It's now C-level strategic… and evolving


The activity soon to be formerly known as operations consulting is moving beyond operations.

A decade ago, some operations consultants produced eye-opening benchmarking reports and advisory services focused on a specific area (e.g., logistics costs, inventory management, forecasting, etc.) that clients sought to optimize. That targeted approach, which occasionally addressed end-end-processes, produced significant value.

So much value, in fact, that the bulk of potential operations-improvement value now resides within “the intersection points between operations and other parts of the organization,” explains Brad Henderson, a Boston Consulting Group Partner who leads the firm’s Operations practice in North America. Henderson says that operations-related improvement “has actually become a C-suite issue.”

Today’s operations consultants talk a lot more about intersections and interdependencies than they do about sub-optimizing the supply chain, improving financial forecasting or fixing product planning. “If you do something in the supply chain, it ripples into human capital because you have to be thinking about performance management,” says Mike Hughes, a Senior Director in West Monroe Partners’ Operations Excellence practice. “Our ability to understand interdependency, the need for collaboration, the role of data and all of the other components is crucial.”

Many forms of operations consulting are increasingly difficult to distinguish from strategy consulting. “You really can’t separate operations any more,” says Hughes.

“I don’t think that line is even worth discussing in many cases because the strategy and the operations are so intertwined,” says Nathan Simon, Director, Lead for Strategy & Operations Research with Kennedy Consulting Research & Advisory (KCRA). KCRA, it turns out, combined the two for research purposes a few years ago.

There is, however, much to discuss about the evolving nature of operations consulting, how firms have reorganized theses practices, what challenges they’re addressing with clients and how they are retooling their teams to strike the right balance of operational depth and cross-functional breadth that clients need.

A Deep and Wide Balancing Act

The role of operations within client companies is expanding. Operations generally has a “wider aperture” when it comes to managing end-to-end processes, says PwC’s Strategy& Operations Leader Eduardo Alvarez. As a result, he adds, “operations is being asked to integrate multiple competencies” across the enterprise.

This shift, of course, requires consulting firms and practices to deliver expertise in multiple competency areas. But the demand for deep, highly specialized operations expertise also remains. Companies still call on consultants for highly specific help, such as strategic sourcing, or industry-specific process improvements. These twin demands create a tension between the functional specialization and the breadth of expertise operations consultants must bring to bear on client work, KCRA’s Simon observes.

“The real reason for a lot of consulting work is that companies do not work well across their functional silos,” Simon adds. “The consulting firms want to get super-specialized. Yet a huge part of their value proposition is that they can break down, or work across, those internal silos … I see some consulting firms struggling to strike this balance.”

New organizational structures represent one way to address this challenge. Earlier this year, Capgemini Consulting Group completed an internal realignment that essentially blended its strategy and transformation practice with its operations practice. Capgemini Vice President Adrian Penka, who leads the new operations strategy and excellence practice, notes that the work of the previous strategy practice often crossed into operations and vice versa.

“There was always a bit of a blend,” he says, pointing out that the current practice also includes a group focused on organizational culture, people and change management. “It was a purposeful alignment, but it was not done to improve customer satisfaction, to capitalize on a new growth area or anything like that. There were always overlaps among our previous practices, and it made sense to bring them together.”

While other firms conduct operations work via vertical-industry structures, most, if not all, operational consulting leaders indicate that blended expertise is a must-have. “We don’t have people who say, ‘I’m the strategy person,’ or, ‘I’m the operations management person,’” says Brooks Kitchel, a Kurt Salmon managing partner who leads his firm’s global retail and consumer practice in North America. “We tend to have strategic thinkers who are also very practical implementers. We find that that’s vitally important because that’s what our clients want today.”

Four Operational Observations

PwC’s Strategy& recently surveyed 1,200 operations executives to learn about their challenges and areas of focus. The top challenges included industry regulations, customer behavior, global competition, complexity management and disruptive technology. With a few exceptions (e.g., war for talent and transportation challenges), those issues track fairly closely with what other operations practice leaders identify as the top client concerns. In conversations, operations consultants tend to devote the most attention to the following four challenges:

1. Digital Disruptions

Addressing some form of digital transformation marks a central component of nearly every operations practice. Henderson identifies a handful of the most noteworthy technologies, which include 3D printing, robotics and automation, digital manufacturing operations and the industrial Internet (i.e., the integration of hardware and sensors).

Clients need help distinguishing which of these and other emerging technologies are likely to pose the largest opportunities. While 3D printing has gained a lot of attention, it seems unlikely at this point to drive radical supply chain changes. Robotics, on the other hand, could deliver profound changes throughout the U.S. manufacturing sector in terms of cost reduction, productivity gains and job losses.

BCG research shows that the average manufacturing labor costs in 2025—when adjusted for inflation and other costs and productivity-enhancing measures—are expected to be 18 to 25 percent lower in the U.S., China, Germany, and Japan due to increases in robotics use.

“We as a firm have started to develop perspectives on which [technologies] matter more, and which matter less,” says Henderson, who adds that clients need help getting past learning about new technologies so that they can figure out what operational and business model changes may be necessary to take advantage of the advancements that are most relevant to their companies and industries.

Other firms appear to be doing similar work. Last year, Capgemini extended its partnership with the MIT Center for Digital Business. The purpose of the relationship is to define how digital technologies and data will change the nature of work and companies. Digital transformation, “to me, is the biggest thing that companies are facing right now,” says Kitchel.

2. Calming Complexity

If some consultants have their way, companies will operate with less complexity 10 years from now. BCG’s extensive research on the topic includes a Harvard Business Review article, a book (Six Simple Rules: How to Manage Complexity without Getting Complicated by Yves Morieux and Peter Tollman), TED Talks, a complexity index and numerous papers. “We spend a lot of time with our clients on reducing complexity,” Henderson emphasizes.

Other firms, including PwC’s Strategy&, also address complexity in their operations work. “We see a realization that complexity is not something that you need to necessarily avoid, but something you really need to learn how to manage,” says Alvarez. His firm’s approach to managing complexity involves helping clients eliminate activities that are truly wasteful or unnecessary; applying greater integration as well as customer segmentation to the value chain; and rewiring information systems to isolate areas that require complexity.

3. Customer Centricity

For years, chief marketing officers (CMOs) have been promoting the value of customer centricity. Given how often operations consultants discuss the need to place the customer at the center of the organization, it appears that the CMOs’ preaching has paid off.

“To stay relevant, we’re finding that [operations leaders] have to model their organizations around the customer and the customers’ needs,” says Penka.

PwC’s Strategy& Principal Rodger Howell agrees. “We see more companies taking a customer-centric view,” he explains. “It’s not just lip service.” Helping clients in this area, Howell explains, requires an array of expertise as well as the ability to operate cross-functionally and the expertise to reduce complexity. He and Alvarez report that a wide range of industries—in business-to-business and business-to-consumer companies—want assistance mapping out the customer journey and learning what each step of these purchasing journeys mean to different parts of operations as well as to the operating model itself. More companies, they say, want help creating a “customer value-centric” mindset throughout operations.

4. Competencies and Culture

When discussing the capabilities within West Monroe Partners’ Operations Excellence practice, Hughes runs through a long list that includes human capital management, organizational change management and workforce optimization. He also says that people- and culture-related considerations and competencies are crucial to the success of operations projects.

KPIs of new programs often need to be integrated into performance management structures to change behaviors and in a way that sustains programs over the long haul. Recruiting, training and leadership development practices often need to be adjusted to support new operating programs and models as well. As more robotics enter the organization, more robotics experts will need to be hired and trained.

Capgemini’s Penka agrees, noting the client companies increasingly ask: How do our cultures need to change as our business objectives evolve? He points to the behavioral and skills shifts that will be required as more equipment transmits more real-time data via embedded tags and sensors. Maintenance workers accustomed to responding to customer requests will have the data necessary to reach out to customers—to renew warranties, upsell services, offer value-added maintenance, propose upgrades and much more—before the customer realizes a piece of equipment or system requires attention. Having that data does ensure that these behaviors will manifest themselves, however.

These technologies and related improvements require behavioral changes throughout operations, Penka says. “When you’re sharing new data among operational groups, you expect them to operate a little more symbiotically and take on some roles that they might not have normally taken on in the past.”

New Delivery Approaches

Operations clients also are hungry for training from their consulting partners as a means of sustaining the impact of the consulting work after the engagement has concluded. This approach marks one of several ways that firms are applying new innovations to service delivery.

Some of these innovations have arisen to address the fading-impact problem that occurs regularly enough on operations engagements: the improvements the client company enjoys following the consulting engagement progressively decrease after the consulting team leaves. More firms are thinking about new delivery approaches that can help sustain the benefits that their consulting engagements produce. Simon describes three of these approaches:

1. Secondment, in which the firm places a consultant within the client company’s organization (e.g., head of sourcing) to run a program or process for several months as if she were a client executive;

2. Training services, either through traditional formats or via more experiential and cutting-edge approaches (e.g., off-site learning academies that replicate real-world situations); and

3. Highly specialized outsourcing services, such as the 22 (and counting) offerings in the “McKinsey Solutions” portfolio.

McKinsey’s offerings are functionally focused (operations, strategy, sales and marketing, etc.) and/or industry-specific (healthcare, mining, insurance, pharmaceuticals, retail, etc.). Most of these solutions have a strong data analytics component.

More traditional forms of outsourcing, those offered by the largest services firm, also figure as an increasingly common add-on component to operations engagements. “Companies love the idea of leveraging more insights from the products that they put tags and sensors on, but they don’t necessarily want to be in the business of managing all that data and all those analytics,” Penka says. As he points out, this is a prime opportunity for Capgemini to set up the plan, structure, systems and analytics and then run that capability via an outsourcing arrangement.

Partnering and self-funding represent other ways that firms are seeking to distinguish their offerings. “We see a need to self-fund transformation programs,” Alvarez says. “Knowing how to extract value while you’re building new capabilities is very important.” He reports that his firm’s operations practice has had success with the firm’s “Fit for Growth” platform, a methodology designed to simultaneously fund and build new capabilities.

As operations customers seek more sophisticated solutions, Kitchel says Kurt Salmon has responded by more frequently partnering with a broader range of technology and services firms to “bring the best package together to drive transformation for our clients.”

He also reports that average operations project sizes have increased significantly—roughly quadrupling in the past six or seven years—as a result of operational changes. Smaller, discreet projects are on the wane. “Today, projects are more along the lines of: How do I change the way I’m moving goods through the supply chain?” Kitchel explains. “Those projects affect so many parts of the business, which just makes the scope of the engagement broader.”

This expansion of operations consulting explains why Henderson frequently taps the head of his firm’s technology, sales and marketing, and people and organizational practices for insights that he and his team apply to operations engagements. The expansion also explains why the days of traditional operations consulting may be numbered.

When asked how operations consulting will evolve five to 10 years down the road, Alvarez responds, “I’m not sure that we will have an ops practice, as we know it now, in the future. I see a convergence around operations and digital that may result in some form of tech-ops group. As we continue to integrate disciplines, it will probably mean that we have even more of a multi-functional ops team in the future.”


Sidebar: Wanted: Entrepreneurs, Facilitators and  ’Prag-Strats’

Normally, when you ask consulting practice leaders what skills they want on their teams, you can hit the snooze button while they dutifully extol the virtues of seasoned expertise, flexibility and the ability to work across silos. But that’s not all the case right now with operations consulting leaders—whose unexpected responses to this question may be the clearest indicator that operations consulting is transforming.

Here are some of the unexpected and eye-opening consulting “types” operations practice leaders say they want on their teams today:

Entrepreneurs: Capgemini Vice President Adrian Penka, who leads his firm’s Operations Strategy and Excellence practice, seeks consultants who are entrepreneurial. “We’re not going to give you a tool that you’re just going to be able to plug into a situation,” he says. “You have to be creative. You’re going to have to come up with new ways of dealing with these problems. For example, you’re likely going to have to come up with creative solutions for taking a traditional operational role and turning it into a revenue generator for the [client] company.”

Facilitators: Mike Hughes, a senior director in West Monroe Partners’ Operations Excellence practice, identifies facilitation is an increasingly valuable operations-consulting skill. “You have to look at a lot of different components as opposed to being laser-focused in one area,” he explains. “Facilitation and leadership alignment capabilities are very important.”

Pragmatic Strategists: Kurt Salmon Managing Partner Brooks Kitchel says he wants consultants who possess both a strategic and pragmatic mindset. In other words, he wants to hire and develop pragmatic strategists or strategic pragmatists. “We want consultants who can be innovative and visionary,” he explains, “but who also show great care in dotting their ‘i’s and crossing their ‘t’s to ensure that that stuff gets done.”


Sidebar:  Operations Consulting Goes ‘Robotic’ 

Not too long ago, many operations consultants earned their keep by helping companies eliminate SKUs.

Today, more operations consultants are helping clients boost their use of robotics to achieve dramatic productivity gains and labor-cost savings. Robotics figure as just one of a growing number of emerging disruptive technologies—including, most notably, the industrial internet (embedding sensors and tags on “things” to generate data) and digital transformation in general—that operations consultants are helping clients across all industries understand and respond to.

“Digital transformation is affecting our world in general,” says Kurt Salmon Managing Partner Brooks Kitchel. “And companies are really trying to figure out how to operate in the new world.”

Introducing more robotics to a wide range of manufacturing sectors means operating with much greater efficiency, but it also will give rise to significant challenges that are less technical and more human in nature.

Boston Consulting Group (BCG) research indicates that average U.S. manufacturing labor costs in 2025, when adjusted for inflation and other costs and productivity-enhancing measures, project to be 18 to 25 percent lower as a result of higher robotics usage. The BCG research also indicates that robots could boost output per worker up to 30 percent over the medium term.

Of course, a lot of work needs to be done for these alluring projections to become reality: advanced manufacturing skills need to be added to the organization (not to mention developed in educational institutions); organizational networks need to become more flexible; production processes need to be rethought; and more.

As the BCG research concludes, “adapting to the age of robotics will require a transformation of their operations.”

Although technology is driving much of operations transformation across all industries, decidedly more human consulting will play a key role in determining the degree to which this transformation succeeds. That explains why so many operations consulting practice leaders emphasize the importance of change management, knowledge management, human capital management, workforce development capabilities and activities.

The biggest internal impacts that disruptive technologies exert on operations include knocking down of traditional functional silos and redefining traditional roles. The maintenance function of an elevator manufacturer that is equipped with real-time data transmitted from customer sites will be able to operate, depending on what the data tells them, like customer experience management function, a sales function, or even as the chief customer officer.

Disruptive technology delivers, asserts Brad Henderson, a Boston Consulting Group partner who leads the firm’s operations practice in North America, “very large workforce development implications.”

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