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Tag: Consulting

CTLs

One of the most challenging things about the shift from one field to any other field is dealing with jargon mismatch. What’s especially jarring is trying to learn new meanings for acronyms that I already learned different meanings for.

Case in point: at my firm, consultants with MBAs who’ve proven themselves and are on track towards promotion are called Case Team Leaders — signifying their emerging role as workstream leaders in our case teams. Seeing as consultants love their TLAs (three letter acronyms), Case Team Leaders are of course called CTLs.

image On the other hand, in immunology, where I spent a reasonable chunk of my scientific time, CTLs refer to cytotoxic lymphocytes. These cells are oftentimes called killer T-cells, because of their role in seeking out and destroying cells which have been taken over by viruses or cancer.

And, even though the only thing remotely similar about the two different CTLs is a propensity to kill things that don’t quite fit :-), it still takes a reasonable amount of effort for me not to laugh when I hear that acronym being used to describe my supervisors.

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Scientific Dictionary

You didn’t think Consultant dictionaries were the only ones available, did you (although some of these can definitely be applied in Consulting)? (hat tip to A. Phan)

From HealthCare Economist:

The following list of phrases and their definitions might help you understand the mysterious language of science and medicine. These special phrases are also applicable to anyone working on a Ph.D. dissertation or academic paper anywhere!

“It has long been known” = I didn’t look up the original reference.

“A definite trend is evident” = These data are practically meaningless.

“While it has not been possible to provide definite answers to the questions” = An unsuccessful experiment, but I still hope to get it published.

“Three of the samples were chosen for detailed study” = The other results didn’t make any sense.

“Typical results are shown” = This is the prettiest graph.

“These results will be in a subsequent report” = I might get around to this sometime, if pushed/funded.

“In my experience” = once.

“In case after case” = twice.

“In a series of cases” = thrice.

“Correct within an order of magnitude” = Wrong.

“According to statistical analysis” = Rumor has it.

“A statistically oriented projection of the significance of these findings” = A wild guess.

“A careful analysis of obtainable data” = Three pages of notes were obliterated when I knocked over a glass of pop.

“It is clear that much additional work will be required before a complete understanding of this phenomenon occurs”= I don’t understand it.

“After additional study by my colleagues”= They don’t understand it either.

“A highly significant area for exploratory study” = A totally useless topic selected by my committee.

“It is hoped that this study will stimulate further investigation in this field” = I quit.

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The Consultant’s Dictionary

Something a colleague from work forwarded to me, and a, sadly, VERY good description of the language that you’re apt to hear as a consultant… for better or for worse.

at the end of the day: a phrase used to attempt summarization, introduce an air of finality and perhaps close off certain avenues of discussion; since most consultants’ days do not end with the setting of the sun, at the end of the day most of them are still working

bandwidth: capacity, free time, ability to do (additional) work; generally used to indicate that speaker cannot or would not prefer to do additional work, as in: “I don’t think I’ll have any bandwidth this Friday”

boil the ocean:
to embark on an apparently impossible, wasteful or fruitless task, usually preceded by an exhortation not to, as in: “Let’s not boil the ocean here, an 80/20 should be enough”; this term suggests that the amount of effort to be expended is not worth the potential payoff

buckets: categories; this is the extent of this word’s definition, so it remains a mystery why people choose to employ the former term; also used as a transitive verb to mean “categorize”

buttoned-up:
to indicate that a particular piece of work or analysis is comprehensive, accurate and capable of withstanding close scrutiny; this is an example of opposite terms with identical meanings

buttoned-down:
see buttoned-up

buy-in:
agreement, support; it is unclear why “buy-in” has come to supplant these terms, as no actual purchasing occurs

circle back:
to follow up with indicated individuals at a later point in time, usually to review progress on the current topic of discussion; this phrase is somewhat redundant, as it is impossible to trace a circle that does not connect back with itself

crisp:
an adjective indicating that the referenced work or analysis is thorough and complete, perhaps by gastronomical allusion to food that is fully prepared; it is duly noted that crisp objects, while ostensibly finished, are also far more brittle and prone to shattering

development opportunity: a weakness, flaw or shortcoming that should be rectified, usually by the subsequent suggestion

directionally correct:
essentially wrong

granular: a detailed level of abstraction; often used in the context of increasing the fineness of the analysis, as in: “We need to get more granular here”

hands:
often prefaced with “client,” indicates the interpersonal skills of an individual in relation to a particular group of people, as in, “That manager sure has great client hands”

hard stop:
used to indicate that after the time indicated, the listeners are on their own, because the person stating that they have a hard stop sure isn’t going to be around to help after then

hope you’re doing well:
a generally well-intended but insincere interpolation used at the beginning of most voicemails to replace the standard pleasantries that would be present in verbal communications; use of this phrase does not indicate actual interest in the well-being of the recipient; also found with alarming frequency in electronic mail

key: critical, essential, required, important, central; the key analysis is generally the linchpin; often used as a noun, and with such frequency that its significance has been diluted, since everything is now “key”

let me play this back:
said when the listener wants to refract and color the conversation through his or her own perspective, under the pretense of reviewing the transcript of what’s been said; in this manner the listener can pretend he or she is a tape recorder

low-hanging fruit: the initial opportunities, areas of exploration, etc. that are easiest to cover; intended to evoke visual imagery of fruit-laden trees, suggesting that much remains beyond the lowest boughs; syn. quick win

provide color:
a directive that translates roughly to “This is perhaps the most boring thing I have ever read, with the possible exception of certain lengthier legal disclaimers, and even then it’s pretty close”; this bit of jargon is nevertheless somewhat of an advance, since, back in the early days of consulting, people were encouraged to provide black and white

push back (verb form) or pushback (noun):
formerly the sole domain of airplanes leaving their gates, this term is now used to indicate resistance and/or disagreement, without actually using those terms; this phrase attempts to avoid any negative connotations of controversy

quick question:
the answer will be anything but; bizarre since the adjective “quick” is intended, by implication, to be transferred to the answer to said question and does not necessarily have any bearing on the length of the question

rock star:
an individual whose performance in a given area or success at specific endeavors is highly impressive, unique and/or admirable; this appellation is generally used sparingly; although the term is sometimes used frivolously to express purportedly extreme gratitude, as in: “Thanks for picking up my mail for me, you’re a rock star”

sea change: in between lake change and ocean change

sniff test:
as in evaluating food for rancidity, this term is used when gauging the viability or reasonableness of a particular analysis; var. smell test

space:
a market, arena, field of endeavor, or general area, not to be confused with the area beyond Earth’s atmosphere; use of this term usually adds nothing in the way of descriptive value, as in “I don’t think there will be many opportunities in the technology space”

straw man:
a humanoid comprised entirely of the dried above-ground stalks of any of a variety of grasses; also, a construct presented purely for the sake of argument, with the implication that it is not designed to withstand repeated attacks

take the lead on:
a clever phrase often used by more experienced consultants when they wish to delegate a menial task, as in: “Why don’t you take the lead on putting together this document,” which may translate to, “I’m lazy and probably not smart or energetic enough to work on this, so go do it”; often appears in utterly irrelevant settings, as in, “Why don’t you take the lead on making dinner reservations for the team,” a manifestly silly request, since one is asked to “take the lead on” something which doesn’t require leadership of anyone and on which they will certainly be working solo

takeaway:
in other settings a British term referring to carry-out food, here this word has been transmogrified to indicate the salient point that should be retained upon the conclusion of the discussion, often prefaced with key

to be transparent:
in indication that what follows will be particularly revelatory, although it often is not especially so; the troubling implication of this usage is that the speaker has heretofore been opaque

value-add: quite simply, that value is added, mashed into a hyphenated noun form

view from 30,000 feet:
a very high-level, preliminary or cursory look at a particular situation, often used to suggest that pertinent details are inappropriately glossed over; however, one never speaks of the view from, say five or six feet, which might be more appropriate given the average height of a human being

wordsmith:
to make trivial or generally unnecessary edits to text that may only subtly change the meaning, if at all; incorrectly implies that one is a craftsman on the order of a blacksmith or goldsmith; sadly, wordsmithing rarely involves the deletion of jargon

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Presentation Training

For the past few months, my firm has sponsored a series of workshops with a presentation consultant, a woman who helps with presentation style and skills. Not wanting to pass up free training and wanting to see how years without debating competitively had treated my speaking skills, I signed up.

The training was very interesting. It’s one thing to have someone tell you their impression of how you speak. It’s another to have a professional presentation consultant videotape your presentation and then play it back to you while explaining specifically why she said what she did about your speaking style.

The verdict? I speak clearly. I vary my intonations and speed and word choice to fit the story that I’m telling. My gestures aren’t distracting. I convey passion about what I’m speaking about. These are all good things, she said, which many people fail to do.

But, my main problem is that I present too much like a debater. I am too adversarial. My speech tells a logical story, but the story is presented from the perspective of someone trying to convince a skeptic, something which was ingrained in me as a science student but not a tactic which lends itself towards building consensus or compelling action. Instead of establishing a personal connection, on a logical and on a emotional level, I focused on content and delivery.

This she pointed out very well on camera, as even I was shocked at the difference between “debate mode” me and “normal” me — my posture, speaking tone, facial expressions were all suddenly different.

After pointing this out to me, she helped me come up with ways to present the same material but in a more emotionally and logically compelling way, and I was able to practice this a few times before the one hour session was up.

In all honesty, I was very skeptical of what a presentation coach could do, but I am very satisfied by this particular experience, and would recommend this type of coaching to anyone who wants to improve their public speaking.

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More Recruiting Tips

Hat tip to fellow consultant and recruiting buddy S. Chen who not only presents a lot more useful advice but also an amusing tidbit which I’m sure too many students undergoing recruiting can probably also relate to:

It’s okay if you fell asleep at a company presentation — I did that for my own company’s during the process! I know, so sad, but try to sit in the back if you’ve been having a rough day.”

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Recruiting Tips

With recruiting season kicking into full speed in campuses across the United States, I felt it might be helpful for consultant-hopefuls if I share some tips I picked up, divided into the four phases I enumerated last time.

Phase 1: Presentation

  1. Go to the presentations – practically, there is not much you can do to improve your odds of getting a job offer by going to a presentation, but there is a good chance that you’ll learn something about the company which will help when you are trying to pick where you actually want to work once you’ve received your offers.
  2. Ask questions – The more you know about a company, the better position you’ll be in to talk in an interview about why you want to work for that company — even if it’s mostly bullshit….

Phase 2: Resume Drop

  1. List academic awards – If anyone’s ever told you that “GPA doesn’t matter”, guess what, they lied. The truth of the matter is, most firms get thousands of applications, and they don’t have a good way to distinguish between applicants. Therefore, one of the first filters they apply on the resumes is a GPA screen — it’s the only way they can guess at who worked in college (and thus might actually show up to the job) and who’s “smarter than average”. Of course, if you’re working on your resume, it’s probably too late to up your GPA, but listing academic awards can quickly boost one’s “apparent smart-ness” and may win you just enough distinction to be taken seriously.
  2. Use action words – Look at your resume. If every bullet point does not begin with a verb explaining something that you did, then either delete or fix it. If the action word is something like “assisted” or “helped” or “attended meetings”, then replace it. When a resume reviewer reads that, one of the first thoughts that come to mind will probably be “so instead of actually doing something, you sat on your hands and watched/attended a meeting?” Yes, it is a hasty generalization to make, but tough luck, you’re dealing with people who can only make hasty generalizations about you, so make them good generalizations. Make sure all your points are full of action words. Real action words.
  3. Give specific numbers – Nobody really believes the numbers that they see on resumes. But, their emotional impact and the boost in one’s credibility are real. Do I really think you managed that $10,000 budget all by yourself? No. But do I think its impressive that you were involved in the budget effort of a group that had $10,000? Probably. Using a number tells the world, “hey, the job I did, even if it was just deliver coffee, was important — and I’m so confident in myself that I’m willing to tell you all about it.”
  4. Don’t make dumb mistakes / omissions – Many resumes from otherwise great applicants are rejected for very basic reasons. Grammatical mistakes. Spelling mistakes. Not following the instructions. Seriously, if the instructions say, “tell us your GPA and your mother’s maiden name.” They both better be there. Failure to do so says that you’re sloppy, can’t follow directions, and will probably be just as sloppy and incapable of doing what’s needed in a job setting. Make sure that you read, and re-read your resume. Then make sure that your friends read it. That your career counselor reads it. And then read it some more. Incidentally, make sure you do the same thing for your cover letter. Its incredibly rare for a cover letter to have real positive weight, but dumb mistakes — like using a competitor’s name or making clear grammatical or spelling errors — do have real negative weight in the process.
  5. Use the largest font and the largest margins you can. LaTeX embodies good text output. And it uses huge margins and large font. While this isn’t always possible in a resume which you have to cram your life story onto one piece of paper, it should be noted that even the most rational of human beings is positively swayed by clean, clear layout. So, use big font and big margins.

Phase 3: Who Got the Interview?

  1. Relax. There’s not much you can do after you submit the resume, so there’s no point stressing about it. There’s no point getting angry at people who got interviews that you didn’t. And there’s no point in doing anything but relaxing. A few months later, you won’t even remember the names of the firms that rejected you.
  2. Practice. If you’re doing a consulting interview, go buy Marc Cosentino’s Case in Point which was written by a Harvard career counselor and is essentially the bible for consulting interviews. It gives a quick-and-easy overview of the consulting interview setup and has many practice cases you can do with friends. Regardless of what job you’re applying for, however, practice. Practice delivering answers to standard questions that you should NOT trip up on (e.g. “why do you want to join this firm?”, “what’s your greatest strength?”, “why consulting?”, etc.). Practice doing quick mental and pen-and-paper math that almost every firm will throw at you in a college-level job interview. Practice doing case interviews. Practice — it will make you less nervous during the real thing, and it will make you better.

Phase 4: Interview

  1. Be polite. Unless you’re Albert Einstein brilliant, you won’t be able to get away with being rude. And, let’s face it, quick 30 minute interview rounds rarely give you enough of a chance to be brilliant. So, while showing basic courtesies won’t get you the job, failure to do so will almost certainly disqualify you because everyone else is on their best behavior. So, no offensive jokes, and make sure you thank your interviewers verbally and by email after the interview.
  2. Slow down. As a debater in high school, I found that speaking really quickly and still being clear and intelligent were not mutually exclusive. Most people don’t feel the same way. If anything, most people find the speakers who are able to speak deliberately (although not painfully slowly) sound more confident and intelligent. So, take a deep breath and speak slowly — you’re probably nervous enough that it’ll speed up to just the right pace.
  3. Get sleep. It’s commonsense, but most college students don’t. So it’s worth mentioning here. It’s hard to seem intelligent when you’re sleepy — instead, you may seem bored, lazy, unsure of yourself, or just plain sloppy.
  4. Hand gestures. When in doubt, leave your hands on the table. If you’re the type of person who can’t control what your hands are doing when you’re nervous, keeping your hands on the table will prevent wild gesticulations. If you can, then ignore this advice.
  5. Write stuff down. Two reasons for this. The first is that nobody wants to speak to a dis-interested audience. Writing stuff down while the interviewer talks is a good way to show that you are interested (even if you’re not). The second is that it makes sure you are paying close enough attention to be able to answer the questions being posed to you.
  6. Treat the interview like its an episode of Who Wants to be a Millionaire. Say out loud what you’re thinking. Even if its trivial — it helps creates a personal connection between you and the interviewer, and it lets the interviewer know where you’re going so that they can either (a) be impressed by your clear thought process or (b) direct you towards the right answer (which is what they’re all trying to do).
  7. Let the interviewer help you. Real business problems are difficult. That’s why consultants get paid reasonably well. The interviewer knows that he/she will have to guide you to the right answer because any problem can be tackled from many different vantage points. A candidate who refuses to listen to the interviewer’s hints is not only hurting him/herself, but is also demonstrating a lack of understanding of nuance.
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Recruiting in a Nutshell

Senior year in college. For many students, it’s a time of joy and a time of reflection. But for those intending to join the finance or consulting worlds, it is potentially a time of stress and turmoil. At the major universities, future workers flock towards their career counselors, dust off their resumes, and prepare for a a few months of recruiting drama and stress.

The general process for recruiting at these firms consists of four main phases:

Phase 1: Presentation

The beginning of the school year at major universities brings a multitude of interested employers to campuses teeming with legions of students hoping to grab gainful employment. At these events, major employers shell out a pretty penny to rent out campus auditoriums, hotel conference rooms, and space in local restaurants in the hopes that the spectacle will be dazzling enough that the really smart, hard-working soon-to-be-graduates will be interested in checking out the firm. Words like “exciting”, “room to grow”, “fun place to work”, and “great way to start a career” flow freely as company representatives shower students with confidence-boosting praise. In this day and age, the prospective employers will also attempt to portray themselves as youth-friendly, talking about how often their firms hold parties and “fun activities” and stressing their commitment to diversity (although ironically not necessarily represented by the people who lead those companies / who show up to recruiting events). At the same time, students, drawn by free food and the hope that they won’t be begging for employment next year, attend these sessions hoping to get their foot in the door with the right people and say the right thing at the right time.

It is my experience that with the exception of the really stellar firms and the really amazing individuals or the individuals who already had a “foot in the door”, it’s pretty rare that these events succeed for either party. Students almost never get a real leg up in the recruiting process, and the most any student can hope for is an assessment of whether or not a firm is the right fit for him/her. Firms which lack stellar names, alas, don’t attract the talent they are hoping for and may simply be wasting good shrimp cocktail. But, because every other firm does this, and because every other student is trying this, both students and firms find themselves forced into this sort of pageantry. Thankfully, these events have enough free food and enough interesting people that, provided you don’t get too stressed out, can be fun and interesting.

Phase 2: The Resume Drop

Following the presentations is, unfortunately, the horrible process of compressing your life into a single page. It leads to many tears as students realize that, had they partied a little less, studied a little bit more, or maybe taken that one extracurricular more seriously, that their paper representation of themselves would look more impressive. The resume crafting also leads to existential angst as countless students see the past couple years of their life condensed onto a single, flimsy sheet of paper and wonder — “was that it?”

Yes, really, that was it. And then, the hour of judgement is come… (PS: nobody really reads your cover letter — stop working on it and go do something that will actually be covered on the paper people actually read)

Phase 3: Who Got the Interview?

There are some people who have truly spectacular resumes. The kids that were made fun of in class for always answering questions in section, always going the extra mile in their extracurriculars — they’re the ones who’re laughing now.

The closest to describing what this phase is like is seeing who made the cut after sports tryouts.

Phase 4: Interviews

This is the meat of the recruiting process. At this point, the exact nature of the interview structure varies from industry-to-industry and from firm-to-firm. But typically there are two rounds of interviews. The first round typically occurs somewhere on campus or nearby (aka you haven’t proven yourself yet, so why should they fly you anywhere). For consultants, the interviews are 2/3 case interview, 1/3 fit interview. The former means that interviewers will give students a simplified business problem to solve whereby the student will have to demonstrate some semblance of fluency with numbers, some ability to cope with sudden changes in context or circumstance, and critical thinking ability. The latter is a basic assessment of the candidate’s leadership potential, fit with the firm culture and goals.

For those who did well enough to move past the first round, there are subsequent rounds of interviews which are usually held in nicer places and, oftentimes, in the very office that one is hoping to land a job in. It is more or less the same thing as the first round, except the questions are more challenging and the interviewers tend to be of higher tenure and level than those from the first round.

With these interviews, its helpful to remember that the goal is not to stump you, but to understand what it would be like to work with you. Practice talking about yourself / your resume in an articulate manner conveying both maturity and relatability and answering case questions without getting flustered will be far more valuable than cramming any specific knowledge.

If one survives the grueling experience of back-to-back interviews, and is, possibly good at it, then he or she is rewarded with the highest privilege of being a college student: servitude to a corporate entity in return for a paycheck and the ability to inflict this process on the next crop of recruits!

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Bake-off

I had the chance to have lunch with a senior partner at my firm yesterday, and got a “in the trenches” feel for the competitive landscape of management consulting.

There are, of course, a large number of management consulting companies. There are the traditional “big three”, Bain, BCG, and McKinsey. There are also other large players such as L.E.K., Mercer, Katzenbach, Accenture, A.T. Kearney, Booz Allen Hamilton, etc. And, there are a lot of niche players — healthcare specialty firms, technology specialty firms, IT specialty firms, finance consulting groups, etc.

What this means is that, although there are certainly industry leaders in specific segments of the consulting market (i.e. a dominant firm in a region, a firm that has a great deal of experience with one particular sector [e.g. Booz Allen Hamilton and Wargaming]), there will usually be some competition between firms for specific projects.

While a big chunk of projects are sold on the grounds of a partner leveraging his or her network of connections, or sold on top of a prior successfully conducted case (i.e. LEK selling a European customer service center overhaul project after successfully helping the company cut costs in its Asian call centers), there is still ample room for consulting firms to engage in what is called a “bake-off“.

It sounds like some crazy hybrid between a bake sale and a dancing contest, but what it actually involves is the major competitors for a specific consulting project making presentations about why they’re the best for the job (so closer to dance-off on the dance-off-bake-sale continuum). In doing so, the various firms attempt to leverage:

  • Their brand strength/prestige (i.e. heavily relied upon by top players Bain, BCG, and McKinsey)
  • Their unique competitive strengths (i.e. specialty practice areas)
  • The experience and credentials of the relevant partners and team managers/leaders (i.e. resumes and biographical sketches get passed around)
  • History/Background (i.e. “we have done 50 cases on that just this past year, and we’ve always been right!”)
  • Overall firm strategy (i.e. “we create a strong working relationship with the senior management”, “we are dedicated to solving your problem!”)
  • Innovative thinking (i.e. “we’ll present some cool slides showing how we think ‘out-of-the-box'”)
  • Cost (self-explanatory and shouldn’t even warrant this parenthetical)

The deciding factor is usually not cost except when a large, experienced player attempts to break into a market or gain a foothold into a potential flagship client (i.e. a new BCG or Bain office breaking into McKinsey territory will “typically” charge lower fees), but usually revolves around the experience/credentials of the people involved and the background of the firm in that particular area.

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War(gaming) – What is it good for?

If you’re Booz Allen Hamilton, its also good for lots of contracts as they are one of the world’s premier war-gaming strategy consulting firms. Not only do they have a pre-eminent business consultancy, they also provide consulting services to many government agencies (including a long-standing relationship with the CIA and US Army) for military strategy and war readiness. Not surprisingly, they sell as one of their core competencies to their corporate clients their ability to develop simulations of competitor behavior and strategy.

It makes a lot of sense. Business is oftentimes compared to war as the elements which make military strategy work — culture, information flow, understanding of competitors, speed, technology, etc. — also make business strategy work.

So, when I’m playing Starcraft, it’s not wasting time, it’s really about training myself strategically!

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Privacy Filter

Confidentiality is a big part of consulting. In much the same way that the practice of medicine and law would be very different (and probably for the worse) if there was no confidentiality between parties, consulting (both the selling of cases and the actual act of providing advice) would be severely hampered without a basic guarantee of privacy.

I don’t know how other firms do it, but there are some general practices at the firm I work for. They are mostly commonsense (ie. don’t pass around sensitive information, keep your desk clear of confidential documents, use enterprise email to maintain access control over files, etc.), but my personal favorites are of course the provided Thinkpad T60 (with hard drive encryption) and the privacy filter: a 3M black film which restricts the available viewing angles for your screen. Therefore, when I’m on a plane or a train, I can do work with minimal fear that the passenger sitting next to me has just read secret corporate data.

It not only protects corporate data it also lets me surf the internet guiltlessly as passerbys have no idea that my screen is not actually a giant Excel spreadsheet but my Google Reader page :).

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Something for Nothing

Where I work, I have instant electronic access to numerous databases. While I no longer have access to Scifinder Scholar (for Chemistry papers and structures and patents) or PubMed (which indexes every biological/medical paper published), my research workhorses are now Factiva (for news and magazine articles), Euromonitor (for economic and market data), and OneSource (for general company information).

Access to these databases cost money. Lots of it. I remember balking the first time I saw the purchase price for a Thomson research report ($10,000 for some analyst’s research on an energy company) that wasn’t covered by the firm’s subscriptions.

And these databases are, if used properly, well worth the cost to the institution in question. But sometimes, you don’t need fancy-shmancy million dollar databases. I’m currently doing research which involves finding historical operating margins and I’ve found the following resources to be very useful and also very cheap (as in free) and just thought I’d introduce three of my best friends from this past week:

  • Google Finance – This is a pretty awesome tool. It’s flashy and aggregates an enormous amount of useful information. You get corporate information, stock price data (back to 1980), a quick summary of the stock performance of related companies, links to recent news articles, and a quick aggregation of top-level income statement, balance sheet, and cash flow statement numbers.
  • Reuters – I used to think this site was purely for news (I’m a huge fan of Reuter’s Oddly Enough which I guess isn’t exactly news), but it’s a treasure trove of financial information. Most useful of all are its industry profiles whereby it describes multiple industries, what makes them tick, and industry statistics that enable you to compare how a company is doing relative to its industry. It also lists some information for companies that are not publicly traded
  • SEC EDGAR – Any company report that has ever been filed with the SEC within the last 13 years can be found here using EDGAR, the SEC’s report search engine. This was particularly helpful when I was looking up financials for telecom companies that no longer exist because they either went out of business, changed their name, went private, or were bought out by someone else.

So useful are these sites that I’ve actually created Firefox keyword searches for them (except for Reuters where I still can’t get the keyword search to work). Now I can look up Dell’s financials with a simple “fin Dell” (to search on Google Finance) or “sec Dell” (to use EDGAR).

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“Boiling the Ocean”

In many ways, scientific training crosses over very well into consulting. It trains individuals to think critically about the world around them, to take in all observations for careful analysis, to skeptically consider evidence, to craft and test falsifiable hypotheses, and to find rigor in numbers and computation. It is no small wonder that so many science students at all levels successfully make the jump into consulting.

On the other hand, scientific training also instills within trainees a few trends which run contrary to what a successful consultant needs to be. Science emphasizes thoroughness and depth. Your training is not complete until you know every little detail relating to your field of interest — and quite a bit more about associated fields. It is quite inconceivable to the layperson just how much a grad student has to read just to be able to “tread water” in his or her field, let alone be successful at it. To that end, grad students are not only forced to but strongly encouraged to read broadly and constantly, leaving no stone unturned; no tree missed, no matter how large the forest.

Unfortunately, while this focus on depth can lead to very deep insights and very complete analysis, a consultant rarely has the time to “boil the ocean”, or perform an analysis with a thoroughness and completeness which leaves no room for uncertainty. It is simply not feasible for a single consultant to read every relevant piece of literature dealing with a given client or industry or division or even a product and yet still have time to complete a segment of analysis fast enough for a client team to meet a deadline or be agile enough to switch strategies when necessary.

Instead, a consultant (or anyone in a non-research oriented job, really) has to learn when enough is enough — when there is enough information to make a judgement or perform a piece of analysis but not too little such that the judgement or analysis has no possibility of being reasonable.

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Consulto-nomics

While doing research for a secret internal project, I stumbled across a book, The Boston Consulting Group On Strategy, one of the many books that various consulting firms put out on a regular basis to establish themselves as relevant experts on business strategy. The book itself is a compilation of opinion and analysis pieces by various BCG (Boston Consulting Group) partners from the past including a few interesting pieces by BCG founder Bruce Henderson.

Henderson is interesting in that he is one of the “founding fathers”, if you will, of management consulting. BCG history is full of examples of powerful insights: the Experience Curve, the growth-share matrix, “The Rule of Three and Four”, among others. To this day, the public persona of the firm is one of a puzzle-solving/innovative thinking culture dedicated to solving and analyzing complex business scenarios.

Yet, despite his role at the beginning of consulting, Henderson’s writing is distinctively not consultant-like. Nowhere are the excessive TLAs (three letter acronyms) or use of impressive-sounding but utterly empty sentences and phrases which seem to mark today’s consultant. Instead, he is simple. To the point. Decidedly not long winded.

I like him already.

One of the points that he makes pertains to economists. Henderson makes the argument that economics leaves one very ill-prepared for the business world, because economists deal in abstracted, perfect conditions which bare no semblance to the world. In the business world, there is no perfect competition, or information symmetry, or pure rational agent which the economist often relies on in his or her thinking and theorizing.

I took a course in the Fall semester of my last year of college which dealt with evolutionary game theory, and while we looked at very complex bells and whistles (spatial components, strategies, memory, etc.), at the end of the day we were just analyzing the infamous prisoner’s dilemma, a game with only two possible moves, and it was surprising how complex the analysis could be: it was done with mathematical rigor in a complete fashion with hypothesis testing and reasonably advanced computational analysis.

But, ultimately, it was still just a two-move game (tic-tac-toe, by comparison, is an, on average, 5 move game) with idealized assumptions. The business world doesn’t have two-move games. It doesn’t let you make nice assumptions. It doesn’t give you the time to conduct complete analysis. You don’t have a Cray supercomputer at your desk with hours to code to do a hard numerical analysis. You have a deadline. You have gray areas. You have incomplete data. You have to deal with people and their volatile personalities and emotions.

So, yes, a proof, an experiment, a mathematical model — these are certainly beautiful and interesting. But, you just can’t do that in business. You have to prioritize. You have to manage your time. You have to work together to tackle a big, amorphous task. You have to make guesses. You have to sometimes leap before you look. You have to beg, to intimidate, to coax, to laugh and to cry and to smile.

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KABOOM!

This just in (hat tip to The Chem Blog):

BEIJING: In the first such case, a Chinese youngster was killed when the battery of his Motorola cell phone exploded, police in northwest China’s Gansu Province confirmed on Wednesday.

The accident occurred at noon on June 19, when welder Xiao Jinpeng was working at the Yingpan Iron Ore Dressing Plant in Jinta County, Gansu Province.

The cell phone, a genuine Motorola, in his chest pocket suddenly exploded and Xiao, 22, died at a local hospital after emergency treatment failed, commissar with the public security bureau of Jinta County, Bai Shixiong said.

The initial investigation showed the phone battery exploded after being exposed to a high temperature, breaking Xiao’s ribs and penetrating into his heart, Xinhua news agency quoted police as saying.

“We haven’t ruled out quality problems with the battery induced the tragedy, but other causes remain possible,” Bai said.

Local police and work safety officers are still trying to ascertain the model of the phone and the battery, and whether they had any quality problems. An investigation report is expected to come out in a couple of days, the official said.

Many Chinese handset users, who are familiar with fake or low-quality accessories, are demanding an immediate reply from relative departments and Motorola about whether the explosion was caused by battery defects or improper use of the phone, the report said.

The local work safety administration temporarily recorded Xiao’s death as a work safety accident as the explosion occurred at the workplace, about 800 km west of the provincial capital, Lanzhou.

However, it is waiting for the investigation results to ascertain direct responsibility. A team of representatives of Motorola are expected to arrive at the site today to help the investigation.

Exploding cell phone batteries were very rare, a public relations official at Motorola’s China branch said. However, Motorola was taking the incident very seriously and would respect the results of the investigation.

Experts said quality defects, frequent overcharging, short circuits and exposure to high temperatures or flammable materials could lead to battery explosions.

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Communicating Answers

How should a company choose what to invest in?

The most logical means of evaluating an investment would be to perform a basic cost-benefit analysis on each investment relative to the others. This is no small task, as with each investment, there is always an element of risk that is difficult to gauge (i.e. maybe sales will jump by 100%, or maybe they’ll tank). There are also more strategic and less concrete benefits and costs which are difficult to assess the value of (i.e. Public Relations, worker morale, etc.)

But let’s say we knew exactly what the benefits in each year would be (i.e. investment A will pay off $10M in two years, $4M in three years, $100M in four years, etc.).How would you evaluate the business choice?

What an economist or a financial accountant will probably tell you is to use some form of Time Value of Money/Discounted Cash Flow analysis to assess the value of each benefit and compare it to the value of the associated costs. The basic principle here refers to the fact that a dollar today is worth more than a dollar tomorrow (because that dollar today can be put in a bank or some other type of investment vehicle and be worth more than a dollar tomorrow). So, Discounted Cash Flow analysis really is just converting all expected costs and benefits to “today dollars” so that we can actually add them up and compare them.

This analysis explains why a company that can always deliver $100 of profit year after year isn’t necessarily worth an infinite amount of money (because next year’s $100 isn’t worth as much as this year’s, and the following year’s is worth even less, and so on).

One common variation of this analysis used by finance types is the Internal Rate of Return (IRR), which performs the exact same Discounted Cash Flow analysis above but summarizes it up in one value which is effectively the interest rate a bank would have to be willing to pay in order to make the costs and the benefits net out to zero (in today dollars). So, a good investment will have a higher IRR because it takes a much higher interest rate at a bank to make someone not want to invest in that opportunity.

To my surprise, however, I learned in training that there are whole groups of firms who do not use either method in evaluating business/investment prospects, but use the much more crude and less technically valid Cash Payback Period. The Cash Payback Period makes no specific allowances for the Time Value of Money (the idea that the value of a dollar tomorrow is less by a factor related to bank interest rates) and is simply the period of time required for a firm to earn enough profit to pay back the initial investment. This technique thus biases the firm towards investments which provide a quick and high cashflow and away from potentially more profitable investments which are slow to return cash (i.e. more long-term Research & Development).

So, big question, why would anybody use this? One possible reason is that smaller firms (who need to worry about paying the bills) or departments without ultimate budget authority may value early cash flow a great deal more. 

Another reason, however, seems to be that Cash Payback Period is much easier to calculate and understand. Never mind that it is less accurate (and in some cases not accurate at all), it’s much easier to explain how “in four years, we recoup all costs” than it is to explain “if we discount future cash streams at an annual rate of 12% then the present discounted value of the investment becomes zero”. 

What that means, practically, for anyone in the business of giving advice is this: being correct is not enough. You also have to make sure you communicate in terms that the client can understand.

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All Roads Lead to . . .

If you had told me four years ago that I would be working in consulting, I would have responded with a basic question: “What’s consulting? And, why am I doing it?”

As recently as a year ago, I was positive that I would be pursuing a PhD in Systems Biology (or something similar such as Computational Biology or Mathematical Biology). The field was deeply exciting to me. It was (and still is) full of untapped potential. I spoke eagerly with professors Erin O’Shea and Michael Brenner about how I could prepare myself and what I could study. Having worked in the lab of professor Tom Maniatis for almost two years at that point, and having been exposed to the joys of doing collaborative scientific work, I was fairly certain that being a graduate student doing research full-time was what I wanted.

With almost a sense of smugness, I looked down at the more “business-y types”. I thought what they were doing lacked rigor, and was hence not worthy of my time. I believed it was mere mental child’s play compared to the rigor and intellectual excitement of trying to decode complex gene networks and how invisible molecules could determine whether we were healthy or sick.

So what happened? Well, I can think of four main reasons. The first and most immediate was that I was part of the organizing committee behind the 2006 Harvard College Asian Business Forum, which was the HPAIR (Harvard Project for Asian and International Relations) business conference. The experience was very rewarding and eye-opening, but more than that, it was an impetus to follow the paths of the many excited delegates, many of whom were early professionals looking into business jobs like consulting and finance.

The second factor was a growing awareness of what life in academia meant. Yes, I was well aware of the struggles that junior academics had to go through on their way towards tenured faculty. But at the same time, towards the end of the summer, with several experiments facing  setbacks and the doubts in my mind over my ability to be a good researcher, I began looking to other alternatives.

The third consideration stems from the fact that I have always been interested in application. My approach towards science has always been rooted in searching for possible applications, whether commercial or for the public interest. Even the reason that I chose to specialize in Systems Biology stemmed from a belief that traditional molecular and cellular techniques will face sharply diminishing returns with regards to finding the causes and cures for diseases. Having lived almost all of my pre-college life in the Silicon Valley, I was geared to seeing fruiftul science as science that moved from “bench to bedside” and my highest aim was to transition brilliant ideas to profitable ones.

The final factor is of course that it’s always exciting to try something new, especially something competitive — and even though I cursed recruiting at times, it could feel like a fun competition. Although I did not expect to receive a job offer from any firm, I did better than I expected in the interview process and received an offer which I simply found too interesting to turn down.

All roads, at least for me, led to consulting.

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