Strategy For Sale

Two CEO’s from competing companies met in the washroom at a local gala event. The story goes that they talked briefly, exchanging pleasantries, when one mentioned they had hired a consulting firm to develop their strategy. The second CEO confessed that they’d also hired a consulting firm to develop their strategic plan which led to the discovery that both companies had hired the same consulting firm. A little surprised and also curious, the two CEO’s made a pact to exchange their respective consulting reports. As you’ve likely anticipated, both reports (and strategies) were the same.

When confronted with this information, the consulting company didn’t apologize for double dipping, rather they defended their report recycling (and charging twice) saying there were limited strategic options in this industrial space. This begs the question; in an age where consulting firms proliferate …. Should you outsource your business strategy?

It’s not only consulting companies that will provide you with a business strategy. AI is being developed that is also up to the job. Author and IMD professor Michel Watkins asked ChatGPT to simulate being a business advisor to a CEO of a large multinational corporation.  He stated “the results were shockingly good”. ChatGPT gave directional advice on how to differentiate the brand and engage with customers.  Unsurprisingly, ChatGPT would also give the same advice to two separate companies inputting similar information.

The ability to create and execute a forward-thinking business plan that leverages an enterprise’s competitive advantage has long been an essential skill of any aspiring business leader. Indeed, developing in-house capabilities that can navigate the future with the tools at hand to create corporate and societal value is in itself a competitive advantage. Outsourcing these capabilities to AI or a consulting company may result in short term bump in results but ultimately can lead to the destruction of your company’s soul and eventually the business itself.  What consulting companies, whether human or AI, ignore is that the strategy must not only be unique to the business but, to be successful, it must also be executed. Many (if not most) of the promised results come from cutting what are considered non-core functions, often leaving the remaining staff angry and divorced from the business.

Where consulting firms can provide expertise is in areas that are not common or outside the scope of the business itself. For example tax planning, M&A, foreign expansion and other areas that are unfamiliar waters are cases where outside experts can provide value in navigating. Likewise, AI can process huge volumes of data developing forecasts and executing Monte Carlo simulations to build scenarios providing business leaders with options and recommendations. However, as good as AI or consulting firms are, don’t let them develop your business strategy!

Business leader Marina Davis from CBIZ gets it right when she says, “We look at each initiative through two lenses: One, does it have a positive impact on the business? And two, does it have a positive impact on the culture?” A good strategy must be sound, executable, and build the soul of the business and no matter how good they are, an outside firm will never know your business like you do.

What lessons can we derive...

1. Outsource information gathering - not your strategy: Consulting firms and AI can provide excellent in-depth market and industry analysis.

2. Strategy must be executable by the core team: Consulting firms’ and AI’s promised results are often unfounded due to deficiencies in execution.

3. Competitive advantage can’t be outsourced: if competitive advantage could be outsourced it would cease to be a competitive advantage.

ChatGPT and consulting companies have a role to play in bringing new insights that may have been previously unavailable due to the quantity of information. However, the role leaders play in developing a business strategy remains the same; it must be unique to the business, create real value and be executed by the business team. So far there is no app for that!