Sunday, October 26, 2008

Building a PRACTICE:A Boston Consulting Group Approach

For a Consultancy firm, a good proprietary approach promises real and different benefits to the clients that hire the consultancy. It is easy to see the attraction of this for the consultancy as well- that is able to offer something that is uniquely the intellectual property of the firm. The Boston Consulting Group is one of the best examples of a firm that founded a substantial international reputation and business on two original concepts, which were linked to provide a powerful consultancy approach for the first time. The first was its approach to Portfolio Analysis with the terminology of dogs, cash and cows which still remains a part of the management vocabulary. And, the second being the Experience Curve, a phenomenon whereby costs fall by a constant percentage everytime cumulative production of an item doubles. This phenomenon is widely used in Manufacturing Industries.

The Boston Consulting Group did enough research to be able to extend this thinking to the total cost of the firm, enabling consultants to calculate the experience curve effect for any given company. So, the business started with these two powerful and effective tools for strategic decision-making that fitted the strategic issues of the day at a time when little was on offer to aid the systematic analysis of strategy. After Porter’s Competitor Analysis and Value Chain Analysis were accepted by many other firm of consultancy, BCG slowly released its methodology, although the basic concept of portfolio analysis became known quite early on, many of the essential details of how to make its analysis system work only became widely known after the original technique had become outdated. Most Consulting firms that build a business on proprietary methods move on as time passes to avoid the danger of being dependent for too long on something that could lose its value. Thus, the Boston Consulting Group today has a business that has developed new techniques and is not dependent on the success of portfolio analysis. The firms should take care they are not hooked too much to the original concept, so that it is used after its sell-by date has expired, or the technique or approach is used in situations for which it is not particularly appropriate.