I wanted to kickstart a new decade with a retrospective on Management Consulting, where it has come from, where it is today and where it is likely heading.

Much research went into the founding of slimdata and as you read through you should see the consulting market is currently poised for disruption.

Timeline

The Accountants and the Birth of Civilization

Officially the first person to be called a “Management Consultant” is Frederick Taylor but the history of management theories and people promoting them goes back further. You could argue many origin points but really the earliest points come from Accounting and the Military.

Accounting as a system of managing business is one of the oldest concepts in human civilisation and is tightly entwined with the origins of writing and money. Given the drinking habits of many consultants I know it seems fitting that even that was invented to make and sell beer 🍻!

As record keeping improved core concepts like Double Entry Bookkeeping and fundamental equations such as Assets equals Liabilities plus Equity and Debits must balance Credits were pioneered by the Roman Empire and Jewish communities. Many of the basic concepts in how companies work still follow these early principles.

It can’t be understated the affect of accounting / record keeping on the ability to structure and manage ever larger organisations. The Roman Empire and Military became the largest organisational structures humans had ever developed. From here we get the roots of Management Hierarchies based on Rank/Units, Spans of Control, Politics and wide scale Project Management (especially infrastructure).

1920s: Manufacturing and the Rise of the Consultant

The Industrial Revolution was certainly a massive pivot point for civilisation however it is interesting to note that it wasn’t really Technology that drove productivity but Process when people figured out how to apply new tools in factories.

A few Examples:

  • Steam: “When When steam engines first began to be installed at cotton-spinning mills in England [1700s] they often were employed not directly as the source of mechanical drive but, but as ‘returning drives’ which lifted water back to the top of a [water wheel drive]” (Paul A. David, 1989). It wasn’t until years later until people realised that with steam they could move and redesign factories and mills to better locations.
  • Electricity: “[Productivity] fell with the arrival of electrification in the 1890s to 1 to 2 percent in the US. It was only in the period after 1915, which saw the diffusion of machines operated by stand-alone secondary motors [where electric motors replaced a large steam motor in a group shaft] productivity growth began to rise” (McKinsey Global Institute, 2018).

Unsurprisingly, this is also when Management Theory and Process Management took hold. This is actually pretty modern history being brought in a little over a 100 years ago with Henry Ford and Frederick Taylor. It could really be said these pioneers did more for productivity than the raw technology did.

Henry Ford introduced moving assembly lines and the specialisation of labor to become highly productive at specific individual components of making the Model T. Many of these changed completely reconfigured what a factory looks like to best utilise available technology. He also believed in raising the minimum wage to increase talent, reduce turnover and reduce training costs as well as formalising the 8-hour, 5-day workweek. All of the above lead to a surge in mass production and economic growth.

Frederick Winslow Taylor on the other hand was more of a theorist, writing books to codify his Principles of Scientific Management. He believed there was “one best way” work could be completed and took a very structured approach to implementing it with his clients. His business card read “Consulting Engineer – Systematizing Shop Management and Manufacturing Costs a Specialty”. He trained up many of the first Management Consultants and widely considered the father of Management Consulting.

These Scientific Management projects involved:

  • Replacing rule-of-thumb work methods with methods based on a scientific study of the tasks. Scientifically select, train, and develop each employee rather than passively leaving them to train themselves.
  • Providing “Detailed instruction and supervision of each worker in the performance of that worker’s discrete task” (Montgomery 1997: 250).
  • Dividing work nearly equally between managers and workers, so that the managers apply scientific management principles to planning the work and the workers actually perform the tasks.

Not long after in 1926, James O. McKinsey launched the (infamous) firm that bears his name. McKinsey was an early practitioner of Scientific Management and also advocated Budgets as a basis for performance measurement and keeping managers accountable.

Around this era also saw innovations in Project Management including the Gantt Chart from Henry Gantt (critical in the development of the Hoover Dam and US Interstate Highway). It is also likely that sometime around around this time the Project Management Triangle or Triple Constraint was introduced with the tradeoff between Scope/Cost/Time - although it is actually unknown who invented it (incredible given how pervasive these ideas are today!).

Later on in this era the famous Management Consultant Peter Drucker introduced Outsourcing and “Management by Objectives” where specific objectives are set upfront, tracked and an employee’s performance is measured by their results. You can more or less than him for your Annual Performance Review.

1950s: Japanese Manufacturing Perfection

Following WW2, there were many factors for Japan’s “Post War Miracle” kicking off from 1945 some credit belongs to the management culture and innovations arising from this period.

Anyone who has studied business will be well familiar with many Japanese terms used in management circles today that owe their origin to the Toyota Production System and the concept of “Just-In-Time” production). The main objectives of this philosophy were to:

  • Eliminate the seven forms of Waste (Muda) consisting of “Transportation”, holding “Inventory”, excessive “Motion” of people, “Waiting” for production steps, “Over Processing” and “Defects”
  • Kaizen or Continuous Improvement of iterative, incremental improvements to the business over time.
  • Kanban where work is “pulled” through system and no items were made or transported without a request. This avoided overproduction, limited work in progress and reduced inventory and transport costs. Today you probably recognise the term “Kanban” in the project management sense where these manufacturing concepts have been adopted by Agile.

Later on these principles became generalised into “Lean Manufacturing” and spawned a whole universe of “Lean” methodologies including the Lean Startup and Lean Software Development.

Lean

The Japanese experience had a worldwide influence on management theory and into the 1980s the obsession with quality management became codified into Total Quality Management and alter on becoming overshadowed by Six Sigma at Motorola with the “Six Sigma” referring to ensuring manufacturing consistency within “6 Standard Deviations” of the mean. Assigning “belts” to certifications just to really hammer home the Japanese influence.

1980s: Computers and the Return (then Departure) (then Return again) of the Accountants

The 1980s was a massive time of growth for Management Consulting and by now the “Strategy Consulting Big-3” (McKinsey, BCG and Bain) well established and the “Accounting Big-5” (Deloitte, KPMG, PwC, EY and Arthur Anderson) were turning their attention to Consulting.

Just like Steam & Electicity prior - it took a couple decades for computerisation to make a big impact on organisations. With one of the biggest transformations to how companies operated coming from the introduction of ERP (Enterprise Resource Planning) software. Which among HR and CRM, was a massive Accounting and Billing platform. Being the masters of record-keeping it is unsurprising to see the influence of the Accountants in modern Technology Consulting.

Inside this also came the CIO and IT Department along with ITIL and CoBIT as a framework for managing IT Departments, Servers and Networks.

And just as soon as the Accountants had returned, they left again with the Enron Scandal and collapse of Arthur Anderson for the role they played. This highlighted the conflicts of interests in being both a Advisor and Auditor for an client leading to the Sarbanes-Oxley Act and the Accountants backed away from Consulting:

  • Arthur Anderson’s Consulting became Accenture
  • KPMG’s Consulting mostly became BearingPoint
  • EY’s Consulting became Capgemini
  • PwC’s Consulting became IBM Global Business Services after a stint on their own
  • Deloitte was the only firm that didn’t break off their Consulting Services

These Accountants set the stage for the giant Technology Consulting firms today and when everyone started outsourcing to India their ranks were joined by InfoSys and Tata Consulting.

And in the last fifteen years the Accountants, always ones to follow the money have turned their attention back to Consulting. These days it remains a core focus and they have become some of the largest consulting firms..

1990s: Software Projects: Just Another Kind of Manufacturing?

Somewhere in the 90s, innovations in manufacturing collided with project management - previously from the 60s software projects had been run like infrastructure projects following a “Waterfall” of Requirements that becomes a Design that becomes Delivery. Which suited for a time but as my Lecturer told me in university “IT Projects are like building a house on water”.

So the knowledge managers gained in redesigning factories started influencing new methodologies to running an IT project. This is were we got Rapid Application Development, SCRUM, XP among others that later got absorbed into the behemoth that is known as Agile

Agile very much suffers from the “No True Scotsman” fallacy and is a bit of an amalgamation of concepts - just take a look at this infographic from an old colleague of mine. But at it’s core it is very much designed around a Manufacturing line with Pull Management (Kanban), Flow and Continuous Improvement (Kaizen) of the Toyota Production System sprinkled in with some other nifty ideas Consultants have had over the years.

Agile

2020: Everything is Data

By now it should be clear that new technologies take a few decades to transform the economy and we once again find ourselves in this position with Big Data, Machine Learning and Data Governance. None of these are new, we just have not found how to restructure companies around them yet.

Mostly the approach to these technologies is to once again treat them like manufacturing - but does it really make sense? Previously we assumed organisations consisted of physical things like People, Buildings & Logistics but as all Manufacturing has been moved offshore the western world has become largely a Services economy with everything becoming more or less a system for processing data.

But how well can a manufacturing mindset work if the physical People, Objects and Places no longer matter?

This is exactly where the problem with Business Process Reengineering when you ask what people do and map their process - it still assumes the people and process are important. The end result is incrementally adding bits of software onto existing processes ending up with dozens of critical information systems. Even worse, when you throw money at some Data Scientists and just bolt on predictions here and there.

Envisioning an alternative isn’t hypothetical but it is as of today unstructured. Here are a few examples of organisations that just exist as data:

  • The Decentralized Autonomous Organization was a company without People and was completely non physical. It was created entirely of Programable Money that could self govern based on the will of the shareholders. Unfortunately it got cut short before it could achieve its vision due to a bug in the code causing hackers to drain all the money from the organisation
  • Issue Based Direct Democracy envisions a world without governments needing to understand the data and making decisions on behalf of the public. It allows citizens to self select their areas of expertise and become the decision makers themselves
  • Mechanical Turk makes the person just a step in a dataflow. Broadly this also applies to Gig Economy companies like Uber and AirBNB where the workers, cars and places don’t really exist in the organisation but instead are managed as a data flow
  • All Cryptocurrencies envision a world where money is data

This is why I am passionate about this space, ultimately Management Consulting needs a pivot in methodology and Data Governance professionals will ultimately lead the redesign.