BCG at 50

No one—and that probably includes founder Bruce Henderson, who passed away in 1992—could have expected that type of success. Certainly not Alan Zakon, the man who succeeded Henderson as CEO. Zakon joined BCG in the mid-1960s and was the first administrator of the Boston office other than Henderson.

"I was a Professor of Finance at Boston University and I got a phone call from this unknown person at this unknown company asking if I wanted to do consulting," says Zakon, who served as BCG's CEO from 1980 to 1985. "Bruce had an assignment with a warehousing company, a very major assignment in fact, and was short on staff. So I signed on as a part-timer, and I loved it. I gave up on academics and decided that I liked teaching, doing research and consulting—and that's what we were going to do at BCG. So, I became a full-timer."

"Nobody Had What We Had"
Reflecting on those early days, Zakon says Henderson did a great job of articulating a concept and strategy, and encouraged people to put together thoughts on what was their definition of strategy. "At that time, we were trying compete with firms like McKinsey and Booz Allen Hamilton, and since we didn't have a whole lot of industry experience—like none—Bruce made us formulate a systematic approach to strategy that had never been seen before," Zakon says. "That was really the key to BCG taking off. Nobody had what we had; we were unique, that's for sure."

And part of Henderson's unique approach was his approach to talent, specifically hiring the smartest and brightest he could find anywhere. One of those early hires was Sandy Moose. Henderson hired her in 1968, and she became a director in 1975 and a senior vice president in 1989, serving in that role until her retirement in late 2003.

Moose still remains active in the firm and in 2010, was honored with a Lifetime Achievement Award from Consulting magazine. She was the firm's first female management consultant, and possibly the first female management consultant in the entire consulting profession.

"I don't think Bruce hired me consciously as a woman, or to make a statement, or to break any new ground," Moose says. "I think he hired me because he enjoyed the intellectual engagement that we had over his concept of "the experience curve," a piece of intellectual capital that helped the firm make its mark.

"I think he felt as though I could make a difference, I could add to the firm. I brought a sort of different lens than the other people who were already there. Bruce's focus on diversity was really a diversity of experiences and mental acuity, not gender."

BCG was founded, Moose says, almost as an ideas boutique where consultants could change the world. In fact, Henderson often challenged them to do just that. He was very fond of quoting Archimedes— "Give me a lever long enough and a place to stand, and I can move the world."

"And to Henderson the lever was the ideas, and the place to stand was BCG with all those bright, young people with exceptional talent, Moose says. "I can remember as a 25-year-old being hired and Bruce saying to me that I could change the world, and he really meant it. And we did," Moose says. "We certainly changed the world in terms of our individual clients, but also we really changed the way business education and strategy was taught."

Defining Strategy Consulting
Henderson was hell-bent on defining strategy consulting, or rather having his team define it, but he took it a step further. Early on, Henderson convinced both the deans of Harvard and Stanford to offer a course called "Strategy" with a focus on driving shareholder value for the entire corporation.

And one of those newly-minted MBAs was John Clarkeson, Chairman Emeritus of BCG. Clarkeson was CEO of the firm from 1986 to 1998 and Chairman from 1998 to 2007. He joined the firm's Boston office in 1966. "I have to say that I had not really planned to take the job in Boston after leaving business school, but what I found fascinating really was that it was only maybe a half a dozen people, but they were each one initially, and then collectively, the most interesting people I had ever met," Clarkeson says.

"They had this idea that there was going to be an opportunity to consult with corporations on their strategy, which was pretty intriguing to me as a young MBA and while, of course, it took a while for that to become reality, it was an awful lot of fun along the way, particularly in early days. As I said, it was a terrific group of people. Each one was extraordinary."

And some of those earliest assignments produced original bits of intellectual capital that BCG became famous for—the experience curve and the growth-share matrix—to name a few. "It was very exciting to see that we could do this because we were a tiny firm no one had heard of, and all of a sudden BCG's ideas were being talked about as though they were the way of the future in business, and the way people were going to look at their businesses going forward," Clarkeson says. "That was a very exciting time and it sure seemed like this is not a train you want to get off, at least not at this point."

Meanwhile, plenty of talented folks were jumping aboard. Carl Stern joined BCG in 1973. He spent 37 years with firm and served as president and CEO from 1997 to 2003 and Chairman of the Board from 2004 to 2011. In his first year, Stern would later discover, BCG was only about 1/10 the size of another firm he had, of course, heard of—McKinsey & Company.

"I was essentially joining a startup without even knowing it, just to show how naive one can be. [BCG] didn't feel small to me, it felt more established than it was because the clients, even in those days, gave us a degree of trust that we probably didn't deserve, especially with the youngsters among us, like me," Stern says.

Even through there was a significant size differential with McKinsey, BCG was still competing for the same clients, but in a different way. At the time, McKinsey and others focused exclusively on the CEO. But BCG was widening that universe of influence to include the entire C-suite, a real differentiator for the firm, Stern says. "Our competitors left us that strategic space, and we've consistently grown faster as a result."

Make it Happen
However, by the early 1980s, the competition was beginning to catch on… and up. It was becoming apparent that BCG needed a strategic shift in their once bread-and-butter strategic approach. "We've had one strategy change in our history and that was in the early 1980s under Alan's [Zakon's] leadership, where we sort of transformed ourselves gradually from a sort of self-indulgent intellectual shop to a real client service organization, which Alan started and then John [Clarkeson] really rammed home through a number of initiatives, including the establishment of practice areas," Stern says. "And it was really Alan that got us going on that path, and he doesn't get enough credit for it."

Zakon took over for Henderson in 1980 as much of the hard success the firm had in the 1960s and 1970s was beginning to soften. "This was Bruce's company, Bruce created it, Bruce set the direction. My job, essentially, was longevity," Zakon says. "We were doing great, but would we be here forever? How could we ensure that we would? Those were difficult questions to answer. The very first priority, at that point, was to survive and lead the company forward."

The competition was getting quite extreme, not only from other consulting companies, but also the private industry, Zakon says. On the market side, companies were getting much more complicated. They were growing rapidly; they were much bigger in 1980 than they were in 1960.

"The CEO's job was changing rapidly. He couldn't make every decision throughout the organization; the companies were just too big," Zakon says. "So it became very clear to me that we needed to change our direction and not just work with one decision maker on the overall strategy."

Zakon says he hates to use the word "implementation," it's too hackneyed. The phrase he used instead was "make it happen." The idea, in its simplest form, was that BCG could "walk and chew gum at the same time," Zakon says. "We can be the world's foremost strategist, and at the same time, we can work with the client to make it happen."

And the early 1980s brought the worst recession since 1958, so right off the bat, illustrating that issue, was the firm's approach to backlog or pipeline. "We didn't have one, Zakon quips. "That was a real shock. I'm about it laughing now, but I wasn't laughing then."

Meanwhile, Zakon was also intent on growing in Europe and in Japan. BCG already had a Japanese office that had not been so successful, he admits, but "I very much wanted to build the Japanese office. And at the same time, we were enormously successful at one location, and really almost one client, in Germany. I very much wanted a second location and a broadening of the German base. And so I put a lot of investments in off shore."

With that type of off shore focus, it's probably no coincidence, that the firm would turn to someone—John Clarkeson—who had spent 15 years in Europe to lead the firm. Clarkeson served as a director in Milan and London, and founder of the firm's Munich office. He would lead BCG from 1986 to 1997 with some of the best practices gleaned from BCG's more successful global client interactions.

In Japan, BCG had discovered a way of working in close collaboration with management, forming from joint teams to do analysis and data gathering, and "that had a marvelous effect in terms of having the clients feel that they owned the results," Clarkeson. "It wasn't unheard of for the client to make the presentation that was really the product of our joint work. That wasn't necessarily happening at other consulting firms, he says, and clients often pointed that out and "became a powerful differentiator for the firm," he says.

Specialized Expertise
If the 1980s was the decade of implementation, the next decade under Clarkeson saw the rise of specialized expertise, or more commonly, practice areas. A more focused approach dovetailed with what was going on the marketplace at the time, Clarkeson says. One aspect was global expansion. Clients were beginning to ask BCG about global strategies for them, Clarkeson says. Clients would ask: "Do you really know anything about our business?"

As strategists, BCG partners had always been viewed as generalists who work across all industries. That had to change, Clarkeson thought. "The market had gotten more sophisticated and that was where practice areas got their start," he says. "That was an extremely fundamental change because it also changed career paths, and if we hadn't done it we wouldn't have had any credibility" in certain market segments.

It was a dramatic change. "We made it voluntary at first and started with people who had already chosen to do a certain amount of specialization," Clarkeson says. "I think that did produce a real new re-energizing of the firm. It created opportunities for people to do new things."

By the end of Clarkeson's term in, BCG was humming. It was a now a firm of more than 1,700 consultants and growing rapidly at the time the reins were passed to Carl Stern. He says, at the time, he felt like he had just climbed on an "overpowered motorbike" when he took over in 1998. "The trick was simply to: 1) stay on balance; and, 2) make sure it didn't head off in entirely the wrong direction."
As it turned out, the right direction was north.

Go North
Stern is credited for coming up with BCG's "Go North" initiative, which focused on increasing revenues by deepening and extending relationships with existing clients.
"I'm not sure I deserve the credit for it, but it did happen on my watch," Stern says. "One of my partners in Chicago, Larry Schulman, simply plotted our billings against the size of the client. It was the strangest-looking graph I had ever seen, and it was like there was a ceiling at some point."

Stern suspected that may be a self-imposed ceiling—something about the way BCG did business that caused it. "And so we thought a bit about that, and I think that broadened our service bundle yet again, and we did end up "going north," which simply meant taking the clients that deserved it above that graph line."

In addition, Stern says the firm's financial performance was also lifted by what was going on in the macro economy—specifically technology— at the time. "We were really good at jumping on a loose ball," he says. But not all of them. The firm made a conscious decision, he says, not to consult to dot-coms. "There were no giants at that time, but rather a bunch of fly-by-night companies," he says. "Everybody else ended up with bad debts. We didn't. But we did end up losing people to them. It was a very strange time."

Of course, the tech bubble eventually did burst in the early 2000s, causing an economic crisis. "Actually the run up was much harder, because no one would expect my biggest challenge would be keeping people when you're growing at 100 percent, as we were at the time," Stern says. "Dealing with the downturn, in comparison, was actually easier. It's no fun, but it's more obvious what you have to do."

A Dynamic Decade
Downturn be damned. By the end of 2002, BCG had 54 offices worldwide and was a $1.15 billion firm. All the success aside, what would happen over the next ten years would be extraordinary. The decade that followed would see the firm's revenue triple to $3.7 billion at the end of 2012. In 2004, Hans-Paul B