Accenture, “Digital Business Era: Stretch Your Boundaries”

Accenture had a good week.  Their stock hit a 16 year high, as they boosted their forecast for both revenues and profits.  Go A-C-N.   While looking for their quarterly investor presentation, I stumbled on something entirely more interesting.

Digital Business Era: Stretch Your Boundaries here.  This report is thought-provoking and relevant to all management consultants.  They surveyed 2,000 business and technology executives and divided the 120 page report into 5 major themes:

  1. Internet of Me
  2. Outcome Economy
  3. Platform (R)evolution
  4. Intelligent Enterprise
  5. Workforce Reimagined

All of us feel the intellectual curiosity of how the next digital revolution is changing business.  Some of it we understand, most of it, we don’t.  Our clients struggle with these issues daily – especially if they are CIO, CMO, or CTOs.  As consultants, we need to understand the context, and preferably have a point of view on it.  I took the 29,000 words in the report, took out the most mundane 10 words (like business, company, data) and came up with this word cloud:

ACN Tech Vision Wordle

This is a time of enormous excitement, speed and disruption.  Accenture notes that 52% of companies from the Fortune 500 have gone bankrupt in large part because of digital disruption (remember Circuit City, Blockbuster etc. . ?)

For those even mildly interested, this is a readable report.  For those who work in Strategy, IT, marketing, enterprise risk, or R&D – r.e.a.d this report, it’s free here.

In the introduction of this massive report, there are 13 “takeaways” which make up an executive summary.  The words in blue color are my commentary, not Accenture’s.  Open to all comments, feedback.

1. Beyond the cloud: stop talking about cloud—the value is in using it.  Amen. This is so true, and sadly, most business people refer to “the cloud” as if it was a mystical place where problems solve themselves.  No, it just has enormous computing power, and storage in a remote location . . .with real-time connectivity.  It’s a ultra-powerful utility. The question is now, what will you do with it?

2. Design for analytics: formulate the questions, and design for the answers.  For all the talk of “big data”, honestly, even “small” data is difficult to gather and analyze.  Most companies have the hardest time getting legacy systems to spit out structured data in usable ways.  Last week, I spoke with a director who spends 2 hours every month, just putting together 1 report because the data is not extracted with a mind for reporting.

3. Relationships at scale: moving beyond transactions to digital relationships.  This touches on CRM (customer relationship management) which is not my area of specialization, but ACN’s argument is simple.  All this SOMOLO (social, mobile, local) data is useful for commerce and marketing, but what is it doing to drive loyalty and life-time-value-of-customer decisions?  Are you gaining real loyalty or just selling better?

4. Seamless collaboration: right channel, right worker, right job. As Peter Drucker said so famously 40+ years ago, “The knowledge worker cannot be supervised.”  This applies now more than ever, as companies rely on their employees, working in teams to collaborate, and create ways of working smarter, harder, and closer-to-the-customer.

5. Active defense: adapting cyber security defenses to the threat.  Accenture argues that even though this field is constantly changing – with the bad guys getting ever craftier – companies need to start with the basics and implement today’s best practices immediately.  The average company is woefully behind-the-times in security.

6. Data velocity: matching the speed of decision to the speed of action.  I found this point to be oddly liberating. There is a flood of data – but in reality – the data which will be acted upon is just a fraction of the total.  This means that the velocity of data analysis is constrained or filtered by the reaction / implementation time of the client.  Put another way, there is no reason to freak-out of all data. . .when in reality, there is a finite (and much smaller) sets of data which will drive management action.

7.Software-defined networking: virtualization’s last mile.  Dude. Gonna skip this one.

8. Digital-physical blur: extending intelligence to the edge. The Internet of Things (IoT), where connected devices are everywhere, allowing consumers to better shape their experience (if they want), Later in the report, they talk of Mercedes linking up your car to your NEST thermostat at home, so it warms / cools your house on your way home. Likewise, with a Los Angeles parking app which tells you which of the 7,000 smart parking spaces are available in real-time. M2M (machine-to-machine) communications is getting cheaper and communication protocols are maturing.

9. From workforce to crowdsource: rise of the borderless enterprise.  Extending collaboration beyond the 4 walls of your company – embracing consumers, suppliers, and even competitors.  Not a new idea, but ACN calls API (applications programming interfaces) the “secret sauce of the digital economy”

10. Data supply chain: putting information into circulation. Enterprise data is woefully under-utilized because it sits in silos. ACN poetically describes the need to better coordinate the supply chain of data from one system to another.  Frankly, if clients could systematically do this, consulting revenues would drop by a third.

11. Harnessing hyperscale: hardware is back (and never really went away).  Skipping.

12. Business of applications: software as a core competency in the digital world. ACN puts this very well, “there is a sharp shift towards simpler, more modular apps.”

13. Architecting resilience: built to survive failure, the mantra of the nonstop business. With the need for systems to be on 24/7, there is a level of robustness and redundancy. They describe it as, systems need to be “designed for failure, not designed to spec.”  

Consultants love buckets. Accenture does too.  This is the evolution of their digitial trends over the last few years.   Very graphical, and shows how ideas flow, flux, and adapt.  Good for Accenture to see this as an organic evolution.

Evolution of Technology

This report shows consultants at their best.  Accenture (disclosure, don’t work there) takes a super broad topic, distills it into easily understood elements, provides real-life examples, and even provides videos, podcasts, and multiple ways to interact with the content.  Complete 360 experience – which just reinforces the message that technology is ubiquitous, and not a separate discipline, but the underpinning of everything.  Whew.

Careers after consulting

There is no better general business training than consulting.  You work with super smart people, interact with clients daily, learn excel ninja skills, and get more valuable daily. The key question is what happens after consulting?

Charles Aris is a search firm based in North Carolina that specializes in placing top-tier management consultants who go into industry. They have job boards here, which gives you a flavor for the kinds of work top-end management consultants get to do when they hang up their Briggs & Riley rollerbags.  Their mailing list is worth the trouble.

Post Management Consulting Jobs

Oh, they also have a great salary survey here.  You will be surprised at how much big 3 consultants can make, if they stick it out 6-8 years after MBA.  Interested now?

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Some rough manager days

I have not blogged in a month because of international travel, 3 concurrent projects, and honestly, some of the toughest manager days I have ever had.  Got some new folks, a fairly ambiguous project, and a lack of thinking.  Sad, but true.  A lack of real thinking. Here is an unfiltered list of the #%^# I said to my teams over the last 3 weeks.

  • You are not thinking through the problem.  You need to think more.
  • If you are not proud of your work, then we have a problem.
  • If it’s not up to your expectation, then why would it be good enough for the client?
  • The client is paying $2K for your time today; you need to have a $10K day
  • I wanted to like this, but I don’t.
  • If you are confused, I will take 50% blame for it
  • Does it make sense to you?  How would you explain it to your nephew?
  • Don’t say that.  It’s not important what I think; does it make sense to you?
  • It’s not just the letter of the law, what is the spirit of the law?  What the purpose?
  • What about the false negatives? Are you basing all your analysis on just the data you got, but no judgment on the data that might be missing or we didn’t get?
  • Right.  It’s ambiguous, that’s where consultants use their judgment
  • Wouldn’t it be better to show the sub-total, and another section called “other”, so it shows a grand total of 100%?

Frankly, it was time for some tough love.  Consulting is an apprenticeship model, and I am confident these guys will be better because of it. There were a few highlights too, but not many. This is how I felt this month (except for the bald head and cane).

Managerial Emotions

As a side-bar, I am a big fan of team consultants.  Some consultants are SAFE - smart, aware, fun, and eager.  I love consultants who think through problems, fill in the white spaces.  I love consultants who go the extra mile, and do the work because it advances the thinking of the team.  I love consultants who are eager to learn from their seniors and soak in the coaching, the ones who are getting better daily.  Consultants who run hard and give their managers leverage.  Consultant – damn it – be a professional.

Business travel in the winter

Yes, I am currently staffed on the East Coast in February.  #$^@#$ it’s #$%#$^ cold. A few words of wisdom for the newbie consultants traveling to into the cold:

Staying warm

  • Buy some 180s.  They are ear warmers that don’t mess up your great hair
  • Win major points with your team by bringing the car up front and warming it up
  • Wear your heaviest clothes on the plane, find a good place to tuck it away
  • Travel with a Contigo thermos; bring K cups if the client has a Keurig
  • Dress in layers- it is easy to “overheat” in the car or coming in from the cold (LS)

Safety

  • Get a larger rental car and load it up with consultants; less sliding on snow
  • Park with your windshield wipers up when it snows; they will get stuck to your car
  • Leave your rollerbag in the garage; don’t drag that dirty thing in your house
  • Carpool – no reason to have 3 rental cars on the road, if you can prevent it
  • Leave the client site while it is still light out; finish up the work at the hotel

Getting home

  • Book the 2nd to last flight home on Thursday.  The last flight is your back-up
  • Check your flight status often; expect delays
  • Be willing to pay the penalty and change flights, don’t get snowed in
  • Stick to airline & hub combinations (e.g., Delta, ATL)
  • Most airlines let you use wifi free to watch movies; Delta Studio here

Looking sharpsnow

  • Mix and match clothes; it won’t all fit in your bag. Re-wear.
  • Bring some portable shoe polish, and leave it at the client
  • Dust the crappy salty snow off your black pants
  • For longer projects, leave some clothes in a hanging bag with the hotel; they don’t mind
  • Use scarves to brighten up
  • Don’t be afraid to go with the “old man” vest look.
  • Wear those partner/principal jackets and turtleneck

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Difference between balance sheet and income statement

For 80% of you, this is so basic that you just “rolled your eyes”.  Completely understand. If one of my team asked me this, I would not be happy.  I would be scared.

In a quick survey from my last post, looks like 1/3 of us don’t feel that confident with our accounting literacy.  That’s okay, but let’s not make this an excuse.  You gotta know and understand this stuff.  It’s basic. . like knowing the difference between a strike and a foul ball in baseball.  All business concepts are built on this foundation.  Without a crystal clear sense of this, everything business thing you say has the potential to be shallow, unstructured, or wrong.

The income statement is about profits.  Fundamentally, it helps you answer the question of “Did the company make money during this quarter?”  It starts with revenue, then takes out costs, taxes, and other things to get you to net income (net profit).

Digging a little bit deeper, here are the steps when reading an income statement:

  1. Revenues are at the top (volume x price)
  2. Take out cost of goods sold (COGS); this is the cost of the actual stuff used to make the product or service (e.g., for a car, this would be the steel, tires, lights)
  3. Take out the sales and general administration (SG&A) operating expenses which includes marketing, R&D, call centers, rent, utilities, insurance, CEO’s salary etc. .
  4. Take out taxes, interest, and depreciation
  5. Net income is what is left at the bottom

Memorize this.   This simple picture sets you up for more cogent discussions with clients on their business model, namely, how they convert revenues into profits.

Income statement waterfall

The balance sheet is about financial strength.  It is largely divided into three sections and represented by this formula: assets = liabilities + equity.  Remember this beer.

Balance Sheet A L E

Assets: What the company owns and could liquidate to cash including investments, inventory, account receivables, land, building, equipment etc. . .

Liabilities: What the company owes to creditors (notes), government (taxes), suppliers (accounts payables), employees (pension), and customers (frequent flyer miles)

Equity: What the company is worth (assets-liabilities).  It is also called “book value” or owner’s equity.  When all the debts have been paid off, this is what is left.

The simplest analogy is a house.  The house (asset) might be worth $300,000, but there is a $210,000 mortgage (liability to the bank).  So the equity is $90,000.

Practice reading financial statements.  I know that sounds boring, and well. . . it is. That said, its like eating your vegetables, it is good for you.  Here are Chipotle’s income statement here and the balance sheet here.  Can you tell the difference now?

Accounting literate?

Consultants are not accountants.  Yes, there are a lot of consultants who work at the big 4 (Deloitte, E&Y, KPMG, PWC), but they are not accountants.  If you ask them to balance credits and debits on a ledger, they will look at you like a confused dog.  Yes, we took financial accounting.  Yes, we can read income statements and balance sheets.  No, we are not accountants.  Trust me on that one.

Consultants are not investment bankers.  For the uninitiated, this a common mistake.  Just because we graduate from MBA, work with executives, wear ties, and ride a lot of planes. . . we are not all the same.  One of the clearest differences is that consultant often do income statement work, while bankers work on the balance sheet:

  • New market-entry strategy (volume = income statement)
  • Online customer segmentation (volume = income statement)
  • Trade discount analysis (price = income statement)
  • Strategic sourcing for lower cost on critical parts (expense = income statement)
  • Tax-aligned supply chain (tax = income statement)

Varying levels of fluency / illiteracy.  You cannot be good at everything, and accounting literacy is no different.  Clearly, if you consult financial services industries (banks, asset managers, insurance companies) or work with the financial types in companies (Corporate Finance, Treasury, FP&A), you better know your accounting.

Short of that, there is a minimum requirement for all consultants who interact with executives.  Can you explain the flow of funds between the financial statements?  Does the equation A=L+E mean something to you?  Can you delineate gross and net profit? Where do you come down on the argument of labor as COGS vs. SG&A?

Confession: During the first few years of my career, I did not understand financial statements.  Yes, I studied them in school and passed my series 7 stockbroker license, but in reality I could not succinctly explain the difference between COGS and SG&A expenses. Not good.  I still remember walking into the CFO’s office asking for his help sorting out above/below the line expenses for an executive summary I was putting together.  Cringe-worthy.  Don’t fake it. Do the work.

If this is making you a bit uneasy, good.  Consultants are only as good as their last project.  Time to get smart.  Enroll in this free online Coursera accounting class here. Introduction to Financial Accounting, starts May 4th, 4 weeks, based on the Wharton first year MBA class.  Great value, only cost is your time.  Sign up.

Coursera Wharton Accounting

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Consultant, do you have 10,000 hours?

Malcolm Gladwell argues in Outliers here that you really don’t start to excel at something until you put in the requisite blood, sweat and tears . . . or 10,000 hours of focused energy. Yes, the Beatles were brilliant, but they also toiled at their craft in hundreds of small German bars in the early 1960s.  Without sacrifice, it’s imitation. . . not excellence.

I completely agree, and not just because I am in my forties.  Proficiency is not excellence. With the internet-speed of everything, it is too easy to know something about something.  Given a half-day with a talented analyst, I can drum up some seriously smart things to say on most any topic.  Yet, you and I know that watching a youtube video does not make you a master who can charge $300/hour.

Do the work.  This is a ridiculously obvious point for anyone in professional services, but is a particularly relevant criticism for young consultants.  As management consultants, we pride ourselves on our ability to get smart on a topic quickly, and logically structuring the problem to a few recommendations.  True, it’s a skill and a craft.

The problem is that some consultants start believing their own marketing (read: bullshit). They repackage “best practices” or simply muddle their way through the “consulting process” as if this were the 1970’s when clients first saw SWOT analyses. For good or bad, our clients are more savvy than ever.  Your “smooth move” 5 years ago, is frankly, just not as smooth as it used to be.

10000 hours

When you are not staffed, stop pretending you’re busy. You are not.  “Let me check my calendar and prioritize” is not the right answer.  The CFO looks at you with this break-even analysis in mind: your salary = billing revenue x net margin

When a partner/principal gives you a task, embrace the ambiguity and start doing the work. Of course you need to understand the basics (purpose, scope, and timeline), but don’t fall in the trap of over-planning.  In reality, you will figure some of that as you go.

Seek out work.  This helps you develop an internal network, learn new skills, get staffed, and gives you sales practice.  If you can build rapport and win work from a grumpy partner, winning work from a paying client will be that much easier.

If you feel like you are coasting. .  you are.  You know it, and scary. . . others do too.

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If offered a seat on a rocket ship, don’t ask which seat. Just get on.

Team dynamics. Some people over-manage their careers – thinking too much about the role they play, how they will position themselves for promotion, and what they deserve to be doing on the team.  My wife rightly says I don’t think about this enough, but honestly, some people think about it way too much.

Do good work.   If you are new to your firm, your group, your school, your church, your team, check yourself.  Have you done good work?  Have you earned equity?  Have you earned the right to demand anything?  What are you entitled to?

When you are in groups of people more educated, more informed, more successful, and more networked. . .why are you talking so much?  You don’t have to be a Confucian to understand group harmony, hierarchy, and organizational flow.

Don’t be an idiot. People talk a lot about themselves – what they have done, what they deserve, what is important for their career.  Let’s not forget we are in the professional services business.  It’s all about the client, and yet, have you mentioned what’s good for the client at any time in the last 3 hours?  If you are busy comparing yourselves to others on your team, well, you are a loser.

Simon Sinek has a great interview here, explaining why organizations built on fear are insular and weak.  If you have team mates who are jockeying for position, comparing themselves to their peers, saving emails as “evidence”, the culture is dying or dead.

Don’t ask which seat.  When staffing a project, listen to the partner and principal.  Yes, you can give you opinion, but don’t be the high-maintenance millennial.  Great HBS speech by Sheryl Sandberg (COO of Facebook) in 2012 here.  She tells a great story about some advice Eric Schmidt gave her when she was applying for a job at Google. See excerpt:

So I sat down with Eric Schmidt, who had just become the CEO, and I showed him the spread sheet and I said, this job meets none of my criteria. He put his hand on my spreadsheet and he looked at me and said, Don’t be an idiot. 

Excellent career advice. And then he said, Get on a rocket ship. When companies are growing quickly and they are having a lot of impact, careers take care of themselves. And when companies aren’t growing quickly or their missions don’t matter as much, that’s when stagnation and politics come in. If you’re offered a seat on a rocket ship, don’t ask what seat. Just get on.

If offered a seat on a rocket ship, don’t ask which seat.  Just get on.

dont pick your seat

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Can you delight your customer like this street artist?

I was at a team dinner and an artist drew this.  Listen to this story . . .

  • As my buddy and I were talking, we noticed someone was watching us
  • The artist was standing outside the restaurant in 30 degree weather
  • He kept sketching something, and we soon realized it was a picture a few of us
  • Impressed, we waved for him to come inside and draw the rest of the team
  • He sat in the corner and drew this cartoon of 20+ of us in less than 30 minutes

Team CartoonAmazing, right?  Here were my consulting takeaways:

  • Confident in his own skills - started drawing without prompting.  No guarantee of a pay-off.  Just doing good work. Shipping art.
  • Knows this target market.  He was not randomly painting people on the street, instead targeting big corporate dinners at upscale restaurants.
  • Pricing to value.  When asked how much, he said $0-40, whatever you “wanted to pay”.  We loved it.  We paid $60
  • Creates mystery.  He drew this remotely, not interfering with event, sitting as far as 30 feet (10 meters) from the people farthest away.  Some of the attendees did not even know this happened, until I showed it on PowerPoint the next day
  • Delighting us.  When we asked him to put our company name on the bottom of the picture (redacted here), he asked, “which font do you want it in?”  Whoa!
  • Strong brand.  All the servers knew this guy.  He’s been doing this for a while.