Ask Andrew Clark about the state of the strategy consulting marketplace and he quickly points to the all-encompassing impact of digital technology.
"The pace of change, particularly around this digital space, is faster than anything I've seen in 25 years," Mr Clark, the Australia and New Zealand managing partner of the Boston Consulting Group, said.
"That includes what clients are looking for, the potential in the technology and the applications of it."
Digital is one part of a multitude of factors forcing strategy consulting firms to re-examine their own strategies and change the way they operate.
Another factor is clients, many of whom are ex-consultants, demanding better value from the firms including tying fees to results and having the strategists stick around to help implement their plans.
Then there's the growing competition from the giant professional service firms trying to get into this rarefied market, smaller firms continuing to carve out niches and alternative players such as platform-based firms.
The market is expanding, with analysts Source Global Research estimating the total Australian consulting market grew 4.4 per cent to $US4.4 billion ($5.9 billion) in 2015.
The three major strategy houses, BCG, Bain and McKinsey, are secretive but an examination of documents filed with the securities regulator and other statutory filings provide some insight into their operations in Australia and New Zealand.
The documents, which vary markedly in the detail provided, show the firms have had mixed financial fortunes in the past few years and have workforces in the hundreds.
The latest available information shows revenue at the local operations of BCG, Bain and McKinsey ranges from about $150 million to $200 million.
Overall, BCG has had three years of continued losses, Bain reported net income of $US3.2 million ($4.2 million) in 2014 and McKinsey posted a $22.5 million profit in 2014.
The staff numbers at the firm show full-time management numbers ranging from about 60 to 100 and full-time consulting staff numbers ranging from about 130 to 180.
While these firms have outsize influence on big businesses, they are minnows when compared against the revenue and staff numbers of big four accounting and advisory services firms KPMG, EY, Deloitte and PwC, and technology and consulting giant Accenture.
The big four believe their ability to deliver a packaged end-to-end solution for clients gives them an edge over the strategy firms, while Accenture, which purchased strategic consultancy 2nd Road on Monday, believes its decades of technology experience puts it in the box seat as businesses digitise.
Strategy still rules: McKinsey and Bain
McKinsey Australia managing partner John Lydon said clients continue to want "high-level insights and the best capability and support to improve their performance".
"But now, compared to say a decade ago, CEOs say that operating a business in Australia has become much more competitive," he said.
The firm now offers a business turnaround service, an execution practice called McKinsey Implementation, as well as its Solutions software and tools platform services.
The head of Bain in Australia and New Zealand, David Zehner, said the firm's core strategy business grew at two times their overall rate of growth.
"In a more turbulent world, it's even more important to have a sense of where to go and how to get there, and our clients are looking for more sophistication and access to the world's best talent as they try to grow their businesses," he said.
What clients want
Wesfarmers and AGL non-executive director Diane Smith-Gander has been both client and consultant, and believes the way companies use strategy firms has changed since her time as a partner at McKinsey between 2000 and 2007.
"Because of digital disruption, clients are now expecting a lot of the outcomes will come with a digital strategy and the digitisation will come with it," Ms Smith-Gander, who is a senior adviser to McKinsey, said.
"There's [also] definitely an expectation from the client that they will now get an outcome that is more capable of speedy implementation and the strategy consultant will take shared responsibility for the implementation."
Ms Smith-Gander said clients were now more demanding because many were either ex-consultants or had completed MBAs.
"So you would expect clients to become way more nuanced and way more demanding," she said.
"I'd say that this is a market that will demand flexibility, agile models of support and great accountability [from consultants]. That can only be a good thing."
BCG goes digital
BCG now does work that includes traditional strategy, operational improvement and business turnaround, implementation of programs and adding or enhancing the digital capability of a client's business with a specific emphasis on growth, Mr Clark said.
The firm made a big move into the digital space with the recent opening of a local office of the firm's Digital Ventures arm in the Rocks in Sydney.
"Digital creates global growth opportunities," Mr Clark said.
"One is around building new businesses, the second is around using digital to improve existing businesses."
The Digital Ventures office, one of six in the world, has a team of around 50 who work with BCG consultants and clients to develop and launch digital products, platforms and businesses.
Clients are also demanding that the firm puts more fees "at risk" where there is a link between a project's outcome and the cost of the consultant's service.
"What [we] see now that [we] never saw before is this fees 'at risk' component, which is a big deal," Mr Clark said.
"Strategy work doesn't lend itself to fees at risk because by definition it's medium-term work.
"Everything else – operational improvement, even some of the organisation work – does lend itself to that."
He said that outside of public-sector work, which accounts for 20 per cent of the firm's billings, most engagements now have some component of fees at risk.
"We've gone to the point of even doing 100 per cent fees at risk," he said.
Implementation now expected
Strategy firms are also moving into operational work where they partner with clients to implement projects.
"In the past you would get involved in a part of an operation, now increasingly it's the full deal," Mr Clark said.
"That changes dramatically the skill sets that we need to access either in house or third parties."
He highlighted an example of a project at a coal mine in Queensland where the team was made up of BCG consultants, industry veterans, client staff and experts from data analytics company The Simulation Group.
"That team came up with solutions that were very counter-intuitive that we wouldn't have otherwise got," Mr Clark said.
"And I think that is the future – we orchestrate it but we recognise that there is a million things that we can't do."
The future of consulting
- Platforms: eBay for consultants takes on McKinsey
- Buyers: Clients want consultants to implement, upskill staff
- Skillsapien goes niche, Expert360 staffs up
- Revealed: How much BCG, Bain and McKinsey make
- Technology: Inside Accenture's 'new approach to strategy'
- BCG, Bain and McKinsey forced to rethink their own strategy
- Deloitte, EY, KPMG and PwC eye up strategy consulting market
- Gender at the Boston Consulting Group, Bain and McKinsey
- Promontory Financial Group and IBM tie up to apply AIÂ to bank regulation
- PiP, Port Jackson Partners focus to compete against strategy firms
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