Friday, October 04, 2013

Why McKinsey will stay at the top

Economist columnist Schumpeter takes a look at McKinsey's future while reviewing two books, one on the firm and another on consulting in general.

The big challenge to the to consulting firms comes from lower-priced competitors, some of whom use consultants who once worked for the big three. I doubt that lower prices will take away the bulk of the top three consultants' business- the companies who hire them are hardly the price-sensitive variety.

As Schumpeter correctly points out, McKinsey's strengths are talent, investment in knowledge creation and a network of alumni who are happy to use its services. In most companies, the people running them are so busy with operational matters that they just don't have the time or the mental space to strategise or even analyse information systematically. The bright minds at consulting firms do just that. Whether this adds value or not is not clear. But it serves a purpose akin that of the psychiatrist counselling patients:

Though lesser firms may be facing disruption, McKinsey dispenses a special sort of consultorial fairy-dust that is hard to replicate, and as much in demand as ever. The global ruling class is seized with a toxic combination of status-obsession and status-insecurity. Decision-makers also fear being swept away by one of Mr Christensen’s disruptive forces. They seek constant reassurance and reaffirmation from prestigious institutions. McKinsey knows better than almost anyone how to exploit this peculiar mindset. That will guarantee the Firm a solid future, even if no one can prove that its advice actually does any good.

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