Monitor Group Bankruptcy - The Downfall

If you've been following the news over the last few weeks, you may have heard that Monitor Group, the highly respected consulting firm, declared bankruptcy and is in the process of being acquired by Deloitte.

The question everybody has been asking is, what the heck happened?

To many, Monitor was considered the #4 firm behind McKinsey, Bain and BCG. In my year, I knew people who declined MBB offers to go work at Monitor - yes, Monitor was respected that much.

At McKinsey, I had colleagues who read everything Monitor co-founder Michael Porter ever wrote. The word "brilliant" came up more than once.

So what happened?

To answer that question, I'll share with you my perspective on Monitor's fall, what we can all learn from it, and what it means for you.

Let's start with the basics of why a firm, any firm, goes bankrupt.

A firm goes bankrupt when it no longer has enough cash to pay its bills.

This is usually correlated with Revenues < Costs, but not always. I'll elaborate on why in a minute.

Traditionally a firm will fail for one of two reasons:

1) Not enough sales (or profit margin)
2) Too much sales

The first reason is more intuitive. When your revenues are less than costs, at some point you can't pay your bills.

The second reason is a little counter-intuitive, so let me explain that one in more detail.

First, it's important to realize that in my writings to you, I spend most of my time talking about strategy.

It's important to keep in mind that strategy differs significantly from how one executes or operationally implements that strategy.

In strategy, we focus on profits… where revenues exceeds costs.

In operations, we (relatively speaking) focus less on profits, and focus much more on cash inflow vs. cash outflow.

Cash inflow = deposits to the bank account
Cash outflow = withdrawals from the bank account

In a case interview, it's assumed that when a company receives an order from a customer (which causes its revenues to increase), the customer pays the company immediately in full for the order.

Similarly, in a case interview, when a company signs a contract obligating them to some new expense from a supplier, it's generally assumed that the supplier gets paid immediately.

In these situations, to over simplify a little:

Revenues = Cash Inflow
Costs = Cash Outflow

(Note: For the accounting oriented, I'm excluding some non-cash costs like amortization, depreciation, etc.)

However, when you're running a company, there are material differences between revenues and cash inflow, and differences between costs and cash outflow.

These differences are based on the timing of when the cash related to a particular order is actually exchanged between customer and company.

The same is true on the cost side. A cost is incurred when you sign a deal with a vendor, but cash outflow is only triggered on the day you actually pay the bill.

As a general rule, it is advantageous for a company to negotiate to get paid by customers immediately, and to deliberately pay its bills 30, 60 or 90+ days after a supplier provides their product or service. Under these ideal circumstances, a company has a "positive cash flow" cycle.

Most Fortune 500 companies have the negotiating power to have a positive cash flow cycle.

For example, if you want to sell your products in Wal-mart, they will place a $10 million order today, but pay you for that order in 4 - 6 months. (Keep in mind, this is negotiated, and any vendors that say "no," don't get the order.)

Conversely, if you get paid for your products and services months after the fact, but you must pay your employees and suppliers immediately, this is a negative cash flow cycle.

A small business that's trying to sell to a Fortune 500 customer will often have a negative cash flow cycle.

They'll land the $10 million order from Wal-Mart, but have to find some way to pay all their expenses until Wal-Mart pays their bills several months later.

As a result, it is possible to go out of business by having too much revenue (and not enough cash to pay all the expenses during the period between when the order is received and the bill is actually paid by the customer).

My consulting practice covers both strategy and operations. With my clients, I am always talking to them about cash flow. I am constantly reminding my clients that a strategy or an idea isn't fully implemented, until the "cash is in the bank."

It's very easy for a CEO to approve an idea, but sometimes neglect to verify if that idea actually produced cash 6 or 12 months later.

It's very important to verify that cash actually got to the bank, because quite often the cash you thought a strategy was supposed to generate doesn't always materialize.

This happens for countless reasons -- you had flawed assumptions in your original analysis; your analysis was correct but there was some hidden problem in execution; you're wasting money somewhere in the business without realizing it.

Welcome to the headache known as "operating a business."

In my own business, the first thing I do each morning is to check my bank account balance to make sure the cash level is what I expect it to be. When operating a business, cash is your life blood.

This is analogous to what a doctor does in the intensive care ward of a hospital. When a doctor enters the room, the first thing she does is check your vital signs (pulse, blood pressure, something called blood oxygenation level -- how much oxygen is actually getting into your blood).

Having spent hundreds of hours in intensive care as a family member, I had many opportunities to observe what the doctors do. The reason they check for things like pulse and blood pressure is very simple. They do so to see if you're dead, alive or somewhere in between (as is often the case in intensive care).

Yes, it is that simple -- after all, most of the patients are not awake and well, it's kind of hard to tell if someone is alive, dead, or just sleeping.

It is the same with cash. As a smart business operator, you watch cash to verify your business is not dead. Hey, it's a pretty useful discipline.

As my mother taught me when I was 10 years old, "Victor, if you have enough cash, you will never go out of business." (I have an unusual mother.)

When I was 11 years old, I used to wear a bright yellow T-shirt around school that said, "Happiness is Positive Cash Flow." (My teachers always thought I was a weird.)

In hindsight, I realized:

1) LOL… I did not have a normal childhood.

2) Positive cash flow doesn't buy you happiness, but negative cash flow definitely gets you misery.

As it relates to Monitor, they most definitely did not have positive cash flow, and they were most certainly miserable about it.

So what happened to Monitor's cash? And why did Monitor fall, when other firms did not?

While there are many reasons, I'd speculate their #1 underlying "root cause" issue was likely…


Monitor underestimated the severity of the problem they had, they did too little to address the problem (i.e., magnitude of solution = magnitude of perceived problem… but…. magnitude of solution < magnitude of actual problem), and acted too late.

What likely happened was Monitor was negatively impacted by the global recession of 2008. However, many other firms were as well and they survived.

However, Monitor also suffered a scandalous blow to their reputation when the media discovered the Libyan Dictator Moammar Gadhafi was a client that hired Monitor to improve his image in the Western media.

In particular, Monitor worked on the Gadhafi engagement using means of questionable ethics. In addition, as part of that engagement, Monitor helped one of his sons write a dissertation for his PhD from the London School of Economics.

(There's a lesson on protecting one's reputation that I'll circle back to in a few minutes.)

So between the recession and reputation damage, that almost certainly caused a structural decline in Monitor's revenues.

At the time, in 2008, the best I can tell Monitor had around 1,500 consultants in 27 offices. While they reduced the number of employees by about 20% and closed a few small offices, it clearly wasn't enough.

They should have cut much more deeply in order to survive. They didn't, and four years later in 2012, they ran out of the cash needed to support an unprofitable business.

Remember -- even with a negative cash flow cycle, if you have enough cash in the bank, you can survive long enough to hopefully improve the cash flow cycle. Monitor ran out of time and money.

If you've been following my work for any period of time, you'll recall how much I emphasize (and continue to use to this day) my profitability framework.

I've recommended that you use it, I use it with my clients, and I use it for my own business because well, profitability is like really, really, really important.

That's an understatement!

Monitor started becoming unprofitable in 2008 due to both the recession and the news around Gadhafi. They cut expenses by 20% to be at least break even in profitability.

Then between 2008 - 2011, sales continued to decline and rather than cut expenses further (and risk signaling to the world that they were having problems), Monitor likely decided to continue to run the firm at a financial loss, in hopes that either:

1) the economy, and therefore sales, would improve soon.


2) enough money could be borrowed from outside investors to fund the losses until sales could recover.

They miscalculated on both fronts -- the revenues did not recover on their own, and despite initial success in borrowing around $50 million from an outside investor, they were unable to get a follow on investment and ran out of cash.

Monitor's bankruptcy is not only a major failure, but it's a particularly humiliating failure. This is precisely the kind of problem that clients hire Monitor to solve for them.

It's like finding out your doctor, who has been telling you to stop eating so much sugar, has diabetes.

It's embarrassing to say the least.

I mean at this point, would you ever hire Monitor for a profit improvement project?


In looking at the Monitor situation, there are… (wait for it…) three key takeaways:

1) Always Protect Your Reputation

As Warren Buffet says... it takes a lifetime to earn a good reputation. It takes a few days to lose it all.

This is worth remembering in your career… especially a career in consulting where the "product" basically is your personal reputation or your firm's reputation.

Reputation comes in two flavors:

a) integrity of words and actions, and
b) reputation by association

The first is about actually believing in what you say and acting in a reliable way towards others.

For example, when I recommend a particular skill, process or behavior in a case (or with a client) and you follow my advice, if it works out well for you, my reputation in your eyes goes up. If I were to tell you something that did not work or was flat out incorrect, then my reputation goes down.

Thankfully, my reputation over the years has gone up on more occasions than it has gone down. It takes a lot of work and care to make that happen. It does not happen by itself.

Last year, my writings were read by, and influenced, CIBs and working consultants in 212 countries -- which is amazing to me. Anecdotally, I'm told that upwards of 50% of the new consultants at MBB are followers of my work in countries ranging from Australia, Nigeria, Malaysia, South Africa, and of course, the U.S., and EU.

How did my reputation grow to seemingly span the world? (Which again, continues to amaze me.)

The short answer:

One sentence at a time.

(In your case, it might be one meeting at a time, one presentation at a time, one analysis at a time, one day at a time… it's daily consistency on the micro that leads to the macro reputation.)

The second form of reputation is reputation by association.

You are judged by the company you keep… in other words, your reputation is assumed to be of the same caliber as the reputation of the people around you.

Conclusion: Be careful who you associate with.

Gadhafi as a client? Maybe not the best choice.

Helping a client's son cheat on his dissertation at the London School of Economics? Perhaps one should think twice on that one.

Secretly hiring prominent academics to write favorable opinion pieces on a Libyan Dictator?

Maybe, just maybe, not a good idea.

Do you really want to be known as the "go to" firm that specializes in cheating and manipulation? The preferred consulting firm of dictators everywhere? Is that really the reputation you want for your firm?

As one Monitor consultant said after the fact…and I paraphrase "we screwed up royally."

Was Monitor really that desperate for revenue?

Building your reputation for integrity is not without costs. The real acid test is: Are you personally willing to turn down income for the sake of reputation or integrity?

I routinely turn down clients when it's not a good fit for them or for me.

I actively stay away from people I do not want to be associated with.

In short, I'm very conscious of the choices I make. You should be too.

Monitor wasn't.

2) PRIDE and EGO are the most expensive costs in a business.

I have been saying for years that the largest expenses I "see" on a company's financial statement are the pride and ego of its leaders.

Of course pride and ego are not actual expenses of the company, but the expenses incurred in protecting one's pride and ego can in my experience be enormous.

What likely happened with Monitor is they continued to shrink even after their initial staff reductions. Rather than continue to cut expenses to be in alignment with the new market demand, they consciously allowed expenses to be higher than revenues.

This is very risky.

Why would a bunch of highly intelligent business leaders rationally run a business unprofitably?

Well, rational leaders wouldn't (or at least not for very long).

But leaders who had their pride and ego tied up in the business, and couldn't bear the thought of having the world think less of them, might.

They decided that rather than admit a moderate defeat, they would rather be in denial and pretend nothing was wrong until they accumulated a massive defeat in the form of a bankruptcy failure.

To be fair, there is another perspective -- a more flattering (or less unflattering) portrayal of what went wrong.

Let's say that sales dropped off, and Monitor continually slashed variable costs (i.e., salaries) to keep pace. I didn't see any mention of this in the news other than the original 20% cut in 2008, but it's possible it happened quietly.

At that point, perhaps their fixed costs, such as leases and loan payments on buildings, were so high and nearly impossible to reduce partially, without eliminating entirely (e.g., maybe they ideally tried to shrink the real estate size of each office by 50% but perhaps nobody else wanted it, they only wanted 100% of it).

While this is possible, I'm a bit skeptical this is what happened as they had nearly four years of time to restructure their costs to be profitable. That's typically more than enough time to shed costs -- provided you intended to do so aggressively.

As an example, when Steve Jobs re-joined Apple as CEO, he took over Apple when the company had roughly 90 days of cash left in the bank. Only 90 days before the company was bankrupt. Jobs stopped the Apple from "bleeding" cash, and did it in 90 days.

In comparison, Monitor had close to 1,400 days to do the same, but couldn't.

Monitor just did not execute.

Slashing costs is not difficult. It is, however, extremely unpleasant.

Medically speaking, cutting off a patient's leg to save their life is not mechanically difficult, nor logically difficult. Alive with one leg is logically better than dead with two legs.

This makes completely rational sense… unless you're the person with the axe and it's your right leg we're talking about. Can you really lift the axe up and swing it down?

I know it's a bit of a gruesome visual, but this is basically (sort of) the sort of "tough decision" that both Steve Jobs and Monitor faced. Jobs was willing to swing the axe. Monitor opted for using nail clippers instead -- not enough in the end.

If you look at where Apple and Monitor are today, I think the results of those pivotal decisions speak for themselves.

Which leads me to my third and final lesson:

3) Execution is harder than it looks.

Amongst MBB-caliber consultants, especially the younger ones, there's an enormous bias that:

Strategy = Hard
Execution = Easy

The bias is rampant inside these firms. Here's how it plays out.

(And I'm going to apologize in advanced to any Harvard folks reading this.)

Let's say you have a hot shot Harvard undergrad, who also has a Harvard PhD, working at MBB.

In one of his early engagements, he discovers the client has been focusing on a segment of the market that's shrinking in size where profit margins have eroded.

The consultant recommends the client switch market segments to a different segment -- one that's growing and much more profitable.

After the final presentation, it's very easy for that consultant to think:

"Geez… it was like so obvious the client was focusing on the wrong segment. I can't believe they didn't do this on their own. Clearly, I / we are smarter than they are, and that's why we earn the big fees."

Now nobody in consulting that I know would say that out loud, but I know a lot of people who quietly think this to themselves.

In fact, at some level, I used to think this way… that is until I ended up going into industry, helping to run public companies, and becoming a business operator of my own.

Let's say I have way more empathy for my previous clients than I did at the time.

Execution is hard.

Let me give you an example.

Since we're on the topic of Apple (which I am a fan of), let me give you an example.

Apple has one glaring vulnerability. It has extraordinarily high profit margins. You could slash Apple's profit margins by 50% and it would still be an incredibly profitable company.

The entire history of technology and Silicon Valley is one of initially inferior technology that's dramatically cheaper, eroding the market position of a superior high priced technology (e.g., PCs vs. mainframe computers).

To oversimplify, one strategy is to compete against Apple at the low end of the market by selling products that are 70% as good, at 30% of the price .

That's "obvious," right?

Now, to actually do that is hard.

Apple has decade-long exclusive contracts with all the major component suppliers in the world. They get preferred pricing and they get supplied first before you do. You have to replicate that somehow.

Apple has an enormous head start on innovation and design. You'd have to come close to matching that.

Apple has an enormous portfolio of patents.

Apple has a ton of cash.

Apple has an incredible brand following.

Apple has… well, a lot going for it.

To compete against Apple requires billions of dollars, incredible levels of talent, enormous resources in 100 countries around the world to all execute simultaneously and then maybe, maybe it might work… barely.

Hardly easy.

As a consultant, I thought strategy was "hard" and operations "easy."

Today, having been (and continuing to be) both strategist and operator, my point of view has changed completely.

Strategy is "easy" and operations is "hard."

At this point in my career, I can take pretty much any business and within an hour or two, find the core strategic issue and often figure out how to fix it. Basically, my initial client meetings are really just what you and I would call a case interview. The difference is that my meetings are usually over the phone or over lunch.

Now, it might take that client working 12-hour work days, 6 days a week, and getting thousands of employees to change what they do every day... and to nudge, push, fight, and battle every work day for 10 years to execute what I sketched out on the back of a napkin over lunch.

Do you want to know why those in industry sometimes dislike and criticize consultants? It's because many of them completely fail to grasp the last three paragraphs.

And you know what? Many of those criticisms are warranted.

Don't be one of those consultants where the criticism is warranted.

Execution is hard. Never forget that.

And in case you ever do, just look at Monitor.

They failed to execute, and it cost them dearly.


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50 comments… add one
  • Luke Tregidgo Jan 15, 2013, 10:30 am

    Really interesting, insightful and thought-provoking insight as always Victor. Thanks for sharing.

    In particular I like the “wake-up call” that execution is way harder than developing strategy.

  • Nduka Jan 15, 2013, 10:56 am

    Awesome!!! The article touched the very heart of Business. Well done, Victor

  • Kuda Jan 15, 2013, 11:02 am

    This is a very insightful piece, keep up the amazing work.

  • R Jan 15, 2013, 11:02 am

    I liked what you wrote about the negative and positive cash-flow. It’s something that many small businesses struggle with and I’ve witnessed a case in which it nearly drove bankruptcy.
    I didn’t like the diabetes example – diabetes is not necessarily caused by sugar consumption, rather genetics Etc. (and since it’s a medical condition it is not something the patient would know anyway)- It brings out the point but still..

    • Victor Cheng Jan 15, 2013, 12:42 pm


      Thanks for pointing out the logical flaw in the diabetes analogy. In hindsight, I should have used something like a punctuality expert always being late or something 100% within one’s control.


      • J Mar 13, 2013, 12:59 am

        Or an example of a doctor who smokes but advises people that smoking is injurious to health 🙂

        Great article by the way. Thanks for the insights.

    • Victor Cheng Jan 15, 2013, 12:44 pm


      You’re right about the diabetes point. In hindsight, it would have been better to use an analogy that’s more fully within one’s control, like a punctuality expert known for always being late.


  • Andre Jan 15, 2013, 11:17 am

    Excellent post Victor. You’re getting better every day!

    • Victor Cheng Jan 16, 2013, 12:41 pm




  • Calvin Jan 15, 2013, 11:31 am

    Loved the point about reputation and how it lives in both your works and the company that you keep. Can’t wait for the next article!

  • Peter Jan 15, 2013, 12:10 pm

    Somehow this article takes the same line as something that made me critical about management consulting:

    Just to the easy job and leave the bloody hard work for other people.

    No doubt that strategy is important and vital for any business survival, but the best strategy is useless if it is not followed. And following a strategy, means execution and that’s the “hard work” which requires determination and endurance.

    Thanks for this great article.

    • Chris Jan 16, 2013, 1:14 pm

      Bear in mind that I do no know the details of Monitor’s business nor its bankruptcy.

      But does anyone find it ironic that Monitor would (or did) disdain operations work when it needed cash?

      I also find it telling that Monitor would rather take a strategy consulting assignment for Libya’s leader when it needed cash – rather than face the brutal facts of its business (or perhaps pivot its business).

  • shandil Jan 15, 2013, 12:23 pm

    Fantastic write up. The thing i admire about you is your clear and concise thought process. Your analytical skills are exemplary. Thanks

  • Jorge Jan 15, 2013, 12:30 pm

    Hi Victor,

    Good post and thoughtful premise! Happy to hear your blog is internationally popular, but as far as I know the UN recognises 193 countries, 201 if one applies the interpretation of the Montevideo Convention. Anything more I have learnt can be perceived culturally insensitive due to territorial disputes and may strike some readers in a negative light.

    • Victor Cheng Jan 15, 2013, 12:41 pm


      Fair point. I go by what Google calls a “country” which does include a number of territories and regions that aren’t necessarily recognized as countries by others and in some cases themselves.


  • Amir Jan 15, 2013, 1:30 pm

    You hit the nail on the head! I am in a unique position in industry where I do both strategy and operations…basically I discover the core issues, strategize and then help execute the changes. And boy is execution difficult! It tests your intellect, will, energy, patience, resilience, just to name a few. Excellent writeup Victor, with wise advice for all.

    • Victor Cheng Jan 16, 2013, 12:41 pm


      Tanks for sharing your thoughts. Operations also tests your endurance, ability to tolerate stress, and determination.


  • Leo Jan 15, 2013, 1:50 pm

    Thanks for the post Victor!
    It was insightful and nice to read!

    Reminds me of a boss at a big consulting firm who told me that 70-80 % if all strategies fail because of bad/no anchoring within the organization.

  • Sri Jan 15, 2013, 1:56 pm

    When I read this post. This was like a complete reflective piece of stuff which is going on in my head. Very insightful posts.

  • Jack Jan 15, 2013, 3:03 pm

    Hi Victor,

    Interesting article! Do you think it is a shrewd investment for Deloitte? I would have thought Monitor’s knowledge, thought leadership and influential brand will enrich Deloitte’s capabilities in key areas. Deloitte could use their reach and resources to almost guide Monitor and distinguish themselves from the rest of the big 4?

  • Darrin Jan 15, 2013, 3:34 pm


    Wonderful article! Do you have any ideas on what this acquisition means to Deloitte and its position on the management consulting industry?

  • Jay Jan 15, 2013, 3:47 pm

    One area not discussed in this post is the development of “beyond strategy” practices by many of the main strategy firms. One of these beyond strategy capabilities is operations excellence work (perfect services when cost cutting is needed!). My understanding is that Monitor kept strictly to strategy, and with the turn of the economy in recent years, pure strategy is no longer as easy to sell when there are more “one-stop-shops”, Deloitte being one, who can service a client on a variety of fronts and be right there with them throughout the entire process.

  • Echo Han Jan 15, 2013, 4:00 pm

    Thanks Victor! always so helpful

  • Vincent Jan 15, 2013, 5:16 pm

    This is a GREAT article, not only in that it explains the reason of Monitor’s bankruptcy, but also in that it offers some great insight into the consulting work. I personally asked several Monitor consultants and Deloitte consultants for the reason of the acquisition and their opinions about it. However, none of them, even though they are sort of directly involved in this event, could give me a insightful answer. But Victor you did it. Thank you so much for this great article.

  • Girish Jan 15, 2013, 11:44 pm

    Great article ! I especially liked the comparision between Apple & Monitor. Regarding Strategy vs execution, I believe both are equally important as companies which are great in execution remain busy in execution while some disruptive force makes their existing strategy obsolete( example Kodak )

    • Victor Cheng Jan 16, 2013, 12:38 pm


      Yes both are important. A note on Kodak. They were actually a client of mine back in the year 2000 when I was in the software industry. One of their enormous challenges was to change the mindset of some 100,000 employees. Everyone at Kodak kept saying, we’re a “film company”.

      So literally there was a major corporate initiative to just get employees to change how they describe the company. They preferred description which tools years to get everyone accustom to saying is I work at Kodak, and we’re in the “memories business”.

      That gives you some insight as to how hard it is to change a culture… Years just to change how you describe the company to one another.

      A few other Kodak notes:

      Question: Which company invented the digital camera?

      Answer: Kodak

      Question: Which year was the digital camera invented?

      Answer: Around 1950

      Interesting isn’t it?


  • Leila Jan 16, 2013, 1:40 am

    Victor, thank you so much for the article, you are hitting the issue right where it hurts.
    Your analysis summarizes what we’ve learned from founding and operating our start up company. We almost went bankrupt both because of the negative cash flow and cost exceeding revenue.
    We learned a lot from our experience, and now your article sharpens our lessons learned.
    The second important thing that we’ve learned, which also you mentioned in your article is the gap between strategy vs execution. I wrote an MBA thesis on developing strategy for my start up, I performed all the steps involved in strategic management using the frameworks involved in it, which grant me an A for my thesis. However execution is another thing, things doesn’t always go the way we assume it would in our strategy. Sometimes execution and reality brings us to a path which is completely different than our strategy in order to survive and grow, which requires us to modify our strategy for a better outcome. So I think what I want to point out is two things: one is that strategy is not a one time deal, it is continuous and evolving. And second is as what you mentioned in the article, that strategy needs to consider operation issues in a great depth in order to be executable.

    Thank you again for your articles, they are really a joy to read since they reflect the truth and full of lessons to learn.
    Warm greetings from Indonesia

    • Victor Cheng Jan 16, 2013, 12:33 pm


      You are totally right that strategy is an on going endeavor. In fact, this is very much the theme of my client work. I always start with an initial strategic plan, based on several key assumptions. Then my client goes out into the marketplace and they get feedback that helps us prove or disprove our assumptions… then we ADAPT to the new information.

      I’ve never had any strategic plan of mine (for myself or a client) get executed exactly as we had intended. While we’ll usually hit our goals, it’s almost never in the exact way we thought.

      The downfall of Monitor was either a failure to get feedback from the market or an unwillingness to accept and adapt to them.

      A few key assumptions in Monitors likely approach:

      1) the economy and therefore our sales will improve on their own (so no need to cut costs too deeply)


      2) we can raise external capital


      3) we can sell the firm before we get into too much trouble

      These are all reasonable INITIAL assumptions, but when you’re in a negative cash flow situation you don’t have a lot of time AND the consequences of being wrong is fatal… The business fails.

      Two courses of action I usually recommend in this situation:

      1) cut costs DEEPER than you think you need (financial problems are almost always worse than initially thought) so that even if the situation deteriorates you’re at least at cash flow neutral and your time horizon to test these assumptions is in theory infinite


      2) Test your assumptions extremely QUICKLY and if you’re wrong, hack costs quickly to ensure survival and again to extend the time horizon you have to figure out the right next move.

      From the outside, it doesn’t appear Monitor did either of these or didn’t do it nearly fast enough.


      PS. Thanks for the greetings from Indonesia… Greetings to you from the Seattle, Washington area. 🙂

      • Leila Jan 17, 2013, 3:24 am

        Thank you for the elaboration
        It’s good to know 🙂

  • Joe Jan 16, 2013, 2:59 am

    Reputation is hard. You have to pay attention constantly. You may have an impeccable reputation but there are someone out there to take you down.

    I battled against those who tried to take me down on framed evidence and it was my reputation that saved me from those who know me diligently.

    About reputation, does Monitor firm tarnished Michael Potter or is he eternally venerated for his works? Is Michael Potter a ‘Lance Armstrong’ of management consulting?

    • Victor Cheng Jan 16, 2013, 12:19 pm


      The fall of Monitor doesn’t boost Porter’s reputation that’s for sure. Unlike Lance Armstrong, Porter didn’t lie or cheat. Also he likely wasnt very involved in operations at Monitor.

      I think his reputation will take a hit, but still survive.


  • Jagadish Patil Jan 16, 2013, 6:56 am

    Excellent Analysis Victor. Thanks to you that such a complicated matter has been explained so well in simple terms. The lessons learnt will go a long way in operating any business. Your mails are quite informative and enlightening on various subjects.

  • Miranda Jan 16, 2013, 7:50 am

    Great article. As I think you suggest, operations requires more patience (and sometimes courage) than strategy. The importance of patience/the long term tends to be too easy to forget in today’s ‘instant’ world. Thanks.

  • William Jan 16, 2013, 2:04 pm

    Hi Victor,

    Really thanks for the great article, truly enjoyable.

    Based on your article above, may I conclude that the root cause of the Monitor downfall is basically lacks of leadership? whenever the problem is obvious and one can’t takes the appropriate action to tackle it (or avoid it), then their capability to lead are questioned.

    I am not a leader, nor a person that already face that kind of situation. But this is so obvious and it was very clear. (or their manage to keep it from hind sight?) I don’t really know.

    Food for thought,

    • Victor Cheng Jan 16, 2013, 2:09 pm


      As my mentor said, when you know a business is completely messed up and you aren’t entirely sure why, it’s a safe bet to blame (or replace) the person in charge.

      So you’re absolutely right.


  • Peter Jan 16, 2013, 10:00 pm


    As part of Deloitte’s Strategy group that will be working with Monitor’s employees – this was an extremely interesting external perspective.

    I appreciate your highlight on the difficulty of execution. My group does not do execution – we hand it off internally to other groups in Deloitte. But consultants in operations do not get enough credit from strategy folks (including myself) for the work they do.

    Thanks again for sharing this article. I’m interested to hear your opinion as to what you expect Deloitte’s Consulting practice will do with the Monitor acquisition.

  • Stanley Kirk Jan 16, 2013, 10:35 pm

    I read your article regarding the Monitor Group. I disagree with your concluding statement that strategy is easy and execution is difficult. The execution process can be started with communicating with all stakeholders. Everyone should be provided with an understanding of why and the extent of the need to change. My expereince suggest that when everyone is aware of a sinking ship, many will do what they can to save the lives of other passengers and more importantly their own lives. Once employees and business partners are given a diagnosis and understand that an organization is on life support, many times they will rally around and help with execution.

    Just a thought…..

  • Rob Ford Jan 17, 2013, 11:51 am

    Excellent analysis with some interesting insights about Monitor’s inner workings (e.g. $50m loan).
    I’m a PhD student at a leading science university in the UK. In applying for jobs this season, I decided to focus my efforts on operational rather than strategy roles. My hypothesis is that ops and implementation will be where the majority of growth for consulting businesses will come from in future. It seems that clients are becoming more and more reluctant to spend on strategy projects. This makes them hard to sell, and even then they are very short (although rates are high). Ops and implementation generally last longer, and not so many have to be sold per year for a partner to meet his targets. Sure it’s not as ‘prestigious’ as strategy – everyone at my university seems obsessed by getting to ‘do strategy work’. However it should provide new consultants with a skillset that is going to be in increasing demand in future.
    The consulting interview process overall is so emotionally draining (and a massive time-sink). Why spend months killing yourself learning case studies etc. for a 1-in-whatever shot at a strategy role? MBB et al. in London only hire 15-20 people each!
    Most people’s best bet would be to get into ops, restructuring, implementation etc. build a focused skillset then transition out to a client / jump to specialist area of industry. Thoughts?

    • Victor Cheng Jan 17, 2013, 12:55 pm


      I don’t have enough data to know if strategy work is shrinking and if it is whether it’s a regular cyclical swing or a structural decline. What I do know is people have been debating strategy vs operations for decades and I also know its very hard to run a business successfully over the long run without both good strategy AND good execution.

      To me it’s somewhat like asking which arm is more important to an Olympic swimmer – the right one or the left one. From my perspective, it doesn’t really matter which is more important because ultimately you need both.

      From a career standpoint, if one has definitely decided on going into business, I think it is valuable to prepare for and interview for strategy jobs – even if one doesn’t get an offer.

      Although most people focus on the outcome, did I get the job or not, the process itself is actually quite useful in and of itself.

      It forces the development of a skill set that the stronger senior level executives have (but developed after 20+ years of experience) that most jobs in industry will not see in their first 10 – 20 years of the career path.

      Even if you decide to focus on operations, you will be a better operational consultant when you understand how the strategic process works.

      In my strategy work, I have the complete opposite advantage. Because I know operations very well (arguably better than I know strategy, though I rarely discuss that in this forum), the trademarks of my strategic recommendations are:

      1) less pure (mba’s with little operating would find “flaws” with it)
      2) highly practicable and implementable
      3) makes the bank account balance go up

      My strategic works is SO much better today (with many years of operating experience under my belt) than it was when I was pure strategy consultant. Similarly, when I am doing operational work, I very often come across a major strategic insight (usually a comment made by a client’s customer, their employee or one of their partners) that under normal operating circumstances one would completely disregard because it’s not relevant to making that month or quarters operating goal.

      In short, my operational consulting is much better because I can think strategically. I notice things (strategic insights and opportunities) that others just aren’t accustom to seeing or looking for. Even though my reputation isn’t as a operations consultant, I’m called in for human capital and process improvement situations because my linkage from operations to strategy, and strategy to operations is much tighter.

      This integrated perspective between operations and consulting is RARE. It is not that it is that hard, its mainly that there are so few natural opportunities to acquire both skill sets or perspectives.

      And for what it’s worth, the strategic thinking taught in business schools is nowhere close to the caliber practiced at the MBB level. This evidenced by the MBB acceptance rate say among Harvard Business School applicants which is probably around 15%.

      In industry, 99% of the employees of a company will never encounter any strategy work in their entire 30-40 year career.

      So by having a strategic perspective when working in an operations is unusual and valuable to clients and employers. For example, when I worked in industry in operating roles, I was very easily in the too 1% or too o.5% mainly because I could see how any operating decisions – cost structure, org chart, investment decision, tactical choices – fit (or didn’t fit) into the overall objective.

      99% of operators can’t do this because they just don’t see or noticed strategic issues and implications.

      Now from a career standpoint, if you flat out enjoy operations work more than strategy (and I know a lot of people where this is the case), then you should go into operations or operational consulting period. It’s a good career track. You learn a lot. It sets you up for opportunities in the future.

      If you think you wouldn’t be competitive amongst MBB and the “second” tier strategy firms, and didn’t want to work for a strategy boutique, then from a “where am I competitive” stand point, it makes sense to target operational consulting firms.

      If however, you’re perhaps borderline competitive, then it’s a tradeoff decisions — is it worth the time given the more modest odds. That decision mainly depends on what’s important to you and is more a personal choice decision than a definitely right or wrong decision.

      I will say that I get a lot of emails from former CIBs who were borderline competitive, but wanted to work in MBB really, really, really badly…. And they got in.

      In those cases, it often took hundreds of hours of networking to secure just one or two interviews, and several hundred hours in terms of case prep. In addition, often the initial attempt didn’t work, and they added another several hundred hours of prep and tried again 18 months later and got in.

      So your characterization that it takes a serious time commitment to prepare I think is valid. The examples above are very extreme.

      If I were to guesstimate what the bell curve on prep time is amongst the FFY that I hear from, I’d say 70% of people who get offers prepared in the 50 – 100 hour range.

      I ultimately didn’t answer your implied question of whether you personally should target operations consulting firms, but hopefully I laid out enough of the criteria that I consider important that you can infer what I would suggest given your personal situation.

      Good luck!

  • Anil Sood Jan 21, 2013, 9:19 am

    A good analysis, maybe totally true. One point did you consider that may be the basic strategic planning as a concept to solve all problems of companies is flawed. So, the people / companies were getting wiser and using other means to solve their problems instead of relying on over-rated companies like Monitor. Will other high flyers go over the cliff?

  • Karan Jan 21, 2013, 5:39 pm

    Thanks Victor for sharing your point of view.

  • G. Jan 21, 2013, 7:16 pm

    Thanks Victor, great insights as usual.

    With negative CF being a technical reason for bancruptcy, it’s quite hard for me to find the link between “too much sales problem” and Monitor’s case.

    The underlying reason was well described, which is revenue decline and inadequate cost management.

    Great point on execution!

  • Ernie F. Jan 27, 2013, 10:22 pm

    Well, Deloitte can solve those two problems and pressing that they didn’t overpay for Monitor, this should turn out to be very cashflow positive 🙂 for Delporte….

  • Francisco Jan 30, 2013, 6:26 pm

    I think one of the main issues in regards to the mistakes, scandals and failures that are branding the consulting world lately, has to do with the personal behavior of the staff that work for these top firms – BBM. Sure, these companies need sharp, smart people that are good with numbers, with good academic credentials,and with a supposedly logical thinking. However, at the end of the day, if they are too arrogant by showing an overwhelming type A, narcisistic personality, then it is a higly cost/ damage for the business prestige. Something similar happened on the Investment Bank industry.
    It would be healthy for the wellness and Human resources departments of these firms to focus on group therapy and prepare or train the employees, just as they do in preparing for case interviews, but with social skills and tolerance as part of their personality package.

  • Motselisi Feb 18, 2013, 3:01 am

    WOW, great article. Really opened my eyes to the difficulties experienced by consulting companies, they advice clients and forget to take care of their own affairs

  • Tom Mar 2, 2013, 12:33 pm

    Hi Victor,

    Great job on the article and I’ve only recently started reading your insights.

    While we’re on the topic of strategy and execution, I wanted to ask: whether you think it’s strategy:easy/execution:hard or vice versa, we can all agree that executing on the laid out strategy is the most difficult. What are some tips you can give on how to go about doing that?

    I know this is a super broad question but if you can just shed some words of wisdom, that would be awesome!.

    • Victor Cheng Mar 6, 2013, 4:28 pm


      The over simplified answer to your question:

      1) Have A players in key operating and consulting roles

      2) Have relentless focus on execution (track progress weekly if not daily, create a “war room” with key metrics, meet weekly on progress / troubleshooting problems)

      3) Fire and/or replace people who don’t deliver results.

      It’s not rocket science. It’s mainly a lot of hard work and the ability to stay focused and avoid distraction. Great people and good process make a big difference.


  • the analyst Mar 9, 2014, 12:31 pm

    To be sincere…this article looks to me like trying to squeeze some theory were it does not fit at all.
    There is no single understanding on the consulting industry their drivers of revenues and their drives of profitability.
    There is no understanding on the competitive positioning of Monitor and even less on the internal problems.
    To put it simply it seems you have hear something (without that much rigor) and tried to adjust it to your theories.
    I guess flawed analysis like this shows why management consultants are still very much needed.
    Some serious guy

  • Chen May 11, 2014, 1:27 pm

    Hi Victor,

    Having followed your blog for a couple of years, I am delightedly find that you agrees with me that there is an analogy between doctors and business consultants.

    ■ Multi-disciplinary skill sets

    Solving business problems as well as the operation of human body is often too much complex that requires multi-disciplinary teams. For example, a pregnant patient who is newly diagnosed cancer would certainly expect an integrated services of several specialists comprising medical specialists, chemotherapy specialists, radiotherapy specialists, radiologists, pathologists, as well as surgeons. Hence, a much border coverage on knowledge and skill set is highly appreciated when cooperating with others in highly demanding situations. The governance of such teams is increasingly system-based, cutting across traditional professional boundaries.

    There are also some extreme cases to justify that broad knowledge is needed. For example, turnaround & restructuring consultancy and emergency surgery. Emergency surgery is unpredictable and over-specialisation is potentially dangerous, particularly in small hospitals where sub-specialists cannot be available in all areas at all times. Turnaround consultancy often is faced with similar situations where seniors are much more appreciated as they normally acquire integrated understanding on the business and thus can be more valuable in delivering effect solutions.

    ■ Career path: generalist first, then specialist

    Current surgical training includes a broad experience surgery before specialisation. This often results in rotation among different departments or units of hospital. So is the career path of a consultant. A new joiner at entry-level coming from undergraduate or non-MBA higher degree education would find himself or herself in an analyst pool. This allows them to be assigned on various projects on the basis of random/availability/skill set match. Consultant career might emphasis much more on on-board training than doctors, and this kind of wide exposure to different sectors and practices is beneficial to develop interests on the ultimate specialisation.

    ■ Shared identity and values

    Just as McKinsey alumni feel more trustable to extend business opportunities to each other, surgeons also share a vital interest in the operating theatres – for a surgeon this is the centre of the hospital with a unique culture. It often take years of training, exams, client dealing and tough projects to get a consultant/doctor fully experienced. This bonding experience gives them unparalleled feeling of belonging and self-filling, which cannot be easily shared with many others outside of this journey.

    It doesn’t take long time for me to realise that here is such close analogy between doctors and business consultants. The hardcore of roles in these two professions are problem solver and change maker. I still remember that in answering the additional question of business school admission application, I further justify my career objective as a consultant with reflections from my experience running clinics.

    “While many other young consultants may be cultivated from a business environment since they are little, I grow up in a family of medicine. I drove myself from comfortable zones and found what I’ve been exposed to medicine is still beneficial to my management consulting career. How? Firstly, consultants see troubled corporations as patients, come up with hypothesises based on intuition, narrow down possible problems and verify them with diagnosis of technological, financial and psychological tools such as dashboards, balance sheets and management scales. Secondly, doctors and consultants all need systematic training and specialized skills on certain fields. Dots seemingly irrelevant can be connected and head for the inconvenient truth. Lastly, both consultants and doctors achieve their goals by persuading others to change themselves to better ones. It involves a lot of social skills.”

    Apologies for the lengthy spam, and any comment is warmly welcomed!

  • BC Oct 12, 2017, 4:46 pm

    I am not sure how intimately the author or readers know of the work that Monitor did in Libya. In a word, phenomenal. It became a very convenient spin for entrenched interests, but Monitor took Libya from being a terror state to securing bilateral trade agreements with the US. They rewrote the constitution, human rights, social policy, healthcare, womens’ rights, education and even made reparations from the Lockerbie bombing. Just to be clear – I am not Libyan and I never worked for Monitor. I simply know the good that was done before geopolitics – and mostly oil and international finance interests –
    took hold of the region and the rest, as they say, is history. As for the case review – the highly leveraged transaction in transforming from partnership to corporation during the economic crisis certainly did not help, either.

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