Reimagine Consulting: Impact of Generative AI on Traditional Consulting Paradigms
In a world where Generative AI is sweeping across society and the market as a “consultant” to people, can traditional consultants, who have demanded high fees, survive?
In the first place, what is the value provided by modern consultants? I have never worked in the consulting industry myself, but as an HR manager, I have experience working with consultants from several firms (such as McKinsey, Deloitte, and PwC). Based on that experience, I believe the main values of consultants are the following three:
- Knowledge and insights of best practices
- Objective and fresh perspectives from a third-party
- Specialized knowledge in specific industries or fields
However, it’s a fact that criticism of consulting never ends. The following drawbacks can contribute to it:
- High fees
- Difficulty in implementation
- Lack of a long-term perspective
The high fees are self-explanatory. The difficulty in implementation means that while the recommendations of consulting firms are “theoretically correct,” they are often challenging to realize when considering the actual culture, history, power dynamics, and resource constraints of the clients. In fact, less than 10% of the recommendations I have received from consulting firms have been implemented.
Also, some consulting firms (not always but often) tend to prioritize short-term success to earn client approval, lacking a long-term perspective. I have seen many proposals from consulting firms that clearly look for additional fees for long-term perspectives, aiming for sustained revenue.
Will Generative AI be an ally or a foe to consultants?
If Generative AI can resolve these dissatisfactions, clients will be happy, and consulting firms will feel threatened. In this context, McKinsey’s AI assistant tool “Lilli,” launched in 2023, offers interesting insights. Lilli is a chat application for McKinsey’s employees, which provides access to McKinsey’s internal knowledge and assets. Also, it delivers appropriate information, data, and insights to the employees, and even assists in recommending internal experts. Some research and planning that took weeks could be accomplished in hours using Lilli according to McKinsey.
“Lilli has unleashed the creative potential in our people. They are helping clients in ways we never anticipated.”
— Phil Hudelson, McKinsey partner
Moreover, Erik Roth, a senior partner, has spoken about the potential of deploying this AI tool for clients. If true, the dissatisfaction with “high fees” among the aforementioned complaints about consultants (depending on the usage fee) is likely to be resolved. Assuming Lilli generously offers McKinsey’s best practices and specialized knowledge, one could even argue that consultants would become entirely unnecessary. But is that the case?
My view is “Yes and No.” More precisely, “consultants need to upgrade themselves.” For example, one of the current values of consultants, “objective and fresh perspectives from a third party,” is something Generative AI can provide to a certain extent, but based on my experience with ChatGPT, it’s likely to be non-offensive, general, and pacifist.
I believe that consultants are expected to have the ability to make sometimes aggressive recommendations. For example, when I sought advice from consulting firms on strategies to reduce employee turnover rates, many consultants advised various measures to increase employee satisfaction.
However, the most rational and practical suggestion was from a partner consultant, who said, “Trying to reduce turnover rates is foolish. In an industry where talent mobility is increasing, including your company, you should consider developing employees, to a level worth changing jobs for, and supporting their career advancement. By doing so, the attractiveness of your company will increase, and you can attract higher-quality employees in the cycle of talent mobility.” Clients would want such suggestions more that break the status quo and strike clients from unexpected angles going forward.
Self-disruption before disrupted
Furthermore, consulting about how to overcome the “difficulty in implementation,” that is, implementation planning and support, is expected to increase. Super-personalized consulting, considering a wide range of client situations and offering practical solutions, is something tough for Generative AI.
For instance, when I was involved in organizational optimization as an HR manager, understanding concepts like vertical, horizontal, and hybrid organization models to hypothesize which is suitable for my company was not so difficult. However, how to actually “proceed” with it was extremely challenging: project team, schedule, phases, and decision-making process. What we truly need is a partner who will seriously think about and plan them together with us.
If AI can replace the basic tasks of consultants, such as research, analytics, and documentation, young consultants (i.e. analysts and associates) may become unnecessary. Then, the career path of consultants becomes more complicated, and more people might first have experience in operational companies before becoming consultants. As a result, consultants specializing in areas related to their previous professions would increase.
Future Business Models of Consulting Firms
The business models of consulting firms would change as well. Especially if AI tools like Lilli are made available to clients, not only a subscription model for the AI could be considered, but a model that provides Lilli for free could also be viable. In that case, the firms could adopt some different models: a freemium model to earn revenue from “manned” consulting, earning from advertisements as Google does, or creating an expert ecosystem to make money from referral fees.
Those models could provide consulting firms with more sustainable revenue, alleviating their risks and anxieties. Then, the tendency to focus on short-term client benefits could be resolved. If consulting firms can make long-term recommendations more confidently, they could build more trust with clients, especially with CxO, who pursue long-term strategies. We could expect that Generative AI would promote the growth of consultants, enhance their value, and ultimately lead to a richer life for people.
Finally, I asked ChatGPT himself as follows (though no one knows if it’s speaking its true feelings):
