Techies and Consultants Collide

A few lines from the epic office-life satire Office Space were quoted in an August 29th Valley Wag blog about Yahoo hiring consultants to support their reorg:

TOM: We're all screwed, that's what. They're gonna downsize Initech.
SAMIR: Oh, what are you talking about Tom? How do you know that?
TOM: They're bringing in a consultant - that's how I know."

As a former consultant, I’ve heard just about every joke about the profession there is (see one of my faves below a la Dilbert), but the sentiment expressed by Valleywag struck a cord in me, as I’ve recently been thinking a lot about the great divide between the tech world and the consulting world. Most large consulting firms have had trouble gaining significant traction at today's tech giants, such as Google, Yahoo, eBay, etc. Why is this?

I have a few hypotheses, represented by this fictional exchange of blatant stereotypes:

Consultant: Let us come work for you. We have the brightest people around; I have an MBA from Wharton
Engineer: I have a PhD from Caltech

Consultant: I have deep expertise in your field that could be extremely valuable
Engineer: Then when aren’t you using it yourself?

Consultant: We know what all of your competitors are doing and can help you learn from their experience
Engineer: But we're better than them already

Consultant: We bring disciplined problem solving techniques to your toughest dilemmas
Engineer: I have an ode to the scientific method tattooed on my lower back; disciplined problem solving is my middle name- seriously, I had it legally changed

Consultant: I'll push my business analysts tirelessly; they'll never stop working for you
Engineer: I can offer them a fifth of your rates and they’d be thrilled to come work for me- and never stop

Consultant: Mommy

Okay, so this might be a bit extreme, but after all, tech firms do have a lot of incredibly bright people (including numerous hired-away ex-consultants), with strong work ethics who take a disciplined approach to their jobs. To make matters worse, high-tech is known for having a healthy disrespect for conventional wisdom and competitive analysis- something other industries explicitly hire consultants to provide.

But that said, I still believe there’s a role for consultants as trusted advisors in high-tech. For one thing, tech firms are notorious for being horrible at knowledge management and leveraging cross-functional efficiencies, due to the high degree of secrecy demanded by the rapid pace of product development and obsolescence. Consultancies, on the other hand, are rather skilled at finding new ways to build bridges across organizations- and generally are better positioned to see opportunities by looking from the top down. Secondly, tech shops are beginning to converge with other industries at lightning pace (media, financial services, etc.)- a phenomenon that begs for some outsider perspective on those industries’ business models and competitive dynamics.

What other opportunities do you see?


Sean said...

Hey DPM! This is a great blog! You've written some great entries so far; keep up the good work! I can't wait to see what you've got coming up next.

Consider yourself added to my Google Reader. :P

Ada said...

Hi :)

Good to see you last week. Thanks for the rockin hospitality and free dinner. ;) This post totally reminds me of our conversation over dinner when I was asking you the point of all this consulting business anyway, and if you'd ever hire one. I love the momentum you have going here, keep up the great writing.

p.s. Do you feel like less a virgin now? ;)


dpm said...

I am truly honoured, Sean.

And Ada- actually even more so! There's so much to learn and do, so many people to meet! I'm realizing my own naivete more and more each day.

Thanks for staying tuned in, guys.

AB said...

neat post, very interesting thoughts. curious to hear your perspective on how/why many of these circumstances are different than in the biotech/pharma world. regulations/patents and scientific r&d are certainly key differences in the industry structure, and perhaps that reduces the entrepreneurial nature of competition in that industry. that being said, it does strike me that the type of folks - brilliant, highly educated scientists/engineers - are similar, perhaps leading you to expect a similar cultural reaction? and, as you know, pharma/biotechs are crawling with consultants :)

dpm said...

Hey AB! Thanks for reading and for your insightful comment. I would hypothesize the following as key differences between tech and pharma:

1. The economics are quite different for the individual; internet technologies are vastly more scalable than pharma, meaning individual fortunes are a more likely scenario in tech. This tends to keep talent in the industry and out of consulting. (i.e. in "The Search," John Batelle (http://battellemedia.com) estimates that over 1/2 of Google's 2000+ employees would be millionaires upon the company's IPO- p.221)

2. The pace of development is lightyears faster in tech; new products can be conceived and launched in months, as opposed to years (or decades) of R&D. Moreover, the risk of an imperfect launch is lower, as no one will die if the newest version of Windows has a bug. This speed fundamentally alters (if not defines) the DNA of the tech industry.

3. Both do have a lot of bright people and large R&D budgets, however, in tech, the engineers tend to maintain greater direct involvement in "running the business." Consultants can work in pharma without "interfering" with the purest R&D activities of the business; not so in tech. This likely reflects greater emphasis placed on entrepreneurship by engineering schools, whereas med schools are notoriously bad at emphasizing commercial activity.

4. Tech innovations, especially software-based applications, are far less easily protected than new drugs- meaning secrecy is even more paramount, and outsiders less trusted.

5. Thus far, medicine has been seen as more of a public good; this makes it rather attractive for industry execs to call in objective 3rd parties to consult on or affirm social policies implicit in business decisions.