KPMG Strategy enters strategy consulting market

27 October 2014 7 min. read
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Big Four firm KPMG is currently in the process of launching a new practice that will specialise in strategy consulting. The new unit – which will be dubbed ‘KPMG Strategy’ – will be housed under the company’s Advisory practice. Recruitment is already well on its way, and according to insiders by the end of 2014 nearly 1,000 KPMG’ers across 35 firms around the world will be “aligned” with the offering.

KPMG’s move to bundle its services and in a consolidated manner enter the strategy consulting market is driven by three main considerations. Firstly, the market is at a global level growing. Against the backdrop of the fast-paced changes in the external landscape, clients are increasingly asking consulting firms for more forward-looking services such as strategy. From rapidly changing business models to new technologies or increased regulatory pressure, clients are struggling keeping up with the pace of change, and even more so, dealing with the potential disruptions in their landscape. At the same time, client issues have become more complex, and strategic issues increasingly involve and rely on other business area such as IT, digital or finance – leading to a rise in demand for ‘integrated strategy’ offerings. On the back of these two drivers, the strategy consulting market is according to Kennedy expected to grow from the current $32.5 billion to $35.4 billion next year, a growth of just over 8%.

Global Strategy Consulting Market Size

Secondly, the decision to bolster its strategy offeringsis in line with KPMG’s long-term plan to grow its market share in the Advisory space. Over the past years the large professionals services firms have witnessed relatively low growth, or even contraction, in their traditional Accounting and Assurance market, and as a result they have turned their eyes to the quicker-growing management consultancy segment. An analysis from reveals that between 2008 and 2013 growth in consulting services has significantly outpaced the other functions*, with Deloitte the strongest performer (+52%), followed by PwC (+45%). And although KPMG’s Advisory practice still is ~$300 million larger than that of EY, its growth rate is lagging the Big Four, risking the firm to lose ground, and this has internally led to a new strategy aimed at boosting its presence in the consulting market.

Global Revenue and Growth Development of Big 4 Firms

The impact of KPMG’s push into the strategy space on its overall Advisory objective should however be placed into perspective. Although strategy consulting is arguably the most prestigious and lucrative market segment in the industry, it represents on average ‘just’ 15% of the global consulting market (valued at approximately $240 billion), with the % of strategy work in the more saturated markets a few percentage points lower. For instance, in the major European markets strategy consultancy’s share hovers between 10% to 12%.

Thirdly, KPMG’s decision to bundle its already existing strategy services into a separate platform will enable the firm to more effectively respond to client requests from all over the globe. From an internal perspective, the KPMG Strategy network will facilitate amongst others better ‘strategy skills’ capability building, international resourcing, shared delivery and thought leadership.

Consulting market per segment

What strategy?
The key question for KPMG will be how it can differentiate itself from its competitors. The strategy consulting space is saturated, and not so long ago it was even labelled a ‘no-go’ area by analysts due to the high pressure on fees & rates and margins, as a result of slowing demand and intensifying competition. The market conditions were turned out so harsh that it urged big names in the industry – with the exception of the so-called ‘Big 3’ firms McKinsey, BCG and Bain – to drastically rethink their strategy: Roland Berger nearly was poached by EY**, Booz & Company decided to sell itself to PwC while Monitor even went bankrupt, after which it was poached for a bargain by Deloitte Consulting.

According to Lynne Doughtie, Vice Chair of KPMG Advisory and the Lead-partner for KPMG Strategy, the firm will be able to set itself apart from the competition through its unique mix of integrated offerings. KPMG chooses to build its new unit largely from the talent it already has in house, unlike its Big Four rivals, which respectively acquired strategy businesses within the last two years (in July EY acquired The Parthenon Group). This will allow KPMG Strategy clients to take advantage of the deep expertise KPMG has outside of the specific strategy unit, says Doughtie. “Our whole approach to delivering strategy to our clients is having a very integrated approach,” she says. “Many of the strategy houses don’t have the depth of world-class risk capability that a KPMG has, particularly in industries where regulation is a key driver such as financial services or healthcare.”

From a revenue perspective, KPMG Strategy will become a top-15 player in the market:

Revenue from Strategy & Operations Consulting

KPMG Strategy
The new KPMG Strategy platform is currently being rolled out within the firm and staffing is well under way. In some countries the move is expected to have little impact – in for instance the UK and Germany KPMG already has a mature Strategy practice within Advisory, while in other countries the selection process will take more time and a larger external recruitment drive will be launched. By the end of the year the firm expects to have just under 1,000 KPMG consultants ‘connected’ to the offering, which will serve as a service line within KPMG’s Management Consulting practice in Advisory.

* Note that some of the Big 4 firms have already released their FY2014 financials, yet as KPMG still has to release its figures the analysis focuses on FY08 – FY13. See the article ‘EY revenue up 6%, driven by double digit Advisory growth’ for EY’s FY2014 results.

** After deciding to remain independent, Roland Berger has formulated a new ambitious strategy. See the article ‘New strategy of Roland Berger aims to triple size’ for details.