McKinsey acquires design firm Lunar for digital transformation

The acquisition will improve McKinsey's competitive position through better user experience. It's a smart move but neither groundbreaking nor surprising.

Consulting strategy firm, McKinsey, just announced its acquisition of San Francisco-based design company Lunar. The move brings Lunar close to McKinsey Digital, which helps clients "separate digital opportunity from hype." In plain English, this group within McKinsey focuses on digital transformation.

The acquisition is interesting for several reasons, but is neither groundbreaking, as one insider said nor is it "unlikely," as Wired reported. Actually, the move represents a natural progression to enhance advisory services related to digitizing processes, rethinking business models and improving the customer experience for digital consumers.

The skills, competencies, and tactics required for digital transformation involve creating positive user experiences as a primary goal. For this reason, enterprise software vendors and consulting firms have embraced design thinking as a core discipline. Although user experience as a concept is hardly new, digital transformation has elevated it to the level of strategic imperative.

With this in mind, we can understand three premises underlying the acquisition:

  1. Digital transformation will comprise an increasing share of McKinsey's offerings
  2. McKinsey seeks to improve its capability in top-quality design on a global scale (Lunar has two offices in the US along with one each in Europe and Asia)
  3. Competitive differentiation for McKinsey's clients, and therefore for the consulting firm itself, rests on the ability to offer great user experiences

As context, be aware that many enterprise software vendors and consulting companies are making similar shifts toward design as a core competency. However, few have purchased a high-end design firm, making this a particularly noteworthy investment.

Multi-billion dollar software vendor, Infor, is one company that has brought design deep into its DNA. When current CEO, Charles Phillips, took the helm, he oversaw the creation of Hook and Loop, which Infor calls the largest design agency in New York City. Hook and Loop is actively shaping Infor's sensibilities around software design, interacting with customers and user experience in general.

Through Hook and Loop, Infor has invested significantly in creating an environment that values collaboration and customer experience. Although technical and design skills are part of the equation, management support for improving customer experience is the underlying driver.

Getting back to consulting companies, firms such as Accenture Digital, Cap Gemini, Avanade, and Cognizant are all investing heavily in digital transformation practices. Consulting is undergoing a transition from labor arbitrage (offshoring cheap hourly rates) to guiding and supporting genuine business change. Senior executives in all these firms are creating thought leadership to get ahead of the pack and remain there.

As an effort to stake out a slice of the massive digital transformation investment that clients will make over the coming years, the acquisition indicates where McKinsey is headed. By deepening roots in user experience and digital transformation, the deal is a smart move.

Disclosures: Avanade is a personal consulting client. Mike Sutcliffe, Group Chief Executive of Accenture Digital, was a guest on CXOTalk. Cognizant's Executive Vice President of Strategy, Malcolm Frank, was also a guest on the show.