Management Consulting and Case Solving

for Dummies

1. What is Management Consulting?

Issac Jojy

PGP 2014-16

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What is management/strategy consulting? Why is it so over-
hyped? Is the hype really worth it?

I had randomly checked with a few people who had come to me for CV evaluation whether they
actually knew what management consulting is. And not a single person knew. It’s ok. Everyone needs
to learn and know stuff at some point. So I thought I should share it with the others as well, as it
might be the case with a lot of you. I’ll explain what management/strategy consulting using a simple
example. Forget about management consulting for the moment and assume that there is a steel
company (Company A) which supplies steel to a construction company (Company B).

Now Company B has 2 options – Either make steel on its own and use it for its own purposes or buy
steel from Company A. Take a moment and think about why Company B buys steel from Company
A. The core competency of Company B is construction and not steel making is not the answer.
Suppose the construction company had huge amounts of steel requirements, isn’t it worth investing
in a steel plant as part of a long term investment. So the question should not be thought around “What
is the core competency of Company B?” The answer is in economies of scale.

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Steel Company A supplies steel to various construction companies C, D etc. because of which buying
steel from A is always more cost efficient for B as compared to making steel on its own. Hence, the
saying – Market is always more efficient than the organization. So your next question would be “In
that case, can all products/services/requirements not be outsourced?” The answer is yes and there are
organizations which do that. The decision to keep in-house or outsource depends on the level of
control / competence that the management decides to keep with itself and this is how organizations
are designed. #MO101
Your next question is “How is this example related to management consulting in any way?” The
answer – In the steel-construction company example, the product being sold by company A is steel.
Now, assume that this product/service is “Strategy”. That’s where management consulting comes in
– The situation is no different from the steel-construction company example.

Say for instance, the top management of company B (some major European conglomerate company)
is deciding to whether to enter the Indian market or not. They do have an in-house strategy team for
relatively smaller decisions, but they have absolutely no idea about the Indian market situation and the
decision to enter or not is a huge decision. So, they outsource their strategy to Management Consulting
Company A, which would know the Indian market. Company A services various other companies C,
D and Company B knows that Company A will give the best of the market recommendations on
whether to enter the market or not, how to enter, investment required etc. This is in no way different
from the steel-construction company example. Outsourcing strategy for big decisions costing huge
investments for the client companies is the reason why management consulting as an industry took
shape.
And these decisions of the top management of company B are big huge decisions. Like 1000’s of
crores worth decisions, may be. And they cannot afford to make a wrong decision when the numbers
involved are so huge. So the client companies don’t have an option but to get the best of the market,
because a wrong decision can easily take the company down in a matter of time.

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An additional reason (although not a good one) why management consultants get hired by client
companies is to back their decisions in front of their shareholders. Like for instance, if the top
management of a company wants to take a decision, but do not have the capability to do the necessary
analysis to back up decision in front of their board of directors and shareholders, they might hire one
of these consult companies, get them to do the analysis and depending on their recommendations,
decide to stick with the earlier decision or change, but either way an approval tag from these companies
on the report that they submit to the board of directors / shareholders has a LOT of credibility.
Although the consult companies do say that they do not heed into such forced decision making and
do not tailor their analysis according to the client’s requirement, I’ve heard from multiple sources
across a few of the consult companies that such things have happened and do happen (I’m keeping
my words qualitative and playing it safe ;) ) - But the point to be conveyed clearly is that such things
might happen because consulting companies are dependent on clients for projects.
So why the hype about consulting? Because these decisions are huge for the clients. So they will happily
pay consultants a fancy huge service fee to ensure that they get the best services. And in return the
services provided by consultants have to be top notch. One small error in the analysis can even take
down the entire client company. So, a lot of the hype is actually worth it. But people over hype it so
much, which I feel is just peer pressure affecting people, and most people who over-hype have
absolutely no clue what management consulting is. If they knew what it actually is, they’d acknowledge
that “yes. It’s an important service providing industry. So the hype is worth it. But definitely not all
this super-over hype about it”. It’s just like any other service like marketing or operations or finance
and no different. The only difference is it is more generic and the diversity involved is awesome. On
one project you might be working on a marketing case, another might be an operations case and the
next case might be an organization re-design case. The most brilliant part about consulting is that you
can get exposure across functions (procurement, operations, sales and marketing, organization design
etc) and for each of these functions, you can get immense exposure across various industries (banking,
insurance, FMCG, retail etc). During my summers, I interned for a fashion retail client. Before the
project started, I had NO clue about anything in fashion retail. At the end of it, I had a very pin-
pointed deep understanding of how the Indian fashion retail industry works. So yeah, the diversity is
awesome in consulting.
Overall, you can expect to use a lot of what you learnt as part of MBA. And even if you do not
remember anything from MBA, there are resources in the consult companies which will help you pick
up all that very quickly. Personally for me, what gives me the kick in management consulting is that
there’s a lot of thinking/ analysis to be done and brain capacity utilization is kicka**. But like I
mentioned, management consulting is just like any other service industry.
This is an extremely basic way to communicate what management consulting is. Depending on the
agreement made between the consulting company and the client company, the scope of services can
range from strategy formulation, strategy implementation etc. and a lot more. With this background,
if you google more, you can get a better perspective of what are the kind of services management
consultants provide, in more detail.
While going through the documents I’ve written, you might get a feeling that consulting is extremely
theoretical and not at all practical. Trust me – That is completely wrong. I also had that feeling initially.
Depending on the project you’re assigned to, you might get a very strategic top management

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perspective (if the project is a pure strategy project) and you have a chance to get a completely on-
the-ground grass root level understanding as well (primarily in strategy implementation projects where
there is extensive on-the-ground field work). So keep that in mind while going through the documents
that follow.
For the purpose of understanding the documents that follow, you just need to understand this
document. You do not need to google more about management consulting. With the context of what
management consulting set, the next document will talk about whether you’d like consulting as a
profession and also, the broad process that is followed at IIMB for getting into a consulting firm.