Consultants can be found in almost every industry and across a wide range of activities. That’s why when you’re ramping up on consulting recruiting, it’s helpful to put together a framework for thinking about the different types of consultants and the classes of consulting firms that are available.
Therefore, to help you get a sense of consulting landscape we’ve broken down the different types of consulting firms into four classes: strategy consulting, implementation consulting, industry specialists and functional specialists.
These classes are not perfect, and as we'll discuss, some firms, particularly in the last five years, have started to cut across categories. However, as with all frameworks, its value is in providing an initial anchoring for how to think about the world.
#3: Functional specialist
#4: Industry specialist
ex: Chartis Group
Strategy consulting firms are among the most known class of consulting firms. Within this class, there are two tiers of consulting firms: Tier 1 consulting firms & Tier 2 consulting firms.
This category includes the well known, "elite" heavyweights such as McKinsey & Co., BCG and Bain & Co.. Since these tier 1 firms have cemented their status over the years, many people simply refer to them as MBB - for McKinsey, BCG and Bain. You'll even hear people say "I'm targeting an MBB" or hiring managers say "I want someone with MBB experience."
This category includes firms that are a step below the top three management consulting firms, they are also sometimes called 2nd tier consulting firms, t2 firms, micro firms or mid tier consulting firms, such as Strategy& (which is part of PWC), Oliver Wyman, LEK, Roland Berger, EY and others. Even though people call these firms tier 2, don't take that to mean they are small. Firms like Deloitte and Accenture are actually bigger than the tier 1 firms by revenue.
What makes a consulting firm a strategy consulting firm? The fundamental idea is that the firm helps a client reach the right strategic answer but is *not* involved in the ongoing implementation of that answer. Later in this section, as we review the profiles of the firm (e.g., estimated revenues, employees), we'll see the strategy reflected in the numbers. For example, strategy firms tend to have fewer employees but charge a higher premium for their work. In addition, firms often need more implementation help than strategy work. Afterall, a firm can only have so many strategies, but often has an endless stream of implementation tasks. Thus, we'd expect higher overall revenues from the implementation firms.
Note: There are very few true "strategy-only" firms left. Over the last decades, the leading strategy firms like McKinsey and BCG have increasingly expanded their implementation offerings. We'll discuss this more below in the trends section on cross-class expansion!
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This class of consulting firms includes the two largest revenue generating consulting firms: Accenture and Deloitte. While the Strategy class gets recognition due to blue chip brands (e.g., McKinsey), the implementation class gets recognition due to strong brands plus a very high volume of case work. The long standing leaders in implementation are Accenture and Deloitte, who both employee massive work forces and put up impressive revenue numbers year over year.
Again, this type of firm is recognizable via its profile as well (see below). Also, in a similar vein as the Strategy class, the implementation firms are also trying to expand their reach. However, in this case, the implementation firms are looking to move upstream into strategy work as well (as opposed to the strategy firms looking to move downstream into implementation).
A lesser known class of consulting firms is one that focuses on a specific function, or a handful of specific functions. For example, there are consulting firms like FTI, which focuses on financial and litigation consulting. What's that mean? Essentially, FTI and firms like it (eg Navigant), help sort out complicated financial situations. The range of case work includes projects like bankruptcy restructuring, such as FTI did with General Motors during the 2008 recession, or helping sort out what happened in the infamous Bernie Madoff ponzi scheme (which FTI also helped with).
Of course, FTI is just one example of a function specific firm. There are firms that specialize in a variety of other functions: economic consulting firms which provide economic analysis in corporate litigation (e.g., Cornerstone Research, Analysis Group), pricing firms (e.g., Applied Predictive Technologies) or design consulting firms (e.g., IDEO or Frog).
Similar to the strategy and implementation firms, many of these firms are attempting to expand into other classes. For example, FTI does some strategy work and design firms like Frog and IDEO occasionally sell strategy cases as well. That said, to date, the cross class movement has been most pronounced and most successful between strategy and implementation and vice versa.
Industry specific firms are the smallest of the four classes. The level of expertise they bring to the table in their given industry can be tremendous, but the overall market that they can sell their services to is obviously constrained (given the industry focus).
Naturally, the largest industry specific firms come from one of the largest global industries: healthcare. Healthcare firms like The Chartis Group and Trinity Partners are great examples of this class of consulting firm. All major industries from education, transportation, nonprofit, real estate, etc. will have their own industry focused consulting firms too.
Sources for revenue, employee base are from publicly available material; full source list here.
Now that we've got a framework for how the consulting industry itself breaks down, it's worth thinking about the trends within the industry itself. There are two mega trends worth calling out.
All the leading firms are looking to drive continued revenue growth. As a result, most of the pure strategy firms (e.g., McKinsey, BCG) have started to go downstream into implementation. Why? This will enable them to sell significantly longer projects and bring in additional revenue, even if the per consultant rate for implementation work is lower.
From a strategic perspective, it also makes sense. Once McKinsey builds out the implementation practice, the upsell should resonate with clients (e.g., "We recommend you adopt this strategy. And, oh, by the way, we've got an implementation team that help you execute on that over the next six months"). Who better to help implement than the people who advocated the strategy?
On the flip slide, the pure implementation firms (e.g., Accenture) are increasingly trying to grab more of the premium priced strategy work. From their side, they already have the strong, durable relationships with clients due to the long timelines for implementation projects.
While it might be more difficult to upsell into strategy, the advantage these firms can utilize is identifying strategic opportunities while being embedded in the organization on an implementation project. Since implementation projects are quite long, if an Accenture, say, does a good job staffing some consultants who can identify strategic opportunities to pitch, that makes sense. For them, the pitch will be akin to: "We noticed that X seems sub-optimal in the current setup. We could do some some analysis and propose an alternate strategy and then help you implement it."
As we spoke about earlier, clients hire firms for functional expertise that they lack or when the stakes are high enough that they absolutely need to get it right. In the next 10 years, the areas of functional expertise which clients most demand is likely to radically evolve. As the global business environment has continued to evolve rapidly, new areas of expertise are popping up: artificial intelligence and machine learning, blockchain and cryptocurrency technology and on-demand services and sharing economy.
Understandably, there is an arms race between McKinsey, BCG, Bain, Accenture et al to prove they've got the expertise in these areas so they can win big chunks of new business from clients. Each firm publishing research in these areas and will double down in putting that expertise to work in cases in the coming years. For further discussion of the industry trends, you should check out this detailed discussion on the rise of strategy consulting, new head winds and what the future holds.
Now that we've got a clear picture of what types of consulting firms are out there, what their company profiles look like and the type of work they focus on, let's go a level deeper and look at the unit economics of consulting. As you're going through case interviews, you'll find yourself assessing the unit economics of all sorts of businesses, from cereal bars to motorcycles. Here, we're going to increase your understanding of the consulting business by looking at the unit economics of a case.
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