Hi there
Is anyone here familiar with the revenue model of BCG DV? Do they charge a fee for building ventures for clients? Or is their staffing cost absorbed by BCG DV and they take an equity stake in the ventures they build with clients?
Many thanks
Hi there,
Great question! BCG DV is a venture builder that typically partners with established companies to develop new innovations and spin them out into fully fledged businesses. As with any venture builder out there, BCG DV takes an equity stake in these new businesses, shared with the companies they partner with.
The partner companies will typically provide access to data, resources, industry experts, and initial investments - while BCG DV will bring together a team of strategists, designers, product managers, and engineers to build, launch, and scale the new business.
Through this equity model, BCG DV can participate in the potential upside of the new business, while also putting “skin in the game” by taking part in the risk associated with it and providing a certain guarantee on the outcome. This is opposite to the traditional consulting fee model where firms typically charge a “fixed” rate dependent on deliverables with limited guarantee on outcomes/impact.
Hope this helps!
Rami
Hi Gootash,
Rami gave an excellent answer here. By the way, this is a fantastic networking question to ask! Gets the conversation going and shows genuine interest in the business.
Hi there,
One point to add here - since this is such a fast growing practice, the arrangements they have with clients tend to be quite flexible and constantly evolving. Rami gave a great overview of the default option, but the arrangements are also negotiated on a case by case basis.
Best,
Cristian
Hello!
Can´t be Rami here, he gave you the best possible answer!
Use this to network also, although careful, since it sounds a bit as if you are trying to understand the business model and replicate it ;) ;)
Cheers,
Clara
Expert case by
Indeed Rami, yours is an excellent response and is also my I understanding of the VB business model.
What I find interesting is the mothership’s willingness to invest in this type of business model vs the traditional fee income consulting model. In particular, the eschewing of short termism and the willingness to risk balance sheet on an investment return that may or not eventuate.
I understand Bain has recently established a VB function. Given their experience in Bain Capital I suspect the investment model of a VB practice may come more naturally for them. I am also aware of McKinsey Leap.
I have a few follow on questions if you don't mind:
(i) Is there something about the BCG philosophy that they had the entrepreneurialism and risk appetite to invest in a proposition like BCG DV years before any of the other MBBs and big consultancies?
(ii) Do the MBB’s and major consulting firms have CVCs?
(iii) Are you also familiar with the McKinsey Leap model? Would you expect it to be similar the BCG DV model with McKinsey being a co-investor with the client?
As an aside question, given the geographically distributed partnership model, how is the balance sheet managed when an MBB decides to make an acquisition? e.g. acquiring a company providing advanced data analytics capabilities.
A lot of questions I know. As Ian says below, these are best served as networking questions but I’m interested to get some preliminary understanding of these topics.
Many thanks
- key successes: BCG DV launched over 200+ businesses since inception by partnering with 400+ Fortune 1000 companies. A few noteworthy examples: (1) Fern Health: partnership with Grünenthal in Germany to roll out a digital solution for musculoskeletal pain management; (2) heycar Spain: partnership with heycar Group, Volkswagen Financial Services, Volkswagen AG, Daimler Mobility AG, and SEAT to roll out a marketplace for quality used cars; (3) Beema Insurance: partnership with ENOC and Axa Insurance in UAE to roll out a usage-based car insurance program
- BCG philosophy: for years there has been increasing pressure from clients for strategy consultancies/think tanks to be more involved in implementation and drive tangible impact. Since, many consultancies have already transformed their offering, by setting up dedicated implementation-focused functions (e.g., BCG Platinion, McKinsey Implementation...). BCG DV's purpose is also in line with this approach, by tackling the gap in corporate innovation where established companies have the required assets/expertise/investments but lack the agility to drive new innovation. BCG saw the opportunity to address that gap to further drive one of its core principles "Drive inspired impact"
- consultancy CVCs: more consultancies are looking into these models; e.g. McKinsey launched Leap, Bain launched Next, EY launched VentureBuilder, etc...
- McKinsey Leap model: I'm not too familiar with it given my background with BCG, I would assume they would follow the same model as BCG DV; but would leave it for a McKinsey-er to confirm
- acquisition integration: unfortunately I don't have an answer to this; would be an excellent question to ask partners during networking events or interviews!