| ABSTRACT |
Take an active interest in the affairs of your Society, come and
learn what has been achieved and what is planned.
The AGM (5:30PM) will be followed by the March lecture meeting.
Who is Jeremy Howard?
I am a management consultant with A.T. Kearney.
A.T. Kearney is one the world's biggest management consulting firms,
and has been the fastest growing over the last decade. I am a
manager in the Finan cial Institutions Group, which means that I
focus on the financial services sector. However, I have worked in a
wide range of industries. I have recently developed a training
program for our consulta nts on applying analytics to management
consulting, and am soon to start an eleven month development project
trying to help our clients leverage their customer information. This
development will cove r a large amount of sophisticated analytics,
including applications of modelling and optimisation.
Prior to A.T. Kearney, I was a management consultant at Australian
Consulting Parters, a small strategy boutique with offices in
Melbourne, Sydney and Hong Kong. My consulting career started at
McKin sey and Company, where I worked as an analytical specialist.
What is management consulting, anyway? When you look at any large
company, you will see similar roles in senior management. There will
be a board, a CEO, and then a group of managers possibly including a
Chief Information Officer, a Chief Finance Officer, an HR Head, a
Head of Marketing, a Head of Corporate Strategy, a Chief Operations
Officer, and heads of key business units and subsidiaries.
The types of challenges that face these people is fairly consistant
from industry to industry, and from market to market. What
competitive forces are shaping my key markets? How will this effect
our company, and how should we respond? How can I best leverage the
organisation's capabilities to generate shareholder returns? Who are
my valuable customers, and why? How can I better meet their needs?
How to I attract and retain good people? How can I tighten costs
without adversely impacting revenue? How do I respond to the new
opportunities and threats of the increasingly on-ine world, without
losing my traditional customers?
A management consultant, as the name suggests, consults to
management. These are the kinds of questions that a management
consultant helps to answer. Every company will have different
priorities, an d a different competitive environment, but the types
of issues they face will not be unique.
What is the role of analytics in management consulting? To a
management consultant, and purely analytical outcome is not an
outcome at all. The client is only interested in outcomes that they
can see will impact their bottom line. However, analytics play a key
role in structuring and testing the hypotheses that are the basis of
a consulting engagement.
For example, a common issue is identifying where to invest when a
company has cash available. Much expert judgement and personal
experience will be used in identifying and testing opportunities.
Anal ysis can also support this process, through developing an
understanding of the underlying properties of profitable markets and
products. The data for this analysis will include the current
profitabil ity and operating environment of the company in each of
its current markets, plus detailed data on competitive dynamics, the
regulatory environment, and so forth. Having pulled this data
together, t raditional statistical techniques can be used to try and
extract the underlying reasons that different products in different
markets have varying levels of profitability.
As another example, organisations can often decrease their cost base
by improving the way they source their business inputs. For example,
through consolidating purchases with one supplier volume disc ounts
can be arranged, and specific levels of service agreed upon.
Pulling together all purchases into a readily analysable form can
involve substantial database development and analysis skills.
Analytics is used in most management consulting engagements in some
way, to integrate disparate data sources, to model complex systems,
to identify value drivers, to cluster customer groups, and so f orth.
What is the role of OR in management consulting?
The answer to this question very much depends on your definition of
'OR'. To an undergraduate, OR is often assumed to be identical to
linear programming. After graduation, OR may seem to mean the mat
hematics of optimisation. After helping a company to re-engineer a
complex process to remove 30% of costs, OR becomes a catch-all to
cover interviewing techniques, change management, measurement, mai
nframe data extraction, IT liaison, and maybe a little bit of
optimisation. . In management consulting, the words 'Operations
Research' are rarely, if ever, heard. Instead, we think about an
'analytical toolkit' which we draw upon as required (see figure 1).
Of course, no one is likely to have an in depth knowledge of every
piece of this toolkit. However, it is important for a consultant to
know how the pieces fit together, where they should be applied, and
their potentia l down-sides.
Having said that, most consultants do not know this. Too many people
in business have seen analytics applied inappropriately, wrongly, or
impractically. Many consultants, and many of our clients, are deeply
sceptical about the power of sophisticated analytics to actually add
value to their business. Instead, they have learnt from experience
that a bit of common-sense and basic primary school mat hs can be
used to develop more robust, communicable, and practical solutions
than what they have seen come from expensive and lengthy analyses.
OR is often seen as one of these sophisticated analytical tools that
provides impractical solutions from inappropriate models. A common
belief is that real life is too complex to be accurately reflec ted
in OR models, and that common sense and deep thinking are better
ways to come up with meaningful results.
Surviving as an OR consultant in a large Management Consultancy
Group I am not one of these sceptics. In this talk, I will argue
that their is a role for sophisticated analytics in solving real
busin ess problems, and in implementing these solutions in real
businesses. I will endeavour to develop a diagnosis of why
sophisticated analytics in general, and OR in particular, have
developed this poor reputation in the field.
I will also argue that for OR teaching and practice to be
successful, we must move beyond the traditional focus on the
mathematics of optimisation. Instead, we need to start training
people on the b roader analytical toolkit, and how to apply it to
real problems. We need to think about the execution capabilities of
the organisations who will apply our results, to ensure that
implementation occur s. I will talk about how I have used the
techniques of operations research in real management consulting
studies, and the successes and failures that I have experienced. I
hope others will also share their experiences and observations.
It is all too rare that teachers, researchers, students,
specialists, and generalists get together to discuss what it means
to be an OR practitioner, and where we should be heading. I hope
that this talk and subsequent discussion will be one of those times.
|
