Vision 20/15: Leading Through a Fundamental Business Transformation

By Paul A. Laudicina
Managing Officer and Chairman of the Board of A.T. Kearney

November 11th, 2009

Welcome. What an honor it is to be here today. I had the privilege of speaking at this same session a few years ago, and, how vastly different our world has become. We weren't without challenges back then, of course, but the fundamentals seemed strong. The global economy was robust and demand for consulting services was high. And then we fell through the rabbit hole, and what many thought could never happen, happened.

Today, the global economy is tentatively recovering from its biggest fall since the Great Depression. We face uncertainty around every corner, and while good news is certainly on the rise, a steady drumbeat warns us that there is more quicksand ahead. Our confidence is shaky and our footing is unsteady, at best.

Our industry, certainly, has also seen a decline. Kennedy Consulting, our esteemed hosts, estimates that the global consulting market will contract 5 percent this year. That's not great, but relatively speaking, that's not as bad as it could be. A few months ago, however, Consultants News sounded the warning of a much more insidious side effect. The "unanswered question," they wrote, "is the consulting industry's own culpability in [the events] that led to the meltdown of the worldwide financial markets."

So, here we are today buffeted by truly unprecedented circumstances. We are facing a new reality, what many call, a "new normal." All industries are being affected, of course, but, as Tolstoy observed, "Happy families are all alike; but every unhappy family is unhappy in its own way." And so it is that our profession faces struggles from this crisis that are unique to those of us in the business of providing advice and counsel. How we respond to the new reality will determine who thrives and who becomes a casualty. At the risk of being guilty of what might sound to some like hubris, if we're not able to discern the right things, the smart things to do to usher in the next era of growth and globalization, then there are much higher stakes at risk.

As we address these challenges, I believe there is much to learn from being honest about how we got to this point and then consider the key strategies that will drive our industry forward and, by extension, help our clients meet their goals. Leading through a fundamental business transformation is also something that we at A.T. Kearney have had recent experience with, and there are certainly some lessons that we continue to draw from as we adapt our strategies to this new world.

A Failure of Leadership

Monday-morning quarterbacking for the Great Recession has already kicked off, and we've seen some early scrimmages. Last month, Consultants News, which has been following the profession for almost 40 years and watching it grow from a few hundred million dollars to almost $300 billion, recounted a litany of questionable consulting services rendered. They concluded with an ominous challenge, "Will there ever be a time when [management consulting] completely shakes the 'buyer-beware' image?" As the scrutiny continues, our profession will, make no mistake about it, be directly in the crosshairs of the public debate.

As diverse as our profession is, I am quite sure that we all promise our clients the insight and foresight to create long- term value and mitigate risk. And so, by definition, when global markets devolved into crisis, consulting as a profession was one of many that failed to do its part to avert disaster. We failed. Yes, some of the consulting profession is tarred with the brush of other services that are also undeniably blameworthy: financial advisors, accounting and the legal profession. And some people in those professions were intimately involved in providing advice that led to the collapse of the international financial system—and in a generic sense, "consulting" shared the blame. It is a heavy and sometimes unfair burden for us to bear that under the mantle of "consultant," which is almost as generic as "businessman," there is diversity of performance and a wide range of capabilities, skill sets and snake oil. So, yes, some have failed more than others, and guilt is not shared equally. Yet, it is emphatically our shared responsibility to do what is required to help ensure such breaches don't happen again.

We take on this task from a big deficit. Let's face it, our images needs some work.

I often tell my oldest son, who's a meteorologist, that his is the only profession that makes consulting look good. Consulting has long been derided as the world's second oldest profession. And there's another old joke that argues that consulting is indeed the oldest. A doctor, an engineer and a consultant were arguing about just this —what was the oldest profession in the world. The doctor remarked, "Well, in the Bible, it says that God created Eve from a rib taken out of Adam. This clearly required surgery, and so I can rightly claim that mine is the oldest profession in the world." The engineer interrupted, and said, "But even earlier, the book of Genesis states that God created the earth from chaos. This was the first and certainly the most spectacular application of civil engineering. Therefore, fair doctor, you are wrong: Mine is the oldest profession in the world." The consultant leaned back in her chair, smiled, and then said confidently, "Ah, but who do you think created the chaos?"

It's not just the teasing, though. Current historians and commentators are bashing the grandfather of consulting, Frederick Winslow Taylor, or "Speedy Taylor," who, as you'll recall, launched groundbreaking time and motion studies to improve productivity. They're accusing him of "fudging his data, lying to his clients and inflating the record of his success." By extension, the argument continues, we are carrying on this legacy. A popular blogger referred to consultants as modern-day Robin Hoods — stealing from the rich and then keeping the loot. Another recent scathing critique is a book called The Management Myth: Why the Experts Keep Getting It Wrong written by a former consultant, Matthew Stewart, who defines management consulting as "precisely nine-tenths shtick and one-tenth Excel." And that's among the nice things he says in his 303-page diatribe.

As much as we groan at the bad jokes and dismiss the disgruntled authors, there's a grain of truth in their derision. And when clients share their horror stories, ignoring the rebukes becomes even more difficult. One former client—and current blogger—of a large consulting firm described how a team of consultants descended on his company for six months, incorrectly diagnosed the problem and presented a faulty solution. The final report was replete with 40 diagrams, which prompted him to complain to top management that, "Since the report cost $2 million, that's roughly $50,000 per diagram. Might I suggest that, next time, we consider using that money to buy fine art, because then we'd have something to sell when we go out of business."

Until we acknowledge our role in perpetuating these stereotypes, we will continue to do our profession a great disservice. The responsibility on, and the requirements of, consulting are greater than ever and we have to own up to them. It's critical that we restore the credibility, trust and respect of our industry because the issues that our clients and, therefore, society are facing are the most intractable and formidable problems of our generation. If we don't have the credibility, trust and respect to help solve them, we'll all lose.

Of course, ours is not a profession that polices itself or is conducive to a regulatory body, as others, such as law and medicine, are. Ultimately, the marketplace determines who wins and who loses. Those whose quality of advice is consistently good and correct succeed, and presumably, those that don't, don't. I believe there will be—and probably should be—a shakeout of our profession. Too many people have been hanging out a shingle without meeting rigorous standards and without living by the strength of their recommendations over a sustained period of time. Those that can't survive the test of their strategies and their enduring value of implementation should get out of the profession because they're not doing themselves or the profession—or certainly their clients —any good in the process.

Those of us who have staying power, however, need to redouble our efforts to understand precisely why most missed much of the discontinuities of the past and what we need to do to ensure that we help our clients be smart enough about the future to empower and enable them to make the most informed decisions in the present. Our industry needs a reality check because, to paraphrase philosopher John Ralston Saul: A profession unable to differentiate between illusion and reality is usually believed to be at the tail end of its existence.

A.T. Kearney's Crucible and Vision 20/15

Our business is all about dispensing and implementing advice to our clients: helping them fulfill their potential, meet their ambitions and achieve their goals. But the world as our clients know it—the world as we know it—is undergoing a transformational shift as convulsive, as disruptive, as disorienting, as filled with both opportunity and risk as that of the Industrial Revolution. So how do we lead both our clients and our own firms through this fundamental business transformation and restore the reputation of our profession in the process?

For those of you who aren't familiar with A.T. Kearney, we're now in our 83rd year. Our predecessor firm was started by James McKinsey. In September 1929, mere days before Black Friday—talk about timing!—Andrew Thomas Kearney signed on as the firm's first partner. Tom Kearney was among the first to approach the practice of consulting as a "general survey" in which he examined all aspects of a business. A few years later, Tom Kearney established his firm with Chicago as its hub.

By all accounts, Tom was an uncomplicated, friendly man, who was unalterably committed to delivering the best, most action-oriented advice possible to clients, always authoritatively and courageously, and always collegially and congenially. After Tom Kearney passed away in 1962, the firm continued to grow. We expanded nationally and then internationally, growing at double-digit rates every year for nearly two decades. Then, in 1995, as some of you may know, we became a wholly-owned subsidiary of the IT services company EDS.

It was not a marriage made in heaven, though the early years continued the extraordinary growth trajectory. Ultimately, however, our entrepreneurial spirit suffered under our new parent, particularly as time went on and leadership changed. And, I'll be candid: We lost many good people who thought we were on an errant, if not sinking, ship. We had lost our way. The values that Tom Kearney instilled were not center stage; we were losing touch with our heritage and the DNA that made us so successful for so many years. So, in 2006, the firm's partners—fewer than 200 of us—purchased A.T. Kearney back from EDS.

It was an exciting time, to be sure, but also fraught with risk. Our prognosis was dismal and many assumed terminal. One analyst from Morgan Stanley described us as being on chemotherapy. We were taking the most pernicious medicine, which could just as easily be curative as fatal. We were a distressed asset, our morale was low, our confidence was shaken and we had very little time to correct our course. Consultant, heal thyself.

So, soon after the management buyout our first step was to apply the rigorous analysis and strategic planning we use for our clients to our own operations. We began by taking an outside-in approach. Where were the markets headed? What were the major shifts underway? What new demands would the world make on our clients and how could we help them get out ahead of these new business dynamics, this new "theory of business"?

This was the seed of what grew into our internal program, Vision 20/15. Vision 20/15 is a double entendre—referring to both a point in time, and the better-than-perfect eyesight, the peripheral vision, that we need to reach our goals amid ever-changing business conditions.

It is also supported by the principles of "Connect, Lead and Sustain," which guide us—everyone at A.T. Kearney—in all that we do. We printed cards articulating the vision for all employees (see figure).

And, indeed, Vision 20/15 has served—and continues to serve —us remarkably well. A.T. Kearney has been invigorated. Just after the buyout, we were dubbed an 80-year-old startup, a term which I still like, because we continue to have that same fresh enthusiasm of a startup while we build on our proud 83-year history. And while we have seen the effects of this Great Recession, I can say that our firm's performance is strong—and certainly exceeds the expectations of just a few years ago. I'm particularly proud that we've managed to build the financial strength to protect our people during this crisis, and have not had to resort to mass layoffs, salary cuts or bonus cancellations even at the height of fiscal uncertainty in late 2008 and early 2009.

The Way Forward

In many ways, I see the consulting profession entering its own crucible. Companies are in crisis mode. Confidence has been shaken—both internally and externally. The future is uncertain. And there is precious little time to correct course. I'm not suggesting that everyone adopt Vision 20/15, but I do believe that the fundamentals that have guided our firm forward are just as necessary for guiding our profession forward.

The first is the need to be global. Unless we have a truly global perspective and global capabilities, we won't be able to help clients understand global risks and opportunities. One of the paradigm shifts—a change in the theory of business, as Peter Drucker would call it—is that we live in an enabled, empowered and imperiled world. In our enabled environment, what happens in one part of the world ricochets around to impact another at unbelievable—and ever- increasing—speed. In our imperiled world, we struggle with the opposing dynamics of increasing demand, and diminishing and degraded environmental conditions. Our empowered world is driven and turbocharged by new technology that allows for instant global connectivity 24/7/360 degrees. These shifts—and the deep implications of each—affect all aspects of a client's business, even if it operates within a single country, or even a single city. If you're in business, you're in global business.

Second, forget the old dichotomy of strategy versus operations. I've often heard the argument that consulting firms should either be strategic or operational. Know where your strengths lie, they say, and focus. But this is a false choice. Strategy without operational pull through is inert; operational implementation without the understanding of strategic direction is doomed. How many brilliant analyses have been undercut by poor implementation? Or worse, how many strategies that looked great in theory could simply never work in practice? Finding a new balance between strategy and operations isn't just for the large firms: Niche players will find it increasingly difficult to provide sustainable value without understanding the fundamental strategic shifts underway in a continuous steady state change environment.

We must also lead—lead within our firms to nurture the next generations of talent and within the industries where we operate. In leading our firms, we must rebuild trust with our internal and external constituents. A recent Harvard Business Review article argued that organizations that fail to achieve transparency will have it foisted upon them —there are no secrets in the Internet age. So, as leaders, we need to communicate honestly and build firms where that's the norm. No organization can be honest with the public if it's not honest with itself.

Consulting is also unique in that we—more than any other profession—are training future leaders across all industries. After graduating with an MBA, many young professionals will try consulting for a few years before settling into a specific industry or function. What are we teaching them? The skills we impart, the values we live by, the behaviors we promote and the ethics we demand are all those that they will carry into future leadership roles. And judging by the lack of leadership in the crisis, we must renew our commitment to mentoring the next generation. We must ensure that our future leaders make the transition from the age of information to the age of interpretation. Leaders must have the ability to think clearly in the face of complexity, paradox and speed. They must also be broad-minded thinkers who are comfortable in multiple disciplines and cultures. These are the skills we need to enhance and encourage not only among our own leadership ranks but also at all levels.

In line with this is the need to create value. In the past year we've had a crash course in the meaning of value. Lehman Brothers and AIG, among countless other firms, got into the business of esoteric financial instruments that even experts were hard-pressed to explain. And, as we painfully saw, at least some of these instruments were just artifices to create wealth without at the same time delivering genuine value. It's a lesson in the need to step back and take a longer-term perspective about value creation—and not allow ourselves as advisers to be dazzled by short-term illusory prizes. We have to not only create wealth but also be sure that all of the wealth that we create is based upon the generation of value.

A few weeks ago, the head of the Bank of Canada gave a talk in which he argued that it's time for the financial services sector to understand that its purpose is to facilitate the real economy, not to think of itself as the real economy. The separation of wealth creation and value creation is fundamentally at the heart of the failure of the system. The chastisement should also extend to consultants who facilitated the illusion of value rather than actual value. It's our role to help clients create value in a way that delivers on the broad needs of shareholders, and more broadly, all stakeholders. Indeed, it's that intersection of wealth and value creation in the broadest context that will constitute the reconstruction of sustainable economic growth and our profession with it.

Successful companies understand this and live this. Since joining A.T. Kearney, I have led the firm's Global Business Policy Council, which is a strategic service for CEOs focused on identifying global growth opportunities and managing business risks. Each year, we convene a retreat with some of the world's most renowned policymakers and thought leaders from across disciplines. At our most recent meeting, I had the honor of bestowing the Council's Statesman of the Year Award to Peter Brabeck, the chairman and former CEO of food giant Nestlé. During his tenure, he continuously broadened the 143-year-old company's focus to concentrate on the triple bottom line— simultaneously meeting the needs of shareholders, the environment and the broader community. He writes, "To develop a successful long-term business, we must go beyond compliance and sustainability and actually create value for society."

In the early months of 2009, when most companies were entrenched and fixated on the single bottom line, Nestlé expanded its Creating Shared Value program that focuses on: nutrition and physical education programs for children globally; R&D centers to increase agricultural productivity and food safety by developing and improving local crops; and local farming programs that have provided more than $27 million in microfinance aid. The global economic crisis didn't negate Nestlé's obligation to the triple bottom line; it reinforced it. And Nestlé has done this while achieving a 25 percent average annual return for its shareholders since 2001.

Ultimately, we must be responsible. As consultants, we have tremendous power and opportunity to guide, influence and drive change, but along with these come equally tremendous responsibility to all stakeholders. Those firms that miss the responsibility piece of the equation ultimately ignore the very basis of today's business environment. It is no longer possible to advance the interests of our clients—and ultimately our clients' shareholders—without at the same time being conscious of how we're advancing the interests of society writ large. More than ever, there is an intersection of doing good and doing well. Dani Rodrick, from Harvard University, describes the mobile minority— which would be us —and the immobile majority, those who are on the outside of the bakery window looking in. In Systems Citizenship: The Leadership Mandate for This Millennium, Peter Senge advises us that, "The era of 'privatizing' profit and 'socializing' many social and environmental costs is passing. These costs are growing and they can no longer be regarded as somebody else's problems at some indefinite time in the future... The future is now."

As consultants, we must also walk the talk. At A.T. Kearney, we have developed and continuously enforce a code of ethics, we have pledged to become carbon neutral in 2010, and we have launched a new global volunteerism program. None of these initiatives, of course, happened overnight—and all require ongoing vigilance and leadership. And they're not enough. But, they are steps in living the values that we promote both internally and externally—and, they are what we would advise our clients to do.

For us, for our clients and for our industry peers, there are no shortcuts to doing the right thing—and for those who misstep, the consequences are greater than ever before. Globalization and, more recently the financial crisis, have intertwined public- and private-sector forces as never before. The result is that the private sector cannot be successful unless the public sector creates the right enabling environment, and the public sector cannot deliver on the needs of its constituencies unless the private sector provides for sustainable economic growth.

So, as a profession, we have a more onerous responsibility than ever before to get that right, because we're at a rare inflection point in history. The stakes are immense. If we understand and correctly help business and government over this hump, we can resume healthy, value-driven growth. If we get it right, we create jobs, income and consumer confidence in a way that's sustainable—in all meanings of the word—and we deliver on the needs of everyone. And, yes, this is our responsibility.

Right Results

As I mentioned earlier, when we developed Vision 20/15: Connect, Lead, Sustain, we included on our vision card a quote by Tom Kearney: "Our success as consultants will depend upon the essential rightness of the advice we give and our capacity for convincing those in authority that it is good." And Tom Kearney lived these words. We know that he was committed to telling his clients what they needed to hear, which was not always what they wanted to hear. And we know that he was deeply committed to the world around him. On several occasions, he took extended leaves to first help with war-readiness efforts in China and then work on reconstruction in post-war Europe. At the time, his partners questioned if that was in the best interest of the business—but he did it because it was the right thing to do.

So, I repeat this quote to our consultants and staff every chance I get. I do this not just because it speaks to Tom Kearney and the firm he built, but because it so eloquently defines our mission as consultants. It speaks to the trust, credibility and respect that we must earn and uphold. It speaks to the expertise, the confidence and the leadership that we need to succeed. And it reminds us that consulting is a noble profession, and that we need to hold ourselves to the highest standards because it is our duty and our responsibility, to deliver the right results to our clients, our colleagues and the world in which we live.

IIf we get it right—if we are able to help our clients return to growth, sustainable growth—we will be the midwives of the next golden era of globalization and the dramatic improvement of the human condition. We can’t afford to fail.

Paul A. Laudicina is Managing Officer and Chairman of the Board of A.T. Kearney.

Download the PDF