The Role of Strategy Consultants in Business Success

The global business landscape has seen a 200% increase in disruptions from 2017 to 2022, leading 58% of CEOs to question their strategies' effectiveness. In this context, companies seeking advice from strategy consultants and adopting emerging technologies are 2.5 times more likely to outperform competitors, with an average revenue growth of 10%. Currently, over 60% of Fortune 500 companies use strategy consulting services, with an average client satisfaction rate of 85%.

Strategy consultants also help their clients to save costs, with businesses seeing up to 15% reduction in operational expenses within the first year of implementing recommendations​. This is important for sectors like manufacturing and retail, facing an increase of up to 8% in operational costs since 2020 due to supply chain disruptions and increased labor costs​. Also financial performance improves significantly, as organizations working with consultants report an average of 10-15% higher EBITDA,​ due to new revenue streams and market opportunities.

Industries such as IT and telecommunications, BFSI (Banking, Financial Services, and Insurance), healthcare, and manufacturing increasingly rely on strategy consultants. In particular, the BSFI sector accounts for over 25% of strategy consulting revenue, while the healthcare sector is expected to witness the highest CAGR from 2022 to 2030.

Strategic Consulting frameworks are logical structures for classifying and organizing complex information. They are essential tools used to diagnose issues, structure analysis, and guide decision-making and remain highly effective for consultants in driving strategy projects. 

Strategy Consulting Frameworks, tracing back to the mid-20th century, mirror the dynamic changes in corporate strategy, each phase reflecting the shifting business landscapes and the need for specialized consulting expertise. Following the BCG Strategy Palette, five main approaches to strategy exist, depending on the malleability (how an individual firm can influence the overall market) and unpredictability (degree of uncertainty and variability) of the business environment: Classic, Adaptive, Visionary, Shaping, and Renewal Strategy.

Classic Strategy: Be Big

Emerging in stable, predictable environments, classic strategies aimed to achieve a sustainable competitive advantage over competition. Mid-20th century frameworks like SWOT Analysis, the Ansoff Matrix, BCG Growth-Share Matrix, and the PEST Analysis helped firms optimize their market positions.

Major advancements came in the late 1970s with Michael Porter's Five Forces Framework, which assessed markets based on buyers and suppliers' bargaining power, threats of new entrants and substitutes, and industry rivalry. Porter's subsequent work introduced the Generic Strategies, including for cost leadership, differentiation, or focused strategies to maintain above-average profitability. Firms failing to adopt these strategies risk being "stuck in the middle."

Porter's Generic Strategies inspired successful case studies like Ikea and Walmart for cost leadership, and Apple for differentiation. He emphasized that competitive advantage depended on a firm’s positioning within its sector, but a Management Research Review study showed that the industry accounts for only a minor percentage of firm performance variance.

Classic strategies like Porter’s Five Forces align with the Industrial Organization Model, suggesting external environmental characteristics determine firm strategies and performance, often overlooking internal firm characteristics. In response, the Resource Based View Framework emerged, stating that a firm’s competitive advantage depends on its ability to identify and harness key resources that are valuable, rare, inimitable, and non-substitutable.

Strategy consultants traditionally relied on these frameworks, effective in stable environments with predictable market conditions. Traditional strategy projects involve setting mission, vision, and objectives, followed by internal and external analysis with a SWOT Analysis. Strategic options are evaluated for feasibility and stakeholder acceptance, leading to the chosen strategy's implementation.

Despite their widespread use, traditional strategic processes have disadvantages in unpredictable environments, often resulting in lagging results and a narrowed strategic focus. The need for more responsive and flexible approaches led to the emergence of Adaptive and Visionary Strategy.

Adaptive Strategy: Be Fast

To navigate volatile environments, the first Adaptive Strategy Consulting frameworks began to emerge in the 1990s. 

The most notable one is The First Mover Advantage, introduced in 1988. It is the competitive advantage gained by a company introducing a product or service into a market in the shortest time. In some industries, first movers are rewarded with near-monopoly status and high margins. However, other industries allow late movers a chance to compete more effectively and efficiently. 

The first mover advantage framework help firms identify opportunities to be first movers, to capitalize on early successes, and/or to identify possible innovative strategies. This vision is still consistent with the traditional strategy models, based on a single dominant idea: the purpose of strategy is to achieve a sustainable competitive advantage. 

In 2014, Columbia Business School professor Rita Gunther McGrath questioned this idea, proposing a new winning path, the Transient Competitive Advantage: capturing opportunities fast, exploiting them decisively, and moving on even before they are exhausted. 

This concept started to become a standard in strategy consulting, focusing on the timing of initiatives and the ability to pivot quickly as the backbone for a successful strategy, consisted of five phases: Launch, Ramp up, Exploit, Reconfigure, and Disengage. 

Strategy consultants help companies implement this strategy by identifying emerging opportunities, guiding the timing of initiatives, designing flexible business models, and developing exit strategies. This ensures continuous adaptation and success in volatile environments.

Visionary Strategy: Be First

In stable industries with rigid, established rules, and with low malleability and uncertainty, companies have less room to drive change. In these cases, using classic strategies like cost advantage or differentiation is an effective way to compete and gain market share.

However, when the competition becomes fiercer and the market becomes more mature, firms need to seek new ways to achieve and sustain competitive advantage. This led to the development of the Blue Ocean strategy by W. Chan Kim and Renée Mauborgne in 2005, built around the ideas of Value Innovation and Disruptive Innovation.

Blue Ocean Strategy focuses on creating new market spaces, or "Blue Oceans," where competition is irrelevant by introducing:

• Value Innovation, which breaks the traditional trade-off between value and cost by aligning innovation with utility, price, and cost positions. 
• Disruptive innovation, the creation of new markets through innovations that initially cater to niche segments but eventually disrupt established leaders.

This led to the emergence of new strategy frameworks, such as the Strategy Canvas and the ERRC framework. These are diagnostic and action tools that help businesses think through the changes needed in their strategy to innovate, providing a visual representation of a company’s value curve against competitors across key competitive factors.

Complemented with comprehensive modern strategy frameworks, such as the Business Model Innovation, strategy consultants can help firms achieve a holistic transformation that not only opens new market spaces, but also enhances the overall efficiency and sustainability of their operations. 

Shaping Strategy: Be The Orchestrator

As industries evolve and become more interconnected, shaping strategies have become crucial. These strategies focus on working together with all the stakeholders involved to influence and drive market changes. This approach is crucial in unpredictable environments, where companies can use their influence to create shared value and encourage innovation across the industry.

A “shaping firm” changes an industry by guiding market development in its favor, by coordinating with all the stakeholders involved in the value chain. This requires the firm to work with a diverse range of partners, sharing risks, resources, and capabilities. By doing so, the market can grow quickly through the combined efforts of many players.

The most recent and influential framework, Shared Value, was introduced by Michael Porter and Mark Kramer in 2011. It emphasizes the importance of creating economic value in a way that also produces value for society by addressing its challenges. This strategic approach moves beyond traditional profit maximization to include societal improvement as a core component of business strategy.

Strategy consultants are crucial in helping companies develop a strong shared value strategy, which goes beyond typical CSR initiatives. It focuses on operating practices that enhance a company's competitiveness while simultaneously improving the economic and social conditions of the communities involved. This ensures that business growth is accompanied by meaningful contributions to societal development.

Renewal Strategy: Be Viable

Together with the strategies aimed at building and sustaining a strong positioning in the market, renewal strategies have become essential for companies dealing with financial instability, intense competition, or significant market disruptions.

A renewal strategy revitalizes a firm's competitiveness when it faces harsh conditions that render current business practices unsustainable. In such challenging circumstances, shifting course to keep and/or reallocate resources is crucial for survival. By preserving resources initially and later directing them towards growth opportunities, firms can not only endure difficult times but also position themselves to thrive in the future.

One of the most used Strategy frameworks for renewal is Kotter’s Change Management framework. It involves 8 steps for implementing change: establishing a sense of urgency, forming a powerful guiding coalition, creating a vision, communicating the vision, empowering others to act on the vision, planning for and creating short-term wins, consolidating improvements, and producing still more change, and institutionalizing new approaches. 

Strategy consultants play a critical role in guiding firms through change management, ensuring that the transition is smooth and that the firm emerges stronger and more competitive, helping in stabilizing the company and in redirecting resources towards growth opportunities.

Strategy consultants are crucial for business success, delivering concrete results through their expertise and methodologies. By analyzing market trends and implementing tailored strategies, they help companies reduce operational expenses by up to 15%, increase EBITDA by 10-15%, and achieve an average revenue growth of 10%. Their role is especially significant in industries facing high competition and rapid changes, such as IT, telecommunications, and healthcare. 

They use comprehensive Consulting frameworks to break down the client’s issue and provide structured solutions to their problem. The case study shows how strategy consultants can revitalize a company’s market position, drive innovation, and improve customer satisfaction, all while being cost-effective. Engaging strategy consultants provides measurable benefits and ensures long-term competitive advantage.

FAQs about Strategy Consultants

What do strategy consultants do?

Strategy consultants analyze a company's current situation, identify growth opportunities, and develop strategic plans to improve performance and achieve long-term goals. They use data-driven methodologies to provide recommendations on market positioning, operational efficiency, and competitive strategies.

Why are strategy consultants important for businesses?

Strategy consultants bring an external, objective perspective and specialized expertise to help businesses navigate complex challenges. They offer insights on market trends, competitive analysis, and innovative solutions that drive operational improvements, cost savings, and revenue growth.

How do strategy consultants help in cost reduction?

Strategy consultants identify inefficiencies and recommend process improvements that can lead to substantial cost savings. For example, businesses implementing consultants' recommendations have seen operational expense reductions of up to 15% within the first year.

What industries benefit most from strategy consulting?

Industries such as IT and telecommunications, banking, financial services and insurance (BFSI), healthcare, and manufacturing benefit significantly from strategy consulting. These sectors face rapid technological changes, regulatory challenges, and intense competition, making strategic guidance essential.

How do strategy consultants improve business performance?

Strategy consultants improve business performance by developing comprehensive strategic plans, optimizing internal processes, and identifying new market opportunities. Companies utilizing strategy consultants report an average of 10-15% higher EBITDA and improved market positioning.