Big data will make it even more critical to think creatively about competitive advantage: Arindam Bhattacharya

Interview with Senior partner & managing director, Boston Consulting Group

Those who can use data to create differentiated insights will win, Arindam Bhattacharya tells Ankita Rai

What are the critical questions companies seeking a strategic edge over competition should answer given the volatility in today's markets? What does it take to be a market leader today?

In 2007-08, we started tracking global advantage, which later became a practice in BCG. One of the key elements of that was the cost structure of the global value chain, which had driven a lot of manufacturing out of high-cost countries. The economics of manufacturing is going through dramatic changes. One is China, which is seeing huge spike in the cost of labour because of the demographics and the rise of employment while productivity is not growing so fast. For particularly low-end manufacturing, China is becoming less competitive. At the same time, the economics of energy, combined with technology and automation processes are changing the economics of manufacturing in the US. So there is fundamental change that has happened since 2008.
 

There are two premises behind the growth of challengers: One, the economics of the global value chain, which was driving the global advantage of lot of challengers, namely, high growth, large market with low cost. This was a huge home advantage and challengers were riding on that wave. Two, family-owned businesses. The main reason behind their growth was that challengers were largely driven by family-owned companies. In fact, 70-75 per cent of the companies in these markets are family owned. The aspirations and risk-taking abilities of these business are of a different order. And this still continues.

However, post the 2008 financial crisis, the change in forex movements and the fall in crude prices have changed the economics of the global value chain. So while the high growth of these challenger markets is still there and aspirations of their promoter-led businesses still continue, the economics have changed quite a bit. The way globalisation has played out, it is very different from what somebody would have predicted before 2008.

There are the four major forces that are playing out in today's scenario. One, an economic shift is happening from the North to South. Second, you have the economics of information such as big data and analytics. Competitive advantage has become even more important today given that the same data is available to everyone. Those who can use the data to create differentiated insights driven by new ideas will win. Three, how do you deal with a resource-intensive business model in countries such as India, China, Africa, South East Asia, where a new middle class is emerging and rapid urbanisation is taking place. Four, technology. Technology is going to transform manufacturing and how products are designed.

The number of discontinuities that will face clients in the next twenty years is going to rise. Even stable industries like construction are going to be impacted.

Many companies in the consulting space are now exploring the possibility of using predictive technology and big data analytics to deliver value faster. Is consulting at the threshold of disruption like the industries it services?

Big data is opening a huge consulting opportunity for us. The way we work and how we use data to drive insights have changed. Big data will make it even more critical to think creatively about competitive advantage. Often we use data that resides with the client. We use it to create solutions and insights. Big data gives us the huge opportunity to take this to the next level.

Consulting never really got disrupted. It depends on what the consulting model is. The more standardised approach to problem-solving might get impacted. Our view is that every client's problem is unique. You cannot use a templatised solution. You have to approach the problem in a customised way. Data only allows you to develop better customised solutions. If you can derive unique insights from the data which others cannot, you derive competitive advantage.

You say consulting never really got disrupted. So how has the business changed over the years? What are the new trends emerging in the field?

During the Bruce's (BCG founder Bruce Henderson) time, consultancy was more about converting a great idea into a solution. It was about strategic advice. Over a period of time, as clients evolved, strategic advice was not enough. They needed help in implementing it. The biggest challenge clients face is in organisational implementation capabilities - how to ensure great ideas get implemented and achieve an impact. So the next phase of evolution is building capabilities for the client. We call it enablement - enabling the client to sustain the impact.

The other dimension in which consulting has changed over the years is in the expertise that is required - both industry expertise and topic expertise. The combination of problem solving skills required now, both in industry expertise and topic expertise, is very different from what it was 20 years before. That is the fundamental shift. It has become more and more expertise-driven along with problem-solving driven.

You spoke of Bruce Henderson earlier. Are the concepts and ideas developed by Henderson relevant today?

BCG founder Bruce Henderson created non-conventional ways to create competitive advantage for our clients, which have now become a landmark work in management. For example, he came up with revolutionary concepts such as the growth-share matrix, the rule of three and four, the experience curve, and time-based competition. Some of these ideas are still valid. The growth-share matrix can be used today to understand where to deploy capital, what kind of businesses to invest in and so on. The rule of three and four is still valid in markets that are very stable. The experience curve is also valid in markets where there is no discontinuity. It is very contextual but the underlying principles are still the same in many industries.