Authors: Isha Agarwal, Lavanya Agarwal, Vaibhav Sonthalia
Consulting involves actively providing specialized guidance and suggesting effective solutions to individuals working within specific industries or domains. Acting as intermediaries, consultants connect intricate client situations with the expertise of their firms. Their tasks encompass various responsibilities such as devising project plans, formulating initial hypotheses, engaging with experts,clients, and customers, analyzing market size, delivering recommendations to clients, and supporting them throughout the implementation process.
During the late 19th and early 20th centuries, the foundations of modern consulting took shape as the demand for work rationalization emerged. The earliest management consulting firms arose from the need for expertise in organizational efficiency and processes.
Arthur D. Little, an early consultant, transitioned from general management to specialized technical and management engineering, influenced by Taylor and Babbage’s theories. This marked the introduction of “scientific management,” enabling firms to optimize tasks and enhance operational efficiency, which gained traction among U.S. factory managers.
Source: https://chaturvedimayank.wordpress.com/2019/03/26/the-origins-and-history-of-management-consulting/
The emergence of management consultancy as a distinct service followed. Clients recognized its value in decision-making and self-sufficiency. The growth of complex manufacturing increased demand for expert business management, creating a need for professional consultants.
The second industrial revolution brought growth and profitability but also challenges. The divide between ownership and management led to seeking external expertise for complex decisions. Governments sought consultancy assistance, exemplified by Booz Allen and Hamilton’s engagement by the US government.
Post the Great Depression, the Glass-Steagall Banking Act spurred demand for expert advice in finance, management, and strategy. This legislation’s aftermath fueled rapid growth in the consulting industry, solidifying its role as a vital partner in addressing diverse business challenges.
Birth of McKinsey & Company-
James McKinsey, an American accountant who achieved certification as a public accountant in 1919 while employed by the State of Illinois, played a pivotal role in shaping today’s management consulting industry.
The concept of establishing a consulting firm sprouted during McKinsey’s tenure with the U.S. Army Ordnance Department, where he observed inefficiencies among military suppliers. This prompted him to found the “Accounting and Management Firm,” advocating the application of accounting principles for effective management. Following McKinsey, the firm’s initial partners, Tom Kearney (hired in 1929) and Marvin Bower (joined in 1933), emerged as key figures.
Above all, McKinsey’s legacy extends beyond its international reach. It introduced the notion of management consulting as a dedicated and legitimate career path, fundamentally shaping the industry’s trajectory.
Today, McKinsey employs 26,000 staff across 120+ offices and generates $8.8bn+ annually in revenues.
Formation of BCG-
Founded by Bruce Henderson in 1963, BCG initially operated as a subsidiary of the Boston Company, becoming independent in 1975. Henderson’s departure from the traditional internal approach of firms like McKinsey marked a pivotal shift. BCG concentrated on external factors—markets and competition—which led to groundbreaking concepts like the “experience curve,” “time-based consumption” and the BCG matrix. The BCG Matrix, also known as the growth share matrix – provides a strategy for analyzing products according to their growth potential and relative market share. These insights were encapsulated in influential essays named Perspectives, continuing as a BCG tradition. Such innovative approaches to problem-solving and strategy development helped BCG stand out and attract clients.
The 1960s saw BCG’s international growth, briefly disrupted in 1973 when VP Bill Bain left to establish Bain & Co. The 1980s and mid-90s spurred further expansion. Despite challenges in the early 2000s due to economic crises and technology advances, BCG solidified its position as a prestigious strategy firm. It stood out by pioneering content marketing to deliver value and establish itself as an authoritative voice, setting an industry standard beyond consulting.
BCG in India-
BCG established its first office in Mumbai in 1995, which acts as the headquarters for BCG’s countrywide operations, supplemented by an office in the capital of New Delhi. It was first inspired by the youthful energy of India, a quarter of a century ago. Regarding its services, the company primarily collaborates with the top leadership of businesses in India, assisting them in formulating positioning strategies, particularly for emerging enterprises and brands. Under a different service vertical, the firm offers support with strategic mergers, joint ventures, acquisitions and divestitures. The firm’s operations have been growing at a rapid rate, having already crossed 1,200 employees in the country, and recording the fastest growth rate amongst the consulting firms active in the market in 2018.
Creation of Bain & Company-
In 1967, BCG’s founder, Bruce Henderson, extended a job offer to Bill Bain, proposing a $17,000 annual salary. The path seemed set for Bain to eventually succeed Henderson at BCG. Yet, Bain’s pivotal decision altered the consulting industry’s trajectory. Instead of becoming Henderson’s heir, Bain chose to leave and established his own consulting venture, Bain & Company.
This pivotal moment shifted the landscape of consulting. The term MBB, encompassing McKinsey & Co., BCG, and Bain & Co., might not have emerged if Bain had remained at BCG. The term “Big Two” might be in use today instead of the “Big Three.” Bain even brought along six employees from BCG as he embarked on his new journey.
What set Bain & Company apart was its innovative approach to client relationship management. The firm focused on nurturing long-term relationships with only one client per industry, enabling it to secure numerous projects from these clients and maximize value per engagement. This approach challenged the prevailing project-based consulting model, driving a significant shift in the industry’s dynamics.
However, Bain & Company’s journey wasn’t without challenges. The late 1980s brought financial turmoil, prompting layoffs, reduced client spending, and strained partner relationships. The firm’s turnaround hinged on the addition of astute minds, like Mitt Romney, who restructured the organization, renegotiated debt, and introduced transparency. By 1998, Bain & Co. rebounded, generating a staggering $220 million in revenue.
Bain in India-
Bain India has been one of the fastest growing consulting practices in the world within the Bain ecosystem with a more than 20% year-on-year growth rate. The firm started operations in India in 2006 and currently has about 60 partners and more than 1,000 consultants. Apart from them, it employs 2,000 people at its global capability center in Gurgaon that provides back-office services to Bain’s global operations. Bain’s involvement in India’s business landscape has likely included assisting companies with market entry strategies, growth initiatives, performance improvement, mergers and acquisitions, and other strategic and operational matters.
Conclusion-
In conclusion, the evolution of management consulting is a tale of visionary thinkers, strategic shifts, and transformative impacts. From its humble origins driven by the need for efficiency and rationalization in the late 19th century to its contemporary status as a vital partner in navigating complex business challenges, the consulting industry has undergone remarkable growth and adaptation. Pioneers like Arthur D. Little, James McKinsey, and Bill Bain laid the groundwork for modern consulting by introducing innovative approaches and frameworks that continue to shape the field today. Their contributions, along with the establishment of firms like McKinsey & Company, BCG, and Bain & Company, have not only solidified the industry’s importance but have also set the standards for excellence and innovation.
The consulting landscape in India, exemplified by the growth and success of BCG and Bain & Company, showcases the global reach and influence of these firms. Their strategic guidance has not only propelled businesses to success but has also contributed to the overall growth of the economy.
As we look ahead, the role of consultants remains as crucial as ever, particularly in a rapidly changing and interconnected world. The challenges businesses face are becoming increasingly intricate, demanding a blend of expertise, creativity, and adaptability. The legacy of these consulting pioneers serves as an inspiration for future generations to continue pushing the boundaries of knowledge and driving transformative change in industries around the globe. Just as the past has paved the way for the present, today’s innovations will shape the consulting landscape of tomorrow.
References:
Laffitte, H. (-, – -). What are the main differences between McK, BCG, Bain? Consulting Wiki. Retrieved September 9, 2023, from https://consulting.wiki/question/what-are-the-main-differences-between-mck-bcg-bain/
Laffitte, H. (2022, May 17). History Of Consulting: The 8 Important Stages. Consulting Quest. Retrieved September 9, 2023, from https://consultingquest.com/insights/8-stages-history-of-consulting/
CONSULTPORT. (2022, July 6). The History of Consulting: An Overview. Consultport. Retrieved September 9, 2023, from https://consultport.com/for-consultants/the-history-of-consulting-an-overview/
My CONSULTING Offer. (n.d.). MBB Consulting: What’s Different About the Big 3 Firms. My Consulting Offer. Retrieved September 9, 2023, from https://www.myconsultingoffer.org/cover-letter/mbb-consulting-firms-mckinsey-bain-bcg/