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In building up its tech capabilities, has McKinsey left itself vulnerable?

Back in 2018, we wrote about the growing threat Bain, BCG, and other firms pose to McKinsey. Focusing on McKinsey’s clients at the time, we saw that Deloitte and Accenture emerged as bigger threats than traditional strategy competitors in a number of key services we ask about, including digital transformation. We also saw that although, unsurprisingly, large proportions of McKinsey’s clients were loyal for business strategy work, when it came to technology services, clients were less likely to select the firm as their first choice to work with, and instead preferred to work with IBM.

In recent years, however, there has been a growing trend, accelerated by the pace of digital transformation and its growing hold over the market: Strategy firms are developing their technology capabilities and offerings, and moving further downstream into implementation—thus bringing strategy firms directly in competition with those previously deemed too dissimilar: IBM, Accenture, etc. One way in which McKinsey—and indeed Bain and BCG—has gone about this is through acquisitions. MBB firms have placed a strong emphasis on acquiring digital and data & analytics firms in recent years to strengthen such capabilities, with McKinsey leading the way in volume having purchased ten firms of this ilk between 2013 and 2020. Alongside this, the firm has developed capabilities in-house, and taken these to market through the introduction of sub-brands, with McKinsey Digital, Analytics, Design, and Technology all being launched within the last ten years.

There is evidence that this investment has begun to pay off when we look at the data from our most recent client survey. When compared to 2018, a larger proportion of McKinsey’s current clients would select it as their first-choice firm in all five technology services we ask about—most notably in AI advice & implementation, RPA (robotic process automation) advice & implementation, and data & analytics.

What is also evident is that this appears to have come at the same time as other firms start to threaten McKinsey more in the strategy space, with a smaller proportion of McKinsey’s clients saying the firm would be their first choice for business strategy.

So, who are the firms threatening McKinsey around business strategy? Using the same data, the chart below shows the percentage of McKinsey’s current clients who would select a different firm as their first-choice firm to work with for business strategy, and the percentage of current clients of other firms who would select McKinsey as their first choice for business strategy. The firms are ordered from the most threatening at the top to the least threatening at the bottom.

What we notice first is that although McKinsey’s more traditional competition (Bain, BCG) are seen as strong threats, it’s Accenture which is the biggest threat to McKinsey’s current clients, with 17% of them selecting the firm as their first choice for business strategy work.

While McKinsey’s focus has been on broadening its technology capabilities, Accenture has been bolstering its credentials in the strategy space, with the launch of Accenture Strategy in 2014 and an even stronger emphasis on acquisitions than the MBB firms. The same could also be said about a number of other firms in our sample, with more firms threatening to take clients from McKinsey than McKinsey threatening to take clients from other firms.

As McKinsey, and other firms, look to gain market share in areas not traditionally associated to them by developing capabilities and expertise in such areas, they are being put under threat in their core areas by other firms with exactly the same goal. The key opportunity here lies in simultaneously developing new forms of expertise whilst also further strengthening existing expertise, in order to ensure that your competition aren’t able to sneak in the back door.