How artificial intelligence might affect management consultants
Management consulting hasn’t escaped threats of ‘disruption’ from artificial intelligence (AI). The Economist recently produced a special report entitled: ‘AI providers will increasingly compete with management consultancies’. Even the Harvard Business Review has run an article with the headline: "AI may soon replace even the most elite consultants."
Those headlines mask a more complex reality.
AI encroaching on consultants’ turf
Developments at McKinsey provide evidence of the growing overlap between AI and consulting. In 2015, they acquired London based AI firm QuantumBlack (external link), described by McKinsey to be: "pioneering the use of big data and advanced analytics to improve organisational performance." The acquisition was said to be: "… a deliberate strategy to bring new tools, technologies, and capabilities to McKinsey clients."
But it was not just adding technical, back-office, number crunching capability. QuantumBlack presents case studies of its own projects that are client facing, strategic initiatives, typical of the work done by large consultancies. They have worked with a:
- Global engineering company’s oil and gas division to improve engineering team design and work processes
- Retail bank to determine the causes of a drop in sales of some product lines in their branch network
Independent AI firms are also encroaching. Cardiff based Amplyfi provides business intelligence, used in applications such as strategic planning or acquisition target search. Its algorithms read and analyse the web, including the ‘deep web’, which is not indexed by standard search engines and contains documents such as patent filings, academic papers and proprietary databases.
Amplyfi says the algorithms "read and interpret unstructured big data across all modern languages to uncover key people, geographies, companies, trends, trajectories, patterns and behaviours."
Chief technology officer, Mark Woods, recently told the Chartered Institute for Securities and Investment: "We don’t doubt that you could pay a large consultancy to have 200 people locked away in a room for a few weeks and produce something like this (one of their AI powered searches). But then in a month’s time you need to repeat the exercise again. And again."
An opportunity for some consultants
Research conducted in 2017 by Odgers Connect, an agency placing independent consultants into project work, showed that 20% of organisations already hire independent consultants to help exploit new digital technologies. And almost a third of hiring organisations expect to increase their use of independent consultants in the areas of data analytics and digital technology (the highest of all areas where consultants are expected to be used).
Odgers described these two areas as ‘sweet spots’ where potential employers had the most demand for consulting work and also thought the quality of work on offer by independent consultants is significantly higher than traditional consulting firms.
Jon Tippell, director at RedKite Intelligence, is a consultant with a focus on this opportunity. He sees the primary role of the independent consultant as a trusted party to help the client think through how to approach AI. He says: "Many organisations know they aren’t good at analytics and AI, but they need to be in order to survive. So there is a continued demand for external support and an enormous appetite for capacity in this space."
But he stresses that it is not an easy opportunity for consultants to capture, and that there is a need for a skill set that combines expertise in problem solving, data, analytics, AI, and organisational change.
"It takes time to create that capability, you have to go through several years of academic learning followed by real work experience to get good at this stuff." Tippell is a computer scientist with extensive strategy consulting experience.
Tippell also points out that the opportunity is not only with larger companies, but also with high-growth SMEs, especially those backed by venture capital. These companies want to move fast, so are prepared to use independent consultants who can hit the ground running.
As an example of this, Tippell cites the work done by a colleague, who had experience in the on-line fresh food delivery sector, and was brought in by Deliveroo to use data and insight to build out their supply chain functions.
Nick Adlam, partner at The Barton Partnership, which places independent consultants into both corporates and venture capital or private equity backed SMEs, also sees a significant opportunity.
"If there was a single biggest shortage of talent that we would like to see more of, it’s people who can work with huge data sets that have that consulting background to be able to ask: 'so, how do I make money from that?'"
He has found that among many of his clients, there is frustration with the poor return on investment from big data and associated systems to date. Adlam explains that there may be very powerful, insightful analyses being produced by some of the new technologies, but there is often a missing link in translating those analyses to specific business decisions that make money.
"Businesses are struggling to get the combination of insight and commerciality," he says.
AI will gradually replace repetitive consulting tasks
Although there is clearly an opportunity for those consultants with the right skill set, there is little doubt that the overlap between AI and consulting will grow, presenting a threat to others.
Where tasks are repetitive or where the volume of data or complexity of analysis is beyond human ability, AI is likely to encroach.
But don’t expect this to happen overnight.
Adlam doesn’t see a significant use of technology, AI or otherwise, being used in the place of consultants at the moment. In his view, "businesses are cautious about new sparkly ideas that will change the world. They have often sunk large amounts of money into IT and big data and been disappointed with the benefits as yet."
He says that getting clients to even consider using independent consultants instead of a big consulting firm is a huge step, so there is an even bigger hurdle to overcome to deploy AI tools for the same functions.
But he does see a future where AI tools will replace some repetitive tasks – such as the research or analyses undertaken by junior consultants – and possibly even in some higher value engagements that have a large degree of standardisation, such as commercial due diligence.
He says: "Whilst the end result of every due diligence is different, probably half the work is taking a standard set of data inputs and turning it into a standard set of charts. AI could feasibly do that. But the real value add is from that set of eyes with 20 or 30 years of experience to look at that chart and interpret it."
Tippell says: "A larger consulting engagement might have had a partner with 8 to 10 more junior consultants. In some areas this has been automated away. So consultants are not needed to do primary research and activities like data cleaning, hand-cranked analytics and report writing. There is a flow away from junior to more advanced roles, achieving the same or better outcomes but with fewer people."
So while it is true that AI threatens some consulting functions, businesses are wary of new technologies promising the world. Many are looking to consultants, especially independent consultants, to help them.
London Tech Week (external link) runs 11-17 June, including an event on AI impacting future innovation
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