The first management consulting firm was formed in 1886 by Arthur D. Little, with the intent of providing technical research and “management engineering” to companies. Soon after, in 1926, McKinsey & Company was founded. Since then, McKinsey, along with several other management consulting giants including BCG and Bain have grown to form a $145 billion industry that serves clients in almost every sector imaginable.
As a McKinsey alum who has since developed an artificial intelligence (AI)-powered expert network, I am interested in examining the management consulting market in the context of our rapidly evolving information sourcing ecosystem. In an age where information is cheap, what is the role of the management consultant?
Management consulting was born from the combination of systematic knowledge sourcing and analytics.
The second Industrial Revolution was the first economic driver for the development of the management consulting industry when demand for mass-produced goods gave rise to the era of the mass factory. This new workplace environment, coupled with increasingly global marketplaces, created a knowledge gap for top executives, who needed the advice of academics and experts outside of their businesses to help them gain analytical insight and expert advice about their new workplaces.
And so the management consultant was born. McKinsey, and in particular Marvin Bower, the CEO from 1950-1967, fostered a team of MBA graduates and built the “up or out” policies that are still prevalent in management consulting today. These teams offered comprehensive, data-driven reports that included tailored data, analysis and reporting. And the model worked astoundingly well for the next 70 years. The primary value-add of these firms was filling the knowledge gap from top corporations with respect to experience and science-driven expertise and analytical power.
In the age of cheap analytics and accessible information, the management consulting industry is threatened.
Today, though, access to expertise and analytics has changed. CEOs share their advice and experiences on Forbes, Quora and The Huffington Post. Blogs pump out SEO-targeted articles to answer any random question imaginable. The cost of storing knowledge has decreased to the point that most consumers have some form of cloud storage. Real-time processing and smart search have made finding answers in a sea of big data easier than ever before. Data visualization tools like Tableau and pervasive analytics systems like SAP and Salesforce give real-time, data-driven insights to even the most technologically illiterate employees. Embedded analytics systems can integrate with almost any tool imaginable, making cross-departmental analytics simple and easily accessible. Both knowledge gaps that birthed management consulting in the early 1900s have been closed. Answers are cheap in the age of the internet.
In the age of AI, answers are even cheaper. Smart speakers source information without requiring more than a rapid verbal ask. Predictive search suggests answers to your question before you’ve even finished asking it. Matching algorithms pair users with jobs, music and even news items, without any user involvement at all. Predictive analytics give extremely accurate and precise insight into behaviors and trends.
So where does that leave management consulting?
The management consultant role will not disappear but rather shift to meet changing client needs.
Knowledge may be cheap and analytics may be easy, but implementing and using both in large enterprises is still a struggle that many companies face. How to implement strategic initiatives, how to read market trends and how to understand new technologies like artificial neural networks still escapes the age of the internet.
The role of the management consultant lives, primarily because there is still a knowledge gap for top executives. Where before, this gap was related to globalization, data and workforce management, today this gap consists of rapidly emerging technologies, data vulnerability and determining trusted sources of information. Particularly in an era of fake news, the reputation of management consulting firms is paramount: They are trusted sources of information without a political agenda.
AI is more skilled (faster and more accurate) than humans at pattern recognition, making predictions based on a large corpus of data, rapidly matching needs with solutions (think: LinkedIn’s AI-powered job matching tool) and surfacing relevant information based on more than simple keyword searches.
Because of this, management consultants in the age of AI are not surfacing information or running analytics. Rather, they are making sense of the information and analytics that most companies already have access to. They are connecting disparate pieces of information to form a cohesive narrative or guide. They are trusted third parties that can offer reliable advice based on the knowledge companies may have access to but not know how to act upon. For instance, emerging technologies such as Blockchain, Deep Learning or Augmented Reality are impacting numerous markets in ways that may not be apparent from a quick Google search.
While the corporate landscape has changed, the need for outside expertise has not, even in the age of AI. In fact, in many ways the need for management consultants has grown as AI has become more prevalent. Much like the second Industrial Revolution, the changes brought about by the fourth Industrial Revolution will necessitate that companies reach outside of their own knowledge domains to gain access to large-scale insights from trusted sources.
Sourced from Forbes - written by Sascha Eder