Originally posted on Forbes.com
Rise of AI is an opportunity to reinvent management consulting, not necessarily an existential threat
Reinvent Management Consulting or see it wither and die? This is the alternative facing the industry in the age of AI. Management consulting is a profession that has excelled at capturing, processing, and synthesizing data to help clients make sense of complicated situations. It turns data about topics like markets, competitors, manufacturing operations, and supply chains into a digestible point of view that enables business leaders to make decisions.
However, this is precisely the area where Generative AI may score big. Large language models can now do in the blink of an eye what it used to take a team of McKinsey consultants months to achieve. This has led many to believe that management consultants will soon be replaced by suites of AI tools, finally exposing the industry’s reliance on the “billable hours” of human labor has been identified as a potential weakness for many years.
But before dancing merrily on the coffins of Bain, BCG, and their ilk, I want to point out that this forecast is based on a misnomer. It assumes that management consultants are only hired to solve “technical” problems that can be resolved through analysis. The reality is that organizations appoint consultants to solve human (or “adaptive”) problems in organizations, even when these problems are dressed up as technical ones. When they say: “Analyze this market and tell me if we should invest in launching a new product.” What the client really means is: “Can you make my bosses believe my decision is the right one?”
The value of consulting is not in the answer it provides to client’s questions, but in its ability to enable organizations to apply those answers to achieve new or different results. AI is likely to be a tremendous aid to the process of creating and delivering value to clients, but it lacks the relationships, prestige, and persuasiveness of a partner from a high-quality consulting firm. This is the value managing consulting brought to business until relatively recently.
Reinvent Management Consulting for a New Age
The problem is that Management Consulting has lost sight of this core value proposition. When James O. McKinsey founded the eponymous firm in Chicago in the 1920s, he did so with a philosophy of “client service.” His influential successor Marvin Bower developed this to position McKinsey as the “counsellor to senior managers.” It was an intimate craft, practiced by expert problem-solvers, who dedicated their skills to advancing the interests of their clients.
Fast forward almost 100 years, and there are now at least three different types of management consultant: expert, implementor, and process.
McKinsey-style Expert Consultants bring specialist expertise to help clients solve technical problems. However, the scope of the technical problems they address has become narrower, and the reliance on analytical capabilities greater. My firm recently worked alongside one of the large, well-known consulting firms at a consumer goods company. Asked by the client to develop a growth strategy to turn around a failing business unit, the consultants developed a magnificently detailed plan for incremental improvement. Unfortunately, this plan completely ignored the much larger strategic threats and opportunities facing the business. This is a repeating problem. Expert Consultants have stopped being the “counsellor to the CEO” and become analysts for middle management.
Another key threat to Expert Consultants is that business school professors have become the “go to” experts on solving complex problems. Senior leaders value objectivity, research-based perspective, and prestige that come with a professor from a marquee school – and they value them more than the viewpoint of a McKinsey Director.
Implementor Consultants perform tasks for clients. They write software code, manage software implementation, and reconfigure supply chains. They are not advisors, but doers, whose promise is to make something happen. The importance of Implementors to consulting firms has become more important with the integration of technology into business operations. This has enabled many firms to expand into technology services in ways that have provided annuity revenue to large firms. However, competitive differentiation is harder. The skills are fungible. People can easily be interchanged. My colleague at Change Logic, Balaji Bondili, proved the portability of such skills by leading a revolution by creating Deloitte Pixel, an open talent marketplace that augments Deloitte consulting teams with freelancers.
Process Consultants are fewer in number than the other types of consultant. Their roots are in solving “human” organizational problems, such as change management, leadership development, and team dynamics. The early work in process consulting came from MIT professor Edgar Schein. He outlined a philosophy of consulting based on guided self-discovery, in which clients solve their own problems. The consultant’s role is to provide disciplines that enable clients to understand the causes of the issues they wanted to solve and then develop solutions they could implement. The virtue of this approach is that it puts the client in charge so that they have ownership for the actions that arise from the Process Consultant’s work. This makes it far more likely that change will happen as opposed to receiving a sterile PowerPoint chart, spreadsheet, or even, AI-based analysis.
The glaring weakness of Process Consultants in this scheme is that they do not have a point of view about what’s a good answer to a problem. They rate success by how widely acceptable an answer is to a human system. This leaves them vulnerable to being as content with a bad answer to a client problem, that will be adopted by an organization, as they are with a great one.
Reinvent Management Consulting as a Synthesis of the Three Types
Reinventing Management Consulting in the age of AI is about reconnecting with the role of counsellor to the senior manager. That will require an ability to deliver expert opinion, as well as a commitment to getting things done, and, critically, a capacity for working the human system that AI cannot touch.
This is why I see the future of Management Consulting as a synthesis of the three types. The Management Consultant of the future will still be obsessed about the accuracy of their analytics; will bring a toolkit for implementation; and have the skills to navigate human systems to enable dialogues that transcend organizational politics. This will allow the profession to reclaim its role at the heart of the C-Suite, helping to guide decision-making, and improve organizational performance.
This is a bigger change for the profession than it might at first seem. Process consulting has been a relative footnote for the industry for the past twenty years. However, this is the skill set that needs to be elevated for the profession to establish its future value.
The focus of large firms has become so obsessively focused on technology implementation and generating narrowly focused analytics, that human systems have been relegated to fringe “people and change” practices. This does a massive disservice to clients by denying them access to capabilities that can help them to apply the answers consultants propose. Consultants need to train themselves to make solving the human equation in a problem integral to how they work. This is where the value lies, not in technical and analytical skills that AI can displace.
Reinvent Management Consulting Business Model
A decision to reinvent management consulting will also change the business model of many firms. The era of massive teams of consultants “burning” hours on client contracts will be replaced by a focus on paying for value. The “sales” cultures of many firms will need to be transformed by “service” culture, that focuses on the client’s most important problems, not the most profitable solutions the consultant can provide.
These important problems have consistent characteristics. I am fortunate to have been serving CEOs for almost thirty years. I learned the more senior you are in an organization, the more you realize that the human dimension of any challenge is the hardest to solve. The challenge of corporate innovation is not generating new ideas, but overcoming the “silent killers” that keep you pinned down to the past. The driver of strategic missteps is not bad analytics, but undiscussed emotions in the senior team.
CEOs want to see us reinvent management consulting. They need trusted partners to help them solve these human, adaptive problems. Management consultants that can make this change have the opportunity to deliver lasting value to clients, even in the age of generative AI. Those that fail to reinvent may wither and die.