Entrepreneurship
Keystone Strategy’s Digital Transformation Focus
and Entrepreneurial Flair
Greg Richards and Marco Iansiti co-founded Keystone Strategy in 2002
to fill a gap in tech industry consulting.
Richards, a former robotics engineer and software product developer with Silicon Valley startups, and Iansiti, his former Harvard Business School professor and advisor, saw the business
opportunity, but also wanted to build a different kind of consulting firm.
Richards and Iansiti felt management consulting and economic consulting firms were
underserving the tech industry, even as technology was on the cutting edge of business strategy
and business model decision-making. According to Richards, “We felt it was fertile ground to
bring a new set of skills to solve these problems. The basic idea was that we would need
software engineering talent, econometricians who could manipulate data and draw insight from
information in large scale, and traditional MBAs with business experience, business intuition and
managerial skills. Combining these skill-sets presented a unique juxtaposition of talent that was
not common at that time.”
Today, Keystone is a strategy, data analytics and economic consulting firm with about 80
employees and offices in Boston, New York, San Francisco and Seattle. The firm also has a
network of over 20 experts, including professors from leading business schools – Harvard,
Stanford, MIT Sloan, Wharton, the University of Chicago – and experts in intellectual property,
economics, Internet businesses and technological innovation, among others. Expert Susan Athey,
Professor of Economics at Stanford Graduate School of Business, is one of the world’s most
renowned economists on Internet marketplace design, Bitcoin and digital currency. Co-founder
Iansiti, head of Harvard’s Technology and Operations Management Group and chair of
Harvard’s Digital Initiative, is an expert himself, brought in on some of Keystone’s most
challenging projects.
Keystone’s client list reads like the Who’s Who of technology firms, including Facebook,
Microsoft, Amazon, LinkedIn, Nike, GE, Intel, Zillow, Expedia, and Getty Images. “The one
universal theme we tend to focus on with clients, whether it be economics or strategy, is that our
work almost always includes growth-based consulting, involving customer-facing and
competition-oriented problems, and it almost always involves use of a significant amount of data
to make decisions,” says Richards.
Strengths in Digital Transformation
Keystone helps companies identify opportunities and implement strategies for digitally
transforming their businesses. The theme of digital transformation, which started in the
technology industry 10-15 years ago, has spilled across industries and is being adopted by large
and small companies. Keystone has been at the forefront of helping many of these companies
adopt and adapt to this transformation.
About 50-60% of Keystone’s business is with big technology firms. The rest involves working
with companies across industries as they look for ways to transform their customer-facing and
growth-oriented functions — such as product development, sales, marketing and partnerships —
using new technology and data strategies. According to Richards, these areas “now demand a
much stronger understanding and new ways to take advantage of real-time data. What used to be
just insight and estimations is now data becoming the raw material you need to know how to
manipulate and apply to nearly every aspect of business. It is now a core competency of a
company to turn raw data into significantly improved performance and success.”
As an example, technology has transformed the consumer buying process and traditional shelf
space optimization models. As Richards notes, “A traditional retail management consultant
might come in and look at shelf space optimization on a quarterly basis, store by store, and
decide how to position and place consumer packaged goods brands next to one another on the
shelf, and maybe apply a lot of analytical rigor. But it’s an overhaul type of mindset to the shelf.
Whereas today, in an online environment like Amazon’s, you just expect that merchandising and
recommendations are determined in real-time and are highly personalized to your own purchase
history and experience, along with other customers’ buying history and experience for similar
products. You expect the site to tailor and tune and improve its performance for you, with
recommendations, and information on ‘people who bought this also bought that.’ This didn’t
exist 13 years ago. The tech industry pioneered this capability, and data is driving this level of
analytics across nearly every industry.”
“Another example of digital transformation outside the tech sector is in farming, where there is a
significant amount of equipment used in fertilizing and delivering pesticides to large swaths of
land with rather inefficient delivery. It’s now commonplace to incorporate camera systems and
drones to provide feedback to John Deere tractors, which tune the delivery acre by acre. This
gives better utilization of fertilizers and much better delivery to the crop. You wouldn’t think of
farming as being the type of industry to have broadband access to feedback information that can
be analyzed with imaging or other sampling, but they do, and it leads to far better performance
and productivity gains. The use of drones and cameras in this industrial capacity isn’t something
you would have thought of happening 10-15 years ago.”
Iansiti and another Keystone Expert Karim R. Lakhani, outlines the impact of digital
transformation in a recent HBR article titled Digital Ubiquity: How Connections, Sensors and
Data are Revolutionizing Business. As Richards summarizes, “GE is instrumenting jet engines
and powering turbines to provide feedback, while also centralizing analytical systems that can
predict maintenance, failure and wear, and characterize or recommend service and performance
tuning. That business model changes how GE interacts with customers and how they make
money. From originally selling engines and offering after-market service and support, to using
these new systems as a recurring service model to optimize performance. The result is a drive
toward performance-based compensation to improve fuel efficiency and use.”
Richards sees many businesses transforming digitally to drive top-line growth vs. cost savings or
quarterly analytical activities. “To me, the most interesting part of digital transformation initiated
by the tech industry is the horizontal spillover to so many other sectors of the economy. Even
customers from industries least likely to be digitized are asking us how they can use digitization
to transform and grow their businesses, from consumer products like tennis shoes, to industrial
products like metal cutting tools. Businesses that you don’t think of as being data-intensive are
now looking for ways to instrument their products and enrich their offerings.”
A Challenger Mindset & Entrepreneurial Culture
As neither co-founder comes from a traditional
management consulting background, Keystone’s
culture reflects a more entrepreneurial spirit. The
New York office is in a SoHo loft space, a far cry
from the typical midtown office of its more
traditional strategy and economic consulting peers.
As a smaller player competing with large strategy
firms, like McKinsey and BCG, and larger
economic consulting firms, like CRA and
Cornerstone Research, Keystone operates with
more of what Richards calls a “’challenger
mindset.’ We hire young folks with an
entrepreneurial flare, with desires to start their
own companies. We have a very flat hierarchy,
and people have an enormous amount of exposure
to what it’s like to grow a firm. Our consultants
work at unusually senior levels with clients on
projects that are outsized compared to their experience. It’s their horsepower and intellect that
give them that opportunity, and they generally don’t find this level of exposure at other firms.”
With several Partners coming from big firms like McKinsey, BCG and Accenture, Keystone
consultants receive the same consulting skills training offered at the larger firms. But, as
Richards describes it, “We also teach people to marshal resources and to be fearless at filling
vacuums and voids. Some of our most exciting projects are those where an executive has fear
and uncertainty about some significant aspect of their business, and no idea how to solve it. It’s
these situations — the least practiced, least perfected, and the least cookie-cutter — that are the
most intellectually stimulating to solve.”
Consultants also get to work in a rapidly growing, transparent firm. Senior management shares
the firm’s financials once a month, and staff at all levels get involved in training, recruitment
programs, and client development efforts. “Our team gets the opportunity to understand what it is
like to grow and run a business, rather than be a part of a firm that spoon feeds them lots of
services,” says Richards. “Sometimes they might need to go out and find the talent or skill that is
missing on their project. At Keystone, they will become very competent in that. It’s a good place
for people with entrepreneurial grit, fight and hunger. Candidates who are particularly
comfortable with ambiguity, where they don’t have layers of resources to solve the problem at
the start, do well with us.”
Recognizing the value of the creative thinking process, Keystone recently brought in former
product developers from IDEO to teach design thinking. IDEO teaches its well-known invention
process to product development teams. Every Keystone office went through a brainstorming
process, out of which came a patent filing initiative and new ways to brainstorm remotely in real
time. Richards says, “We do a lot of patent work and we wanted people to know what a patent is.
We also believe creativity can break almost any logjam, and we wanted people to be more fully
immersed in the creative thinking process. This is an investment in our people that reaps rewards
in client delivery, job satisfaction and culture.”
Bleeding Edge Project Work
Keystone’s business mix is roughly 50% strategy and 50% economic consulting, and Associates
work on both types of cases, rather than aligning with a particular practice. Associates have
informal access to Keystone’s network of Experts, which provides them the opportunity to work
side by side and learn from some of the foremost thinkers in technology, economics, finance, law
and other fields.
Strategy consulting projects might involve helping a company decide how to acquire customers
in an entirely new market or price a product without a comparable example. Economic
consulting projects might involve a competition case – such as a larger merger or pricing issues
that might run into regulatory scrutiny – or an Intellectual Property case. Economists tend to lead
the economic cases, with MBAs leading the strategy projects.
Richards relishes the opportunity to apply his and his team’s intellectual curiosity and creative
problem-solving skills to help clients solve novel, highly complex problems. “The projects we
are brought in on are the ones that are the most novel, stimulating, and generally unsolved. A
client might wonder how to price this new ‘Internet of Things’ device, which no one has solved
before because the market is in an early development phase. Sometimes we work on the business
model, how to price it, and who to charge in the spirit of muti-sided markets. This is often
challenging and exciting for people who want to work on the bleeding edge of technology.”
In speaking to Keystone Strategy consultants, Richards says a common theme is the value they
get in having full access to cutting edge work from some of the top technology and consumer
brands in the world. “Some consultants struggle with the decision to go the corporate route
versus consulting. With Keystone, they get to work with the businesses they’re most attracted to,
but they don’t have to choose just one. Here, they can work with all of them.”