, we would not be writing about this now!!
Was the decision to focus on what they do best the right strategy for AT & T? Is it not better to allow innovation to happen in the hands of a gritty, no holds barred entrepreneur like Craig that beat the barriers down to create a winner? Did A T & T do well at scaling the infant business and making it a giant winner??
I think I agree with you here. Predicting the future is a dangerous business anyway, and a few specific failures of prediction can't be used as evidence of something more sinister.
Check out the EADS ownership chart. It’s like the Krebs cycle of aerospace
I enjoyed this! Just curious: what's your education in?
Engineering, economics and an MBA 🙄🤷♂️
Interesting. I'm a philosophy PhD student and you seem to be cognitively inclined in that direction. Your posts are extremely long but I look forward to plumbing through them!
That's what I would've done in a world where I wasn't actively being steered away from it. I hope you're enjoying it enough!
But very kind of you to say so! I try to be short but sometimes life takes you the long way. I started the blog with my philosophical manifesto but quickly ended up exploring the world. It's fun :-)
so, how then the big businesses need to do to boost innovation?
One example I wrote about recently - https://www.strangeloopcanon.com/p/thinking-like-a-city .. There are more in archive too.
The part about laggards seemed to me to be wrong:
Google most definitely uses tons of consultants. Not only hiring MBB directly but also to staff its in house consultancy teams almost exclusively. I would be comfortable betting that these consultants opine regularly on the strategy for search.
True MBB doesn't guide Google on what their technical team should research next for search. But I bet you a consultant has looked over the cost structure and org design for the search team.
Meant more that they don't use them for the core search function (from what I know). Same Goldman doesn't use them for their prop trading desk.
Pressed post too soon. So the consultants who do look do things like where to localise more next (find biggest country/ locality to focus), or org structure. But even that's more led by their BizOps team.
Sure but Exxon don’t use McKinsey to decide how to drill, and analysis of where to open a new field is likely not outsourced to McK often.
This just seems like a technical vs management distinction.
I used to work in a company that was behind the curve on some things. We still didn’t outsource the key technical questions.
I did help build a model when I was at mck to help an oil major figure out where to drill FWIW. But it's normally not for the #1 player, it's the #5 player who wants to become #2. But it's a fair distinction to make - I should've been clearer on which mgmt decisions are routinely relegated (and what type of company relegates them) vs making it sound like it's a more generic decision delta.
This was super insightful, I work in a large company transitioning from startup phase into a large mature company now 2k plus people and have little internal coherence and are missing out on the innovation in the industry that is important to our long term success. Thank you for this post!
Glad you liked it!
> Microsoft is my favourite here. They bought Skype for $8B, did barely anything with it. They bought Motorola, and skipped the entire mobile revolution.
Do you mean Nokia here? Google bought Motorola.
Yes I did! Thanks for the catch!
👍 Great article!
Thanks! Really appreciate it.