The professional services industry, long revered as the bastion of bespoke solutions and exclusive expertise, is poised for a seismic shift. According to IBISWorld, our industry has a 5-year forecasted Compound Annual Growth Rate (CAGR) of revenue at a modest 0.6% and a 2.2% CAGR of new entrants, while experiencing a slight dip in profit margins at a CAGR of -0.3 percentage points over the past five years. This means our industry will become increasingly saturated with competitors without substantive growth in revenue opportunities. In addition, consulting firms are optimizing their operating models, restructuring, and shuttering because of less margin. One might think that consulting firms simply need to weather the current storm like many did during COVID. I think this storm is different...very different.
During COVID, the slowdown in consulting spend was arguably attributed to client decisions to place most consulting needs below the budget "cut line" until things returned to normal. COVID was a disruption, but it was followed by a notable bump in consulting spend as many clients explored transformations to align to new realities. Conversely, A.I. is a knowledge tool, and it offers capabilities that hit at the heart of why clients rely on professional services: help filling knowledge gaps, augmenting existing talent, and facilitated problem-solving.
Expert Advisory Services
When deep expertise is needed to expand a client's understanding of a topic, an expert advisor is who you want on the phone. The value the advisor brings is their depth and breadth of knowledge on a subject matter. They can recall several past experiences and reference the latest materials on a subject to inform how they help a client understand a new concept. It is truly amazing to witness; knowledge is the advisor's superpower.
While nothing beats having a conversation with a real person, A.I. can turn some of those calls to experts into queries in an A.I.-enabled tool. For example, through Corvus Link, a unified platform for optimizing and scaling operating models, I can ask A.I. to review my plan, operating model, company background, and what I'm working on to explain how I might prepare for an economic downturn. While I do not believe human advisory services will go extinct, A.I. is a powerful new market entrant at a much lower price point in an industry that has stagnant revenue while growing 20,000+ new competitors each year.
Management Consulting Services
Many companies are navigating a new world shaped by the pains and the learnings of the pandemic. Leading exploration in this new world has historically been the domain of professional services; management consultants, specifically. They have many years of experience navigating disruption, gaining depth in a functional area, and helping companies build resilience when faced with disruption. It's inspiring to see an individual or team of consultants help a client design and deliver sustainable change.
The challenge A.I. poses in this space is not that it can do everything every management consultant can; it is that A.I. can do many things a management consultant can do and faster. This changes the structure of the need; a team of management consultants to facilitate a reorganization might become an A.I. supporting design and a contracted project manager supporting implementation. For example, in a couple weeks, users in Corvus Link can leverage A.I. to review their current operating model, strategic plans, objectives for a reorganization, and generally accepted org design principles to produce a new operating model, as well as projects, collateral, and workflows to implement the design. I don't believe management consulting services will disappear, but how they are used will likely evolve.
Staff Augmentation Services
The challenge many companies face today is how to effectively manage workload to meet their goals. Sometimes the work can be done with existing talent, and sometimes contracted talent is needed for the peaks in work. Staffing firms offer ready talent to join a team, quickly acclimate, and extend the team's capacity. Folks in staffing firms have a unique ability to join teams with minimal disruption and do great work. So, what happens when those peaks in work are tempered by efficiency?
A.I. has unexplored potential in this space, but early indications of future capability are compelling. For example, in Corvus Link I can use A.I. and automations to plan, prepare, execute, validate, deliver, adapt, and evolve my work in minutes as opposed to months. Even so, I do not believe staff augmentation services will go away, but I do believe companies will have potential to operate more efficiently with A.I., freeing up time for existing talent to do more.
Lowering Complexity, Increasing Efficiency
The key disrupting factors with A.I. are complexity and efficiency. The Cynefin framework breaks down decision making environments into Simple, Complicated, Complex, Chaotic, and Confusion. Management consulting firms thrive in the latter three environments while staffing firms thrive in the first two environments. A.I. is a powerful tool in these areas because it can lower complexity with the right context, and it can improve efficiency. Add tools like Corvus Link that help solve the context problem with A.I., and the disruptive power of A.I. becomes even more clear.
A.I. democratizes consulting expertise. It is a harbinger of a new era where strategic acumen is not the sole province of the few but a distributed capability, woven into the fabric of organizations large and small. The future of consulting lies not in the guarding of proprietary methodologies but in the open embrace of A.I.'s transformative potential.
As we stand at this inflection point, the question is not if, but how we will navigate this new terrain. The industry must pivot, embracing A.I. not as a competitor but as a collaborator. The consultancy of tomorrow will be a hybrid entity, one where human insight and artificial intelligence converge to deliver solutions that are as ingenious as they are data-driven. This is the future of knowledge work.
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