For once, consulting companies are no longer the analysts of the digital transformation but their industry is under digital transformation: big data, AI and Generative AI are transforming forces. How is changing consulting with data and AI? What are the strategies of major players? How do value drivers change?
Generative AI: Opportunities for Consulting Firms
For consulting companies, Generative AI represents three value creation opportunities. First, it’s an opportunity to grow revenue on the current business model offering services to help clients implement Generative AI solutions in their processes. Second, it’s an opportunity to optimise operations through automation or augmentation of consultants’ tasks. Third, it’s a new business model opportunity launching digital offerings such as SaaS software to be used by corporate clients and other consulting firms.
The three opportunities are not totally new and Generative AI accelerates existing trends. Surfing new technologies has been for long a significant source of business as clients are looking for expertise and support to use them. Regarding productivity and process streamlining, it took the form of outsourcing some tasks in low labor cost countries. Last, companies like McKinsey have already grown a significant share of their revenue through selling access to proprietary software.
The scale and pace of adoption of Generative AI act as an accelerator and urge all the players in the industry to move to embrace the change. If they don’t, competitors will get the market. In particular, new competitors coming from other industries. Additionally, the battle for value capture with companies at other parts of the value chain (tech infrastructure, data, models) is fierce.
In order to seize these value creation opportunities and address competition threats, consulting companies need to access to diverse set of resources:
- human consulting talents to support their clients in their transformation journey
- human technical talents in data and AI to develop internal digital offerings and clients’ tools
- data assets to develop specific models
- technical infrastructure to run the new digital offerings
Consequently, announcements of significant investments were made by all the big consulting companies. Accenture announced a 3B$ investment over 3 years, PwC 1B$ over the next 3 years and Cap Gemini, 2B$ over the same timeframe.
Strategic Adaptations in the Consulting Industry
One relatively quick and flexible strategy for acquiring new resources is to build partnerships and over the last few months, agreements between consulting giants and Generative AI startups have blossomed:
- Bain & Company announces services alliance with OpenAI to help enterprise clients identify and realize the full potential and maximum value of AI.
- Bain also signed a partnership with Microsoft which combines Bain’s multidisciplinary expertise in strategic business advice, data, and engineering with Microsoft’s Azure OpenAI service.
- McKinsey and Cohere collaborate to transform clients with enterprise generative AI.
- BCG and Anthropic Announce New Collaboration to Bring Responsible GenAI to Enterprise Clients.
In addition, consulting companies dedicate a lot of effort growing their internal stack of resources through the acquisition of smaller boutique firms, recruitment of tech and data teams, training their existing workforce on these technologies.
Last, with the move to digital services, the whole marketing and sales function is revamped to serve users and not only clients, in a similar transformation that product manufacturers engaged in with the Internet of Things and connected devices. That move from clients to users, from BtoB to Btoc is definitely not a catwalk and involves major shifts in hard resources (technology, marketing, …) and soft (culture, representations).
Will consulting be eaten by tech?
On one side, Generative AI is described as an existential threat to consulting and some argue that the whole industry is about to be replaced by chatbots. The argument is that large language models are trained on massive existing data to produce new content, which is a way to describe how consulting works. In this view, clients no longer need to call an external consultant to have a list of best practices in a given function or context, they just need to write in a chat box and get the answer immediately. There are obvious limits to this argument, but still, it’s likely clients will be more demanding in terms of content and consultants will need to make visible their difference and value added in terms of content compared with Generative AI tools.
On a less radical note, the spread of AI and Generative AI is reinforcing a trend for part of the consulting market: moving to digital services. For a decade now, some consulting companies have developed offerings which go beyond recommendation and advice, they offer digital tools for a given problem. For example, McKinsey offers a pricing tool to their clients. With AI and Generative AI, the opportunities to scale such digital offerings increase (as Cap Gemini announced already) and simultaneously will increase the importance and value of proprietary data and exclusive models and infrastructure.
However, clients buy consulting services not only to get an information or recommendation. They also buy consulting services for three other reasons that make the industry quite resilient to tech: label, internal politics and change management. First, part of the value of consulting lies in the label and the day when an executive will justify a massive organisation reshuffle because it’s been recommended by ChatGPT is certainly quite far. Second, the use of consultants to support an idea, launch a project or even fail an initiative is a standard practice to deal with balance of power at top management levels and it’s quite unlikely the subtility of such moves could be digitalised. Third, the main segment in terms of volume within the consulting industry addresses implementation of recommendations and transformation projects are also quite unlikely to be digitalised. The ability to frame a problem, embark on a new vision, manage conflicts productively, forge alliances or motivate teams relies on humans and digital only acts as a supportive means.
In conclusion, it’s crucial to remember that the core value of consulting extends beyond mere data analysis and technological solutions. While Generative AI can augment and accelerate the data-driven aspects of consulting, the nuanced art of asking the right questions, understanding complex human dynamics, and navigating organizational challenges remains distinctly human. Consultants will be valued not just for the answers they provide but for their ability to discern the questions that truly matter, guiding their clients towards meaningful, sustainable change in an increasingly digital world.
In a world where all answers are easily available, the ability to pick and frame the right question will be even more precious.