Consultant News 21 May 03

Website: www.consultant-news.com

New entrant opens up the market for McKinsey-style strategy consulting

What does the future hold for strategy consultants? Numerous sources confirm we are starting to see the first green shoots in the world of strategy consulting, with McKinsey beginning to recruit once again and other major strategy firms also enjoying modest improvements in their order books. But whilst many of the majors are only just picking themselves up from a period of contracting revenues, there is a new breed of strategy consultancies that have remained busy throughout the downturn, posing a new challenge to the established firms...

Historical backdrop

Most mainstream consultancies have suffered during the recent economic downturn, but perhaps none so much as the pure strategy houses typified by McKinsey, Bain & BCG. When corporates are in financial crisis and shareholders are crying out for better returns, projects to define long-term corporate strategies are unsurprisingly one of the first items of expenditure to face the axe. During crisis periods, corporates tend to focus on short-term results and divert consulting resources to operational issues such as sales, cost cutting, reorganisation, etc. So how can a strategy firm entice companies to develop their long-term strategy in a tough market... and pay for it? We met with new strategy firm Candesic to explore their approach to the market...

The birth of Candesic

A little over a year ago, sitting "on the beach" inside his McKinsey office, Leonid Shapiro was amazed at how many trained and talented strategists were out there, all underutilised and concerned about job security; at the same time there seemed to be a growing number of struggling companies who needed strategic help more than ever - but who couldn’t afford to hire top strategy advisors.

Out of that thinking came Candesic, a strategy consultancy Shapiro set up with former colleagues from McKinsey. The idea was simple. Bring together a group of talented consultants from top strategy houses, agree with them a 100% performance based remuneration structure, and sell strategy services to cost sensitive companies at 1/3rd the price of major firms.

But cut-price doesn’t mean cut-quality. Candesic ensured its people were supported with all the trimmings of a large firm. Thanks to the Internet, access to top business information is no longer confined to large firms. Candesic were able to offer the information research department capabilities of the larger firms by outsourcing this work to India on a pay-as-you-go basis.

To add fuel to the fire Candesic also formed a network of "in-the-field" topical experts to augment their talent from top strategy firms. These experts weren’t on Candesic’s payroll, but agreed to consult (and be remunerated) on an ad hoc basis to help teams by bringing deep expertise. This gave Candesic the revered combination of strategic business thinkers with deep topical experts.

The result was the birth of a strategy consultancy with deep topical expertise operating at near 100% variable costs, enabling it to cut waste and pass on the savings to its clients. Consultants have also warmed to the idea of a more flexible lifestyle; with remuneration based solely on utilisation, nobody minds if a consultant wants to take 2 months off.

Clients seem to agree. In the past six months, Candesic has managed to sign several strategy projects from Fortune 500 firms. Smaller firms have also taken part. Candesic’s price point opens up the strategy market to many smaller firms who might never consider hiring a McKinsey or BCG – and who would typically never have been targeted as clients by these big brand consultancies. So rather than purely undercutting the strategy firms for existing business, the likes of Candesic are actually extending the market for strategy consulting by offering a service that opens up such services to a new raft of potential clients.

Where to next for Candesic? Shapiro is already forming partnerships with small strategy consultancy firms in other countries to be able to offer support to multinationals or local firms expanding outside their home markets. If success continues, the Candesic model may well be rolled out in other countries. Could this be a whole new segment within strategy consulting taking shape?