It all started in 1963 when Bruce D. Henderson founded the Boston Consulting Group (BCG) as part of The Boston Safe Deposit and Trust Company. The BCG became independent by the end of the 1970s and started an expansion process. In 2019, BCG made over $8.5 billion in revenues.
The Product Portfolio (the BCG trademark)
In the 1970s, Bruce D. Henderson, founder of the Boston Consulting Group, came up with The Product Portfolio (aka BCG Matrix, or Growth-share Matrix), which would look at a successful business product portfolio based on potential growth and market shares. It divided products into four main categories: cash cows, pets (dogs), question marks, and stars.
BCG has been able to expand globally also thanks to its recognized brand and the ability of its founder (Bruce Henderson) to leverage on a model where ownership was distributed, thus enabling a fast expansion.
At the same time, the BCG trademarks and ideas shaped the consulting world for decades.
Among its most recognized trademark ideas and one of those concepts that you find persistently at business school, there is the BCG Matrix.
According to that, success is achieved when a company can divert part of its cash and resources toward products that can turn into cash cows in the long run.
While failure is guaranteed when the cash generated from cash cows or star products is diverted into products that, over time, will become dogs.
Origin and evolution of BCG
Bruce Henderson, the founder of BCG, was an innovator who proposed alternative business ideas back in the 1960s that became part of its trademark.
Ideas like The Product Portfolio (aka BCG Matrix or growth-share matrix) and time-based compensation would become the main trademarks of its brand.
In the 1960s, BCG established itself as a consulting firm proposing alternative ideas compared to companies that applied best practices and acted according to the previous era’s strategy rules.
It helped the post-war European, and Japanese markets recover, thus enabling BCG to expand globally.
By 1968, BCG counted 68 consultants between New York and Tokyo, and its BCG Matrix would have become its trademark.
By the 1970s, BCG, now a prominent consulting firm, would start its expansion in Europe, gaining an important share of the consulting market.
The company had tripled by the 1970s, with 277 consultants and seven offices worldwide.
Bruce Henderson would compare strategy with a “bucketful of marbles:”
By the 1980s, BCG had reached 524 consultants and 14 total offices worldwide.
BCG started helping companies optimize their processes in those years and decades, which would become its trademark in the 1990s.
By the 1990s, all the big brands and companies relied on BCG to execute complex projects, from post-merger integration process optimization to restructuring IT systems.
By the 2000s, change management had become the most requested service.
As the dot-com bubble burst, by 2001, BCG helped companies restructure their operations.
How does BCG make money today?
By 2019, BCG had reached $8.5 billion in revenues.
To gain a bit of context, Accenture and Deloitte would reach $43.2 and $46.2 billion, while smaller management consulting firms like Bain and Company and Kearney reached $4.5 billion and $1.3 billion, respectively.
As reported by BCG, “from 2009 to 2019, global sales grew from $2.75 billion to $8.5 billion” and from 6,900 to 21,000 employees worldwide. Therefore tripling in size in a decade.
While revenues kept growing, the question of whether BCG’s approach is still relevant in today’s world is still open, which forced the iconic consulting firm to rush a set of acquisitions to stay on top of its game.
The rushed acquisitions to stay relevant in a new world
What drove growth throughout this decade? CEO Rich Lesser noted that “more than ever before, clients turn to BCG for new solutions to the challenges of our times,” while its focus on “digitizing and embedding AI in core processes, building “bionic” organizations, and supporting large-scale change efforts to accelerate performance, even in challenging environments.”
As of 2020, the BCG management consulting services are broken down in a few main areas.
There used to be a time when management consulting firms were seen by large corporations as the ones to call to help them solve important problems related to innovation.
That time though was gone; when the web took over, those management consulting firms also lost some of their relevance, and while their bottom lines have grown, those companies still have major corporate clients.
Management consulting firms, BCG as well, have been rushing to acquire small innovative management consulting firms in an attempt to stay relevant in a market that has completely shifted.
Therefore, now BCG has been integrating those consulting firms within the BCG global team, which now offers a few “innovative” services, as part of this acquisition process:
BCG Digital Ventures: helping companies research, design, and launch new products and services.
BCG GAMMA: data science, AI, and analytics arm.
BCG Platinion is primarily about IT processes focused on digital transformation.
Expand: offering research and syndicated benchmarking for the world’s leading financial institutions.
INVERTO: an international supply chain and procurement consultancy side.
How will BCG stay relevant in the coming decade?
In this new era, where data is available anywhere, the primary job of companies like BCG will be to help, especially larger brands, figure out what to do with that data in the first place.
For instance, in 2019, BCG acquired Kernel Analytics and integrated it within its BCG Gamma services.
As BCG CEO Rich Lesser said at the time,
“BCG GAMMA is one of the most exciting parts of our business, and we expect the market for tailored AI solutions to continue growing rapidly. As we further expand our capabilities, this acquisition will help us to continue enabling our clients to deliver on their ambitions,”
The GAMMA team comprises profiles such as Analytics Software Engineers, Machine Learning Engineers, Analytics Architects, and many other profiles able to handle and interpret a large amount of data.
Most of GAMMA’s team are people on the engineering side rather than sales or marketing.
Therefore, those are more Ph.D. rather than MBA.
As pointed out by a GAMMA engineer, back in 2018, they “deliver custom data science-based solutions (machine learning, numerical optimization…) to clients to allow them to take advantage of the huge impact data analytics and AI are having on the business world: pricing optimization, personalized marketing, more dynamic logistic, etc.. they create the data science models, program the software (in Python or R essentially) and deliver working solutions, not only advices and slide decks. To build those solutions, we need to understand both data science and business.”
You can use the Ansoff Matrix as a strategic framework to understand what growthstrategy is more suited based on the market context. Developed by mathematician and business manager Igor Ansoff, it assumes a growthstrategy can be derived by whether the market is new or existing and the product is new or existing.
The GE McKinsey Matrix was developed in the 1970s after General Electric asked its consultant McKinsey to develop a portfolio management model. This matrix is a strategy tool that guides how a corporation should prioritize its investments among its business units, leading to three possible scenarios: invest, protect, harvest, and divest.
Porter’s Five Forces is a model that helps organizations better understand their industries and competition. Professor Michael Porter published for the first time in his book “Competitive Strategy” in the 1980s. The model breaks down industries and markets by analyzing them through five forces.
The McKinsey 7-S Model was developed in the late 1970s by Robert Waterman and Thomas Peters, consultants at McKinsey & Company. Waterman and Peters created seven key internal elements that inform a business of how well positioned it is to achieve its goals, based on three hard and four soft elements.
According to Michael Porter, a competitive advantage in a given industry could be pursued in two key ways: low cost (cost leadership) or differentiation. A third generic strategy is a focus. According to Porter, a failure to do so would end up stuck in the middle scenario, where the company will not retain a long-term competitive advantage.According to Porter, there are three core strategies for competitive positioning: cost leadership, differentiation, and focus. Cost leadership is straightforward, as the player rolling this out will become the lost-cost producer in the industry.
In his 1985 book Competitive Advantage, Porter explains that a value chain is a collection of processes a company performs to create value for its consumers. As a result, he asserts that value chain analysis is directly linked to competitive advantage. Porter’s Value Chain Model is a strategic management tool developed by Harvard Business School professor Michael Porter. The tool analyses a company’s value chain – the combination of processes that the company uses to make money.
Porter’s Diamond Model is a diamond-shaped framework that explains why specific industries in a nation become internationally competitive while those in other nations do not. The model was first published in Michael Porter’s 1990 book The Competitive Advantage of Nations. This framework looks at the firm strategy, structure/rivalry, factor conditions, demand conditions, and related and supporting industries.
A SWOT Analysis is a framework for evaluating the business’s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to future challenges your organization might face.
The PESTEL analysis is a framework that can help marketers assess whether macroeconomic factors are affecting an organization. This critical step helps organizations identify potential threats and weaknesses that can be used in other frameworks such as SWOT or to gain a broader and better understanding of the overall marketing environment.
A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is valueinnovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
