Explaining the 30-30 rule at Deloitte

During the past two years, Deloitte has acquired nine technology specialists in Australia as part of aggressive go-to-market plans.

James Henderson Jul 20th 2018
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For a business built on global foundations, headquartered in the UK and housing an army of consultants, more than 260,000 to be precise, Deloitte is a walking definition of a titan of industry.

As the facts suggest - with global revenue surpassing US$38 billion during 2017 - this statement is true, not forgetting a recent regional mega-merger.

But in Australia, as with affiliates in other countries, a local flavour is flourishing, driven by the acquisition of nine technology specialists since August 2016.

The long-list of strategic buys starts with SixTree, before moving onto The Explainers, Cinder Agency, Kid Neon and Plenary Networks, alongside Strut Digital, JK Vine, CBIG Consulting APAC and Well Placed Cactus.

“We have two goals, which is based around a 30-30 strategy,” explained Robert Hillard, managing partner of consulting, Deloitte. “Firstly, 30 per cent of what we do as a business should come from things that we didn’t do two years ago.

“We’re tapping into that constant need for reinvention. It’s not enough for Deloitte Consulting to say that we have a successful revenue stream. Actually, we need to say that 30 per cent of what we are doing didn’t exist two years ago.”

The division of Deloitte Consulting - which has been ranked number one globally in consulting based on revenue by Gartner for the past six years - is essentially blending long-held heritage with a desire to innovate.

“Good consultants don’t do things that can easily be replicated and commoditised,” Hillard said. “We should be taking clients somewhere quite uncomfortable, somewhere that doesn’t feel like a place they should be going. The same rules apply for our business.”

Secondly, another 30 per cent of growth must come from organic activity.

“If you examine the transactions we make, they are disproportionally geared towards enabling us to build out around those core transformation goals,” Hillard added. “We tend not to go after transactions for scale because we are strong at growing.

“Just as a good consultant makes clients uncomfortable, every consultant should be constantly feeling uncomfortable and the transactions are as much about making ourselves feel uncomfortable as we go. By our nature, being comfortable is not where we want to be.”

M&A

Delving deeper into Deloitte’s acquisition strategy locally, the buyouts of SixTree and JK Vine came under the Platform Engineering practice, bolstering capabilities across integrated technology platforms and optimisation.

Within Deloitte Digital, The Explainers provides storytelling and customer centric expertise, Cinder Agency specialises in marketing optimisation specific to Salesforce, Kid Neon offers virtual reality skills and Well Placed Cactus excels across augmented reality and interactive developers.

The tech advisory attributes of Plenary Networks, in the context of the Internet of Things, falls under the Technology Strategy and Architecture (TSA) division, joined by the DevOps and Amazon Web Services’ expertise from Strut Digital.

Finally, the skill-sets of CBIG Consulting APAC - spanning business intelligence and data analytics - fall under the Analytics and Information Management practice.

Collectively, the nine acquisitions are helping shape, and reshape, Deloitte’s go-to-market strategy in Australia.

“We have a very strong view of what Australian business and government markets will look like in five years’ time,” Hillard acknowledged. “We have concrete views but also appreciate in some sectors, moving parts exist and we have to be flexible.”

In looking ahead, Hillard said Deloitte has mapped out the internal capabilities required to capitalise on both current and future market trends, tapping into both acquisition and organic growth opportunities.

“It’s a very deliberate strategy, this is not opportunistic,” Hillard said. “We also work with companies at a very early stage to encourage or sometimes invest to drive growth which allows them to become that target that we would go after later on.”

Upon completion of the deal, the acquired business is eventually folded within the Deloitte business, ensuring that all skill-sets and technical attributes are maximised from the outset.

“We don’t leave them as standalone,” Hillard clarified. “If something is a standalone, they are better to have their own balance sheet.

“And for those that are standalone, we are always open to creating an alliance and investing in that way. But specific to acquisition, we have a strong business transformation capability and we apply it to ourselves.”

Hillard acknowledged that for staff working within boutique and specialist providers, the idea of downing tools and joining a large entity such as Deloitte can be a daunting exercise, an emotion the firm has worked hard to overcome.

“There’s a reason why people worked for that organisation,” Hillard said. “So how can we maintain a level of identity and pride in what they do, but within the Deloitte brand?

“This is a conversation that we have a lot when we sit down with incoming staff. We speak about what it will mean coming into Deloitte and most people say, I actively chose to work within a smaller organisation and I feel like I’m losing out.”

That’s a common conversation, according to Hillard.

“But the whole point of being a consultant is that you never get comfortable being part of a machine and you’re always working as part of small teams,” he qualified. “You have a responsibility to clients, a responsibility to your IP and a responsibility to spot opportunity for your client. You must have ambition for your client.

“When you put those elements together, staff come away after six months with a sense of not losing that boutique organisation feel, but instead shaping it with a much stronger backbone.”

Strategy

With a remit for helping businesses respond to change - whether technological, economic and social - Hillard leverages the expertise of more than 1200 management consultants across the country.

Yet in looking back on more than 25 years of experience, Hillard believes that in some instances, technology strategies are still out of date within large professional services firm, drawing on practices first established during the 1990s.

“This came out of the way that people viewed technology at the turn of the century,” he explained. “Which was a traditional mindset in that you have a technology busyness which provides back-office support which is what the 1990s were all about, through to the mid-2000s.

“And then you provide a technology team that offers advice, an advisory team and an implementation team. That was pretty much the structure.”

The question then centred around weight, and allocations across advisory and implementation divisions.

For example, how much was weighted in servers and infrastructure towards the advisory and how much towards implementation? The same applied for ERP and so on.

“About five years ago, we disbanded our technology team,” Hillard added.

Because for Hillard, and Deloitte, the game fundamentally changed.

Broadly speaking, the market is well versed in rhetoric associated to cloud and digital disruption, yet this change represented a much larger shift across the industry.

“This was the move from back-office computing to technology as the enabler of a business service to a client,” Hillard said. “And at that point, the buyer was fundamentally changing as well.

“We’re in the business of business transformation. We are not chasing anybody who has a problem - technology or otherwise - were the outcome is to keep their business roughly the same.

“If somebody has a business running in a particular way and they want to provide a managed service or simply carry out an upgrade to a piece of technology, but there is no transformation goal, we are unlikely to be the service provider that is best placed to do that.”

For Hillard, where Deloitte demonstrates strength in when a transformational outcome is required, aligned to the agenda of customers within the organisation.

“We broadly divided our client agendas into separate categories,” he explained. “This includes CEO, CFO, CHRO, CMO and CIO.

“We split out the technology team and also the management consulting teams and spread them across these agendas. And we told our teams to wake up in the morning and think about your clients in terms of what that agenda should be saying today.”

At this stage, Hillard said the business was then able to examine potential acquisition targets, coupled with organic investment plans, to assess how Deloitte can help transformation strategies stick in the long-term.

“Our goal is to reinvent Australian business and governments,” he said. “And the word reinvent is crucial because for most successful organisations, there is a basis that you are already building on.

“Take the road system for example. We used to have the view that building a city involved laying all the roads first and having everyone move into the city once the work was finished. And that was the end of the story.

“The reality is that we start with a village, build a town and move towards a city. When you drive around you see huge amounts of roadworks because you are constantly investing. That’s exactly how technology and transformation is evolving.”