16

“Our people tell me that this feels like

‘A.T. Kearney in the mid-’90s’ or ‘Gemini Consulting in its early years.’And what they

mean is that we are working together. We’re working

to do things.”

— Archstone CEO & President Todd Lavieri

PHOTOGRAPH

BY

LOREFFREY

THE AGE OFARCHSTONE

Con su l t i n g March/Apr i l 2007 17

It is the age of no big ideas, an age when

less is more and small is better,

an age when good listeners hold sway

over serial advice givers.

BY JACK SWEENEY

ä

WH A T M A Y B E T H E M O S T D E F I N I N G

characteristic of the current age of consulting is how

the profession’s leadership uniformly struggles to

define it. In general, most leaders agree that the latest

epoch began in 2002 with the collapse of Andersen —

a grim signpost if ever there were one. Nonetheless,

this was a marker that has influenced the profession in

visible and not so visible ways.

2002 2003Archstone’s Early Milestones

GB

L18 March/Apr i l 2007 Con su l t i n g

Andersen shuttersits offices under acloud of scandal

Downturn in consulting services purchases causesoverall consultingmarket to shrinkfor the first timeon record

Deloitte rejects the profession’s popular wisdomand nixes a plan to split off consulting

Firm is established withthree principals;Todd Lavieri serves as CEO and president

Lake Capitalinvests $75 million in firmknown asCandlewoodConsulting

Newly named ArchstoneConsulting grows to 39employees

Opens offices: Chicago, New York,Stamford

In the past, such murky episodes of introspec-tion have come sandwiched between waves ofclient opportunities — none lasting perhaps morethan two or three years.

Now, five years after the fall of Andersen, con-sulting leaders still persist in defining the currentage by what it lacks rather than by the clientopportunities it yields. It is the age of no bigideas, we have routinely been told. However, aswith every other age of consulting, the presentone is arguably best revealed by the clients con-sultants serve.

Listening to ClientsRic Noreen, senior director of growth channelsfor Kraft, says that the company’s currentapproach to working with consultants calls forKraft executives to be more precise when defin-ing problems up front.

“Manufacturers like Kraft are using consul-tants in a much more narrowly defined projectscope, and the firms that can respond to this sortof pinpoint targeting of problem-and-solution arein a great position to continue to bill,” saysNoreen, whose company’s growing appetite fornarrowly scoped projects and more specializedservices appears to be part of a larger trend on thepart of industry, according to research completedby Kennedy Information, of Peterborough, NewHampshire (see chart, p. 20).

As narrowly scoped engagements grow as a per-centage of overall consulting spending, corporateclients have more frequently been opening the doorto smaller firms that now compete and win againstlarger firms that sometimes struggle to maintaintheir profit margins on smaller engagements,according to Kennedy Information.

“I see far more projects with narrowly definedoutcomes or solutions initiated by Kraft over thelast couple of years than I do the large, multidi-mensional, $2 million dollar engagements,” says

Noreen, who first agreed to be interviewed byConsulting Magazine upon hearing that our arti-cle was on a small but growing consulting firmknown as Archstone Consulting. According toNoreen, Archstone is exactly the type of firm thatKraft tends to do business with these days:focused, nimble, and with its seniormost peopleroutinely involved.

Elise Klein, a vice president at Berlex Inc.,shares Noreen’s opinion of Archstone and believesthat the firm is extra cautious when it comes toreusing content. “You never get the sense that Arch-stone is recycling material, and if they are, they tellyou,” says Klein.

Suzanne Doft, Director/Team Leader ofOncology at Pfizer, believes that Archstone is high-ly attentive to individual client needs.

“They listen really well,” explains Doft. “Theylisten and then they understand, and they not onlyunderstand the problem, they also understand ourpeople roles very well so that they are able to adjusttheir content and allow the different disciplines tobe able to digest it.”

Defining the AgeHaving captured 13 new clients in January of thisyear alone, Archstone appears to have specializedofferings whose appeal extends well beyond theabove-mentioned clients. Archstone grew by 34percent last year, while capturing $59 million inannual revenue and expanding its client portfolio to150 clients.

Not bad for a three-and-half-year-old firm thatwas launched in the midst of a calamitous consult-ing sales downturn. In fact, the year beforeArchstone was launched, the global market for con-sulting services shrank for the first time on record.

Certainly, the idea that such a newbie firm hascome to have a hand in defining the latest age ofconsulting is a notion that is rejected, not surpris-ingly, by larger, more established, consulting firms.

Now watch ArchstonePrincipal Mark Schmeling

discuss the firm’s CFO services offerings on

This Week in Consulting at www.consultingmag.com.

C

2004 2005 2006 2007

“Archstone who?” is the frequent refrain echoedfrom one super-sized consulting rival to the next.

But, while Archstone may still be flying underthe radar, the concept behind the firm alreadylooms large. It’s a concept that Archstone can nowfully exploit, having been conceived at whatmight be deemed the perfect place and time — ajunction where a confluence of market and regu-latory forces pounded the profession’s Big Fourconsulting organizations and helped to shakeloose bushels of top talent.

“We had a concept that there was room in themarket for a specialty consulting firm that wasconstructed with world-class profes-sionals focused on critical clientneeds in certain specialtyareas,” recalls Paul Yovovich,president and cofounder ofLake Capital Partners, aChicago-based privateequity firm that helpedlaunch Archstone byinvesting $75 million inthe firm in September of2003. Archstone was thesecond consulting firmLake Capital helped to startup within only 18 months, hav-ing invested $40 million in HuronConsulting of Chicago in March 2002.

Today, the seasoned consultants found withinboth Huron and Archstone confess that their firm-building ambitions are in part fed by discontentwith their past professional lives. While the rise ofHuron is viewed by many of its consultants as a vin-dication of their Andersen heritage (160 formerAndersen consultants joined Huron on day one), therise of Archstone is more a tale of emancipationrather than vindication.

And, unlike the tale of Huron’s launch —a collective work writ by many — the story

behind the rise of Archstone largely bearsone thumbprint more than any other.

The Perfect Place in TimeThe plan to split off Deloitte Consulting fromDeloitte was made public in early 2002 — nearlyfive years after KPMG Peat Marwick had firstannounced its own consulting split-off strategy, andtwo years after the sale of Ernst & YoungConsulting to Cap Gemini was first announced. Atthe time, the market for consulting services wasexperiencing the worst downturn in its history, and

in light of this, the split-off’s payout wasexpected to rank among the smallest

ever of Big Four returns. If only Deloitte Consulting

had split off before Enronreared its ugly head orbefore the NASDAQtumble of March 2000,things may have beendifferent. But, caughtbetween a rock and hardplace, Deloitte took a

path that had been rou-tinely discarded by its Big

Four rivals: In March 2003,the firm opted to reintegrate its

consulting arm. When Lake Capital first talked to

Todd Lavieri about its specialized firm concept, hetold them that he was not interested. His future, hebelieved, was with Braxton — the planned consult-ing spin-off that Deloitte had already spent tens ofmillions of dollars to plan and rebrand. When LakeCapital contacted Lavieri again after Deloitte hadannounced a change in plans, Lavieri was less cer-tain about where his future might lie and began hav-ing discussions with a number of business people herespected and had learned from over the course ofhis career.

Con su l t i n g March/Apr i l 2007 19

“Manufacturers like Kraft are using

consultants in a much more narrowly defined project scope,and the firms that can respond

to this sort of pinpoint targeting of problem-and-solution are

in a great position to continue to bill.”

— Kraft’s Noreen

Grows to100employees

Sales: $22 million

Opens SanFranciscooffice

Grows to 150 employees

Sales: $42 million

OpensLondonoffice

Sales: $59 million

Number of clientsgrows to150

First acquisition:TheHazeltonGroup

Signs 13new clientsin singlemonth

Grows to225employeesand 7offices

(continued on page 20)

20 March/Apr i l 2007 Con su l t i n g

“Todd believed that it was the perfect place intime to launch a consulting firm, and it turns out thathe read the tea leaves correctly,” says CharlesBiggs, a current board member for QuestCommunications who headed Deloitte’s strategypractice in the 1990s and has mentored Lavierithroughout his career.

“We have all known bright, smart people overthe years who have made bad decisions, but Todd isnot one of them. He studied the market, understoodthe fundamentals that were required, and went forit,” says Biggs, who ultimately acted as a referencefor Lavieri when Lake Capital sought to evaluatehis credentials to build and lead a firm.

Today, when asked whether Archstone wouldhave existed without Lavieri, Lake Capital’sYovovich says that the equity firm’s concept in partbears Lavieri’s thumbprint. “It’s hard to figurewhich came first. We did contact Todd. We did havea concept. But that concept was quickly refined.Todd really gave it flesh and executed the launch ofit. I think that the chicken-and-egg metaphor is agood one, because it’s really insoluble when itcomes to Archstone,” says Yovovich.

Putting Flesh on the BoneLake Capital’s investment in Archstone came onlysix months after Lavieri exited Deloitte Consulting.During the months in between, the fledgling firmdid business as Candlewood Consulting, a projectname assigned during the initial due diligence phaseof Lake Capital’s investment.

While clearly Huron’s executed flight plan

offered Archstone some valuable insight into themonths ahead, different factors made Archstone’sstart-up challenges unique. First, unlike Huron,Archstone’s early workforce was not augmentedby a mass migration of Andersen talent.Moreover, the consultants who did join Lavierifrom Deloitte or other Big Four consulting firms

often were unable to serve their vet-eran clients due to two-year noncom-pete contracts, often standard amongBig Four employers. For their part,Andersen consultants received someleeway where “competes” were con-cerned in light of the firm’s collapse.

Whereas Huron could immediatelyfocus largely on client work,Archstone faced a greater recruitinghurdle. According to Lavieri, the start-up challenges were made less of a bur-den because of Lake Capital’s help.“Our role was a combination of seeingthe opportunity, making certain thatwe had a shared vision, and for us toprovide them with the financial sup-port necessary for them to scale thebusiness,” explains Yovovich.

Lavieri recalls the early division oflabor between Lake Capital and the

fledgling Archstone this way: “Todd, you focus ontrying to find the right people, you sell the work. Wecan help you with getting the other things rolling.”

Asked what the “other things” were, Lavieriquickly responds: “Finding real estate in Chicago;setting up an e-mail system; getting our financialsystems identified, procured, and implemented.”

During the remainder of 2003, Archstone grewto 60 employees as it opened offices in Chicago,New York, and Stamford, Connecticut. The follow-ing year, it grew to more than 100 employees and$22 million in sales, while in 2005 it leaped to $42million in sales and 150 employees. Along the way,the firm beefed up its initial beachhead industrypractices in manufacturing, consumer packagedgoods, and life sciences by adding new recruits andservice lines. In addition the firm began adding newfunctional practice areas such CFO advisory ser-vices. By the end of 2006, Archstone had openedoffices in London, Amsterdam, and San Francisco,while completing its first acquisition of another spe-cialty firm.

The Roots of LeadershipAsked how someone who has built a career in anorganization as mature and sizable as Deloitte

Understanding of Specific Needs

Depth of Functional Expertise

Depth of Industry Expertise

Price

Prior Performance

Reputation

Strategic Thinking

Speed of Work

Firm Location

Breadth of Services

0% 1% 3% 5% 7% 9% 11% 13% 15%2% 4% 6% 8% 10% 12% 14%

Selec

tion

Crite

ria

Client Weighting of Importance

Clients favor specific capabilities over broad experience

Source: Kennedy Information, Inc., 2006

Con su l t i n g March/Apr i l 2007 21

would qualify to lead an entrepreneurial venture,Lake Capital’s Yovovich says that entrepreneursreside in both big and small organizations, but arenot always easy to identify.

“Not everyone is able to do it, and in addition tohaving an entrepreneurial spark, there are a wholeset of requirements for running a successful enter-prise. For instance, you need to be able to build ateam that works cohesively and pulls in thesame direction,” says Yovovich, touch-ing upon, perhaps, the one qualityabove all others that madeLavieri a unique candidate.

As the leader ofglobal manufacturingfor Deloitte, Lavieri hadascended to the top ofthe firm’s largest indus-try practice. He waswidely recognized asbelonging to an inner cir-cle of senior partners “whocalled the shots” insideDeloitte’s consulting opera-tions, and yet, unlike certain battle-scarred peers, he appeared not to havelost favor with the rank-and-file consultants as heclimbed the ladder. One former Deloitte seniormanager recently echoed what a number of past andpresent consultants in essence told us: “He was oneof us. We were a team, and he was this rare-birdpartner who did the walk as revealed by his actionsday in and day out.”

Lavieri’s Deloitte career had begun in 1989when Deloitte merged with Touche Ross, where a26-year-old Lavieri had only months earlier landeda consulting job after business school.

“When we together joined Deloitte, we wereentering a period when consulting was ready for agreat growth spurt, and the Stamford office, whereTodd joined, quickly became an important part ofthe firm’s consulting base,” explains Biggs, whohad first joined Touche Ross in 1968 and subse-quently became an early mentor of Lavieri’s whenhe went on to oversee the Deloitte Consulting’snortheast region following the merger.

While Lavieri no doubt can in part thankDeloitte’s partnership culture for developing theteam-building skills that helped Lake Capitalview him as an attractive leader, the profes-sion’s leadership gurus tell us that such qualitiesoften take root earlier in a person’s more forma-tive years.

In Lavieri’s case, those years may have

Now watch ArchstonePrincipal Maryann Gallivandiscuss the firm’s LifeSciences offerings on This Week in Consulting at www.consultingmag.com.

enveloped the summers he spent working at anaerospace company cofounded by his grandfather.As the youngest of five children being raised aloneby their mother (his father had died when he was 2),he found that the family business, perhaps, becamea kind of extended family — a place where the rudi-ments of business as well as collaborative valuescould be learned.

No matter where Lavieri’s team-oriented val-ues may be rooted, there’s little ques-

tion that they are now part of thecharacter of his young firm,

according to interviews withmultiple clients.

“There are no walls atArchstone. Whether it ispeople or capabilities, wehave found that every-thing is available to usfrom everyone at any

time,” explains JamesShillaber, vice president of

human resources at BerlexLaboratories, who says that

when partners from different firmsare selling business, they often resist let-

ting other partners become involved, and they oftenrequire that they be included at every meetinginvolving their firm. He continues: “I don’t knowhow their compensation and incentive structureworks, but I can tell you that it is not an obstacle.”

When asked about the collaborative nature ofArchstone consultants, Lavieri quickly points outthat one of the firm’s founding principles was to bean organization that behaves and acts likes a part-nership, even though Archstone is a company. It’sa principle that many consulting companies vow tolive by but often stray from as they grow larger.

“Our people tell me that this feels like ‘A.T.Kearney in the mid-’90s’ or ‘Gemini Consulting inits early years.’ And what they mean is that we areworking together. We’re working to do things,”explains Lavieri, who says that consulting firms, asthey grow larger, often struggle to raise the “ener-gy” of their people around their brand.

“The passion and optimism around the brandand what we want to do in the market is red hot withthis group, so we know that the culture is right,”says Lavieri, who quickly identifies another corevalue: “discipline, not bureaucracy.”

“This is a simple business,” he concludes. “It’speople, times rates, times time. In my mind, if weget the services right and the right people, the finan-cials and everything else falls right into place.” C

“It’s hard to figure which came first.

We did contact Todd.We did have a concept. But that concept was quickly refined.Todd really gave it flesh and executed the launch of it.

I think that the chicken-and-egg metaphor is a good one, because it’s

really insoluble when it comes to Archstone.”— Lake Capital’s Yovovich