From Structure to Strategy: The Evolution and Impact of Consulting Firms

In 1886, Arthur Dehon Little, a chemist from MIT, founded the first strategy consulting firm, paving the way for what is now a cornerstone of modern business practices. Little’s vision of solving complex, unsolved problems stood apart, but his refusal to embrace standardized approaches led to his firm’s decline. Meanwhile, other consulting firms gained traction by adopting more systematic methods, solving familiar problems, and replicating solutions across organizations.

The Rise of Structured Models

DuPont Company pioneered a revolutionary organizational structure in the post-WWI era, breaking away from function-based divisions (e.g., sales, R&D) to product-based departments like explosives and paints. This multidepartmental structure enabled diversification and set a precedent for consulting firms like McKinsey and Booz Allen Hamilton, who adopted and propagated it widely. By the 1940s, these firms had established themselves as "mind architects," shaping how organizations were structured globally.

McKinsey, under James McKinsey and later Martin Bower, built its reputation through innovative recruitment practices and a systematic approach to consulting. The firm focused on long-term client relationships, choosing business giants like De Beers over prestigious institutions. This strategy solidified its leadership, especially as consulting evolved from solving structural issues to providing strategic advice in the 1960s.

From Structure to Strategy

The consulting industry faced a turning point during the economic downturn of the 1970s. As traditional organizational models became ubiquitous, firms had to innovate to stay relevant. The Boston Consulting Group (BCG) emerged as a disruptor, introducing the BCG Matrix and the experience curve, which helped businesses allocate resources and optimize portfolios. These theoretical contributions reshaped strategy consulting and set BCG apart as a thought leader.

McKinsey responded by emphasizing corporate culture through its 7S model, introduced in In Search of Excellence. By this time, consultants had become essential not only for solving business problems but also for legitimizing managerial decisions.

Legitimacy and the Growth of Consulting

Consulting firms increasingly assumed a dual role: bringing innovative ideas and providing legitimacy to managerial decisions. In the U.S., during the 1980s, rising insurance costs for executive liabilities spurred firms to rely on management audits, further cementing the role of consultants.

As the profession matured, the collaboration between consulting firms and business schools created a robust talent pipeline. Institutions like Harvard and Stanford became key recruiting grounds, while European business schools followed suit. For many young professionals, consulting became a prestigious career offering diverse challenges and opportunities to apply academic case-study skills in real-world scenarios.

The Consultant’s Legacy

Consultants didn’t just contribute to business strategy; they institutionalized it. By formalizing knowledge into a teachable field, they laid the groundwork for strategy as an academic discipline. Their influence extended beyond clients to academia, where professors and researchers build upon the frameworks consultants popularized.

Call to Action

Are you ready to leverage strategic insights for your business? Learn how consulting firms shape industries and how their methods can drive your organization’s success. Stay ahead—embrace the strategies that define tomorrow. Reach out today to explore tailored solutions!