The advent of AI and intelligent machines that automate human work has been widely discussed these days—often related to manufacturing and manual work.
Of those, a pretty major part is in management consulting, which is one of the largest industries in the world. In 2015. McKinsey acquired London-based AI company QuantumBlack. The acquisition was described as "... a deliberate strategy to provide McKinsey's clients with new tools, technologies, and features."
A 2017 McKinsey study suggested that more traditional office work was also at stake, especially in corporate and financial consulting. By moving to AI solutions in the future, it is possible to significantly eliminate various cognitive biases caused by human advisors and theoretically make "Robo-advisors" more attractive. We already see companies using AI to help them make important business decisions, or otherwise act as consumer pseudo-consultants.
For example: Amazon’s Alexa can give financial advice - In October 2016, UBS Group AG partnered with Amazon's Alexa to enable and allow people to ask artificial intelligence helpers a variety of economic questions; from "what's happening in the U.S. economy" to "what is inflation?". The AskUBS feature, a product of the Swiss Bank's Wealth Management Innovation Lab, could be one of the first of many such AI-based features.
The US management consulting market in 2016 was worth $58 billion, and almost all of that consulting was done by humans, making it costly. While there is no substitute for the highly personalised strategic advice that a talented consultant can provide to an individual client, there is no doubt that data analysis and presentation are important parts of a management consultant's job. And apparently, maybe AI can do it better.
As management consultants have little experience in processing large datasets and building AI models, AI's ability to absorb and analyse vast amounts of information makes it a prime candidate for complex decision-making.
Intelligent algorithms can help improve the accuracy of business development processes, improve employee and resource fit, and streamline administrative and project tasks. However, more value can be unleashed in the core consulting process—improving the recommendations made by a consulting firm, as well as the lives of consultants and the quality of work they do—delivering to customers.
Companies like Harley-Davidson are using AI to gauge what's already working in their marketing channels. Apple, Facebook, Microsoft, and Amazon are veterans of using AI to improve customer engagement and better understand their respective markets, increasing their leads by 15% within one month, and by 2,930% within three months.
So, what risks can AI bring to the Management Consulting Industry?
The risks of the management consulting industry are well summarized in an article by Alexandre Gonfalonieri, an AI consultant based in Paris. He predicts that while management consultants will continue to exist, there will be fewer consultants for each project and the duration of the project will be shortened. Traditional management consultants are forced to compete with leading technology companies, start-ups, and specialised AI consultants who offer low-cost AI-based solutions, which also puts pressure on profit margins. As the demand for current services decreases, consulting firms are forced to expand to more software-based services, which may hire a relatively large number of data analysts and a small number of general consultants.
AI is becoming a barrier to entry into the management consulting industry, and large companies are investing to adapt to an automated, data-driven environment. They have acquired technology companies, set up innovation labs, and are developing AI software solutions. This allows senior management to combine technology with traditional consulting to provide reliable recommendations that can be used as the basis for business decisions. The roles of consultants and data scientists will overlap as both provide meaningful data analysis as part of a consulting project.
So, is the management consulting industry endangered?
The industry still has a future as many companies are working hard to adapt. Companies that integrate AI into consulting projects and train consultants on the use of this technology will gain a competitive advantage in the AI era. Companies preparing to bridge the gap between AI-based tools being developed by technology companies and the actual business challenges of potential customers may also find sustainable niches in new business environments. Empathy, and respect for the history, culture, and values of the clients and their employees are still important in advising on the delicate and time-sensitive issues facing large companies. And AI cannot do that.
Rapid adaptation is critical to job security and business continuity in the future, where AI systems work with traditional consultants and may also compete against them. Building a new business model that integrates AI and data science has strategic value for consulting firms. By being keenly aware of AI capabilities and development trends, consultants can overcome obstacles, fend off new entrants, and replace outdated areas of activity. Sharpening human qualities such as emotional intelligence, presentation skills, critical thinking, and commitment to customer relationships provides a valuable competitive advantage in the future world.
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