Artificial intelligence is shedding new light on the $400 billion world of strategy consulting, potentially undermining the appeal of highly paid business strategists.
This may be the conclusion we come to when we listen to all the consultancies that are ramping up the use of AI and claiming that it can make their legion of consultants faster, better, and more effective. But behind the curtain, the demand for management consultants – a small but flashy segment of the broader consulting industry – is different than before. In the era of LLMs, the value of the advice they provide has diminished, and there is increasing pressure on consultants to develop more in-depth expertise and specialization.
Giants in the field have been vocal about their use of AI, and have already laid off several consultants hired during the pandemic.
But the disruption may not be over yet, with AI potentially replacing another 25% of management consultants as companies move away from generalists and hold consultants accountable for results, industry experts told Business Insider.
It appears that change has already begun. Management consultants, who provide business strategy support to many different types of companies and are considered generalists in the industry, are facing the toughest job market for their profession since 2008, according to an analysis conducted for Business Insider by workplace intelligence firm Revelio Labs.
Although the broader job market for consultants, like other industries, appears to be stagnant, with low turnover and entry rates, demand for more specialized consultants remains high. For example, Revelio data shows that hiring consultants focused on niche areas such as sustainability, defense, supply chain, and technology is stronger than hiring general management consultants.
Management Consulted, a firm that conducts industry research and provides career advice to consultants, estimates that employment of professional consultants may have increased by 20% to 35% over the past three years.
It is estimated that employment of professionals could increase by up to 60% over the next five years, driven largely by demand for skills in AI, data, and other industry expertise. Namaan Main, chief operating officer at Management Consulted, told Business Insider that demand for broader strategy consultants could fall by another 10% over that period.
“Strategy consulting is not going away,” Mian said. “The composition of employment is changing,” Mian said.
James Ransom, head of strategy, management consulting and executive search at talent advisory firm Patrick Morgan, predicts more volatility going forward. He estimates that over the next five years, the ratio of generalists to specialists in the consulting industry could move from 80:20 to 60:40, which would equate to about a quarter of management consultants being forced out of their jobs.
“AI is what will change the pyramid,” he told Business Insider. “They’re no longer just looking at a few slides and expecting a thumbs up. They’re really looking for people who can add value, and ideally have experience in the industry.”
According to a February report from Source Global, cybersecurity consulting is expected to become the fastest-growing service area in the U.S. consulting field, expanding by 14%. In contrast, consulting related to human resources, transformation, and HR strategy is expected to grow by just 2% this year.
Some companies have announced their focus on specialized areas. In January, Business Insider exclusively reported that Deloitte plans to overhaul its job titles across the U.S. and replace them with more detailed job titles that reflect employees’ “job families,” or areas of focus.
McKinsey, the management consulting industry giant, said it is looking to hire more generalists, but is also increasingly focusing on consultants’ ability to integrate multiple areas of expertise.
Yuval Atzmon, the company’s chief financial officer, said he believes many of the company’s consultants have one or more areas of expertise that allow them to work in a specific industry or within a specific function across multiple industries.
“We are definitely looking for people with a higher level of technology quotient, AI quotient,” he said, adding that these two areas will be of particular focus going forward.
Boston Consulting Group, another management consulting giant, told Business Insider that it is hiring more experts with a focus on areas such as AI, technology, supply chain and marketing.
Brian Meyerholtz, senior partner at Boston Consulting Group and head of North American recruiting for the firm, said generalist slots still exist and career progression at the firm is flexible, but consultants are now expected to develop specializations sooner, such as after one or two promotion cycles.
“When I joined BCG, I thought I would remain a generalist even if I stayed at BCG for much longer,” Meyerholtz said.
Bain, the third largest management consulting company, did not respond to a request for an interview from Business Insider.
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The days of consultants charging for slide decks may be over.
Tom Rodenhauser, managing partner at K2 Consulting Research, told BI that the presence of AI has eroded some of the value of pure business strategy, which has long been the “foundation” of MBB3.
AI has also changed the hourly billing model for consulting. As this technology accelerates research and other processes, more companies are moving to results-based pricing combined with fixed fees. As a result, the industry has placed a new emphasis on implementation and value, rather than just activity.
“It’s like we’re starting to squeeze out the generalists,” Rodenhauser said. “You can’t have a bunch of generalists who are good at dealing with customers, but is that really what you want?”
“The ‘strategy’ is a given and the focus will be on results,” he continued in an email.
In November, McKinsey told Business Insider that about a quarter of its fees come from performance-based pricing.
At Big Four accounting firm KPMG, a “significant portion” of its business is already running out of billable hours, said Rob Fischer, vice chairman of advisory at KPMG US. The old model “is not an accurate representation of the cost of engagement or the value it provides.”
While not necessarily lower prices, the change is attractive to customers, Fisher added.
“They really like the idea of, “Here’s a fixed price,” or “We can tie it to this outcome,” rather than the possibility that the price keeps going up if the team takes longer than expected.
Management Consulted’s Mian said that more companies are focusing on revenue per employee as a performance metric, citing conversations with industry players.
“I think there’s a very active discussion internally about focusing on impact, not just insight. That’s part of our metrics,” BCG’s Meyerholtz said. “I think it’s always been part of the conversation, but it’s probably more part of the conversation today than ever before.”
Ransom said specialization now sets consultants apart. His firm, which works with consulting firms, has seen a three-fold increase in the past two years in the number of clients who have expressed a preference for candidates with specific industry experience over those with pure consulting backgrounds.
Rodenhauser said the demand for technology consultants is likely to outstrip the demand for general management consultants in the coming years. In the new era of consulting, partners are more likely to be considered “domain experts” in any niche, he sees.
He added that he believes the industry is experiencing something of an existential crisis as companies redefine what it means to be a consultant.
“They won’t admit it publicly, but I think they know privately that the industry is irrevocably changing,” he said of the industry’s biggest players. “Because if we really did this, a lot of companies would shrink.”