To strategic planning consultant W. Walker Lewis, the problem was simple, the solution straightforward.

The case involved a company at a crossroads. Long an innovator in its field, it was dwarfed by competitors 10 times its size. The loss of a critical piece of business two years earlier had battered revenue and profit, forced layoffs and sent the firm's stock price into a tailspin. And it was clear that changing competitive forces would require major investments in coming years that were beyond the company's existing resources.

"What we would advise a client of our own in a case like that is {to} merge into a larger company with the resources to carry out the strategy," Lewis said.

But in this case, Lewis's advice was hardly dispassionate. The company for which he was plotting strategy was the one he had founded and run for nearly two decades: Washington-based Strategic Planning Associates Inc.

By agreeing late last year to sell the company to insurance and consulting giant Marsh & McLennan Cos. for $79 million, Lewis and other top executives capped three years of activity -- beginning with a decision to sell stock to the public, unusual for a management consulting firm -- in which SPA was put in the unusual position of having to give itself the same kind of advice it was used to giving others.

Company executives said they were satisfied with the outcome of the process -- Marsh & McLennan provides a good fit that gives SPA a lot of autonomy of operation and provides it with resources needed for future growth, particularly as strategic planning becomes more involved in human resources issues in which New York-based Marsh & McLennan long has specialized.

But the experience also shows that even experts in handling corporate upheaval are not themselves immune from it, and that their greatest test may be how they can handle internal challenges. SPA's history, as Lewis says, "really is wrapped up in the history of management consulting."

In sharp contrast to the old-line major management consulting firms, which traditionally have focused on broad organizational concepts, SPA is part of a new breed of business consultants that specialize in high-level strategic planning, preaching a bottom-line, results-oriented doctrine. That's backed up, at SPA particularly, by sophisticated computer techniques that allow the modeling of extremely complicated business situations, providing "what if" analysis that in turn produces much more specific business plans than traditional techniques.

SPA's top management is populated by a number of people, including Lewis, President Francois E. de Carbonnel and Executive Vice President Roy M. Barbee, who spent time at Boston Consulting Group, a firm that generally is considered to have been at the forefront of modern strategic planning in the last 20 years.

Most traditional management consultants in the 1960s and 1970s focused on corporate organizational concepts. Buzzwords such as "experience curve," "portfolio building" and "competitive dynamics" were all the rage, although little emphasis was given to the impact of actual operational changes. "There was a lot of fuzzy, muddled thinking in the industry," Barbee said.

Boston Consulting Group, often referred to as BCG, took a new tack. Its philosophy was that the business world was becoming more competitive and global, and American companies remained complacent at their peril. The arrogant business theory that, if you could make it, you could sell it, was being replaced by a new reality, Lewis said: "If you could make it, you could sell it -- but you might lose your shirt."

"They basically turned their thoughts to competition as a driver for strategy," Barbee said of BCG, which he left in 1981 to join SPA.

All manner of changes in the economic landscape were forcing American corporations to take tough looks at their businesses. Many companies began to undertake major restructurings, and they looked to BCG and other companies for strategic planning advice.

"Their timing was precisely right," Lewis said of BCG's approach. "In 1972, if you could spell the phrase 'strategic planning,' you could get work."

Lewis had gotten into strategic planning pretty much by accident. A one-time journalist and instructor at Ohio University, he was recruited to the Boston Consulting Group by a BCG executive he met at lunch who was intrigued by the idea of hiring someone who did not have the standard business school background. But after a few years at BCG, Lewis grew restless and decided to strike out on his own.

His twist on what BCG was doing was to apply sophisticated computer techniques to strategic consulting. Business was becoming so complex, he reasoned, that classic analytical techniques were no longer enough. What was needed was powerful data-crunching know-how.

So in 1972, at the age of 28, he started SPA, locating it in Washington, his wife's hometown. "I saw this idea and said, 'Let's try it,' " he recalled. "I was too young to know better. That's the truth."

At the time, neither computer technology nor corporate interest paralleled Lewis's vision. "I was much too early," Lewis concedes now. "The idea was right, but the timing was really wrong." The fledgling company struggled for several years, its revenue still only at $1 million by 1978.

But SPA finally began to grow as minicomputers and then personal computers became less expensive and big companies, increasingly buffeted by economic turbulence, became more frustrated with the limitations of older planning techniques.

SPA also benefited from a side effect of corporate downsizing -- one of the first departments many companies cut in attempting to streamline their operations was the corporate planning department, providing an instant opportunity for outside consultants such as SPA, Boston Consulting Group, McKinsey & Co. Inc., Booz Allen & Hamilton Inc. and Bain & Co.

"The growth of restructuring as a corporate phenomenon in the 1980s, as a response to corporate raiders, global competition and technology, made our approach highly marketable," Lewis said.

Catering to the cream of corporate America -- mostly companies with $1 billion or more in annual revenue -- SPA found clients all over the Fortune 500 and developed particular expertise in the telecommunications, financial services and oil industries.

Those industries presented similar challenges: Each was undergoing fundamental structural change, their business data were easily quantified, and the solutions to their problems were not necessarily obvious.

Using reams of data supplied by clients, extensive interviews and other sources, SPA would build computerized models that took into account a client's business and that of competitors, enabling the consideration of a large number of factors and scenarios.

"They would then use those models as almost empirical tools to show companies the impact on profit of changes in company strategy," said Cato Carpenter, a securities analyst who followed SPA for Baltimore brokerage Alex. Brown Inc.

Clients included Royal Dutch Shell Group of Companies, Equitable Life Assurance Society, Ameritech Corp. and Chase Manhattan Bank.

For Royal Dutch Shell, for instance, SPA tackled the question of whether the oil giant's network of 100 worldwide refineries represented the maximum in operating efficiency. SPA constructed an extensive computerized model of Shell's refinery system, factoring in data about competitors' refining capabilities, and then made detailed recommendations about how the company could reduce costs in the refinery system to become more competitive.

Such specific, profit-oriented advice was a far cry from the more general suggestions offered by traditional planning consultants.

"I started out in 1972 thinking it's strategic planning," Lewis said. "Today I know it's bottom-line consulting. Any idea we have that won't move a company's bottom line isn't really worth the effort we have to put in to get it."

By 1986, SPA had grown into a $25 million company, but its top executives were becoming concerned about the future.

Two clients -- Royal Dutch Shell and Equitable Assurance -- accounted for 40 percent of revenue, making the company highly vulnerable to the loss of one of its mainstays. The competition had largely matched SPA's innovations in computer modeling, and Lewis believed SPA needed capital to fund expansion to better compete with larger consulting firms.

SPA also was experiencing some of the disadvantages of being a fast-growing partnership -- profit was being paid out to partners rather than being reinvested in the business, partners who wanted to leave had virtually no way to cash out of the company, and the partnership system made it virtually impossible to offer ownership incentives to new recruits.

SPA, which hires young college graduates who work 70 hours a week and more under the direction of the firm's senior officials, sold a 30 percent interest to the public in late 1986, raising $5 million. The stock issue satisfied some of SPA's needs but not others, in part because the 1987 stock market crash made it difficult to sell additional shares. Still, SPA thrived, its revenue nearly doubling in two years.

But the strong growth was interrupted late in 1987 when Equitable Assurance's board made a strategic decision of its own: to replace the company's top management.

SPA was swept out along with the old regime at Equitable, and virtually overnight, the firm lost more than $10 million in revenue -- about 20 percent of its total. Coincidentally, other smaller, but still significant, clients left at about the same time.

The loss of business exposed the flaw in SPA's strategy of relying on a small number of big clients, and it didn't take any fancy computer modeling to figure out that SPA suddenly was in the kind of jam it was used to helping other companies deal with. To make matters worse, Equitable's decision came after SPA already had hired its full complement of business school recruits for the year, leaving the company seriously overstaffed. Since salaries are a consulting company's biggest fixed cost, the sharp drop in revenue hit profits hard.

For several months, the company attempted to overcome the reality by fighting. "We just felt bold enough that we could power through and make it happen," said Eugene P. Nesbeda, a former SPA executive who left the firm in September to become vice president of business development and planning at General Electric Co. "I think we just underestimated the effort in having to go out and get other very large clients to support the infrastructure."

While the company scrambled for new business without first making cuts in expenses, profits plummeted. The company took a $1.6 million loss in the quarter ended Nov. 30, 1988, and in the fiscal year ended Aug. 31, 1989, revenue was off 19 percent to $43 million and profit fell 85 percent, to $860,000.

That fiscal year included the company's first-ever layoffs, in late 1988, after an ill-fated attempt to expand SPA's corporate takeover consulting work. From 40 to 50 people were let go, or about 10 percent of the company's total employment.

"It was horrible," Barbee said. "Having to respond in the way that we had to, by having to lay off people, was a real shock to our culture."

SPA's stock also was hit hard. The company had gone public at $8.50 a share, and the stock had risen as high as $21.75 in 1987. But in mid-1988 it plummeted to $6 from $17.50 in a matter of months. "The stock cratered," Barbee said.

Although the company had enough cash reserves to remain in fairly good financial health, SPA's management was forced to take a hard look at the firm's prospects. "A bunch of us, including myself, decided that we didn't want to have to go through that again," Barbee said of the turmoil of 1988. "We were also certain that, at some stage in the future, we would have another hiccup."

"I think they began to kind of realize they weren't very well suited to be a public company because they couldn't provide stable profitability. It would sort of soar and crash," said analyst Carpenter. "It's much easier to be part of a larger entity and not have all these peaks and valleys so intensely scrutinized by public shareholders and analysts and the press."

At the same time, Lewis said, management concluded that given the challenges it would face in the future, SPA "was simply subscale."

To be successful in an increasingly international, competitive marketplace, Lewis said, a major consulting firm needs offices all over the world, expertise in all major industries and the ability to integrate strategic planning with other consulting disciplines.

"A meaningful-sized consulting company has to be 2,000 professionals or larger," Lewis said. "It's simple math." That math indicates a company five times SPA's size, and although SPA's revenue was recovering to its pre-Equitable levels, Lewis and the rest of management concluded that the company was not going to grow quickly enough to stay competitive in the new environment.

SPA considered possible deals with a large European bank and several other consulting companies before deciding to be taken over by Marsh & McClennan, which was looking to expand in the strategic planning field.

The deal involved a swap of Marsh & McClennan shares for SPA stock, which shot up early this year from a low of $8.25 to more than $13 a share.

"We needed a larger strategic component and we needed a global presence, and SPA satisfied both those criteria," said Thomas Waylett, managing director for consulting at Marsh & McLennan.

SPA complements several of Marsh & McLennan's other consulting businesses, including Temple Barker & Sloan, a more traditional management consulting firm, and Mercer-Meidinger-Hansen, the nation's largest compensation and benefits consultancy.

Although Lewis is an entrepreneur who probably would have liked to keep SPA independent, he said, "I think we probably would have merged at some point, because the idea we're pursuing is much bigger than we were or are. ...

"Managements are fast losing their appetite for consultants to offer their opinions of what is good or bad; rubber-stamp consulting is dying," Lewis said.

"Now there are large projects for companies that are dealing with analytical changes, human changes and organizational changes. There is a need for firms who can work on many business profiles and on implementation. Only big firms can do that," Lewis said.

Barbee said the autonomy given to SPA by its new corporate parent fits the company's culture well, especially that of the entrepreneurial Lewis. "To work for somebody else in the more traditional way ... would be a very difficult thing for Walker to do," Barbee said.

But Lewis said the experience of taking the company public eased the transition to ownership by another company, since it gave him a taste of the feeling of being an employee rather than an entrepreneur.

"So the idea of merging with a large company that could help us go further was maybe easier for me than for most classical entrepreneurs," he said. Besides, he said, "If I thought the '90s were stable as hell, I'd remain independent."

After what's happened over the past few years, Lewis could use some stability.

"In 1988, I lived through one of the toughest years of my life, because I had hoped to build Strategic Planning Associates as an independent company for a number of years," Lewis said. "The reality of losing large clients, laying off employees, rebuilding painfully, were all very tough experiences, personally and professionally for myself and the people who went through it.

"I believe it was probably one of the best experiences we could have," he continued. "Reality is the best teacher, and you don't look for the opportunities to build character -- you just hope that they turn out all right."