Consulting Magazine - February 2017

Forest and Trees, Etc.

The Great Panic of 1857 hit London like a ton of bricks. The previous decade had seen a huge expansion in global trade with the UK’s exports doubling from 1848-1857. And then it all came crashing down in a wave of bank failures and bank runs.

The British Parliament created a committee, the Select Committee on Commercial Distress, to find out just what had gone wrong. In many respects it was a story very familiar to modern ears: a toxic mix of real estate speculation, securities and commodities bubbles, and credit markets gone wild. It spanned Western Europe to the Baltic Sea to China, with much of it pivoting in London, the world’s financial capital.

Parliament and the Select Committee came under tremendous popular pressure to do something, anything, but they were confounded by the reality that so much of the crisis’ root causes lay in California gold mines and Swedish banks and Chinese fur pelt trading stations, beyond Britain’s shores, out of Parliament’s reach.

We are in a similar situation today, where those who bear the brunt of economic change are lashing out at a system they see as unfair and “rigged” against them. And at least in some respects, they’re not necessarily wrong. The Economist reports that since 1990, almost a billion people around the world have been lifted out of poverty, but that’s small comfort to those in Detroit or Manchester, UK from which simple manufacturing jobs have fled. Populist anger is transforming politics in Europe and the US. People who feel marginalized by recent economic shifts want to reassert some level of control over their local economies; they want to re-impose national and local controls on global economic trends as they watch jobs and investments flow elsewhere. Populist outrage is a fact of life for businesses in 2017.

And consulting firms are on the front lines, both as facilitators for greater global business models, as well as an industry that is itself strenuously striving to become increasingly global in both organization and delivery.

Globalization is not dead. Supply chains and distribution channels must be efficient and cost effective, capital and resources must be deployed to companies’ strategic benefit, global client needs must be met in a global way.

And neither will other forces shaping the business world like the automation revolution go away because less adaptive regions are struggling with economic stagnation. But the anger in these regions is real and is generating very tangible consequences around the world for businesses.

It’s up to consulting firms, particularly those most scaled to global production and delivery models, to help clients balance the global with a more weighted and in-depth relationship with local communities. The issue of why some regions are less economically adaptive is a political problem, but consultancies must help companies successfully operate in those environments, with a local lens, being able to move among trees while not losing sight of the forest.

Many firms have become experts in helping clients address complicated local issues in remote places. What is changing is that now consulting firms will have to use those capabilities to continue to be global, but with a greater emphasis on the local. Changes to regulations may channel corporate strategies towards local options, but companies will likely have to go further than the regulations. The emphasis is shifting to the local—in the US, in the UK, in Europe, everywhere. This is not just political or regulatory but also a reputation and brand issue for clients, and for consulting firms themselves.

The challenge will now be to balance business needs for competitiveness with a much greater sensitivity to local concerns. Some of this will revolve around better communications, and broadening the field of defined stakeholders. But at least for the short term, it may also mean possibly keeping jobs or assets local while helping clients defray the opportunity cost. That is not a permanent solution, but 2016 and 2017 are seeing a revolt of the local against global forces, and consulting firms can and should play an important role in helping clients navigate the shifting political winds that could prove a very disruptive force in 2017, indeed.