Bain & Company, Inc.: Growing the - Fred Reichheld€¦ · Bain & Company, Inc.: Growing the...

Harvard Business School 9-391-069September 28, 1990

Charles M. Ormiston, MBA 1990, prepared this case under the supervision of Professor Michael Y. Yoshino as the basis forclass discussion rather than to illustrate either effective or ineffective handling of an administrative situation.

Copyright © 1990 by the President and Fellows of Harvard College. To order copies or request permission toreproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go tohttp://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system,used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying,recording, or otherwise—without the permission of Harvard Business School.

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Bain & Company, Inc.:Growing the Business

Bain! We’re going to grow forever,And if they might think it’s a lie,We’ll keep on working togetherAnd then kiss McKinsey goodbye.

- Sung to the tune of Fame

The refrain was one of many that the “Bain Band” had played to enthusiastic audiences overthe years. The partnership Bill Bain founded in 1973 had participated in the growth and performanceof over 150 corporations in 50 countries around the world. As presented in Exhibit 1, Bain &Company clients had outperformed competitors by a significant margin. Their clients’ success hadallowed Bain to emerge from the pack of “strategy boutiques” spawned in the 1970s to become a top-tier management consulting company with a global network in 1990 of eleven offices employingabout 1,400 professional and support staff.

The competition, however, had not been standing still. McKinsey and Company hadestablished 42 offices in 23 countries. The Boston Consulting Group, a laggard in the early 1980s, hadbeen showing signs of a resurgence. And two upstarts, Monitor Company and the LEK Partnership,had been increasing their staffs at rates of 50-100% per year.

As Bain & Company vied for the top position in the competitive top-tier managementconsulting industry, the firm’s partners were evaluating several strategies to compete effectively inthe global marketplace. Should Bain focus on developing its position in traditional “advancedmarkets,” or were “developing markets” a more attractive option? Should Bain rely exclusively oninternal resources to build its international market position, or were external opportunities, likeacquisitions, joint ventures, and hiring well-positioned outsiders, an appropriate way to expand? Underany scenario, how would change affect the strong commitment to “one firm” and “client exclusivity”that had differentiated Bain over the years?

391-069 Bain & Company, Inc.: Growing the Business

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Top-Tier Management Consulting Industry

Top-tier management consulting firms recommend, and sometimes implement, solutions tocomplex problems faced by senior management of large corporations. The top-tier firms charge muchhigher fees compared to other management consulting firms (see Exhibit 2). Top-tier managementconsulting firms had traditionally been called “strategy consulting firms,” but that term had becomeincreasingly ambiguous as most “strategy consulting firms” broadened their practices to includeorganization studies, information technology, etc. The top-tier management consulting firms hadhistorically been generalist practices, but several firms founded in the 1980s focused on specificindustries or practice areas.

Many similarities existed among the top-tier management consulting firms, but they differedin several critical ways:

• Capabilities derived from the location and networking of offices• Marketing of discrete projects versus long-term relationships• Degree of specialization

– Function (e.g., manufacturing, consumer marketing)– Industry (e.g., energy, commercial banking)– Analytical methods (e.g., the growth share matrix)

• Firm culture• Willingness to work for multiple clients in an industry

Competition between firms was seldom driven by price, because the value of tenderedservices and competitive offerings were difficult to predict prior to delivery. As large companiesglobalized, the ability of consulting firms to organize and manage resources in multiple internationaloffices had become an important factor in firm selection.

Economics of the Top-Tier Firms

The cost structures of the top-tier management consulting firms were similar. Professionalstaff, the largest expense, was drawn from the same labor pool: honors graduates of top universitiesand graduate schools. Competition for entry-level professionals forced firms to offer comparablecompensation. According to the 1986 prospectus of Strategic Planning Associates, an Americanmanagement consulting firm: “In addition to leasehold and other basic fixed operating costs,personnel costs are essentially fixed to assure stable and supportive staff development. Evenpotentially discretionary costs such as recruiting and marketing costs, which amounted to 7% of salesin fiscal 1986, are regarded as fixed expenses.” The prospectus also described the pricing of strategyconsulting services:

The strategic planning segment generally prices its services at three and one-half to four times staff salaries. In contrast, large segments of the consulting industrybill services at two to three times staff salaries.

The premium pricing which characterizes the strategic planning segment ofthe consulting industry results from two principal interrelated factors. First, thepotential business rewards to clients from successful strategy assignments can farexceed engagement costs. Second, in order to assist a client in achieving theserewards, strategy consulting firms assemble and develop a highly qualified team ofconsultants with different areas of expertise.

While pricing was similar among top-tier management consulting firms, the key driver ofprofitability, according to a Bain director, was capacity utilization:

Bain & Company, Inc.: Growing the Business 391-069

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In a client relationship-oriented firm like Bain, with a few people managing alimited number of large relationships, capacity utilization is not terribly difficult tomanage. A firm should shift resources between offices to maximize utilization. Iremember a competitor who was turning away business in Paris and had people withnothing to do in London. Morale was the pits in both offices: in Paris because ofoverwork, and in London because there was nothing to do. Six months later thesituation was reversed.

Exhibit 3 provides data on the hypothetical impact of capacity utilization on firmprofitability.

Competition

Bain & Company considered its main competitors to be McKinsey & Company, The BostonConsulting Group, Monitor Company, and the LEK Partnership. Because of the size and scope oftheir global networks, McKinsey & Company and The Boston Consulting Group are described below.

McKinsey & Company, Inc.

Behind McKinsey’s imposing doors on Manhattan’s East 52nd Street arepeople who unabashedly think of themselves as secular versions of the Jesuits, giftedintellectuals uplifting the world of commerce with their vision. Newcomers quicklylearn that McKinsey is not engaged in a “business” but a “profession.” McKinseydoes not work “for” clients, it works “with” them. McKinsey consultants do not goout on “jobs,” they go out on “engagements.”1

Founded by J.O. McKinsey in 1926, much of McKinsey & Company’s initial growth could beattributed to Marvin Bower. The firm was one of the largest management consulting firms, with 1989revenues estimated by Consultants News at $635 million (see Exhibit 2). Early and broad internationalexpansion gave McKinsey a strong competitive position by 1990: 42 worldwide offices, with 57%revenues originating from outside the United States. Bower’s vision during McKinsey’s early yearswas to create a profession, like law or medicine, where objectivity, independence, andprofessionalism were critical elements of the “package.”

McKinsey’s international expansion began in London, in 1959; by 1971 there were 17 officeson four continents (see Exhibit 4). “The firm,” argued Ronald Daniels, former managing director ofMcKinsey & Company, “is the most international corporation currently operating in the world.”2 Tomaintain a culture of “one firm,” McKinsey had developed a variety of systems: exchangingprofessionals between offices, worldwide training programs, multioffice professional developmentseminars, and interoffice personnel evaluations. The integration had not come cheap; Daniels notedin the 1987 Forbes article, “We are the high-cost producer.”

McKinsey’s success was not always assured. Beginning with The Boston Consulting Group,several entrepreneurial “boutiques” targeted the strategy segment of management consulting,challenging McKinsey’s traditional approach and staid professionalism. Observed Michael Porter ofHarvard Business School in a 1979 interview:

McKinsey has been marketing people, not concepts, and a reputation forexcellence in implementation. It is very much in the Harvard tradition of looking at

1 “We Don’t Learn from our Clients, We Learn from Each Other.” Merwin, John, Forbes, October 19, 1987, pp.122-128.2 This comment was made during a November 1989 class discussion at Harvard Business School.


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each case as unique and being skeptical about generalizing on key issues. But, partlyas a result of BCG’s success, managers are very interested in concepts. BCG has hadsomething specific to say to people, rather than having a client betting on itscompetence.3

Unlike several competitors, McKinsey successfully adapted its practice to meet the threat ofthe strategy boutiques. One initiative was the launching of “centers of competence”—ranging fromcorporate finance to manufacturing logistics—to codify and market its expertise. In a foreword to theSpring 1989 25th anniversary issue of the McKinsey Quarterly, the firm’s managing director describedMcKinsey:

In theory, each issue of the Quarterly ought to be six inches thick. Last year weundertook 1,450 engagements for 734 clients. The challenge for us is to generalizefrom this huge body of experience, store the lessons we gain in our institutionalmemory, and apply them. In addition, almost all of us are involved in one or more ofour 25 industry and functional practices; not as specialists but as generalists trying tobuild depth and capture experience others of us can tap.

The Boston Consulting Group

Founded in 1963 by Bruce Henderson, a former Arthur D. Little consultant, The BostonConsulting Group was the first large management consulting firm to specialize in strategy consulting.Recognized for its intellectual leadership, BCG was responsible for two major conceptualbreakthroughs of the 1960s: the “growth-share matrix” and the “experience curve.” In 1988 a BCGpartner’s Harvard Business Review article on “time-based competition” was heralded as a new advancein conceptual thinking.4

In 1984 BCG had 160 significant clients and about 350 professional staff.5 By 1990 BCG haddeveloped a strong international network, with 14 offices in 9 countries. The firm’s non-U.S. officeswere responsible for about half of BCG’s total revenues. Long-term growth had averaged 15-20%since the firm’s founding, although growth in 1988 and 1989 had exceeded 25% annually.

A 1989 recruiting brochure described BCG’s emphasis on international experience:

The Boston Consulting Group encourages its consulting staff in Europe andJapan to spend a portion of their careers in the United States and urges U.S.consultants to do the same abroad. This commitment to staff development providesprofessionals with a wealth of cross-cultural business experience and helps the firmmaintain a common culture, practice, and set of uniform standards worldwide.

In 1987 BCG established six worldwide practice areas: consumer products, corporatedevelopment, financial services, health care, high technology, and operational effectiveness. Twoother practice areas, organization, and information technology, were set up in 1989. To communicatethe firm’s expertise, BCG published the Perspective Series, a set of focused publications privatelydistributed to business executives.

The BCG culture was described by a BCG partner as “respect for the individual.” Animportant aspect of BCG’s organization was a “free-market” staffing system. Although the system

3 “McKinsey and Company: Problem-Solvers,” New York Times, August 16, 1979, p. F10.4 “Time—The Next Source of Competitive Advantage,” Stalk, George, Harvard Business Review, vol. 66, no. 4,Jul/Aug 1988, pp. 41 - 51.5 Boston Globe, May 1, 1984, pp. 25-26 and Journal of Business Strategy, Summer, 1986.


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had been diluted as a result of international expansion, BCG’s partners felt the tradition facilitatedcooperation between offices while maintaining the entrepreneurial spirit of the firm.

As illustrated in Exhibit 5, former BCG professionals had founding roles in StrategicPlanning Associates (1972), Bain & Company (1973), Braxton Associates (1976), and the AllianceGroup (1986). These “defections,” which hampered BCG’s growth in the 1970s, illustrated thedifficulties all consulting firms faced in retaining talented, entrepreneurial professional staff.

Bain & Company, Inc.

Relationship Consulting

Bill Bain and six former BCG consultants founded Bain & Company in 1973 to develop astrategy practice that varied significantly from then-current industry norms. As Bill Bain explains:

The product of consulting firms at the time was the report. In addition, the scope ofwhat was being done by consulting firms was pretty narrow, or if it was broad,pretty shallow. I saw four major flaws in the traditional consulting practices: One,most projects were of short duration. Two, there was little use of data to supportrecommendations. Three, there was little or no attempt to follow through onrecommendations. Finally, performance measurement emphasized a consultingfirm’s internal peer review rather than external measures of success.

As a first step, Bill Bain committed to clients that his firm would not work for competitors.The firm would focus its marketing on pursuing deeper involvement with a limited set of clients. Hedescribed this shift to “relationship consulting”: “Because we don’t work for a client’s competitors,we want to be deeply involved with that client. Our clients, and our relationships with those clients,tend to be large relative to our competitors.” Second, Bain & Company would de-emphasize the“report” as the product, focusing instead on helping the client to implement its strategyrecommendations. Finally, Bain would judge its performance through external measures such as thestock-price performance of its clients relative to industry indices.

This service concept allowed Bain to grow rapidly with a limited number of clients. In 1984Business Week estimated that Bain, with 450 professionals, had a client base of “only 15-20 blue-chipcorporations.” (September 10, 1984, pp. 95-96).

Relationship consulting also created a new marketing situation for Bain compared to project-oriented competitors. Obtaining a client’s commitment to a relationship required extensiveinvolvement by senior Bain partners and corporate executives. But once the relationship wasestablished, partners could focus on the work being performed at the client rather than on marketingadditional discrete projects. As a Bain director noted in a 1986 interview:

We have an advantage over conventional consulting firms, which have to replace60% - 80% of their business every six or eight months. Their senior people spend halftheir time developing new clients. The comparable figure for our management is solow, it is almost impossible to measure.

Commitment to Client Exclusivity

A critical aspect of Bain’s practice was the firm’s unwillingness to work for competitors in“head-to-head combat.” As stated in a 1987 Fortune article:


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In order to guarantee clients a proprietary strategy, [Bain] promised that hisfirm would not work for their competitors. The notion was unique; otherconsultants thought nothing of working for two or more competitors simultaneously.In return for abiding by that restriction, Bain ultimately expected a long-termcommitment from the client. (April 27, 1987).

One difficulty Bain had with its commitment to exclusivity was defining a competitivesituation. A 1989 recruiting brochure provided a guideline for exclusivity:

As you can imagine, defining “competing” and “competitors” is not often asstraightforward as General Motors versus Ford. In gray areas where competitiveoverlap is less clear, it will always be our customer—the existing client CEO—who isthe final judge of whether or not we will work with another company.

One director felt there was another dimension to the issue:

I was consistently surprised at how little prospective clients really cared when wesaid we wouldn’t work for competitors. But from my personal perspective, it wasextremely important. I could not have developed the quality of client relationships Idid if I had not made an undivided commitment to the client. Some of our peoplewere more loyal to the client than to Bain & Company. Believe it or not, I thoughtthat was healthy. If your people are more loyal to the client than to Bain, thecommitment to exclusivity will not create conflicts.

One major impact of long-term, exclusive relationships with large corporations—in severalcases more than 50 professionals were assigned to a client—was the decision to concentrateprofessionals in large offices. It was easier to balance changing client service requirements in a fewlarge offices rather than in a network of small offices.

A “One Firm” Culture

Beyond its reputation for innovation, Bain is famous for the iron discipline and gung-ho spirit of its troops (who are known throughout the industry as Bainies), and for itsextraordinary secrecy. (New York Times Magazine, September 24, 1989).

Another reason for maintaining large offices was the firm’s emphasis on maintaining a singleset of values. Harry Strachan, a former Harvard Business School professor and later a director withBain, noted, “I think you have to understand that Bain, more than any other consulting firm, is onefirm. To create results for our clients, we have to develop a very strong culture. That is easier to do inlarge offices.” Bill Bain added, “A large number of small, localized offices makes coordinationdifficult. They develop their own culture, their own mind-set. Bain values, primarily a singular focuson the client, must predominate. As we go forward, I would be satisfied with slightly smaller officesthan we have now, but on average, I believe we will continue to have larger clients, and larger offices,relative to our competitors.”

“One firm” was a phrase Bain’s management often used, but defining the term was difficult.For Bill Bain and Harry Strachan, it meant a set of values that guided Bain professionals to be single-mindedly dedicated to their clients. To others, the “one firm” concept meant a broader set offunctions, from facilitating multioffice studies to a kind of organization where consultants wereindifferent to which office they worked in, and clients were indifferent to where work was performed.Despite these differing interpretations, all agreed that the “one firm” culture was important.

Because each consulting project was highly customized, the critical success factor in a clientrelationship was the personal initiative of the professionals involved in specific projects. The


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development of these professionals required that senior management be committed to providingquality service, recruiting top people, and sponsoring comprehensive international training. Systemsfor communication and storing expertise were focused on increasing the efficiency of sharinginformation between professionals. Bain’s management also sought to break organizational barriersto communication and flexibility that would hamper the uniform execution of the Bain servicemission.

Promoting a Common Standard of Quality The importance of personal initiative compelled Bainto rely almost exclusively on developing a set of common values and employee capabilities to fulfillits service mission, a codified version of which sat on the desk of virtually every Bain professional(see Exhibit 6). Strachan used his legal background to illustrate Bain’s approach:

Most legal systems are set up to enforce a minimum acceptable level ofbehavior. Below that level, sanctions are imposed. Business control systems basicallyperform the same function.

“Controlling” quality in this way doesn’t work in a firm like Bain. What weare trying to do is to raise the creative excellence of the professional. We want acommitment to higher levels of aspiration, to develop the capabilities to achieve theselevels, and to put in place systems that reward and celebrate their achievement.

Recruiting Top Students Worldwide Another factor in developing uniform capabilities for eachBain office was recruiting top students worldwide. Ann Merrifield, a vice-president in the Bostonoffice, described Bain’s U.S. recruiting program:

We are looking for two things. First, we want the top minds. Second, we are lookingfor team players, results-oriented people who might be a little less academic than youwould find in other firms. These criteria support our focus on implementation andachieving measurable results. The process is relatively selective: in Boston last yearwe had over 8,000 applicants and interviewed about 1,950 people. After threerounds of interviews, we made offers to 98 students.

When asked to describe the critical challenges facing Bain & Company in the 1990s, Bill Bainfocused on only one: “Our greatest challenge is finding and attracting the best people. This is morecomplicated internationally, particularly in Germany and Japan.”

Emphasizing Global Training Programs “Bain is in a people business, where the developmentof employees could be the most critical ingredient to our success. We want Bain to become theacknowledged leader in training its people,” commented a senior partner in 1986, as the firmprepared to inaugurate a two-week training program for associate consultants. The program, knownwithin Bain as “boot camp,” was featured in Lisa Birnbach’s book Going to Work.

One of the first things to make a strong impression [on me] was how thisprogram almost erases the cultural differences among the various offices andlocations around the world. Aside from the spread of the shirt collars and the diverseaccents, it is one world, one culture. Each group is made up of people from thedifferent offices speaking the same language, using the same jargon, sharing frontpage business concerns.6

Another form of training for Bain professionals was offsite “team-building” exercises,generally held at outdoor training schools similar to Outward Bound. An excerpt from the Winter1989-90 Bain Arrow (an employee publication) described one event:

6 “Going to Work: A Unique Guided Tour Through Corporate America,” Birnbach, Lisa, Random, 1988.


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Sixty Bainies from the Munich, Milan, and London offices traveled to the Welshmountains for a weekend of training in team building. Vice presidents, managers,consultants, associate consultants, and support staff participated in this “getawaywith a goal.” Activities such as completing obstacle courses, mountain climbing,bridge building, and canoeing taught Bainies valuable lessons in teamwork,communication and the value of accurate data (as any member of the weekend’sHeadquarters team will tell you).

Ralph Willard, managing director of Bain International, summarized the importance ofinternational training programs in carrying out the Bain service mission:

Core values are necessary but not sufficient to do high-quality international work.People need contact. We have to do everything we can to foster these contacts, likemaintaining a focus on multioffice studies, and forcing training, for bothprofessionals and staff, to be global. Procedures help, but contact is more important.

Fostering Interoffice Communication Because of the team-intensive nature of Bain’s analysis,facilitating communication was a top priority for senior management. Willard reflected on some ofBain’s efforts over the years.

The most critical element of communications is breaking down the barriers betweenoffices. Technology has facilitated this a great deal. We make extensive use ofphonemail;7 in fact, I think we’re one of the world’s largest customers. Right nowwe’re exploring an option to develop an international phonemail system, whichwould allow a consultant to transfer messages between international offices at thetouch of a few buttons. We’ve also installed a videoconferencing capability in eachoffice.

A Boston vice-president commented on the videoconferencing rooms. “It has gotten to thepoint that the San Francisco office won’t even talk to me on the phone. They want to see my face,watch my expressions. It makes a big difference.”

Sharing Worldwide Expertise The main system for storing Bain expertise was an “experiencecenter,” which contained over 10,000 documents chronicling 15 years of work for Bain clients. Anassociate consultant in the Tokyo office described the center:

Every experience center presentation is available on microfiche in Tokyo. When Iperform work for Japanese subsidiaries of American corporations, I always reviewpast projects to evaluate the issues and learn the analytical techniques that have beenused in earlier work. The presentations also give me insights as to the nature of theBain-client relationship.

Because of Bain’s unique commitment to client exclusivity, the firm considered its ability tofreely share information between professionals to be a source of competitive advantage.

Another way of sharing information was “international client days”—annual meetings thatbrought the worldwide management of Bain project teams and client executives together for a day ofdiscussion, planning, and socializing. Finally, the firm had recently sponsored three “centers ofexcellence” for the purpose of recording and communicating functional expertise in advancedmanufacturing, consumer products, and service quality and customer retention. The groups

7-Phonemail® is a Rolm voice message system that allows people to send, receive, forward, and store messages.Bain & Company was one of the first users of the phonemail system.


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conducted seminars, developed videos on “best demonstrated practices,” and served as internalconsultants to case teams and client marketing assignments.

Organizing Internationally by Client Unlike virtually every other consulting firm, Bain wasstructured by client, not by office. At the head of the team was a Bain partner, who maintained arelationship with the CEO of the client and was responsible for the success or failure of any work thefirm performed. Reporting to the Bain partner were a number of managers who were responsible forindividual projects. These managers had horizontal relationships with the client and verticalrelationships with consultants and associate consultants, who gathered and analyzed information andhad their own relationships with client personnel. The client and project “teams” were flexible unitsthat changed according to the requirements and time-frames under which work was performed. (SeeAppendix I for a description of a sample project.)

Strachan commented on the firm’s organization:

There are reasons why a client focus, rather than an office focus, worked better in ourcompany than in other consulting firms. To date, we have managed the firmfinancially as one company. The P&Ls used for bonus calculations were theworldwide client revenues and costs, which were given more attention than officereports. This minimized disincentives to handing off clients or client work to otherprofessionals or other offices. The same was true for moving people. Clients werethe firm’s assets; people were the firm’s assets. Client performance was whatcounted.

But another director focused on the day-to-day pressures that made it tough to implement theone-firm standard:

One thing that always struck me was how difficult it was to get people to accept the“one-firm” idea in practical ways. Take, for example, the need to balance workloadsbetween offices. A 5% increase in utilization has an enormous impact on the firm’sprofitability. Yet there are powerful forces against cross-office team management.Office managers want to know that professionals are available when they market aproject, and can’t speak for other offices as well as their own. They want to build ateam, create consistency, minimize distractions. Any time a London manager wasmanaging teams outside of the U.K. it was a hassle; he or she didn’t know the qualityof the team and couldn’t control the consultants’ share of time devoted to theirproject. And the typical second-year consultant doesn’t like the idea either. He orshe is looking for a reference group, seeking a promotion path and sponsors withinan office.

Role of Country Managers Country managers in Bain performed a dual role, developing andmanaging client relationships as well as taking on office management responsibilities. They could beeither directors or vice-presidents of the firm.

Country managers were measured on target revenue levels, employee development, and theoffice culture. As a result of their increased responsibilities, the variability and potential levels ofcompensation for country managers tended to be higher than for other officers in the firm.

Role of Central Decision-Making Several centralized administrative functions affected Bain’sinternational network: (1) controlling and monitoring the transfer of professionals between offices;(2) developing and distributing “experience center” resources; and (3) supporting internationalrecruiting at U.S. business schools. Strachan also felt that centralized administrative functions wouldeventually play a role, as yet unclear, in auditing the worldwide work for Bain clients, andmonitoring the performance review and promotion policies of each office, particularly at the partnerlevel.


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In 1989 Bill Bain announced the formation of an executive committee, whose task was to setcorporate policy worldwide for the consulting business, coordinate activities between the NorthAmerican and international consulting practice, and oversee the financial structure of Bain &Company, Inc. Bill Bain offered his view of the future:

As we get larger we will have to delegate selling and office development to anew generation. This means we will probably have to put in place systems to obtainaccountability and to provide feedback for allocating resources. Right now a taskforce is looking at this very issue.

At some point, we may have a lot of little P&Ls. We’ll probably overshootfirst and then reassess. Until we go too far, we won’t know if we’ve gone far enough.I can say that we will not be swimming upstream. If we are clearly focused on whatwe are in business for, and you have the quality of people we do, the “forces ofnature” will take care of the control issues. The culture of “value for the client” and“performance” does not leave much room for politics.

International Expansion

Bain & Company opened its first office outside the United States in London in 1978 to servean American client with a significant presence in Europe. In 1979 John Theroux (Harvard MBA,1975), an American, was appointed managing director of the London office, and was responsible forBain’s activities in Europe. By 1980 the London office was working for a large European bank. In1981 a British consumer products company was added and in 1982, a British conglomerate. In 1982Bain opened an office in Munich, followed by a 1985 office opening in Paris. Bain’s growth in Europefrom 1979-1986 exceeded 75% per year, as Bain achieved the number-one position in the British andFrench markets (measured by revenues). The development of new offices in Europe was relativelyslow, reflecting the conservative strategy of Theroux. In 1986 Theroux became chairman of BainEurope, and Willard was transferred to Europe as the managing director. In 1987 Willard andTheroux took joint responsibility for all international consulting operations, including Japan.

Until 1989 the Munich office had not grown as rapidly as the other European offices, whichseveral Bain partners attributed to McKinsey’s strong defense of the German market. Therouxdescribed the situation:

In most markets, McKinsey was a sleeping giant; they could have done a lotmore than they did to block the growth of BCG and Bain. In Germany, theydefended their turf more aggressively.

The German business environment is also very different from and in someways more difficult than the British or American markets. Company governance isdifferent. The Vorstande are democratic, collegial management committees that runmost German companies by consensus. It was difficult for the speaker of a Vorstandto step out of the norm and pick a new firm like Bain.

Finally, it is extremely difficult to develop a strong German staff without alocal office. Few Germans go to business school. The good ones at Germancorporations are loyal to their firms and rarely leave Germany. It’s a tough market tobreak into.

On the other hand, the Paris office has quickly achieved the leading positionin the French market. I think Paris has been such a big success because we resistedthe pressure to open an office in Paris until we had developed several good client


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relationships. We marketed from a position of strength because we were so busy inLondon. When we finally opened an office, we balanced the utilization levels inParis with our staff in London, avoiding the normal peaks and valleys of a start-up.

The Tokyo office opened in 1981 to meet the needs of a U.S. client with a joint venture inJapan. During the next several years the office performed what Willard described as “telexconsulting”—collecting data on the Japanese market and Japanese competitors for American andEuropean clients. By 1986 the office had reached about 30 staff: 20 Japanese and 10 Americans.Capacity utilization was high due to the significant demand among Bain’s clients for information onthe Japanese market. However, the Tokyo office had no Japanese clients. A professional with Bain atthe time described the office:

In the early years, Bain Tokyo had a difficult time performing relationship consultingservices for Japanese clients. Because there were no Japanese managers, and most ofthe American managers could not speak Japanese, Bain could not involveprofessionals at all levels of the client organization, which is essential for this type ofwork. Without Japanese clients, it was impossible for us to develop the expertisenecessary to gain a competitive advantage in the Japanese market.

According to Willard, the critical turnaround occurred when Masatake Ushiro, a graduate ofTokyo University and the Harvard Business School, was recruited from a private consulting practice.Ushiro, a former partner at McKinsey in Tokyo, was described by Willard as “a local guy who couldjudge local quality.” Ushiro discussed his first two years:

I had two objectives: to develop a first-rate Japanese client base and to attainthe highest standard of quality for management consulting in Japan. The two are notunrelated. In the embryo stage, foreign multinationals tend to focus on the“information gap” between the headquarters’ perception and the reality of localmarkets. Filling this “information gap” has been a significant part of our work forthese clients.

This “information gap” is much lower for Japanese companies (and“localized” multinationals). As a result, Japanese clients demand complex analysis,insights, and action plans from the very beginning of our relationship. By providinga full range of consulting services to Japanese clients, we raise Bain’s ability to helpnon-Japanese clients.

To develop high-quality local staff, we employed top people from industryand the best universities, started a series of training programs (including voluntarySaturday sessions), challenged professionals with full-scale Japanese clientrelationships, and rotated people to the London and San Francisco offices. Our staffhas done excellent work in the other Bain offices as well as in Tokyo. Last year wepromoted four Japanese professionals to manager.

The transition was not made through Tokyo’s efforts alone. We havereceived the endorsement and warm support of other Bain offices (and officers)throughout the development period. Bob Maginn has been doing an excellent jobmanaging our practice for non-Japanese clients. Through his and others’ efforts, BainTokyo is now fully integrated into the firm’s international network. As a result, wenow have a good balance of 50% foreign clients and 50% local clients, most of whichare in the “trillion yen” class.

In spring 1989 Bain announced a joint venture with Cuneo & Associates, a startupmanagement consulting firm founded by a former director of McKinsey’s Milan office. The jointventure, which included 15 former McKinsey professionals, was considered a major coup for Bain’s


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international practice. Bain added professionals with an international reputation, a consultingpractice with a dozen major Italian clients, and a senior management team that contributed to Bain’spractice in other countries. By 1990, Bain’s business in Italy had expanded to 50 full-time professionalstaff.

The Toronto, Sydney, and Brussels offices were opened less than a year later. Each office fitdifferently into Bain’s expansion strategy. Willard discussed the offices:

The decision to go to Toronto was not very difficult to make. We already hadseveral clients in Canada. We felt that establishing Bain as a Toronto “insider” wouldincrease our business there. And we had six Canadians in London who wanted tocarry the Bain banner.

Sydney was a different situation altogether. Greg Hutchinson, an Australian,had spent ten years with Bain and was anxious to return to Australia. We made twotrips to Australia and probably met with half of the CEOs from Australia’s 40 largestcorporations. Despite the very positive reception by the Australians, it was still adifficult decision. Ultimately, Sydney is too far away to develop big clientrelationships from London, and I didn’t want to lose Greg.

Brussels wasn’t an imperative, but it made sense. A French vice-president ofours in London married a Belgian dentist and wanted to relocate. The client heworked for had coincidentally shifted its headquarters to Brussels. And several ofour clients had requested that Bain perform pan-European work in Brussels becauseof its “neutral environment.” However, we opened the office for humanitarianreasons as much as economic ones.

Growth Strategies

Three critical issues faced Bain in the early 1990s: where it should establish new offices, theextent to which it should use internal resources in this expansion, and the role of client exclusivity inits growing international network.

Where to Build

Bain was considering three strategies for growth. Each represented a perspective on thepotential of different markets, the impact of a local presence in a country or geographic region, theimportance of global market share in the “top-tier” management consulting industry, and whetherBain should lead or follow client relationships.

Traditional Strategy One director declared, “This may be peculiar to Bain & Co., but until youhave a few high-quality client relationships, you don’t have a genuine office.” In this strategy, Bainwould focus its resources on deeply penetrating the British, French, Italian, German, Japanese, andAmerican markets; developing new offices in the United States; and investing significantmanagement and marketing resources in the Munich and Tokyo offices to expand their marketpresence. This strategy would focus on building market share in existing markets rather thanpenetrating new ones. Clients outside of existing markets would be served from the anchor officesuntil the scale of client relationships justified a local office.

A director in Europe argued:


13

As far as I am concerned, opening offices in anticipation of demand ratherthan in response to it should be avoided if at all possible. You take a bunch of smartpeople and put them in a new office, and yes, they’ll find work. The risk is not thatyou won’t have business, but that you’ll have the wrong kind of business—insignificant projects gathering data. You give me two good client relationships, andI’ll give you an office.

I realize that certain markets may require an upfront investment in a localpresence, but it comes at a cost. I try as hard as I can to avoid a geographicsegmentation of the business. Our objective is to build high-quality clientrelationships, not a particular office network. We should concentrate all of our efforton building client relationships and avoid distractions as much as possible. This isparticularly true of senior people, who get heavily involved in new officedevelopment as well as clients. The office network should be a result rather than anobjective in our management of the business.

Directors supporting this traditional strategy felt that the large size of the typical Bain clientlimited the number of countries with sufficient market demand for Bain services (see Exhibits 7 and8). Demand for the firm’s services was further constrained by its commitment to client exclusivity,which occasionally forced Bain to forgo a promising opportunity in a new office because of anexisting client relationship in an established office. Pressure to locate an office near a client wasreduced by the nature of Bain’s customers, multinationals who often sourced products and servicesfrom outside their home market. Managing multioffice studies and monitoring the quality of thework of individual offices became increasingly complex with each new office, raising coordinationcosts. With more offices, “turf” battles could erupt as offices competed for clients and people. Thesedirectors felt strongly that new markets could be developed from Bain’s “anchor” offices and thatthere were significant economic and cultural benefits to doing so.

Penetrating Advanced Markets Willard chuckled a little as he plotted on a piece of graph paper.“You can’t have a case about Bain without at least one matrix”.

Table 1 International Market Segmentation

Easy to do Hard to do

Have to do U.S. JapanU.K. West GermanyFrance Italy

Should have Canada ScandinaviaAustralia Spain/PortugalBelgium Soviet UnionSwitzerland The Netherlands

Wait and see Latin AmericaIndiaS.E. AsiaIsraelCentral EuropeTurkey

None of these markets is really “easy.” But situational factors make somemarkets less difficult for us than others. Language and proximity to another Bainoffice are critical. France was relatively easy to set up because we had Frenchnationals in our London office. I want to emphasize that this was a unique situation.When the Socialists came to power in France in 1981 and began nationalizingcompanies in 1982, a number of extremely talented French professionals wanted to


14

work for Bain in London. By 1985 the situation had reversed, and many of theFrench professionals, now well-versed in the Bain approach to consulting, wanted toreturn to France. While the office opening went very smoothly, it was an idealsituation that is unlikely to be repeated.

There are several reasons why a market might be “hard to do.” One of themost critical is our ability to attract local staff. A stigma can be associated withworking for an American firm rather than a local one. Other factors include languagedifferences, the internal availability of managers, and the strength of our competition.To develop a competitive position in these markets, we have to start early and investa lot of senior management time. In the early stages of Bain’s growth, this wasprobably not worthwhile.

The “have to have” markets are the six biggest economies in the free world:the United States, Britain, France, West Germany, Italy, and Japan. In our traditionalway of thinking, we could serve all the other countries out of these six offices. But ifyou believe you need a local presence in the “should have” markets—which I do—you’ve got to be more aggressive. For example, Sweden is not a big market, but ithas many large, internationally oriented companies that fit the typical Bain clientprofile. We have been unable to sustain Swedish client relationships without a localoffice.

I am painfully aware that every time you open a new office, you riskduplication of expenses and fragmentation of your office network. We have tomanage the network very carefully to minimize this problem until an office grows toscale. We can mitigate the impact of small offices by thinking of them as part of ourlarge “anchor” offices. For example, I can see the Brussels and Geneva offices as partof the Paris office, and Toronto as part of Boston for certain things. You can see thatthe office “spheres” are driven by commonalities in language and culture.

Proponents of a local office presence also cited the different legal environments, cultures, andlanguages that inhibited “shuttle consulting.” Noted Ushiro:

To be effective in Japan, you must speak Japanese and know Japanese businesspractices. I cannot do what they do in Europe, swapping professionals to balanceutilization and readily transfer personal expertise. I wish I could.

The presence of a local office signaled a commitment to the local client and local economyand facilitated recruitment of nationals of that country. Some partners in the firm felt that new officesprovided entrepreneurial opportunities for the new generation of management and avoided the lossof key professionals, who might otherwise have sought these opportunities elsewhere.

Developing Markets Several partners felt that Bain should be more aggressive in expandingoutside the advanced markets selected by Willard. Strachan argued:

If you want to focus your business on advanced markets, you may doomyourself to being number two. The question is whether you want to follow or leadcompetitors into these markets. The critical argument is that you don’t want to waituntil you have to go into these markets. You may sacrifice profitability in the short-term, but you ride the steepest growth curve, provide entrepreneurial opportunitiesfor your people, and enrich the firm’s experience base.

Individual markets are rather small right now, and they’re dealing with somedifficult issues, especially the debt situation in some Latin American countries likeBrazil and Mexico. And I realize that not many corporations fit the profile of the


15

typical Bain client, but there are business groups in several of these countries whereour concepts are very applicable.

Several management consulting firms had established offices in the Asian NICs by 1990, butnone had met with great success. McKinsey opened an office in Hong Kong in 1985, but in five yearsthe office had grown to only about 20 professionals. The firm had also opened a branch office inTaipei, Taiwan, a one-hour flight away. The Boston Consulting Group was rumored to be starting anoffice in Hong Kong in early 1990. Only McKinsey had established a presence in Latin America, withoffices in Mexico, Venezuela, and Brazil. These offices were thought to be reasonably profitable buterratic. Several directors anticipated a strong demand for Bain’s style of management consulting inthe East Bloc.

Several issues clouded the picture. How did the opportunities break down by country?Should Bain open offices to service its current clients, or was it also realistic to market to local clients?Was there a first-mover advantage? Where would the firm hire local staff who met its stringentrequirements?

How to Grow

The second major issue for international growth was the choice between internal and“opportunistic” expansion. Many partners felt Bain should pursue a relatively opportunistic strategy.The hiring of Ushiro and the joint venture in Milan had each resulted in dramatic gains in marketshare in critical Asian and European countries. Willard presented the case for being opportunistic:

If a distiller wants to know how much 12-year-old scotch they will producein 1992, they look in the cellar and see how much they put in casks in 1980. We facethe same situation. The people who start up Bain’s offices are 10- or 12-year veteransof the business. They have to be, to do what we do for our clients. If I want to openan office in Sweden, I’ve got to incubate Swedish professionals for years. If themarket is interesting enough, and we don’t have the right people internally, we haveto be prepared to bring in outsiders.

We aren’t comfortable doing this, and I don’t think we ever should be. TheTokyo and Milan situations are working out extremely well because we did it right. Ihad 20 meetings with Phil Cuneo before we did the joint venture in Milan. We hadthorough talks about how we do business, what we think about the future. We hadto be absolutely sure we were dealing with compatible people.

With Ushiro, it was love at first sight. We had talked to a lot of people beforewe met with him, but none of them would have worked out. He is the right age andhas the right pedigree, technical expertise, and philosophy.

The consulting business is consolidating much faster than I would havepredicted only two or three years ago. We do have a reputation for a strong culture,which we want to maintain. And we always want to do things the Bain way. But wecan’t afford to be shut out of critical markets in the world if we want to serve ourglobal clients and continue to be an exciting place for the best people to work.

Commitment to Client Exclusivity

A hotly debated issue within Bain was whether the commitment to client exclusivity hadoutlived its usefulness and in fact limited the company’s ability to market its expertise. The head ofthe recently opened Toronto office discussed the impact of the exclusivity commitment on onepotential client relationship:


16

We had marketed to a large Canadian consumer products corporation that wanted usto perform a six-month strategy overview for the firm’s entire North Americanoperations. I talked with a few people in Boston, and we decided the project wouldconflict with a client we were serving in the U.S. We dropped the project. It wouldhave been the second major client generated by our new office in Toronto.

On the other hand, the Paris office had developed a client relationship that clearly benefitedfrom Bain’s commitment to exclusivity. Noted one of the cofounders of the office:

We began work with the client in early 1984, in one of the firm’s smallerdivisions. The client was then employing several consulting companies in its otherdivisions. The CEO found our policy interesting but not particularly relevant. Infact, he tended to prefer firms with industry expertise.

But by 1985 Bain’s work with the client had expanded to all areas of thecompany and involved case teams in nearly all of Bain’s offices. Other consultingfirms were phased out.

The CEO called me in and told me that due to the sensitive nature of thework we were doing and the fact that vital interests of the client were at stake, ourexclusive commitment to them was absolutely critical. In fact, they asked us to sign acontract with them, and one of the major stipulations of the contract involvedexclusivity.

Would compromising or dropping the commitment to exclusivity be opportunistic, or wouldit make good business sense? How should the needs of new offices to attract clients be balancedagainst the mature client relationships of the established offices? How closely related was the firm’straditional commitment to exclusivity on where and how to grow?


17

Appendix I: A Sample International Project

A director of the firm illustrated how a Bain-client relationship worked in practice.

A project I recently managed was for the scientific instruments division of a major servicecompany. The client has had a long-term relationship with Bain, so we were the only firmconsidered for the project. Projects like this are not a big event for our clients; they use ourservices because we offer a competitive advantage in objective, comprehensive analysis.

In this case the client was frustrated with an unprofitable business that had been piecedtogether through several acquisitions over the years. Attempts to turn the situation around hadfailed, and the firm’s senior management was skeptical of the current strategy. The client valuedthe objectivity Bain would bring to what had become a very political situation.

The target of our analysis was the fastest growing segment of our client’s industry, in whichour client held a weak position. We focused on three questions: Do we have to participate in thissegment to be viable in other parts of the business? What is the gap between our client’scapabilities and the leader in this segment? Is there a strategy that closes this gap and adds valueto our client?

The initial work focused on evaluating the worldwide markets and industry structure. Thetarget segment, which accounted for 20% of industry sales at the time of the study, was projectedto grow to 40% within ten years. More importantly, profits attributable to this segment wouldshift from 40% to 70% of the industry. Finally, there were important linkages between thissegment and our client’s traditional segment. These findings answered our first question.

The second phase of our project was a detailed customer analysis. The objectives were toevaluate the emerging customer requirements in each important country market, and to measurecustomer satisfaction with our client’s and competitors’ products. In the U.S. we conducted fivefocus groups, visited 30 customer sites, and contacted 150-200 customers through surveys. Weperformed similar “market-mapping” exercises in Europe and Asia, focusing on the U.K., French,German, and Japanese markets. For example, our Tokyo office surveyed over 120 customers tosupport our analysis in Japan.

The answer was a little bit of a surprise: the customers who used our client’s products werevery satisfied with the product’s performance. Our client’s lack of competitiveness in thissegment stemmed from other factors: a narrow product line, weak distribution, and high costsdriven by low volumes.

The findings on the product were compelling; the client decided to pursue a strategy to gainshare. The first implementation phase was tactical: focusing the division’s sales efforts againsttheir competitors’ vulnerable areas. This included an emphasis on our client’s traditionalcustomer base and current nonusers. With the assistance of Bain’s European offices, our teamidentified several firms with which our client developed formal international distributionarrangements.

A year later our client had gone from a distant follower with no investment to a strong playerin the growth segment of the market. They were also making money. As a result, we workedwith senior management to shift the strategy implementation from the tactical phase to a morecomprehensive phase, where funds were invested in product development to broaden the client’sproduct lines, and in the distribution network to deepen market penetration.

Our strong relationships with our clients give us time to do a comprehensive job and to getthings right. Since we are generally involved in implementing our work, we get feedback on thequality of our strategies. And because our relationship is long-term, we can vary resourcecommitments to perform follow-up work like the shift from a tactical strategy to one that involvessignificant investment.


18

Exhibit 1 Stock Market Performance of Bain & Company Clients


19

Exhibit 2 Worldwide Market Data on U.S. Management Consulting Firms

Company1989

Revenue*Change

from 1988Percent

OverseasNumberof Pros

Revenueper Pro**

1. Anderson Consulting (a) 1,422 +29% 40% 18,000 80.1 2. Ernst & Young (b) *** 814 +10% 42% 7,239 112.4 3. Marsh & McLennan Cos (c) 800 +26% 30% **** 8,250 97.0 4. KPMG Peat Marwick (b,d) 650 +14% 46% 5,700 114.0 5. McKinsey 635 -2% 57% 2,500 254.0 6. Towers Perrin (e) 621 +15% 24% 3,786 164.0 7. Coopers & Lybrand (b) 536 +20% 48% 6,100 87.9 8. Deloitte & Touche (f,g) 526 -11% 33% 5,000 105.2 9. Price Waterhouse (h) 508 +32% 53% 6,000 84.7 10. Booz-Allen & Hamilton (i) 453 +1% 19% 2,262 200.3 11. Wyatt 396 +19% 20% 2,276 174.0 12. CSC Consulting (j) 287 49% 2,922 98.2 13. Alexander Proudfoot (k) 285 +24% 68% 1,090 261.5 14. Hewitt Assoc 248 +23% 5% 1,890 131.2 15. Bain 242 +10% 30% 968 250.0 16. Arthur D. Little 228 +13% 42% 1,403 162.5 17. PA Consulting 217 +26% 89% 1,430 151.7 18. Hay Group 210 0% 60% 1,200 175.0 19. Alexander Cons Group 194 +10% 24% 1,089 178.1 20. American Mngmnt. Sys. (l) 190 +9% 3% 2,050 92.7 21. Laventhol & Horwath 150 +3% 20% 1,150 130.4 22. A Foster Higgins 145 -4% 10% 1,300 111.5 23. Boston Cons Group 140 +27% 55% 525 266.7 24. A T Kearney 135 +29% 41% 590 228.8 25. Buck Consultants (i) 109 0% 22% 880 123.9 26. RCG (Reliance Cons Group) 91 +17% 19% 865 105.2 27. Milliman & Robertson 88 +7% .1% 284 309.9 28. Science Management 75 -12% 21% 505 148.5 29. United Research 80 +48% 30% 414 193.2 30. SRI International 72 +11% 44% 400 180.0 31. Godwins 63 +5% 54% 900 70.0 32. Grant Thorton (m) 63 -2% 48% 630 100.0 33. MAC Group 62 +38% 58% 221 280.5 34. Pannell Kerr Forster 62 0% 29% 540 114.8 35. Martin E Segal 57 +8% 1% 484 117.8 36. Kurt Salmon Assoc (n) 51 +2% 29% 320 159.4 37. TSC (o) 50 0% 350 142.9 38. Gearge S May 42 -5% 21% 265 158.5 39. Kepner-Tregoe 34 +18% 53% 159 213.8 40. Sandy Corp (a) 32 +23% .01% 163 196.3

* In millions of dollars of management consulting revenueonly, less reimbursed expenses

** In thousands of dollars: Note: definition of professionalvaries

*** Includes expenses**** Total number of employees

(a) Fiscal year ended Aug. 31(b) Fiscal year ended Sept. 30(c) Includes WM M MERCER, TBS, STRAT PLANNING

ASS, NATL ECON RCH, CLAYTON ENVIRON SVCS(d) Does not include late ‘89 mergers in Canada, Germany &

Sweden

(e) Includes CRESAP and TILLINGHAST(f) Fiscal year ended May 31 (DELOITTE) Fiscal year ended

Aug 31 (TOUCHE)(g) Includes ABC, GARR, BRAXTON, VEAS(h) Fiscal year ended June 30(i) Fiscal year ended March 31(j) Includes INDEX GROUP, CLEVELAND CONSULTING,

CDS, CSC PART/EUROPE(k) Includes CROSBY ASSOC(l) Includes DATA BASE MGMY, AMS OPERATIONS, AMS

TECH SYS(m) Fiscal year ended July 31(n) Includes KSA INFO SYS, HAMILTON/KSA(o) Fiscal year ended May 31

Source: Reprinted with permission of James H. Kennedy, editor, CONSULTANTS NEWS, Fitzwilliam, NH 03447


20

Exhibit 3 Hypothetical Impact of Capacity Utilization

PercentUtilization

AnnualRevenues

TotalProfits

Profit/Partner

50% $ 20 mm ($ 4) mm ($ 266,667)60% $ 24 mm $ 0 mm $ 070% $ 28 mm $ 4 mm $ 266,66780% $ 32 mm $ 8 mm $ 533,33390% $ 36 mm $ 12 mm $ 800,000

Assumptions:• 100 professionals/15 partners• Break-even utilization at 60%• Mean salary of professional staff = $100,000• Average billing rate = 4x salary• No variable costs

Note: These figures do not correspond to Bain & Company data.


21

Exhibit 4 Historical Expansion of Top-Tier Management Consulting Firms (Year offices founded)

Region Country City McKinsey BCG Bain

Europe Belgium Brussels 1979 *Denmark Copenhagen 1972Finland Helsinki 1988France Paris 1964 1972 1985Germany Dusseldorf 1964 1982

Munich 1975 1975 1982Frankfurt 1979Hamburg 1977Stuttgart 1986

Italy Milan 1969 1986 1989Rome 1988

Netherlands Amsterdam 1964Norway Oslo 1984Portugal Lisbon 1985Spain Madrid 1977 1987Sweden Stockholm 1979 1988Switzerland Geneva 1987

Zurich 1966 1989U.K. London 1959 1970 1978

North America Canada Toronto 1968 1989Mexico Mexico City 1970U.S.A. Atlanta 1978

Boston 1981 1963 1973Chicago 1947 1979Cleveland 1963Dallas 1974 *Houston 1975Los Angeles 1949 1982Minneapolis 1988New York 1939 1984Pittsburg 1983San Francisco 1944 1974 1978San Jose 1988Stamford 1973Washington D.C. 1951

South America Brazil Sao Paulo 1988Venezuela Caracas 1982

Asia Australia Melbourne 1962Sydney 1971 *

Hong Kong Hong Kong 1985 *Japan Tokyo 1971 1966 1981

Osaka 1981

TOTAL OFFICES (1989) 42 14 8TOTAL PROFESSIONALS 1,800 420 880AVERAGE PRO’s/OFFICE 42.9 30.0 110.0

* Opening in 1990

Sources: Bain & Company, The Boston Consulting Group, and recruiting brochures


22

Exhibit 5 Geneology of top-tier Management Consulting Firms

1920

1930

1940

1950

1960

1970

1980

1 Major parent1 Major parentParented by 2 or more firms

McKinsey1926

Booz-Allen1914

Booz-Allen1914

Arthur D.Little1886

Cresap1946

BostonConsulting

Group1963

Braxton1976

Bain1973

Alliance1986

Quantum1989

Bain1973

LEK1983

StrategicPlanning

Associates1972

Monitor1983


23

Exhibit 6 Bain & Company, Inc.: Mission Statement and Operating Principles

Mission Statement

Bain & Company’s mission is to help our clients create such high levels of economic value thattogether we set new standards of excellence in our respective industries.

The mission demands

• The Bain vision of the most productive client relationship and single-mindeddedication to achieving it with each client.

• The Bain community of extraordinary teams.• The Bain approach to creating value, based on a sharp competitive and customer

focus, the most effective analytic techniques, and our process for collaborationwith the client.

We believe that accomplishing our mission will redefine the management consulting business, andwill provide new levels of rewards for our clients and for our organization.

Operating Principles

• One firm• Team work• Commitment to client success, individual success, firm success• Excellence/meritocracy• Fun• Trust

391-069 -24-

Exhibit 7 Corporations Outside the United States

Rank by Sales Sales Profits Assets Stockholders’ Equity Employees Industry1988 1987 Company Country $ Millions $ Millions Rank $ Millions Rank $ Millions Rank Number Rank Code

1 1 Royal Dutch/Shell Group Britain/Netherlands $78,381.1 $5,238.7 1 $85,681.3 1 $45,485.6 1 134,000 29 292 3 Toyota Motor Japan 50,789.9 2,314.6 3 40,817.6 5 24,603.2 3 86,082 51 403 2 British Petroleum Britain 46,174.0 2,155.3 4 53,030.6 2 20,830.3 4 125,950 33 294 4 IRI Italy 45,521.5 921.9 28 NA NA 417,826 2 335 5 Daimler-Benz W. Germany 41,817.9 953.1 26 29,281.6 13 6,031.6 32 33,749 4 406 7 Hitachi Japan 41,330.7 989.0 23 49,862.4 3 16,265.5 6 263,996 8 367 9 Siemens W. Germany 34,129.4 757.0 39 31,829.8 10 8,998.8 13 353,000 3 368 8 Fiat Italy 34,039.3 2,324.7 2 40,424.3 6 10,358.6 10 277,353 7 409 10 Matsushita Electric Industrial Japan 33,922.5 1,177.2 18 39,011.4 7 19,961.4 5 134,186 28 36

10 6 Volkswagen W. Germany 33,696.2 420.1 77 28,358.8 15 6,116.8 30 252,066 9 4011 11 Unilever Britain/Netherlands 30,488.2 1,485.6 11 19,893.5 28 5,810.7 33 291,000 6 2012 13 Nissan Motor Japan 29,097.1 463.0 71 33,631.2 9 11,645.2 8 108,716 40 4013 12 Philips’ Gloeilampenfabrieken Netherlands 28,370.5 477.1 67 25,483.5 19 7,729.8 18 310,258 5 3614 16 Nestlé Switzerland 27,803.0 1,392.7 13 22,083.2 24 7,151.1 19 197,722 12 2015 20 Samsung South Korea 27,386.1 464.3 70 22,192.7 23 2,749.2 94 175,710 14 3616 14 Renault France 27,109.7 1,496.7 8 18,185.3 33 2,312.2 115 181,715 13 4017 23 Toshiba Japan 25,440.8 438.9 72 27,873.8 17 5,785.2 34 122,000 34 3618 15 ENI Italy 25,226.8 917.3 29 36,297.4 8 8,928.1 14 116,364 39 2919 17 BASF W. Germany 24,960.5 802.2 35 18,454.8 32 7,050.6 21 134,834 27 2820 22 Hoechst W. Germany 23,308.1 1,037.8 20 17,693.8 36 5,713.0 37 164,527 19 2821 24 Peugeot France 23,249.7 1,485.8 10 16,148.0 40 4,828.9 47 158,100 20 4022 21 Bayer W. Germany 23,025.9 1,055.5 19 19,365.7 29 8,313.5 16 165,700 18 2823 26 Honda Motor Japan 22,236.5 819.5 33 14,382.1 49 6,282.7 28 58,320 77 4024 18 CGE (CIE Générale d’Électricité) France 21,487.5 362.4 92 29,590.1 12 2,950.2 85 204,100 10 3625 19 Elf Aquitaine France 21,175.0 1,209.9 16 28,032.0 16 9,645.4 12 73,000 64 2926 25 Imperial Chemical Industries Britain 20,839.0 1,490.9 9 16,999.9 37 7,098.4 20 130,400 31 2827 28 NEC Japan 19,626.1 183.4 192 23,408.0 21 4,780.2 48 102,452 44 3628 ! Ferruzzi Finanziaria Italy 18,311.1 425.6 76 26,850.2 18 2,362.4 112 75,811 60 2829 ! Asea Brown Boveri Switzerland 17,562.0 386.0 85 18,965.0 30 3,122.0 78 169,459 16 4530 35 Daewoo South Korea 17,251.2 33.3 425 24,397.2 20 2,917.3 86 93,930 47 3631 29 Nippon Steel Japan 17,108.9 291.7 117 28,614.8 14 5,459.7 40 67,766 68 3332 38 Mitsubishi Electric Japan 16,857.4 160.6 214 17,961.3 34 4,444.8 53 75,795 61 3633 33 Thyssen W. Germany 16,796.0 372.3 87 10,333.4 74 2,150.2 121 127,778 32 3334 30 Volvo Sweden 15,752.1 807.3 34 14,536.6 46 4,574.6 51 78,614 56 4035 34 Robert Bosch W. Germany 15,746.7 282.6 124 11,447.1 64 3,254.9 74 167,780 17 4036 40 General Motors of Canada Canada 15,657.2 291.4 118 4,912.2 173 2,254.0 118 43,571 111 4037 46 Mazda Motor Japan 15,150.9 76.4 310 9,576.8 80 2,647.9 101 28,027 178 4038 39 INI Spain 14,985.5 268.7 138 30,021.6 11 6,846.5 23 155,945 24 3339 27 Petrobràs Brazil 14,806.4 765.0 37 13,535.0 51 6,973.3 22 67,080 70 2940 43 Fujitsu Japan 14,797.3 304.5 110 18,667.2 31 6,664.2 25 94,825 46 4441 56 Mitsubishi Motors Japan 14,183.3 96.2 282 11,593.2 63 1,250.9 195 25,600 195 4042 41 Bat Industries Britain 14,066.7 1,717.1 7 17,909.6 35 6,512.4 26 156,694 23 2143 31 Total France 13,986.6 248.4 149 14,512.7 47 3,599.7 64 41,862 117 2944 45 Mitsubishi Heavy Industries Japan 13,398.0 221.8 166 22,472.6 22 4,907.3 45 56,100 82 4545 44 Usinor France 13,247.1 737.5 40 13,188.5 53 2,094.2 126 80,700 54 3346 36 Pemex (Petróleos Mexicanos) Mexico 13,060.0 570.6 56 45,669.3 4 28,216.6 2 170,766 15 2947 51 Ford Motor of Canada Canada 12,927.0 218.8 167 3,025.0 284 1,187.6 207 27,300 182 4048 47 Nippon Oil Japan 12,773.0 167.0 204 12,896.0 57 3,310.4 70 10,178 373 2949 54 Thomson France 12,566.6 201.0 177 21,816.0 25 1,450.8 175 104,000 43 3650 53 Kuwait Petroleum Kuwait 12,078.0 435.2 74 21,495.7 26 14,845.2 7 15,450 298 29

Source: Fortune, July 31, 1989

391-069 -25-

Exhibit 7b Fortune International 500 by Country

1-100 101-200 201-300 301-400 401-500 Total Largest Company Sales ($ million) Rank

Argentina 0 1 0 0 0 1 YPF (Yacimientos Petroliferos 6,435.0 125Australiaa 1 3 1 4 3 13 Elders IXL 7,618.2 97Austria 0 0 2 0 0 2 OMV 3,565.2 228Belgiuma 1 2 0 0 1 4 Petrofina 9,898.5 63Brazil 1 1 0 2 1 5 Petrobras (Petróleo Brasiliero) 14,806.4 39Britaina 11 14 20 17 12 74 British Petroleum 46,174.0 3Britain/Netherlands 2 0 0 0 0 2 Royal Dutch/Shell Group 78,381.1 1Canadaa 4 4 7 7 6 28 General Motors of Canada 15,657.2 36Chile 0 0 1 0 0 1 Codelco-Chile 3,153.0 262Colombia 0 0 0 0 1 1 Empresa Colombiana De Petróleos 1,783.0 427Denmark 0 0 0 0 2 2 MD Foods 1,690.9 437Finland 0 2 0 6 3 11 Neste 6,352.9 129Francea 0 2 0 6 3 11 Renault 27,109.7 16India 1 0 3 2 1 7 Indian Oil 9,853.7 65Indonesia 0 0 0 0 1 1 PT Astra International 1,642.6 446Ireland 0 0 0 0 1 1 Jefferson Smurfit Group 1,742.2 431Israel 0 0 0 1 0 1 Koor Industries 2,638.7 304Italya 1 0 3 2 1 7 IRI 45,521.5 4Italy/Switzerland 0 1 0 0 0 1 Pirelli 7,006.4 108Japana 31 31 34 31 32 159 Toyota Motor 50,789.9 2Kuwait 1 0 0 0 0 1 Kuwait Petroleum 12,078.0 50Luxembourg 0 1 0 0 0 1 Arbed 5,112.0 158Malaysia 0 0 1 0 0 1 Petronas 3,633.0 223Mexico 1 0 0 0 1 2 Pemex (Petróleos Mexicanos) 13,060.0 46Netherlands 2 1 2 3 1 9 Philips 28,370.5 13Netherlands Antilles 0 1 0 0 0 1 Schlumberger 4,942.5 163New Zealand 0 1 0 0 0 1 Fletcher Challenge 5,135.1 155Norway 1 1 0 0 1 3 Norsk Hydro 9,202.0 75Panama 0 0 0 1 0 1 McDermott International 2,351.7 333Saudi Arabia 0 0 0 1 0 1 Sabic 2,369.9 331South Africa 1 1 0 1 3 6 Barlow Rand 9,314.6 71South Korea 3 3 3 1 1 11 Samsung 27,386.1 15Spain 2 0 3 1 2 8 INI 14,985.5 38Sweden 2 3 7 5 3 20 Volvo 15,752.1 34Switzerland 3 4 3 0 3 13 Sabic 2,369.9 331Taiwan 0 1 0 0 3 4 Chinese Petroleum 6,606.4 118Turkey 0 3 0 0 0 3 Koç Holding 5,568.6 143Venezuela 1 0 0 0 0 1 Petroleos de Venezuela 9,507.8 68West Germanya 16 11 6 10 10 53 Daimler-Benz 41.817.9 5Zambia 0 0 0 1 0 1 Zambia Industrial & Mining 2,285.9 345

Source: Fortune magazine, July 31, 1989aExisting Bain offices.Note: The United States has 278 firms exceeding $1.439 billion in sales, the size of #500 on the International 500.

391-069 -26-

Exhibit 8 Country Data - 1988

CountryCurrency

UnitBusinessLanguage(s)

ExchangeRates 1988(local/U.S.$)

GDP 1988(localbase) Year

Population1989

(millions)GDP

($ billion)

GNP PerCapita($ 000)

PopulationDensity

(per sq. M.) Principal CityNearest

Bain Office

Distance toNearest

Bain Office

Australia Aust. $ English 1.2 315 17 269 16.3 5.4 Sydney Sydney N/A

Austria Schilling German 11.3 1,488 1987 8 132 17.4 233.0 Vienna Munich 222

Belgium Franc Flemish, French 37.3 5,608 10 150 15.2 840.0 Brussels Brussels N/A

Brazil New Cr Portuguese 0.8 93 144 122 0.8 47.0 Rio Boston 4,810

Canada Can $ English/French 1.2 599 26 502 19.3 6.0 Toronto Toronto N/A

China (PRC) Yuan Mandarin Chinese 3.7 1,118 1987 1,096 300 0.3 288.0 Shanghai Tokyo 1,095

France Franc French 6.1 5,655 56 933 16.7 252.0 Paris Paris N/A

Germany (East) Mark German 1.9 106 1987 17 197 11.8 400.0 Berlin Munich 310

Germany (West) Mage German 1.8 2,111 61 1,186 19.4 626.0 Munich Munich N/A

Hong Kong H.K. $ Cantonese/English 7.8 353 6 45 7.9 13,691.9 Hong Kong Tokyo 1,791

Hungary Forint Hungarian 52.5 1,411 11 27 2.5 293.0 Bucharest Munich 725

India Rupee Hindi/English 12.9 3,305 1987 781 257 0.3 658.0 Bombay London 4,526

Indonesia Rupiah Malay/English 1,650.0 114,519 1987 170 69 0.4 255.0 Jakarta Sydney 3,416

Ireland Pounds English/Gaelic 0.6 20 1987 4 33 9.4 137.0 Dublin London 300

Italy Lira Italian 1,035.0 1,078,860 57 1,042 18.2 493.0 Milan Milan N/A

Japan Yen Japanese 125.9 366,366 123 2,911 23.6 844.0 Tokyo Tokyo N/A

Malaysia Ringgit Malay/English 2.7 91 17 33 2.0 132.0 Kuala Lumpur Tokyo

Mexico Peso Spanish 2,210.0 192,935 1987 88 87 1.0 115.0 Mexico City San Francisco 1,870

Netherlands Guilder Dutch 2.0 450 15 225 15.2 931.0 Amsterdam Brussels 105

Philippines Peso Filipino/English 21.3 827 59 39 0.7 535.0 Manila Tokyo 1,866

Poland Zioty Polish 315.5 16,940 1987 38 54 1.4 317.0 Warsaw Munich 500

Romania Lei Rumanian/Hungarian 15.3 927 1986 23 61 2.7 252.0 Bucharest Munich 725

Singapore Sing. $ English 2.0 42 1987 3 21 8.0 11,910.0 Singapore Tokyo 3,350

South Korea Won Korean 792.3 99,790 1987 42 126 3.0 1,189.0 Seoul Tokyo 745

Spain Peso Spanish 113.5 39,618 39 349 9.0 204.0 Madrid Paris 645

Sweden Krona Swedish/English 6.2 1,096 8 178 21.2 48.0 Stockholm London 885

Switzerland Franc German/French/Italian 1.5 269 7 179 27.2 406.0 Zurich Munich 156

Taiwan NT $ (k) Mandarin Chinese 28.1 3,335 20 119 6.0 1,460.0 Taipei Tokyo 1,354

Thailand Baht Thai 25.1 1,223.2 1987 53.6 49 0.9 277.0 Bangkok Tokyo 2,865

United Kingdom Pounds English 0.6 453.0 57 820 14.4 601.0 London London N/A

United States U.S. $ English 1.0 4,839 246 4,839 19.6 68.0 Boston Boston N/A

USSR Ruble Russian/various 0.6 1,475 1987 287 2,375 8.3 33.0 Moscow Munich 1,220

Venezuela Bolivian Spanish 14.5 895 19 62 3.3 54.0 Caracas Boston 2,120

Yugoslavia Dinar Serbo-Croatian 457.0 25,083 1986 23 55 2.4 240.0 Belgrade Munich 475

Sources: 1989 International Monetary Fund Financial Statistics; The World Almanac (distances and population/mile ˆ2); Central Intelligence Agency estimates (USSR and East Germany)

Notes: Yugoslavia—gross material product; USSR and East Germany—gross national product; exchange rates are official rates for Eastern Europe—may overstate relative economic strength.

391-069 -27-

Exhibit 9 Organization of Bain & Company, Inc.

Bill BainCEO, President

Executive Committee

Bill BainPete DawkinsPat Graham

Steve SchaubertRalph WillardJim Pitts

Pete Dawkins, Managing DirectorNorth America

Pete Dawkins, Managing DirectorNorth America

Ralph Willard, Managing DirectorInternational

London Tokyo

ParisParis

Milan

Brussels*

Sydney*

Munich

Toronto Dallas* BostonSan

Francisco

*New offices in 1990

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