To be more successful, companies must manage more strategically. There is at least one company that took its own advice and did just that, with outstanding results. This short article looks at the first steps in that company’s strategic management process and provides a good example of how strategic management can dramatically improve a company’s performance.
During the years from 1993 to 2001, KPMG’s financial services consulting (FSC) practice in the United States grew at an unprecedented rate. The practice’s revenues grew during that period at a compound annual growth rate of just over 40%. Outside of the US, this high growth rate started a couple of years later than in the US, but once it started, the results were similar. From a starting point of less than $100 million in 1993, in 2001, after several years of significant growth, FSC’s global revenue exceeded $1.2 billion.
There were many factors that contributed to this extraordinary growth. The purpose of this article is to discuss one of them, the market strategy that was defined for the practice. It can be strongly argued that the go-to-market strategy was the most important factor in the success of the practice, but regardless, it was at least the first step in moving the practice forward.
Market strategy
The market strategy selected for FSC was ‘business management’. That market strategy turned out to be an excellent fit for FSC, for a couple of important reasons:
- The “business management” strategy clearly differentiated FSC from its competitors. At that time, the companies in the market that advised financial services organizations could be classified into three main types. Systems integration and managed services companies have approached the market with their functional skills and deep pools of resources. There were general strategy firms that approached the market with their consulting process and reputations at the corporate level. There were also dozens of niche companies that approached the market with their knowledge and experience in a limited range of services. No firm in the market offered services where depth of business knowledge was a requirement. FSC followed that path and quickly differentiated itself in the marketplace.
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The “business management” strategy was based on the core strengths of FSC. Traditionally, FSC hired consultants with at least three years of experience in the industry. This hands-on business experience became a good starting point for developing even deeper business knowledge and an understanding of best practice in an industry.
natural client
The natural clients for FSC’s “business management” strategy were heads of internal business lines of large financial services organizations. These were people who usually held executive vice president titles, or sometimes vice president titles, and who had full responsibility for the profit and loss of retail, corporate, capital markets, and other major businesses. Other firms targeted CTOs, the board of directors, or lower levels throughout the organization. Other firms did not identify strongly with the executives who had day-to-day responsibility for profit and loss, and who were also the primary visionaries for their businesses in the marketplace.
FSC’s go-to-market strategy attracted business line heads and they controlled significant consulting budgets. The market strategy required a deep understanding of the business. Functional knowledge was also important, but only within the context of business knowledge. More often than not, the problems facing business line managers cannot be broken down into functional components. It was necessary to combine several functional skills, such as strategy, risk, finance, operations and technology, in project teams, all with a deep understanding of the business.
purchase factors
Business line managers, who were natural clients of FSC, had two buying factors that could not be compromised when selecting consulting firms:
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There could be no business learning on the job. FSC not only embraced this buying factor, but tried to take it a step further. The goal was to assign professionals to projects who knew the business better than a personal client. Therefore, industry best practices are introduced to clients in the normal course of consulting projects.
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Consulting expenses had to have a return on investment. Once understood, this buying factor became a benefit for FSC. Line-of-business heads were much more inclined to spend money on consulting projects when there was a known quantified return. FSC had the knowledge and confidence to make reimbursement commitments when necessary.
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FSC enjoyed unprecedented growth during the 1990s. One of the main factors contributing to that growth was FSC’s market strategy of “commercial management”. The go-to-market strategy attracted the internal heads of the business lines, who became natural clients for FSC. These natural clients had requirements for selecting consulting firms that required in-depth knowledge of the business and recovery of consulting costs. The market strategy proved to be effective for FSC.
Taking the first step on the strategic management path required a great deal of information gathering, analysis, insight, and hard work, but in the end, the results were worth it. FSC would not have been as successful during that period without first thinking strategically.