Consulting, like many other industries, is under threat from artificial intelligence (AI) and machine learning (ML). AI refers to a range of technologies that allow computers (or robots) to perform tasks commonly associated with intelligent beings. ML plays an important part in building AI systems, and refers to the study of algorithms that improve with experience. Stanford Professor Andrew Ng has stated that “machine learning is the science of getting computers to learn without being explicitly programmed”. These are powerful advances that will confer on computers key capabilities that were previously uniquely possessed by humans.
There is a concern that the 4th industrial revolution will lead AI technologies to replace many white collar workers, including management consultants, whose daily tasks involve finding, organising, analysing, and evaluating information in order to solve their client’s most challenging problems. Many Fortune 500 companies, like Amazon and Coca-Cola, are investing in this area in order to obtain increased data analysis and decision making ability. This will reduce the need to outsource these functions, and result in less business opportunities for those that provide these services.
The risks to the management consulting industry are summarized well in an article written by Alexandre Gonfalonieri, an AI Consultant based in Paris. Gonfalonieri predicts that, although management consultants will continue to exist, there will be less consultants on each project and the length of projects will be reduced. Profit margins will also be squeezed as traditional management consulting firms are forced to compete with big tech firms, start-ups, and dedicated AI consulting firms offering cost effective AI based solutions. Since consulting firms will face less demand for their current services they will be forced to branch out into more software based services, and so they will be likely to hire relatively more data analysts and fewer generalist consultants.
Consulting firms should invest now in order to build new business models and technology that will allow them to offer promising AI based solutions. An example of just how disruptive AI can be to an industry is the introduction of robo-advisors. Financial consultants providing asset management services are witnessing their function quickly become automated. Companies such as Betterment and Wealthfront use robo-advisors for asset management and already have more than $440 billion in assets under management.
AI will become a large barrier to entry in the management consulting industry and leading firms are investing in order to adapt to the automated and data-driven environment. They are acquiring tech firms, setting up innovation labs, and developing AI software solutions. This will give them the ability to combine technology with traditional consulting in order to provide trusted recommendations that senior management can use as the basis for business decision making. The role of the consultant and data scientist will overlap as both will provide meaningful data analysis as part of a consulting project.
The management consulting industry has a future because of the firms that are working hard to adapt. The firms that incorporate AI into consulting projects and train consultants to utilize that technology will gain a competitive advantage in the AI age. The firms that are preparing to be the bridge between AI based tools created by tech firms and the real business challenges faced by prospective clients are also likely to find themselves a sustainable niche in the new business environment. Empathy and regard for the client’s employees, history and values will remain crucial when consulting on sensitive and time critical issues faced by leading companies.
The AI age will change a few of the fundamentals of the management consulting industry all the way down to the recruitment level. Applicants with backgrounds in data science will have a key advantage over other recruits. Data scientists and consultants will collaborate on many projects with an emphasis on setting clear objectives and presenting solutions in a client friendly way. Although the burden of number crunching will be increasingly carried by AI systems, consultants are likely to work on shorter faster paced projects, each with a steep learning curve.
Conclusion
In the possible future where AI systems both collaborate with and compete with traditional consultants, adapting quickly will be crucial for job security and business continuity. Building new business models that incorporate AI and data science will be of strategic value to consultancies. A keen awareness of AI’s capabilities and development trends will help consulting firms surmount obstacles, fend off new entrants and replace obsolete practice areas. Sharpening the human qualities such as emotional intelligence, presentation skills, critical thinking and commitment to relationships with clients will also offer a valuable competitive advantage in a futuristic world.
Rhulani (Ruce) Ndlala is an accounting student at the University of Cape Town, and former President of the UCT Consulting Club.
Image: Pixabay
One reply on “The Impact of AI on the Management Consulting Industry”
Always nice to see nice articles from students. Keep it up.