Imagine the offices of The Boston Consulting Group (BCG), the $5b consulting firm . You may visualize people drawing on white boards, debating vigorously in meetings, and crunching numbers. And you’d mostly be right, with one exception: the Manhattan Beach offices of BCG Digital Ventures (BCGDV), BCG’s corporate startup builder, incubator, and investing vehicle. Here, Sublime Text conquers PowerPoint, and you’re as likely to see a deep V-neck as a Brooks Brothers coat.
BCGDV launched in response to the threats and opportunities of digitization, piloting a new business model and operating model launching digital startups for clients, developing internal digital IP, and making venture investments. As it scales, it’s opening a new means for corporate titans to participate in the digitized future being created by startups and tech companies.
An opportunity and crisis
Prior to BCGDV, BCG partners had a problem. As Silicon Valley tech rose to stratospheric valuations, established industry leaders felt increasingly threatened by the agility of startups and the potential for displacement. Jamie Dimon’s Q2 2015 letter to J.P. Morgan shareholders sums up these sentiments best: “Silicon Valley is coming.” 
Solving this particular issue for clients would require a business and operating model radically different from traditional BCG projects: enter BCGDV.
Products, startups, and investment, not recommendations
BCGDV’s first innovation was in the consulting business model itself, both in terms of the actual “product” offering, and in the economics of its delivery.
While BCG traditionally used variations of a fees-for-services model, digitization presented new opportunities for BCGDV: venture investment and productization of BCG IP. These business models complement the BCGDV customer promise of building and launching digital startups that drive growth, and co-exist with BCG’s traditional fees-for-services model.
- Building and launching startups is the core of the BCGDV offering. While specific companies are confidential, BCGDV engages beyond strategy in the full startup lifecycle, from ideation, to product development, and commercialization. A successful BCGDV project results in new ventures, not recommendations.
- Investments in digital startups provide BCGDV with access to cutting-edge digital technologies that are of strategic relevance to clients. Takt, for example, is a customer analytics and personalization startup, in which BCGDV led the $30m Series A investment . Personalization is a hot topic in many client industries – retailers, financial services, and more – and as a result of this investment, BCG’s expertise in personalization is greatly enhanced. To broaden its investment capability further, BCG became the partner and an anchor LP for B Capital Group, a new $143m venture capital fund led by Raj Ganguly and Eduardo Saverin .
- Productization of IP is the final way in which BCG leverages digital to better serve clients. Through project experience, BCG identifies common problems that can be better solved with technology solutions, and productizes them. For example, BCG built a digital platform to help clients make optimal pricing decisions based on its experiences in pricing engagements.
Going from slides to software, however, is not trivial, and necessitates a significant evolution in BCG’s operating model in terms of recruiting and people processes.
A new operating model for new people
BCGDV has grown like a weed, from zero to 500+ people in two years, in functions that previously did not exist at BCG: product management, engineering, and design . Hiring and retaining this talent is a major challenge. Used to recruiting grad students, BCG has developed different recruiting approaches, for example working with agencies and targeting industry experts rather than new graduates.
BCG has also developed new career mechanisms for this talent, with significant implications for employee turnover and utilization. Unlike the traditional model, BCGDV doesn’t always operate under a strict “up-or-out” policy, because of the ongoing need for expertise in niche functional topics. BCGDV also reworked the BCG staffing model to allow junior staff to work across multiple projects, reflecting, for example, that a solution architect might not be needed in a 100% capacity.
Ultimately, BCGDV startups must compete with their Silicon Valley cousins. BCGDV can take two concrete actions to hedge its eventual success:
- Coordinate ventures across clients – By virtue of relationships, BCG is uniquely positioned to develop platforms that coordinate multiple stakeholders in an industry (e.g. comparison sites like Kayak). BCGDV should identify clients with aligned interests and help them pool resources to launch the digital business that will disrupt them – before someone else does
- Involve outside venture funds – Scaling a true rocket startup requires hundreds of millions to billions in investment, capital beyond what BCG or its clients alone can provide
Time will tell who will be the ultimate digitization winner in consulting, but BCG is gearing up for the long haul.
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 Forbes, America’s Largest Private Companies, http://www.forbes.com/companies/boston-consulting-group/
 USA Today Money, ‘Silicon Valley is Coming’ Warns JP Morgan CEO, April 9 2015, http://americasmarkets.usatoday.com/2015/04/09/jp-morgan-warns-silicon-valley-is-coming/
 Venture Beat, Takt Raises $30m Series A Funding Led By BCG Digital Ventures, July 25 2016, http://venturebeat.com/2016/07/25/takt-inc-raises-30-million-in-series-a-funding-led-by-bcg-digital-ventures/
 Finsmens, Eduardo Saverin’s Venture Capital Firm B Capital Group Closes Fund, at $143M, May 20 2016, http://www.finsmes.com/2016/05/eduardo-saverin-s-venture-capital-firm-b-capital-group-closes-fund-at-143m.html
 LinkedIn Company Pages, BCG Digital Ventures, https://www.linkedin.com/company/bcg-digital-ventures
Credit for images goes to Glassdoor, Feelgrafix, and BCG Digital Ventures
Blog post written based on publicly-available information and reflects the opinions of only the author