The Deep Flaw in MBB Strategic Planning

When I first started recruiting for consulting jobs, an interviewer at Bain shared a story (arguably a legend at this point) about how Bain (or it might have been McKinsey) was asked to advise Motorola on whether or not they should enter the mobile phone market.

As you might know, Motorola eventually dominated the pre-smartphone mobile phone market with close to $10 billion in annual sales.

As the legend goes, the consulting firm advising Motorola recommended that Motorola not enter the mobile phone market. Obviously, that recommendation was dead wrong and thankfully for Motorola, they ignored the recommendation.

I heard similar stories at McKinsey as well, all revolving around a central theme — McKinsey consultants hate to be wrong, and they hate to have conclusions they can’t support with quantitative data.

This is one of the main reasons McKinsey and the other top consulting firms so rigorously test for logical analysis in the case interview.

However, anytime anyone is over wedded to a particular approach, it leaves them prone to vulnerability. In this case, McKinsey and the other top firms are vulnerable to missing conclusions that are correct but cannot be supported well with hard data.

In the case of the supposed Motorola engagement, which I believe took place in the 1970s, there was so little data available that there was not much to analyze. While there were some clever ways to forecast technology adoption, none of the data or methodologies were 100% accurate or reliable.

(MBB now often uses “real options” analysis to value multiple uncertain scenarios in a more accurate way, but the fact remains that in many of these situations, a high degree of uncertainty exists and that drives MBB consultants absolutely crazy.)

A similar bias exists within corporations as well as most white-collar professionals (especially the well-educated ones). In the Global 500, there’s an enormous bias to create a strategic plan and stick to it — no matter what. Under many circumstances, this degree of focus serves as a sound management principle.

But like anything overdone, it creates vulnerabilities. Anytime one is over wedded to “the plan,” it leaves one exposed to missing emergent opportunities that weren’t obvious at the time the plan was being created.

Harvard Business School professor Clay Christensen, legendary in technology circles, calls this the difference between the “planned strategy” vs. the “emergent strategy.” He argues, and I agree, that when it comes to strategically planning one’s career, many people overlook the emergent strategy approach.

The classic strategic planning approach is to gather all data, analyze, identify your optimal opportunity and focus your plan on it.

For large corporations, this would typically involve segmenting the market and looking at the size of each segment and its growth rate. Then it would involve analyzing the company’s capabilities vs. the competitors vs. what each customer segment wanted.

Ideally, you look for a segment that's growing fast, overlooked by competitors, and one where your company has a competitive advantage in serving.

This would be a textbook strategy created by McKinsey, Bain or BCG.

This approach works incredibly well in more established industries where there’s ample data available on the market, customer segments and competitors.

But what happens in smaller markets or with smaller clients?

In my consulting practice today, I exclusively serve small businesses — some as small as $500,000 a year in sales up to $15 million typically (sometimes up to $300 million). With these clients, they often operate in very small industries and there’s just no data available (or affordably available) to analyze.

In classic case study analysis, you’d ask them, "What are the market segments?" They’d say, "I don’t know." "How large is each segment?" "I’m not sure." "How fast is each growing?" "I don’t know."

In these situations, the classic strategic planning process doesn’t work very well.

Over the years, I’ve gravitated towards the emergent strategy approach. Here’s how it works.

You take your best guess at what you think is the right strategic approach and then you try it (preferably cheaply and quickly) and see what happens.

If it works, you keep doing it. If it doesn’t, you analyze the data you uncovered in the attempt to find some new insight not previously available and revise the strategic focus.

Seventy percent of my client work these days is emergent strategy oriented.

Let me give you an example.

I was recently asked by a client whether they should introduce a new offer to a particular customer segment. If this were a Fortune 500 client, I would commission a market research project, focus groups or analyze prior research. In my client's case, none of that was available.

So, my suggestion was to target 100 prospective clients by sending them direct mail and cold calling them and see what happens. It’s market research via taking marketplace action.

In general, one of two things happens. The market test 1) works brilliantly, or 2) it fails spectacularly. I instruct clients that in both situations they need to get direct feedback from prospective clients as to WHY they value or absolutely hate a particular proposed product offering.

The purpose of the test, in these cases, is not to succeed or to fail. It is to learn.

It’s not a particularly elegant approach, but if you have access to very limited information and there’s a high degree of uncertainty, it’s an approach that works.

In this way, emergent strategic planning is a bit of an iterative approach.

Now, let me connect this planned vs. emergent strategy distinction to career plans.

I have found, especially for ivy-caliber, white-collar professionals, that there’s an overwhelming bias to using the “planned strategy” approach.

The plan looks something like this:

I will graduate from college, get a job at MBB, get a Harvard MBA, go back to MBB, make partner, retire.

This plan is often devised when the person is in the middle of college — typically 19 or 20 years of age and is laying out a rough plan for the next 4 decades.

(There are similar career plans for those in pre-med, pre-law, and those pursuing a PhD and career in academia.)

While this approach does work out for some, for many it ends up being problematic.

Here’s my theory as to why.

Let's take a variant of my business situation framework for analyzing business opportunities and adapt it for analyzing career opportunities.

So instead of:

1) Customer
2) Competitor
3) Company

Let’s replace that with:

1) Employers (those who “buy” my labor)
2) Competitors (other prospective employees vying for the job)
3) Self

When you use this adapted framework for analyzing career opportunities, there are two components of the framework where there is very little data for the 20-year-old college student laying out her long-term career plan.

The first is employers. By and large, most people only research a few employers in a few select fields. For example, out of a global economy with 100,000 industries and 100 million employers, I personally only did research on two industries for future employment (investment banking and management consulting). Within those two fields, I only researched 10 prospective employers.

So out of a universe of 100 million potential employers, I analyzed only 20.

As a result, that which is unknown is infinitely larger than that which is known (or that for which research has been attempted).

In addition, you can research all you want about what it is like to work for a particular company, but you often do not know what the actual experience will be like until you actually show up for work. It’s only then that you discover the clients you will serve, who you will be working alongside in your project teams, and learn the identity of your “boss” (in consulting firms, the partners you work for often are not known in advance or are rotated by project).

Again, things become known with greater accuracy only after the decision to accept an offer has been made.

The second area of vulnerability is in the “self” aspect of the framework.

In my experience, most 20-year-olds do not know themselves very well. Twenty-somethings coming out of the Ivies are incredibly smart but rarely wise.

Wisdom comes from being tested in the real world, falling flat on your face repeatedly and learning who you are in the process. In my opinion, the extremely sheltered environment of a university campus develops intelligence to its greatest potential, but not so much for wisdom. It’s too structured, too protected, too predictable… a massive oversimplification of how the rest of the world lives.

So, what commonly happens is the 20-something college graduate pursues her career “plan” and, once the real world is confronted, she realizes that many assumptions she made in her original plan were not true in reality.

Working at XYZ organization wasn’t exactly as she thought. She thought doing XYZ professionally would be a lot more enjoyable than reality.

This happens when the rising star pre-med student enters medical school only to discover she hates seeing patients and doesn’t like research.

It’s the pre-law student who goes to law school in hopes of being a fearsome courtroom litigator (that’s often glamorized on TV), only to discover that being a young lawyer is spending 100 hours a week reading paper documents and creating new paper documents for other people to read.

This is not at all to pass judgment on these people. It’s just a reflection of the reality that many things are not knowable at the outset of creating a career plan. Some things just aren’t knowable until after you actually try it.

(Though things like informational interviewing do help quite a bit in narrowing down the discrepancy between expectations and reality.)

When assumed expectations don’t match reality, that’s when there’s an opportunity to shift from pursuing planned career opportunities to emergent career opportunities.

In many cases, people find it troubling when they discover the career path they’re on is not the right fit for them but an opportunity with a better fit is not yet obvious.

In these situations, people take one of two paths. They either stay on the current known wrong career path until something better comes along (it rarely does, or the wait is excruciatingly long). Or they exit the known wrong opportunity to deliberately seek out the right opportunity.

It’s my belief that the former is what leads to the “mid-life crisis” — doing what you hate for 10 or 20 years and ending up successful and miserable... or as I like to call it, "successfully miserable."

The latter has a lot of uncertainty (which again drives MBB consultants and those cut from the same cloth absolutely crazy). The key distinction is that the uncertainty is often temporary.

If you pursue emergent opportunities as a “market test” (such as the ones I advocate my small business clients take), then you discover more information about the market and yourself much more quickly.

Sometimes to find out what is definitely right for you, you have to attempt pursuing things that seem potentially right for you (often repeatedly) until the definitely right opportunity becomes clear.

What makes this journey especially disconcerting, especially for those successful in school, is the final destination is often not known (and not knowable) until AFTER you’ve departed for the trip.

(Just remember that clarity increases and uncertainty decreases once the journey is underway.)

The alternative is to follow a career path that you know is wrong and passively wait for something better to come along. This is the path to being successful (if you force yourself to do what you hate) and miserable, or successfully miserable.

That’s my thought for today.

What are your thoughts?

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43 comments… add one
  • Francisco Mar 21, 2014, 5:51 pm

    Dear Victor, perhaps my comment is going to be a bit out of line, but I would like to know your opinion and suggestions about an old urban myth in my region regarding chastity as an asset or liability, and how it can be related to the planned strategy or emergent strategy.

    For example you wait for the right-one, then you get married, have kids,and both partners try to motivate each other in order to make it to the top by getting a job at BBM.

    There is also an expression that if you jump in the labor market as a virgin (literaly speaking), THIS will affect your instinct to foretell people, their intention and attitude towards you, as well as the lack of confidence for being open to oportunities and challenges. The end result will be that you are being left behind by life itself due to your own slowness.

    However, being the other way could be also a liability. Being a player or womanizer like former president Bill Clinton could guarantee being succesful miserably as a family man.

    Without discredit the former president, considering that very few become head of state, if he would have kept his integrity and commitment on his relationship, could he had become a legitimate success in life? Or as the expression goes, he would not have moved ahead of his game/ plan.

    What are your thoughts about this urban hypothesis

    • Victor Cheng Mar 23, 2014, 12:52 pm

      Francisco,

      My read is the analogy seems to be overly forced into the career context. My take is that in your 20’s (and sometimes later for those who got a lot start) that’s a time to learn about yourself and to figure out what you like and are good at.

      This applies in both the personal and professional contexts. Most 20 year olds have only recently left the orbit of their parents. For such a person, it is a time to figure out who you are. Which ideas are your own vs your parents? Which values are yours as opposed to those of someone else’s?

      Similarly in terms of careers, what kind of work do you like?

      For someone who is never worked a full time job, this is a tough question to answer without actually working in a job?

      For example, I’m pretty good at in person selling but I could never be a full time sales person. The role has too many repetitive aspects to it and I get incredibly bored and miserable at anything repetitive. I know this about myself now, but I didn’t when I was 20.

      To have a successful and happy career it useful to figure out 1) what you are good at and 2) what you enjoy. The first is the prerequisite for success, the latter for happiness (from career).

      Some people figure this out before they turn 20. The rest of us have to figure it out. Anything that disrupts this process, in my opinion, disrupts the path to either success of happiness (from career), or both.

      Victor

  • VV Mar 21, 2014, 3:01 pm

    Great Article (from an MBB consultant ) – at a time when I am trying to pivot from my current consulting job.

    Being a rigid thinker myself, I feel that the reason we come up with ONE rigid strategic plan stems from a deep fear of failure that all of us have within us, and this is more pronounced in people who are extremely competitive

    The emergent strategy is a good alternative – to try out and experiment and see how things work out and ACCEPT if things don’t work out — But for the emergent strategy to work out, it is very important for us to lose this fear of failure and be willing to try and fail

    • Victor Cheng Mar 23, 2014, 12:44 pm

      VV,

      Yes, yes, yes!

      In school environments, failure = bad. The premise in academic environments, which seems especially ingrained in the minds of those successful in a traditional sense (e.g. successful in school first, as opposed to “street smart” people who did not perform well in school, but did in life after school ), is that failure should be avoided because failure was entirely avoidable.

      In school this is true. In business and in life this is not. Making mistakes in life = how we learn.

      A 1 year old child learns to walk, mostly be trying lots of ways to walk and falling down a hell of a lot. No parent ever said, OMG the baby fell down while trying to walk, she is a failure. That’s because making mistakes is a normal part of being human and is how human beings learn.

      The oldest school in the world is not Harvard. Is it the school of “trial and error”.

      In addition, the legacy of the artificially created academic thinking is that there is one correct answer. In real life, there are multiple “correct” answers.

      Not only that but there are multiple definitions of “correct”.

      In school, “correct” is defined by what the teacher wants to see. In life, “correct” is defined by what YOU want out of life.

      As a result, what is “correct” for you is very likely to be completely different than what is “correct” for me. That is why there is a danger in benchmarking one’s career plans versus others because the definition of “correct” will vary tremendously between individuals.

      Victor

      • VV Mar 23, 2014, 3:25 pm

        Great thoughts Victor ! Thank you for your reply

      • LKL Apr 13, 2014, 5:42 am

        VV and Victor,
        Totally agree that “… it is very important for us to lose this fear of failure and be willing to try and fail” and ” In life, “correct” is defined by what YOU want out of life”. Thanks for sharing such insights. You gave me courage to follow my intuition.
        Regards,

  • Dorothy Zhuomei Mar 21, 2014, 1:49 pm

    Hi Victor,

    I have been a subscriber to your emails since my MBA days almost 2 years ago. I always found your messages very insightful. But this post is the one that really prompted me to leave a comment for the very first time, because I absolutely resonated with the second half of the post regarding career change.

    I am one of those MBB consultants that recently decided to leave the path to explore a field that is full of uncertainty but feels true to me. Everyday I struggle with my uncomfortableness with uncertainty and I feel vulnerable and scared quite often. I keep turning around and look at my MBB and MBA friends who continue to pursue the traditional route in business and I have to keep reminding myself that I was unhappy and I should not cave in for another easy way out. It’s a quite a fascinating journey for me as I slowly develop the muscle to deal with uncertainty and retain the grit to follow through with my new path.

    So yes, your insight around MBB’s risk-adverse, uncertainty-adverse mindset is dead on, and your encouragement for those of us to take the step is well-received, at least by me :)

    Lastly, I plan to start a blog and a website soon which is related to my field (coaching and personal/leadership development), and would love to quote some of your words. Just want to check if this is ok with you and I will definitely share the sources when I quote.

    • Victor Cheng Mar 23, 2014, 12:32 pm

      Dorothy,

      Congratulations on have the courage to break from the pack to meet your own needs and goals. I always find it ironic that MBA programs and consultants train people to become independent critical thinkers, and a surprising number do not think independently in their own personal lives.

      I will write about he topic of being able to absorb uncertainty in the future, but needless to say being able to do so both emotionally and financially opens up many more opportunities.

      You are welcome to quote me so long as it is limited to a paragraph or less. Under US copyright laws, that constitutes the definition of fair use. So need to ask for permission to quote a few sentences. I just ask that you reference that the quote originated from me and a link back to a specific article or to my website home page would be appreciated.

      Good luck,
      Victor

  • Ayush Agrawal Mar 21, 2014, 12:57 pm

    Hi,

    As people above have said, its very similar to Minimum Viable Product model of Eric Ries, but the thing that’s of interest is your suggestion of its application to one’s career. As they say its one thing to know something but applying it is what makes all the difference. It also reminds of your mail in which you talked about spotting patterns from other industry (Startup in this case) and using it in some different industry (One’s career in this case).

    • Victor Cheng Mar 23, 2014, 12:24 pm

      Ayush,

      Thanks for pointing out the connection and sources of the two ideas. You’re right it is a mashup of the two and I wasn’t consciously aware that I was doing it.

      Also Rie’s minimum viable product concept is actually a 30-50 year old concept from the direct mail industry. Direct mailers used to send promotions for people to buy products that did not yet exist. In the extreme case, they would take the money and run which was blatantly illegal.

      Some direct marketers would take orders, and the rush to create the product after the fact. This is when the US Federal Trade Commission instituted laws about products purchase must be delivered within 30 days of purchase or something like that.

      The above is called “dry testing” because it was a way to test for market demand and test for the effectiveness of the advertisement copy before and R&D dollars were expended.

      The underlying principle is the same… Though in direct mail, the minimum viable product was to have no product at all.

      The principle still applies today, thought not as aggressively as before due to the laws.

      Victor

  • Cissoko Mamady Mar 21, 2014, 11:54 am

    Interesting analogy with great insight!

    Thanks Victor!

  • Manik Mar 21, 2014, 10:45 am

    Hi Victor

    I’m also one from the legion of long & ardent followers of your mailers & consulting prep material, but this article pushed me to comment. I agree with your “emergent” career strategy principle but challenge the approach.

    About me: I belong to the “planned” career path types you mention – engineer – consulting – MBA – consulting again…& am happy with where I am now. But I often wonder if I wanted to move out, where & what would I like to do. So I’m investing time to volunteer in spaces that seem interesting to me. For example, investing in SME companies seemed interesting so I got involved with a trade body and consulted for a few. The experience was interesting but I learnt that it was not what I wanted as my next career.

    The bridge between a planned & an emergent career move needn’t be quitting one to explore the other. One could try to sail in two boats together. Of course it will be tricky, but one with lesser opportunity cost.

    Your thoughts?

    • Victor Cheng Mar 23, 2014, 12:18 pm

      Manik,

      I totally agree with you. The planned vs emergent opportunity need not be mutually exclusive. It’s lower risk if some aspect of the emergent opportunity can be explored with low cost. These approaches include: reading trade publications, conducting informational interviews with people in the emergent field, attending industry events, volunteering, and numerous other ways.

      This is especially true if one likes the planned career path but wonders if an even better one exists. For those who definitively know they hate the current career path and are working 100 hours a week such that it precludes researching other opportunities, my argument is the risk of leaving a known bad opportunity it relatively low compared with the uncertainty of a better opportunity.

      When you hate what you’re doing, the bar for finding a better opportunity is not very high — though it has some uncertainty and does take some time.

      Having sufficient savings also helps provide the time to transition career paths, so that isn’t a require prerequisite but it certainly helps a lot with reducing risk and stress in a more aggressively structured switch toward an emergent career path.

      Victor

  • Dim Mar 21, 2014, 7:18 am

    Dear Victor,

    The article is very interesting and I really enjoyed reading it. I have been stuck in the last 8 years in banking and just finished the MBA. Definitely second (uncertain) path is worth taking rather than playing safe. My comment is that such career change journey involves two parties: Self (The employee) and Employers. My perception is that Employers are rarely taking the same risks as career changers. Straight career path is considered more appealing. That said, it seems that stability in choosing the “right” job at the beginning is more valued than the personal interest you could have. It would be good to know what percentage of people are career changers like me.

    • Victor Cheng Mar 21, 2014, 7:03 pm

      Dim,

      I don’t have the latest career changer stats but the last set I saw several years ago compared # of career changes in a lifetime vs similar aged people 50 years ago was dramatically different.

      The MBA in particular is an especially nice, very socially acceptable, career changing pivot point. It is perceived to be totally ok to change career direction after an mba – especially a well recognized one.

      -Victor

  • hansika malik Mar 21, 2014, 6:47 am

    Very inspiring!

  • Vinay Mar 21, 2014, 4:49 am

    Hi Victor : enjoyed reading this article. As a PhD with numerous patents and publications and now a FT management consultant with my own practice, I would add that “one learns more from his/her failures than successes.” When you “dont know what you don’t know,” setting up parameters to test with specific hypothesis and analyzing failure(s) is very insightful. Another suggestion, which is hard in the business world is about persistence. When one has a string of failures, it is easy to give up. While one cannot work on failed projects forever, being impatient too early can often be the difference between an Apple Newton vs Apple iPad. A structured approach such as this or as you highlighted for “emergent” strategies indeed is very powerful and how successful scientists /engineers have prevailed.

  • Jennifer Mar 21, 2014, 12:57 am

    I think this is a great post that so many young people reading your site need to see.
    My one concern with the emergent path (which we in Silicon Valley call testing, iterating and/or pivoting), is this: What do you do if you try 1 career path and you know it’s not right so you leave, then you try another career and it’s not right either, and then suddenly you have a resume full of < 2 year stints and future employers/people label you as a "job hopper"?

    All just because you were trying to find your way

    • Victor Cheng Mar 21, 2014, 7:01 pm

      Jennifer,

      One way to mitigate the risk is to invest in informational interviewing and networking to meet people in the fields you have an interest in before committing to work in the field. It doesn’t necessarily help you figure out what you will like, but it definitely helps you figure out what you will not like.

      Assuming one has done that I think the job hopping label is slightly overblown, especially if one is in his or her 20’s. The idea is you spend your 20’s figuring out what you like, then you spend your 30’s getting really good, and then spend your 40’s and 50’s earning high income from being exceptional at something valued by others that you like a lot.

      The job hopper issue is really an issue if you’re still doing it in your 30’s and 40’s. Once you find your sweet spot, it is SO much easier to excel. This is why I encourage those earlier in their careers to make big switches if current career choices aren’t working out for them. The stakes get higher as you get older (both personally (e.g., mortgage, kids, etc..) and professionally).

      -Victor

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