Wednesday, February 22, 2012

Information In, Information Out

While still working for BCG, Bill Bain, the founder of Bain & Co., happened upon an apparent conflict of interest. He was disturbed by the fact that colleagues at the Boston Consulting Group would take on work for one firm and then, after that engagement was finished, turn around and work on an assignment for a competitor. Bain immediately complained to BCG’s headmaster, Bruce Henderson. Henderson, while sympathetic, waved off Bain’s concerns. Henderson argued that companies could hire and fire consultants as they pleased. As consolation, Henderson did, however, allow Bain to inform his clients of BCG’s policy regarding the matter. When Bain went on to form his own consulting firm, he mandated that the firm only take on one client from each industry.

These days, hiring consultants (especially tech ones) in order to gain an understanding of their competitors’ business plans is commonplace. Consulting firms, while required to sign confidentiality agreements, base their entire business model around stockpiling general insights on industry outlooks, trends, best practices, and strategies. Consultants rake this information in by going from one competitor to another. The real question is why would companies, knowing that their ideas will ultimately be shared with rivals, hire consultants in the first place? Well, for most, and this is even more true in the fast-moving tech sector, the sharing of some in house R&D ideas, for example, in exchange for an entire industry’s worth of R&D data is, on balance, more positive than negative. In some ways, in order to not be left behind, this indirect method of sharing knowledge has become a de facto imperative.
- Read more about it here: Reuters