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)
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.
- BCG Omnia: offering strategy and data solutions.
- BrightHouse: a global creative consultancy firm.
- 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.”
Timeline
- Founding and Growth: BCG was founded in 1963 by Bruce D. Henderson as part of The Boston Safe Deposit and Trust Company. It later became independent and experienced significant growth, reaching over 21,000 employees globally and generating over $8.5 billion in revenue by 2019.
- BCG Matrix: One of BCG’s trademark concepts is The Product Portfolio (BCG Matrix), introduced in the 1970s. This matrix categorizes products into four groups based on growth potential and market share: cash cows, pets (dogs), question marks, and stars.
- Global Expansion: BCG expanded internationally, especially in Europe and Asia, and played a role in helping post-war European and Japanese markets recover. The company’s founder, Bruce Henderson, emphasized innovative ideas and alternative strategies, differentiating BCG from competitors.
- Acquisitions for Relevance: As the business landscape evolved, BCG made acquisitions of small innovative management consulting firms to remain relevant. This led to the creation of various services such as BCG Digital Ventures, BCG GAMMA (data science and AI arm), BCG Platinion (digital transformation), and more.
- Future Focus: BCG’s future relevance is centered around leveraging data and AI solutions to help companies navigate the changing business landscape. The company is focused on providing tailored AI solutions, such as analytics, machine learning, and data interpretation, to enable clients to make informed decisions and optimize their operations.
- Shift in Consulting Landscape: The rise of digitalization and data-driven decision-making has led BCG and other consulting firms to adapt their offerings to cater to the changing needs of clients. BCG’s acquisitions and focus on AI and data reflect this shift in the consulting industry.
Key Highlights:
- Boston Consulting Group (BCG) was founded by Bruce D. Henderson in the 1960s and has since become one of the world’s leading management consulting firms.
- The BCG trademark includes concepts like The Product Portfolio (BCG Matrix) and time-based compensation, which have shaped the consulting world for decades.
- The BCG Matrix categorizes products into four main categories: cash cows, pets (dogs), question marks, and stars, based on potential growth and market shares.
- BCG has expanded globally and grown its revenues significantly, reaching over $8.5 billion in 2019.
- In recent years, BCG has focused on digitizing and embedding AI in core processes, building “bionic” organizations, and supporting large-scale change efforts to accelerate performance.
- BCG has made a series of acquisitions of small innovative management consulting firms to stay relevant in the rapidly changing market.
- The acquisitions have led to the creation of BCG Digital Ventures, BCG GAMMA (data science, AI, and analytics arm), BCG Platinion (IT processes for digital transformation), and other innovative services.
- BCG’s future relevance will rely on its ability to help companies make the most of data and AI solutions in the evolving business landscape.
Business Model Recap
| Element | Description |
|---|---|
| Value Proposition | BCG offers a range of value propositions that cater to the needs of its clients: – Strategic Consulting: BCG’s core value proposition is its ability to provide strategic guidance to clients. This encompasses helping businesses identify growth opportunities, address operational challenges, and develop long-term strategies. BCG’s expertise in strategy formulation is a significant draw for clients seeking to stay competitive in their respective industries. – Data-Driven Insights: In today’s data-driven world, BCG leverages extensive research, market data, and analytics to provide clients with actionable insights. These insights enable clients to make informed decisions, optimize their operations, and gain a competitive edge. Data-driven decision-making is a key value proposition for clients looking to navigate complex market dynamics. – Innovation and Digital Transformation: As the business landscape evolves, BCG assists clients in embracing innovation and undergoing digital transformations. This value proposition helps organizations adapt to changing customer expectations and technological advancements. BCG’s guidance in areas such as digital strategy, technology adoption, and innovation management is highly sought after by clients aiming to future-proof their businesses. – Global Expertise: With a global network of offices and consultants, BCG offers clients a unique value proposition of global expertise. The firm’s consultants bring diverse perspectives and insights from various regions and industries, enabling clients to gain a broader understanding of international markets, trends, and best practices. BCG’s global reach is particularly valuable to multinational clients with operations across multiple geographies. |
| Core Products/Services | BCG’s core products and services include: – Strategic Consulting: BCG provides strategic consulting services that encompass strategy development, growth planning, market entry strategy, mergers and acquisitions, and operational optimization. These services form the backbone of BCG’s offerings, helping clients achieve their business objectives. – Data Analytics: BCG leverages extensive data analytics capabilities to provide clients with data-driven insights. This includes market research, competitive analysis, and predictive analytics to support decision-making. – Innovation Advisory: BCG assists clients in embracing innovation and digital transformation. This includes guidance on digital strategy, technology adoption, and innovation management. – Thought Leadership: BCG publishes research reports, whitepapers, and industry insights, showcasing its expertise and providing valuable knowledge to clients and the public. |
| Customer Segments | BCG’s services are tailored to serve diverse customer segments: – Corporate Clients: The primary customer segment for BCG consists of large corporations and multinational companies. These clients seek BCG’s expertise to address a wide range of strategic challenges, including market entry, growth strategy, mergers and acquisitions, and operational optimization. BCG’s services are particularly valuable to corporate clients operating in competitive and dynamic industries. – Government and Public Sector: BCG extends its consulting services to government agencies and public sector organizations. These clients engage BCG to address public policy challenges, improve the efficiency of public services, and drive economic growth. BCG’s involvement in the public sector aligns with its mission to create positive social impact through its consulting expertise. – Non-Profit and Social Impact: BCG collaborates with non-profit organizations and foundations to drive social impact and improve philanthropic efforts. These clients rely on BCG’s strategic advice to maximize the effectiveness of their initiatives, address societal issues, and achieve their mission-driven goals. BCG’s commitment to social impact resonates with non-profit and socially responsible organizations. |
| Revenue Streams | BCG’s revenue generation is facilitated through several revenue streams: – Consulting Fees: The primary revenue source for BCG is consulting fees charged to clients. These fees are typically structured based on the scope, complexity, and duration of consulting projects. Clients pay for the expertise, analysis, and strategic guidance provided by BCG’s consultants. Consulting fees form a substantial portion of BCG’s revenue. – Performance-Based Fees: In certain cases, BCG may incorporate performance-based fees into its revenue model. These fees are tied to achieving predefined business outcomes or targets. By aligning fees with results, BCG shares in the client’s success and demonstrates a commitment to delivering tangible value. Performance-based fees can enhance BCG’s revenue and incentivize client engagement. – Licensing and Intellectual Property: BCG may develop proprietary tools, frameworks, and methodologies during consulting engagements. These intellectual property assets can be licensed to clients for ongoing use. Licensing agreements generate additional revenue for BCG, particularly when clients find value in implementing BCG’s proprietary solutions within their organizations. |
| Distribution Strategy | BCG employs a multifaceted distribution strategy to deliver its services effectively: – Consulting Teams: BCG deploys dedicated consulting teams composed of experts in various industries and functional areas. These teams work closely with clients, often on-site, to understand their specific needs, develop tailored solutions, and implement strategic recommendations. Consulting teams serve as the primary interface between BCG and its clients. – Global Network: BCG’s extensive global network of offices and consultants plays a vital role in its distribution strategy. The firm operates in major cities around the world, allowing it to serve clients across diverse geographies and time zones. This global presence enables BCG to offer clients insights into international markets and trends. Consultants often collaborate across regions to provide clients with diverse perspectives and expertise. – Digital Platforms: In the digital age, BCG leverages digital platforms and tools to facilitate communication, data sharing, and project management. These platforms enhance collaboration between BCG’s consultants and clients, allowing for real-time information exchange and project tracking. Digital platforms also support the analysis of large datasets, enabling data-driven decision-making. – Thought Leadership: BCG actively engages in thought leadership activities by publishing research reports, whitepapers, and industry insights. This content is made available to the public and clients alike, showcasing BCG’s expertise and thought leadership in various fields. Thought leadership serves as a marketing and educational tool, attracting potential clients and demonstrating BCG’s industry knowledge. – Client Relationships: Building and maintaining long-term client relationships is a fundamental aspect of BCG’s distribution strategy. The firm strives to become a trusted advisor to clients, fostering ongoing partnerships. Repeat engagements with clients are common, as BCG continues to provide strategic guidance and support as clients’ needs evolve. Strong client relationships contribute to client retention and referrals, sustaining BCG’s growth. |
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