Mystique but No Magic from Management Consultants; City Comment
Hilton, Anthony, The Evening Standard (London, England)
Byline: ANTHONY HILTON
GIVEN all the flak that is being thrown at investment bankers and accountants following the collapse of Enron, the management consultancy business seems to have got off remarkably lightly.
Too lightly perhaps for just as accountants Andersen were heavily involved with Enron, now the world's biggest bankrupt, so too were management consultants McKinsey - so much so in fact that the firm published the most eulogistic articles promoting the virtues of the company.
Given that many managers regard the McKinsey view as gospel, the extracts that appeared just a few months ago are worth quoting at some length: "Enron has built a reputation as one of the world's most innovative companies by attacking and atomising traditional industry structures - first in natural gas and later in such diverse businesses as electric power, internet bandwidth and pulp and paper. In each case, Enron focused on the business sliver of intermediation while avoiding incumbency problems created by a large asset base and vertical integration. Enron no longer produces oil and gas in the United States, no longer owns an electric utility and has never held a large investment in telecom networks. Yet it is a leading value creator in each of these industries.
"Is it possible to adopt a new-business-building mindset and overcome the incumbent's curse? Once again, Enron provides an example for success. Over the past 10 years, the company has built at least five major wholly owned greenfield businesses, which collectively provide more than 90% of its market capitalisation. In achieving this track record, the company has directly attacked all four dimensions of the incumbent's curse.
"It has regularly deployed its top talent in new start-ups and provided these managers with entrepreneurlike incentives: when Enron launched its broadband business in 1999, for example, it reassigned the top two executives of its largest business unit, and its corporate president devoted 80% of his time to running the new company. …