What do McKinsey, BCG, and Bain do in layman's terms?

hello everyone my name is Kenton Courvoisier I'm an ex BCG consultant an ex-googler and the founder of rocket blocks which is an online platform that helps students prepare for case interviews in today's rocketbox mini lesson we're going to be talking about an incredibly important piece of context that you need before you even walk into your very first interview and that is what in firms like McKinsey BCG and Bain do in layman's terms now this sounds like a super simple question and in fact it is a actually a very simple question but the answer to it as we're gonna see is a little more complex than you might think and it's harder to get to than you might think as well now before we even get to that let's talk about why it's actually really important to understand the answer this question fundamentally and the reason for that is actually pretty simple if you are interviewing for one of these firms you want to be able to really understand at a deep level what they actually do what their business model is and why clients are paying them so much money and why this all works so really understanding this is critical if you have that type of understanding it puts everything else into perspective you'll better understand why these firms are using case interviews why they test the type of skills they do it all just makes sense so let's take a look at how to get a good understanding of what these firms actually do now the challenge is that if you say go ask a consultant you know what what what is a firm like your Kinsey or BCG do they tend to give me the 20,000 foot high level answer which is something akin to well we help our clients solve their most challenging problems okay great so that's useful in terms of directionally knowing what they do but it doesn't provide a lot of detail on you know the flip side if you go look at say the McKinsey website or the BCG website and start reading about the different practice areas and the different industries they cover it can become overwhelming and it goes into the the weeds and the details pretty quickly so for example I'm just gonna read a quick snippet that I on one of the practice home pages for BCG this leads to an increase in organizational complicatedness and not even sure that's a word meaning a number of procedures vertical layers interface structures coordination bodies and decision approvals all of these internal complicatedness factors okay that's enough of that I'm just gonna pause that so you can see that we go from a 20,000 foot answer to way in the weeds so what we're gonna do in this video is we're gonna put forth a framework for understanding the types of work that these companies do that's gonna help us kind of sort through all of these details that we find on somewhere like a website and also put a more specific kind of structure in place for thinking about this then we're gonna get from you know the 20,000 foot answer that we started with so let's go ahead and jump in okay so now let's talk about the framework itself a nice part about the framework is it's really quite simple and what we're gonna do is we're gonna lay out three buckets encompass all the types of work of these firms commonly do it won't capture a hundred percent of cases but it's gonna get ninety five percent plus of them easily and it's going to allow you to think about what these firms do in a really structured manner that's gonna help increase your understanding so the framework is it's these firms basically do work in one of three buckets the first is functional expertise and what I mean by that is this is where the the consulting firm is bringing their expertise and knowledge to bear on a specific problem that the client has so for example this might be McKinsey is bringing their pricing knowledge and expertise to bear on a pricing problem that the client has so that's the first bucket and we'll talk about each of these in detail we're just gonna lay out the buckets first so bucket number one functional expertise bucket number two is an objective opinion and what I mean by this is this is where a consulting firm a primary reason they are brought in is to be an objective third party outsider analyze a problem and present a recommendation that you know either the board can review or the senior executive team and a company but a lot of the value really comes from the fact that they are an objective third party analyzing the problem in providing their recommendation so that's bucket number two and maybe this would be you know like BCG is making a recommendation on whether company a should acquire another company or not okay the third bucket is what I'm calling on-demand brains and this is a case where a firm the consulting firm is really hired to bring smart people to bear on a problem and turn around an answer really really quickly when the client doesn't have the resources to do it themselves so a really good example here is you know a private equity firm hiring Bain to help them do due diligence on a company they're looking at so we're gonna talk about each of these in detail but that is basically the framework all the work that these firms do typically falls within one of these three buckets so either they're bringing functional expertise to bear they are driving an objective opinion for the company or three and they're acting in capacity where they are bringing on-demand brains to a challenging problem that the company has okay so let's jump in and walk through all three so let's dig into the first bucket functional expertise so this is the bucket where companies are really hiring these firms because they have significant built up expertise and experience handling and dealing with certain types of challenges that are not in the wheelhouse of the hiring company itself so for example let's pretend there is a apparel retailer and they are increasingly worried about competing with Amazon and feel that from a data perspective using the customer data that they built up over decades of operation is not their strength you know their strength is in branding their strength is in marketing maybe supply chain predicting fashion trends and apparel trends but using all their customer data making sure they're doing it as efficiently possible in honestly so that's the type of situation where you'd have a functional expertise case or someone like McKinsey BCD or main would be hired to help that company come up with a strategy for using their data you know putting it to work in new ways making sure that the central data infrastructure is set up correctly so they can take advantage of it make real-time decisions etc and so you can imagine how those type of functional expertise cases happen across a lot of different verticals there might be a case where say an automotive company is looking at entering the Chinese market for the first time it needs help making sure that they price their cars correctly that's a high-stakes decision they want to make sure they get it right and so they bring in someone that's done a ton of pricing in the Chinese market for example and so you know McKinsey or Bain or DCG could come in and help out with that or you know maybe it is a consumer electronics firm that's merging with another consumer electronics firm it's gonna be a big merger they haven't done big murders like this before they want someone like BCG or McKinsey to come help them do post-merger integration and make sure it goes as well as possible given that the stakes are so high so there's a ton of different functional expertise scenarios that come up but the key thing to think about in this bucket is that really the the impetus for the company to hire the firm is that they realize that challenge they're facing is out of their wheelhouse and they know that there are these highly respected talented firms that have solved those type of problems over and over and over again for decades and they can bring that expertise to better and so that is what a functional expertise case looks like bucket number two is objective opinion now this is a fun one because I think it's one that a lot of people outside of the industry misunderstand and they're and the reason is that they fail to realize that there is a true structural imbalance that firms like McKinsey BCG and Bain have in that they are outsiders to their client firms and that actually is really really valuable it means they can come in and provide an objective third party decision in the case where that's really needed so for example imagine a CPG company a large global CPG company and they're considering making an acquisition in a new product space that they've never operated in before now let's say in this case at the senior management of the CPG company is bullish on this acquisition and wants to move forward but the board however is not convinced they've got a slightly different opinion about the dynamics and that industry and what it takes to succeed in that product space so this is a this is one of those scenarios where a McKinsey BCG urbane could come in study that same situation and provide an objective third-party recommendation about which way they would go and that's really useful because it can help break the logjam internally maybe it brings new issues to light maybe they've cover something a little different or they have a new framework or way of thinking about something that helps both parties actually reach a decision now that's really really valuable and it is distinct from functional expertise because remember in this case we're not talking about the company saying look we don't know how to evaluate this acquisition at all this is just outside of our wheelhouse the company is saying look we we've done our analysis here and we just have within the company that you know the board thinks one thing and the senior management thinks the other so we want a third-party objective opinion to come in and study the situation and make a recommendation so that's really the key difference there and it is something that the consulting firms structurally just have an advantage from to me because they are a different entity than the client firms themselves bucket number three this is the bucket that I call on-demand brains and really what this bucket is all about is providing smart team members and quote brains quickly to to the hiring company so that they can solve some sort of pressing problem that they're working now different than the first two buckets we talked about this firm is not hiring the extra team because they don't have that functional expertise internally or because they need an objective opinion to break a logjam but really why they're doing it is they have a plate of work that they've got and they've got a tight timeline they need to get it solved on and they just don't have the resources internally to solve all those different aspects so for example the really kind of canonical case where this comes up here is a private equity due diligence case you have a lien private equity firm that's looking at making a big acquisition so this the stakes are high and you know they want to look at XY and Z factors and they just don't have enough resources internally to look at all of those in the time line they need to so for example they might bring in someone like Bain to help out do due diligence and look specifically and say maybe the you know the market concentration and the market segmentation aspect of the problem and make a recommendation in that particular part to the private equity firm which they they can then use with the other factors that they were looking at to make an ultimate decision so really here that impetus is the reason that a company is hiring a consulting firm is because they need to augment their existing resources with a smart kind of respected trusted team and they're gonna give them a part of the problem or you know big chunk of the problem that they're working on and expect them to kind of solve it and to do that quickly and it's just much faster for them to hire someone externally and bring them in rather than trying to staff up and you know hire and actually onboard new employees themselves okay so now we've got a framework first thinking about all the different types of casework that these consulting firms do and no matter what the website says you know 15 industry specialties and 12 capability practices you now have a way of for bucketing any of those cases that come up into a framework that's gonna help you make sense of the full landscape now occasionally you might run into a case that does bleed over the edges a little bit so for example maybe there's a private equity case where it really does seem like it fits squarely in the on-demand brains bucket but then you realize you know the partner was hired because they also had a particular expertise that the PE firm was interested in for the acquisition they were looking at that's okay the world is a little bit messy and occasionally these things will bleed over but at least you've got a framework for thinking about it you kind of know how to classify that as well and finally if you think back to the very beginning of the video we talked about that 20,000 foot answer that consultants love to give about what they do well we help you know we help our clients with their most challenging problems now you've got another layer deeper you can really think about the types of problems that the clients are facing what is the real situation and a motivation that they're hiring a consulting firm and how that consulting firm then plugs in and really helps and adds value so thank you so much for watching we hope you enjoyed the video there is a subscribe button below if you haven't subscribed yet we've got new videos on the interviewing process coming out weekly so check them out thank you again for watching and we will see you next time you

Channel: rocketblocks

Views: 109,567

Keywords: McKinsey, McKinsey & Co, Bain, Bain & Co., BCG, Boston Consulting Group, consulting interviews, case interviews, case interview prep, case prep, consulting prep, management consulting

Id: EVIWJTXQbGo

Length: 14min 30sec (870 seconds)

Published: Thu Nov 09 2017