I realise I’ve focused on what McKinsey has had to say on the downturn, and especially on the failure to warn of the subprime nonsense, so thought I should check out the other big consulting firms. Not so easy, as they mostly don’t publish their own views quite so firmly or accessibly as happens with the McK Quarterly.
Why am I banging on about this? If those advisors had been urging caution when it was obvious trouble could be building, and their clients had listened and acted, then much of the over-commitment that made the boom-to-bust so serious would never have occurred. What, for example, would have happened had these firms all blown the whistle on the subprime bubble early in 2006? The world might have been a very different and happier place than it now is. So what did the consultants have to say on this and the impending downturn generally?
It’s not easy finding what Boston Consulting Group strategy folk had to say on the subject. Publications seem to be a mix of reports, press releases and external citations, organised by industry and topic, and the search function delivers a long, repetitious list of items. I couldn’t find any pre-warnings about the likelihood of collapse, though, either in subprime specifically or in the wider economy – but it may be there somewhere.
Bain & Co offer ‘Bain briefs‘ and newsletters that, like McK Q articles are very well written and helpful. They are a little easier to find your way around, but I found no mention of subprime in either set of resources, and again no warnings before collapse was well under way in many other sectors, nor strategy recommendations on what to do about it.
Monitor has items nicely organised by topic and by industry. Many of these, like BCG’s were published in other channels. Couldn’t find much on the finance industry – certainly no warnings. Under strategy there are some items from the Financial Times on ‘mastering risk’, but these focus on firm-specific risk, rather than warning of dangers building in the wider environment. What is especially curious about this is that Monitor has a link-up with Global Business Network – the premiere scenario planning gurus [As I write, their website does not seem to be responding]. Indeed, the Monitor site has some publications by, or in collaboration with GBN experts, such as Future-Proofing Your Organisation, by partner Nick Turner. Strange then, that neither this article nor any other I could find explicitly warned CEOs during 2006/7 to anticipate and plan for a serious reversal – but again I may well have missed something.
Booz Allen Hamilton, of course, publishes strategy+business magazine which regularly offers great articles, the most useful of which I try to post on. The BHA website also offers Reports & Studies, with extensive archives. Didn’t see much from the last couple of years that warned about hard times ahead, but I did pounce on 2007: Trends and Prospects: Letters to Clients, which offered articles aimed at various sectors. By that time, we were well into the slow-down that would turn into collapse, so good to see that on both mortgages and retail banking generally, Booz were not urging firms to go for growth, though the main response recommended was merely to cut costs, not to cut out bad quality business or take a knife to ill-conceived ‘strategic’ initiatives. And I saw no mention in their views on the Auto industry, for example, of any possible reversal [currently down 30% in UK], and with the US big-3 asking for bail-outs.
That’s about all I’ve got time for right now. We could go on and see what the next few firms in the consultancy rankings had to say – Mercer, Deloitte, Wyman, PWC etc, but I hope you get the point. The main responsibility of strategic management is to ensure sustainability of organizations’ mid- to long-term future, so it is vital that top teams look over the horizon and prepare for what might be approaching. Most larger companies rely to some degree on the consulting firms for strategic advice, so could have expected these advisors to be warning of possible trouble ahead as long ago as 2006, and saying how firms should prepare – but I could find no sign of them having done that.
Hi. Seems to be that you really think this is important. But do you actually believe that the warning could make things different? The consult warning to who, the banker? The investment bank? These people of course already knows the risk of subprime bubble, but they’re making money from it, a lot of money, and there are chances that the bubble won’t break so soon, so they’re just keep doing it.
Should the consult company make the warning? I don’t think so. They’re not saint, doing that can neither help the world to stop the subprime bubble, or help their own business. So I just think it’s OK for them not doing that.
I don’t see a conflict here, and am not even asking consulting firms to act for the greater good at their own expense.
Surely a consulting firm who said to a client “There’s good reason why this will all go horribly wrong in 12-18 months’ time, and we can tell you how to avoid getting killed in the collapse” would both make money with that immediate advice and earn their client’s deep gratitude and repeat business. That would have been a good message from many consulting firms to many clients through much of 2005-06 and if it had been given, listened to, and acted upon, would have both been hugely in those clients’ interests and at the same time mitigated the crisis.
Kim