Why Outsourcing Strategy is Killing Your Company’s Future

Here's why your organization needs to build strategic thinking as an in-house competitive advantage

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Last month, a Fortune 500 tech company paid a top strategy consultancy $2.34M, hoping for a breakthrough strategy to guide them through the next two years.

But today, that engagement’s slick,147-page strategy deck is collecting digital dust on their shared drive like any other PowerPoint.

Sound familiar?

Seeking the advantage

Companies invest in strategy consulting, constantly looking to gain a competitive edge.

But as we’ll see, what they get frequently falls short of what they need.

Pulling back the curtain

A team I was on once hired a global consulting group a few years back to run a comprehensive strategy reboot.

After a few weeks of discovery, the group returned with a strategy they sold to executive leadership. They claimed insight into one specific area we weren't yet exploiting, and their revenue projections promised exponential growth curves. While some leaders were initially skeptical, we approved and moved into the "execution" phase.

Over time, the experienced partners faded into the background like old friends who'd grown apart. 

While still invited to key meetings, their appearances grew increasingly rare.

This isn’t “our” strategy

After discussing what I was seeing with friends who had also worked with this firm, it became clear the strategy we were following had been more or less copied straight from that of another company in a different industry on the other side of the globe. 

While the other company wasn’t a direct competitor, it represented a gray area, bordering on an ethical dilemma—how could this company provide the same basic strategy both to us, as well as this other company?

And what was stopping them from telling our direct competition everything about our strategy?

Has this, or anything similar, has happened to you? 

Here are four signs to look out for that you may have missed.

Four Fatal Flaws of Strategy Consulting

At its core, there are four main reasons companies aren’t always getting their money’s worth from the traditional strategy consulting business model:

1. The Playbook Problem

2. The Execution Gap

3. The Knowledge Drain

4. The Legacy Digital Transformation Trap

Let’s look at what’s really going on behind each.

1. The Playbook Problem

As my story showed, the custom strategies you get from these engagements aren’t “custom” at all. 

The consultant pulls an existing strategy deck off the shelf from their giant library and runs a quick “search and replace” for industry verticals, competitors, geography, etc.

Developing your strategy this way is bad for many reasons, but the most important one is that it ignores the critical company, tech, and industry-specific aspects of effective strategy creation.

Sometimes, the curtain gets pulled back, revealing the consulting industry’s underbelly.

South African debacle 

In 2015-2016, McKinsey was found to have copy-pasted the turnaround strategies for two South Afrrican state-owned agencies, utility Eskom and South African Airways.

Astoundingly, the South African government paid more than double the going rate for this privilege, an eye-popping $20 million a month over six months.

Worse, the execution team deployed to the South African government came from a subcontractor at a level far below McKinsey’s top talent.

Nike’s crash & CEO ouster

More recently, McKinsey used one of its playbooks to advise incoming Nike CEO John Donahoe to slash costs and rely more on data for decision-making.

Following this guidance, Donahoe pivoted Nike to a “Direct to Consumer” (“DTC”)-led model, severing most of Nike’s valued wholesale reseller relationships. He also centralized marketing and made it entirely digital and data-driven.

The result?

The global sports giant’s share price dropped by a third, and its market capitalization shed over $25 billion in a single day, leading to Donahoe’s ouster in September 2024.

2. The Execution Gap

One of the more damaging downsides of hiring a strategy consultancy is the inevitable bait-and-switch of high-level vs. less-experienced consultants.

For their business model to work, consultancies only send their best people out to client engagements to close the sale. Once the contract is signed, they flood the client site with an army of young, inexperienced people to “execute” the strategy. Many of these fresh recruits frequently lack basic skills and critical industry knowledge.

When strategy questions do come up, recent recruits avoid them or tell you they’ll get back to you, which wastes precious time trying to track down the more seasoned partners.

Don’t bother looking for them—those top-level consultants are off closing another engagement over at your competitor’s.

And now there’s a third, even more critical problem looming in the background, one you’ve now made for yourself.

3. The Knowledge Drain

Consistently relying on consultancies has created a much larger problem—an ever-deepening form of organizational dependency.

All it takes is a security breach or a bold, unexpected move by a competitor, anything that prompts the slightest dip in the stock price, and leadership becomes fearful and uncertain, second-guessing every next move. In these cases, the board naturally advises the executive team to scurry back and seek “expert” guidance from “the pros.”

So the cycle of mistakes, dependency, and uncertainty becomes a self-fulfilling prophecy.

Out of shape

After years of relying on others for your strategy, you’ll begin to experience the costliest result of not building internal strategic capabilities. 

By letting your own strategy and innovation abilities atrophy, you’ve lost the opportunity to build innovation and competitiveness from within.

And if we bring the strategic enabling power of technology into the mix, the situation looks even worse.

4. The Legacy Digital Transformation Trap

The stakes have never been higher in today’s Gen AI-powered landscape.

As software has “eaten the world,” these seismic changes are playing out in every industry. Like it or not, every company must face the fact that they’re a technology company.

Satya Nadella encouraged every enterprise to build their own, in-house “tech intensity,” given the importance of software as a strategic differentiator.

But you can’t rely on this level of “intensity” from the consulting industry.

Lagging tech playbooks

Consultants' playbook-based approach typically causes them to push a standard set of legacy Enterprise digital IT transformation solutions they've successfully sold for years to other Enterprises, regardless of industry vertical or size.

For the most part, strategy firms simply aren’t equipped to design custom-tailored emerging tech strategies. They frequently miss crucial nuances of a company’s tech stack, engineering culture, and readiness to embrace emerging tech opportunities, given potential legal or regulatory constraints. 

They’re just starting to grasp how the current realities of cloud, AI, and DevOps have exploded the ways tech can create strategic opportunities. 

Netflix's Strategy Disaster

In 2011, Netflix outsourced their strategy, leading to the infamous Qwikster debacle that cost them 800,000 subscribers and 77% of their stock value.

By coming dangerously close to disaster, they learned their lesson the hard way.

As a result, they built their own in-house strategy team that has gone on to drive scores of industry-leading tech and user experience innovations like their recommendation engine and original content strategy.

Real-World Consequences

These missed patterns play out consistently across consultant-led tech initiatives:

• Generic “lift-and-shift” cloud migration strategies that ignore compliance, microservices architecture or specific application constraints

• Gen AI implementation approaches lacking governance or data quality considerations

• Edge computing recommendations missing critical latency requirements

• Blockchain proposals that overlooked fundamental scalability challenges

In this environment, strategic technology decisions need to come from your own, in-house team of product, tech, UX and industry Subject Matter Experts (SMEs). They’re the ones with the best understanding of your customers, your business, and your technology.

Effective business strategy depends on bringing the right emerging technologies to bear to solve your unique customers’ problems in ways that drive value for your business.

Need another reason why you need to build your own strategic capabilities?

The power of strategy

According to Roger L. Martin, strategy is the only activity that creates revenue.

Everything else your company does is a cost.

“Customers decide what revenues to send to the company and whether they do so or not is a function of the quality of the company’s strategy. 

Strategy is the only thing that compels customers to send their sales dollars.”

Roger L. Martin, Strategy & Time

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The New Strategic Capability Revolution

Strategy must become one of your core competencies if your company is to create a new future and achieve its potential to win for your customers.

Don’t be distracted by people who claim strategy isn’t necessary or that what’s really important is great “execution.”

Or others who dismiss strategy's importance by saying things like “culture eats strategy for breakfast.” (Whatever that’s supposed to mean).

There’s a clear and compelling bottom-line reason you should build your own internal strategy capabilities.

P&G’s strategy renaissance

There's no better example of building strategy in-house than Cincinnati consumer-packaged goods (CPG) giant Procter & Gamble.

From 2000 to 2009, P&G, under CEO AG Lafley (together with his special strategy advisor Roger L. Martin), created a strategy “renaissance” through a concerted effort to develop strategy as a core capability.

Beyond producing 10% of S&P 500 CEOs, Lafley’s strategic capability-building initiative at P&G delivered spectacular bottom-line results:

• P&G sales doubled, and profits quadrupled

• Earnings per share increased 12 percent per year

• P&G’s share price increased by more than 80 percent in a decade that saw the S&P 500 go down overall

• Company market capitalization more than doubled, placing P&G among the most valuable companies in the world

Lafley, A. G.; Martin, Roger L.; Playing to Win: How Strategy Really Works (p. 253). Harvard Business Review Press. Kindle Edition.

While this kind of culture, expertise, and bottom-line results take years to build, there’s no reason your company can’t already start growing your own competitive in-house strategic talent.

The right guidance

But how to get started on this journey?

Expert strategy consultants can help, but only if you hire them specifically to come in and build out your strategic capabilities.

But you may not have seen this kind of service much, if at all.

Why is it so rare? 

Great business model..?

Because as a consulting business model, it absolutely sucks.

The better they do their job, the faster you’ll no longer need their services.

This completely eliminates any opportunity for pricey, long-term, multi-year contracts or commitments.

Yet this is exactly the kind of guidance you’ll need if you don’t want to be beholden to your consultancy forever like some addict to their drug dealer.

And it’s the only way to break free and create your own business future. 

Who You Need Instead

If you’re going to build your company’s strategic capability, you’ll need the right consultancy that excels in teaching, coaching, and change management.

It’s a radically different approach from handing you a strategy and sending in “the troops” to execute it.

Success isn’t measured by delivering a single initiative, but by developing the skills, culture, and habits underlying strategic thinking.

Done well, their job is to come in, educate, and up-level your people.

And the right strategy consultant can be indispensable as part of your strategic strength-building program.

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Four Pillars of Strategic Capability Building

Establishing your own internal strategy potential might seem daunting at first.

But you can make it approachable by starting with these four tracks, which I’ve condensed into my TMPC framework:

1. Training and Education

Improving strategy means unlearning some bad habits and learning the elements of great strategy:

• Leading strategy design frameworks

• The importance of client-centricity in centricity

• The role of qualitative and quantitative insights

• How technologies can be your strategic lever

2. Modeling what “good” looks like

You probably already have a few people who are natural strategists in your organizations. Look for people who:

• Aren’t always overly busy

• Always think first from a customer perspective

• Are effective and question accepted assumptions 

• Understand how your company makes money

They might be senior business or technical managers, product managers, or even senior engineers.

These people will lead by taking the new frameworks you’ve learned and sharing how they use strategy effectively in your organization. 

3. Practice and Application

People learning new skills need to practice them in low-risk ways. The same is true of strategy. Give groups of new strategy trainees small internal challenges to address strategically first, and design a new strategy.

They’ll need:

• Access to data and systems

• A clear timeline

• Help thinking through the problem and support

• Permission to fail, look back, and learn from their mistakes

You’ll also want to stand up a “Strategy Community of Practice” where learnings can be collected and shared.

4. Coaching and Mentorship

Using a mix of internal people and external coaches, you can offer additional support through

• Ongoing shadowing and coaching 

• Pair newer people with more experienced strategists

• Get ongoing feedback on their strategic thinking and choice-making

As with user experience or product thinking, the goal isn’t to have strategy remain isolated within a dedicated “strategy team,” but to weave a culture of strategic thinking into the fiber of your company’s DNA.

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Takeaways

If you take only one thing away from this article, it’s that you don’t have to be stuck relying on others for your strategy.

Don’t become another company that spent millions on a strategy that wasn’t made for them and has little chance of helping them succeed.

Building your own strategic capability in-house can be one of the biggest “bang for your buck” changes that can have the greatest impact on your company’s present and future success.

The next time a consulting firm tries to sell you a “quick fix” strategy, remember: 

You're not just buying a “fish” to eat for today. You're missing out on an opportunity to teach your entire organization how to “fish” so you can control your own destiny into the future.

The choice is yours: Keep renting your strategic thinking, or start building your own strategy muscle  in-house as your unique competitive advantage.