Management Consulting, Consultancies Industry Terminology

Activity-Based Costing (ABC)

A costing method that assigns overhead and indirect costs to products or services based on the activities they consume, improving cost accuracy and pricing decisions.

Examples: - Reallocating overhead using ABC changed the client’s product margins. - Let’s run an ABC analysis to see which SKUs are actually profitable. - ABC revealed that service calls, not manufacturing, drove most costs.

Agile

An iterative delivery approach emphasizing small, frequent releases, customer feedback, and adaptive planning; often used in digital and transformation projects.

Examples: - We’ll deliver the MVP in two Agile sprints. - Let’s prioritize the backlog for the next sprint review. - The client’s PMO wants to scale Agile across three workstreams.

Back-of-the-Envelope Calculation

A fast, approximate estimate used to test feasibility or order of magnitude before deeper analysis.

Examples: - Do a quick back-of-the-envelope to size the revenue upside. - Our back-of-the-envelope suggests a 6–8% margin lift. - Use rough order-of-magnitude assumptions for a back-of-the-envelope check.

Balanced Scorecard

A strategy execution framework that tracks performance across financial, customer, internal process, and learning & growth perspectives.

Examples: - We’ll design a Balanced Scorecard spanning financial and customer KPIs. - The CEO wants Balanced Scorecard targets cascaded to business units. - Let’s align initiatives to the Balanced Scorecard perspectives.

Benchmarking

Systematically comparing metrics, processes, or practices to peers or best-in-class to identify gaps and improvement opportunities.

Examples: - Benchmark cost per claim against top quartile peers. - We’ll benchmark the client’s churn versus industry leaders. - Use process benchmarking to identify efficiency gaps.

Blue Ocean Strategy

Creating uncontested market space by shifting value dimensions, reducing competition, and unlocking new demand.

Examples: - The new service creates a blue ocean by redefining the category. - Stop competing on price; pursue a blue ocean value curve. - Our canvas shows noncustomers we could unlock via blue ocean moves.

Bottom-Up Analysis

Estimating totals by aggregating granular inputs (e.g., unit volumes, conversion rates), often used for sizing or resource planning.

Examples: - Build revenue from store-level traffic and conversion (bottom-up). - A bottom-up capacity model will validate headcount needs. - Use bottom-up assumptions to triangulate the TAM.

Break-even Analysis

Determining the output or revenue level at which total costs equal total revenues, indicating no profit or loss.

Examples: - What volume achieves break-even given fixed and variable costs? - The pricing move delays break-even by two quarters. - Let’s chart break-even under high and low demand cases.

Business Case

A structured rationale for an initiative, quantifying benefits, costs, risks, and strategic fit to support decision-making.

Examples: - The investment won’t pass without a robust business case. - Add NPV and TCO to strengthen the business case. - The board requested scenario analysis in the business case.

CAGR (Compound Annual Growth Rate)

The smoothed annual growth rate over a period, as if the value grew at a steady rate each year.

Examples: - Revenue grew at a 12% CAGR from 2021–2024. - Use CAGR to smooth volatility across years. - The market’s five-year CAGR outpaces GDP by 3 pts.

Case Interview

A consulting recruiting interview format where candidates solve business problems using structured, analytical reasoning.

Examples: - Practice a profitability case with MECE structuring. - Clarify the objective before diving into a case framework. - Synthesize insights and next steps in your case close.

Change Management

Preparing, equipping, and supporting people to adopt new ways of working, ensuring initiatives deliver intended outcomes.

Examples: - Build a change plan with leadership alignment and training. - The change curve explains stakeholder resistance. - We’ll stand up a change network to cascade messages.

Core Competency

An organization’s unique, hard-to-imitate capabilities that provide sustained competitive advantage.

Examples: - Outsource non-core activities; invest in core competencies. - The client’s core competency is last-mile fulfillment. - Don’t dilute focus; stay anchored to core strengths.

Deck

A slide presentation used to communicate analyses, recommendations, and storylines to stakeholders.

Examples: - Tighten the executive summary at the front of the deck. - The client asked for the deck by EOD for pre-read. - Clean up the storyline and page flow in the deck.

Deliverable

A tangible output produced by a project (e.g., report, model, roadmap) with defined scope and acceptance criteria.

Examples: - The PMO needs the final deliverables by Friday. - Define acceptance criteria for each deliverable. - Bundle the model, deck, and playbook as deliverables.

Design Thinking

A human-centered problem-solving approach emphasizing empathy, ideation, prototyping, and iterative testing.

Examples: - Let’s run empathy interviews before we ideate. - Prototype and test quickly per design thinking principles. - Map the current-state journey to find pain points.

Due Diligence

A structured investigation (commercial, financial, operational) to assess risks and value, often in M&A or partnerships.

Examples: - We’re leading the commercial due diligence workstream. - Diligence flagged churn risk in the SMB segment. - Include expert calls in the diligence plan.

EBITDA

Earnings before interest, taxes, depreciation, and amortization; a proxy for operating cash generation and valuation.

Examples: - The deal is valued at 10x forward EBITDA. - Normalize EBITDA for one-time restructuring costs. - EBITDA margins trail peers by 300 bps.

Engagement Manager (EM)

The consulting team lead responsible for day-to-day delivery, client management, quality, and team coordination.

Examples: - The EM will align stakeholders and manage the team. - Raise scope issues with the EM and partner. - The EM owns weekly steering committee updates.

Full-Time Equivalent (FTE)

A standardized measure of labor equal to one person working full-time for a set period (e.g., 40 hours per week).

Examples: - The new process saves 12 FTEs annually. - Convert contractor hours to FTEs for apples-to-apples. - Capacity modeling shows a 3 FTE gap in Q4.

Go-to-Market (GTM)

The integrated plan for how a company reaches, acquires, and grows customers across channels, offerings, and motions.

Examples: - Define GTM motion across direct and partner channels. - Align marketing, sales ops, and CS in the GTM plan. - Pilot a new GTM for the mid-market segment.

Growth-Share Matrix (BCG Matrix)

A portfolio tool classifying businesses as stars, cash cows, question marks, or dogs by market growth and relative share.

Examples: - Rebalance investment across stars and question marks. - The legacy product is a cash cow funding innovation. - Plot the portfolio on the growth-share matrix.

Hypothesis-Driven Approach

A problem-solving method that posits testable hypotheses upfront and focuses analyses on proving or disproving them.

Examples: - Start with H1: pricing, H2: churn, H3: mix. - Let’s design analyses to kill or validate the hypotheses. - Keep the workplan anchored to the top hypotheses.

Implementation Roadmap

A sequenced plan detailing initiatives, timelines, owners, dependencies, and milestones to deliver a strategy.

Examples: - Build a 12-month roadmap with milestones and owners. - The roadmap de-risks go-live via phased rollout. - Add critical dependencies to the implementation plan.

Issue Tree

A hierarchical decomposition of a problem into mutually exclusive, collectively exhaustive branches to guide analysis.

Examples: - Break the problem into a MECE issue tree. - The cost tree splits volume, price, and mix drivers. - Use the issue tree to guide analyses and staffing.

Key Performance Indicator (KPI)

A quantifiable metric used to evaluate progress toward critical business outcomes.

Examples: - Define KPIs that tie to the strategic objectives. - NPS and churn are the client’s north-star KPIs. - Build a dashboard for weekly KPI tracking.

Lean Six Sigma

A methodology combining Lean waste reduction with Six Sigma variability reduction to improve quality and speed.

Examples: - Run a DMAIC cycle to reduce defects by 30%. - Value stream mapping exposed non-value add steps. - Lean redesign cut cycle time from 10 to 6 days.

MECE (Mutually Exclusive, Collectively Exhaustive)

A structuring principle ensuring categories don’t overlap and together cover the full space of possibilities.

Examples: - Make the options MECE to avoid double-counting. - The revenue bridge isn’t MECE; fix overlaps. - Reframe the storyline using MECE buckets.

Net Present Value (NPV)

The value today of future cash flows discounted at a required rate, used to assess investment attractiveness.

Examples: - The NPV is positive under all three scenarios. - Increase the discount rate to test NPV sensitivity. - The project’s NPV hinges on retention assumptions.

Net Promoter Score (NPS)

A customer loyalty metric calculated as promoters minus detractors from a 0–10 likelihood-to-recommend survey.

Examples: - Lift NPS by targeting top detractor themes. - NPS trails peers; prioritize the onboarding journey. - Track NPS by segment for targeted interventions.

Operating Model

The blueprint for how an organization creates and delivers value, covering structure, governance, processes, and capabilities.

Examples: - Redesign the operating model for omnichannel. - Define roles, governance, and ways of working. - The target operating model centralizes analytics.

Organizational Design (Org Design)

Configuring structure, roles, spans and layers, and governance to enable strategy execution.

Examples: - Shift from functional to product-line org. - Clarify spans and layers to reduce complexity. - Create a data COE in the new org design.

Outsourcing

Contracting external providers to perform functions or processes to reduce cost, access expertise, or increase flexibility.

Examples: - Outsource tier-1 support to reduce costs. - Consider a managed service for infrastructure. - Build a vendor scorecard for outsourcing partners.

PMO (Project/Program Management Office)

A governance function that standardizes project practices, tracks delivery, and manages risks, issues, and dependencies.

Examples: - The PMO will track milestones and risks. - Stand up a transformation PMO for governance. - PMO cadence includes weekly standups and RAG reports.

Porter's Five Forces

A framework assessing industry attractiveness via competitive rivalry, threat of entrants, substitutes, and buyer/supplier power.

Examples: - Buyer power is high due to few large retailers. - Substitutes cap pricing; re-evaluate positioning. - Map industry structure using Five Forces.

Price Elasticity

The responsiveness of demand to price changes, typically measured as the percentage change in quantity per percentage change in price.

Examples: - Elasticity is −1.2; a 10% price rise cuts volume ~12%. - Test elasticity by segment before repricing. - Use elasticity in the demand model for scenarios.

Profitability Framework

A structured decomposition of profit into revenue and cost drivers to diagnose issues and identify improvement levers.

Examples: - Decompose margin into price, volume, mix, and cost. - The profitability tree shows COGS as the main driver. - Use the framework to prioritize margin levers.

Proof of Concept (POC)

A limited-scope test to validate feasibility, value, or approach before full-scale implementation.

Examples: - Run a POC in two stores before scaling. - The POC validated the data integration approach. - Define POC success criteria and exit plan.

Quick Wins

Low-effort, high-impact actions that deliver visible results fast and build momentum for change.

Examples: - Prioritize quick wins to fund the journey. - A billing tweak delivered a quick 2% revenue lift. - Track quick wins on the executive dashboard.

Request for Proposal (RFP)

A formal solicitation inviting vendors to propose solutions and pricing for a defined scope of work.

Examples: - The client issued an RFP for analytics support. - Craft an RFP response highlighting credentials. - The RFP scorecard weights price at 30%.

Return on Investment (ROI)

A performance metric expressing net benefits relative to costs, often as a percentage.

Examples: - The pilot achieved a 45% ROI in year one. - Improve ROI by reducing CAC payback. - Present ROI alongside NPV for the board.

Root Cause Analysis (RCA)

A method for identifying underlying causes of problems to prevent recurrence, using tools like 5 Whys and fishbone diagrams.

Examples: - Use 5 Whys to get to root causes. - The fishbone diagram points to process defects. - RCA shows training gaps drive rework.

Scope Creep

Uncontrolled expansion of project scope without adjustments to time, resources, or budget.

Examples: - Adding features mid-sprint caused scope creep. - Lock scope in the SOW to prevent creep. - Track change requests to manage scope creep.

Sensitivity Analysis

Evaluating how changes in key assumptions affect outcomes, to identify critical drivers and risks.

Examples: - Vary churn and ARPU to test model sensitivity. - Tornado charts highlight the key drivers. - Run a sensitivity on discount rate and terminal value.

Stakeholder Mapping

Identifying and assessing stakeholders’ influence, interests, and support levels to guide engagement strategies.

Examples: - Map influence vs. interest to tailor engagement. - The CFO is high influence, low support; plan outreach. - Update the map after the org reshuffle.

Statement of Work (SOW)

A contractual document detailing scope, deliverables, timelines, responsibilities, and commercial terms for a project.

Examples: - The SOW defines scope, deliverables, and fees. - Add acceptance criteria and milestones to the SOW. - Scope changes will require an SOW amendment.

Storyline (Consulting)

The logical narrative that connects insights to recommendations in a clear, top-down structure.

Examples: - Tighten the top-down storyline for the execs. - Each page should land one message in the storyline. - Start with the answer; support with three proof points.

SWOT Analysis

A diagnostic tool that organizes internal strengths and weaknesses and external opportunities and threats.

Examples: - Run a SWOT to frame the strategic options. - The SWOT shows brand strength but supply risks. - Use SWOT in the board pre-read for alignment.

Total Cost of Ownership (TCO)

The full lifecycle cost of an asset or solution, including acquisition, operation, maintenance, and disposal.

Examples: - Cloud TCO beats on-prem over five years. - Include maintenance and training in the TCO. - TCO modeling changed the buy vs. build decision.

Value Proposition

The clear statement of benefits that explains why customers should choose an offering over alternatives.

Examples: - Clarify the value proposition for SMB buyers. - Our differentiated value is speed and reliability. - Test the value proposition via customer interviews.