It’s a rite of passage for growing, successful startups: that moment when management consulting firms come knocking.
These firms work with some of the biggest businesses in the world. Now they want to work with you! And you probably feel like you can’t say no.
I’ve been there.
My previous company, Dyn, was spending upwards of $750,000 a year on consultants at the height of our scaling journey, en route to our acquisition by Oracle. That’s peanuts for mega-corporations (who spend exponentially more with these firms), but it was a huge amount for us.
And I’m here to tell you: It wasn’t worth it.
Fortunately, the world is starting to see the cracks in the consultants’ armor. Look no further than John Oliver’s recent viral takedown of McKinsey and Company, the standard bearer for old-school management consulting firms.
“Essentially, McKinsey is a firm that projects a huge amount of confidence to sell a frequently unremarkable product at sky-high prices,” Oliver says in the 26-minute video, which has 7 million views and counting on YouTube alone. He clearly hit a nerve.
Companies of all sizes deserve access to real growth help that doesn’t break the bank. They need a new, better approach to management consulting.
Just the Way It Is
For too long, the tech industry (among others) has accepted management consulting firms as the de facto. The same goes for the big analyst firms and agencies, plus all the independent, siloed vendors who come out of the woodwork when you’re on the cusp of success.
The perception is that growing, pre-IPO companies can only take the next step if they allocate massive budget to these vendors. And if they don’t, then they really aren’t serious about their business.
It doesn’t matter if these firms are slow and redundant. It doesn’t matter whether or not they provide actual, meaningful value. It’s just the way it is.
During my startup journey, we dropped $500,000 on a firm touting value-based enterprise selling strategies and another $150,000 on a strategic communications firm. And those are just two examples. Even when firms are helpful, that’s simply unaffordable for any pragmatic startup.
I’m not saying all management consulting firms are bad all the time. Some provide real, helpful, strategic advice. And sometimes this advice is even worth the money.
But even in the best-case scenario, their clients are left on their own to execute these high-priced strategies — and many growing companies don’t have the resources to pull it off successfully.
A New Model
In lieu of working with consultants, startups and growth-stage companies often turn to their investors. Traditional venture capital firms always say they’re there to help, and their portfolio companies believe they’re incentivized to do so.
Truth is, their tactical support is limited.
Most VCs only provide strategic advice, not long-term help. Sure, they can swoop in, identify problems and make suggestions. But they don’t have the operational teams to roll up their sleeves and work alongside you to solve those problems.
Why? Because traditional VCs weren’t built to support the long-term success of all their startups. They were built to maximize returns for investors. To do that, they only need 5% or 10% of their portfolio to have outlier-level success. The rest of their companies don’t really matter. And that’s a shame, because they can still be successful, sustainable businesses.
But these companies need more than advice. They need work taken off their plate. Where can they turn?
That question pulled at me during Dyn’s journey. It never went away during three post-acquisition years at Oracle. And it’s one of the big reasons I co-founded York IE in 2019.
Most startups and growth-stage companies don’t need “management consulting.” They need strategic advisory services and tactical execution support. They need to get it from proven entrepreneurs and operators — not from, as Oliver said, “some mid-20s Ivy Leaguer who fancies himself a business genius.” And they need to get it at a price point that demonstrates actual value.
Too many of the institutions that were built to help companies — management consultants, VCs, analyst firms, agencies — are actually failing them. It’s time for a new model that truly supports the growth of all businesses.