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Paying for advice? Go get a therapist. RIP management consultants

2. Expertise

One of the conventional criticisms of consultants is that they send generalists into companies to do an expert’s job. Complex problems, the thinking goes, can only be solved by someone with relevant experience.

That’s exactly why consulting firms have long cultivated people with special types of experience outside their walls. From academics and industry veterans to leaders in business and government, these experts can provide consultancies with an operator’s perspective on many types of client problems. Having a wide network of experts helps consulting firms come up with better solutions for clients and build up their prestige. Employing the world’s foremost experts in specific fields — say, CPG supply chain management — can even give them defensible advantages in those areas.

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Until fairly recently, consulting firms were the only places aggregating expertise from all those different avenues. Today, it’s much easier to get access to “experts.” You don’t need to work with a Bain or a BCG to talk to someone with in-depth knowledge about supply chain management.

But the specialization of the management consultancies’ knowledge bases — a trend that began during the 1980s — means that even today, much of the world’s operating experience in pillar topics like supply chain management is bound up at firms like McKinsey. While experts may be easier to find, management consultancies have gained hard-fought advantages in solving certain kinds of problems.

Consulting today

A decade after Gluck took over the mission of making McKinsey a “knowledge-centered” company, the McKinsey Global Institute (MGI) was born. The Soviet Union had just collapsed, China was beginning to open, and US firms needed international expertise — something McKinsey stepped in to offer with MGI, which combined macroeconomics with on-the-ground analysis from trained consultants.

Today, the same types of experts that big consultancies have hired for decades can be consulted independently, without needing to pay for the rest of the management consulting package, thanks to so-called “learning networks.”

Companies doing this in Europe include Third Bridge and AlphaSights, while in the US, the standout is Gerson Lehrman Group (GLG). GLG and others like it vet experts similar to how a consultancy like McKinsey would, then hires them out to answer companies’ questions on an on-demand basis.

Whether you’re an investor who needs to understand the future of US coal production or a technology executive looking for an expert on AI, you can work with companies like GLG to find the right source, then pay by the hour for a confidential, informal chat (or series of chats) on whatever topics you choose.

How the disruption works

While GLG describes itself today as “a learning membership connecting business people trying to solve problems to experts that can solve them,” the company was started as a publishing business.

The idea was to get experts to help write guidebooks that could help investors at hedge funds and other firms understand the investments they were making in particular industries.

An early guidebook on the pharmaceutical industry from GLG.

Over time, GLG found that its investor clients were much more interested in having casual, one-off chats with its experts than in reading its reports. The fund managers GLG talked to, according to the New York Times, said “many of their best insights came through casual conversations, not from formal reports.”

GLG retooled the company to focus on connecting experts with people who needed them. Ironically, with this new business model, the company found that management consulting firms — often hungry for very specific, niche expertise — were some of its best customers.

GLG network experts can get paid up to $1,000 an hour for a phone call, if not more. Today, GLG’s experts include former ambassador to China Jon Huntsman Jr., former Obama campaign manager David Plouffe, and former Under Secretary of Defense for Intelligence Michael G. Vickers, among other high-profile names in government, finance, and business. Clients can even use GLG to have a conversation with people like Pamela Thomas-Graham, a former executive at Credit Suisse and partner at McKinsey.

“You could call what we do consulting, but it isn’t, really,” GLG president and CEO Alexander Saint-Amand told Recode. “We’ve done millions of projects. Our members have answered almost 100M questions on our various sites. But the primary experience is a one-to-one phone call or meeting.”

GLG struggled with cost-cutting across the financial sector after the 2008 crisis, but since then, the popularity of expert networks has risen significantly.

In 2008, companies were spending less than $100M on expert learning networks. In 2017, that number was $800M. As of early 2020, that figure stood at more than $1.3B — a figure that proves Integrity Research’s estimates that annual expert network spending would pass $1B before 2021 were accurate.

GLG is, of course, far from the only expert network company benefiting from the growth in this space.

London-based AlphaSights was named one of the fastest-growing companies in Europe by Financial Times in 2017. Third Bridge was similarly listed among the 100 companies with the fastest-growing profits in Britain in 2019.

 


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