Management consultancy is one of those marmite jobs. If you’re a young professional with an MBA tucked under your arm then a job at McKinsey, Bain or BCG could well represent the holy grail for your budding career. For many others, consultants’ high salaries and higher fees have made it a profession that people love to loathe.
Now, entrepreneurs are building products with AI that they say can outperform these highly-compensated professionals in certain important tasks — such as identifying M&A targets and performing due diligence on companies — while the firms themselves are racing to incorporate the technology into their own workflows.
Management consultants now have AI breathing down their necks, and experts say that some in the industry will struggle to survive by the new laws of the jungle as automation creeps in.
"You have no idea about the industry"
Two consultants who saw that the profession would be changed beyond recognition by AI are Richard Karlsson and Johan Cederqvist, both formerly at McKinsey. They’re now cofounders at Stockholm-based Grasp — a startup that says its product “outperforms top tier consultants fourfold.”
The company’s first feature that it is selling to clients is an AI tool that automates M&A target identification — a process that Karlsson says currently involves a lot of manual work for consultants.
“Imagine you’re doing market analysis of the 5G industry — you have no idea about the 5G industry, that’s a typical starting point,” he explains. “You read a lot of articles and market reports, and then you start extracting the relevant pieces of information and putting that down into a PowerPoint or Excel that you then provide to your client. It’s striking how much time we spend on that manual work. It's repetitive and AI is perfect for that.”
Karlsson says that Grasp’s M&A target identifier has been used by their clients — which include corporates, private equity firms and consultancy firms — to produce more comprehensive results than consultants can achieve.
“Clients have compared our output to what they’ve managed to produce with external support before from consultants and typically it's better, in terms of the number of relevant companies found, versus the manual methods,” he says. “That's just because our system goes through the internet, and looks at millions of companies. At McKinsey I would look at thousands.”
“There is downward pressure”
Grasp is currently developing new product features, such as a tool to run due diligence checks on identified acquisition targets which would further automate work done by consultants.
But the big firms aren’t about to let startup insurgents have all the fun with new AI capabilities.
Back in 2015 McKinsey acquired London-based startup QuantumBlack to help bolster its AI capabilities, while one former Bain consultant (who preferred to remain anonymous) tells Sifted that the firm has reacted quickly to new GenAI tools hitting the market.
“When ChatGPT exploded into the world, Bain very quickly got to the point where they were saying: ‘We've got a version of this now for all of our consultants, we've got everyone using it, we've trained people up,’ and they wanted to be very quick on that,” he says.
The former Bain employee added that big consultancies are under pressure to do more work with less.
“The Bains, BCGs and McKinseys of this world are very expensive and for many years there’s been downward pressure on their pricing,” he says. “Twenty years ago you might have needed your McKinsey consultant to fly around the world and visit all of the sites because your central HQ literally had no idea what was going on in those places. As data has gotten better at businesses, they're able to do more themselves and might question the value of a consultant for some projects.”
Who is at risk?
As management consultancies and startups like Grasp are increasingly automating elements of this highly sought after profession, some positions in the sector will be affected more than others.
Karlsson says that, in general, consultants will be expected to produce more output in the same amount of time, but AI could also reduce the need for more junior hires: “There's certainly a scenario where the number of people in the junior ranks decreases.”
Large management consultancy companies will now look to cut costs in areas that are typically outsourced, like quality assurance testing for software, according to Gabriel Matuschka, a former consultant at IBM and now partner at AI-focused VC firm Fly Ventures.
“I would expect a significant impact of AI replacing work done by humans today in software testing for large scale IT projects, that the likes of IBM historically outsourced to teams in India,” he says.
It’s not all over for management consultants
Karlsson adds that bigger firms will increasingly be under pressure from smaller, more specialist consultancies that are able to offer competitive services for less money.
“If you just look at the research side of it, big firms have hundreds of people and small firms don't have the same resources, but AI is definitely changing that,” says Karlsson. “That's definitely going to shift the balance of the industry. Smaller firms will have the same capabilities, research-wise, as the big firms and will definitely get an advantage from that.”
The former management consultant at Bain agrees that, even if less-established rivals can’t provide a fully comparable service to the big consultancy firms, organisations using AI tools could dramatically undercut the incumbents.
“It takes three to four weeks for a full Bain team to assess acquisition targets. A competitor could say, ‘We'll give you a light version, which gives you 70% of the information but for a 20th of the price,’” he says.
Some parts of consultancy will, of course, be harder to automate — including client-facing work, complex modelling and strategic work that involves a more human touch.
But as AI sweeps across the professional world, management consultancies won’t be immune to disruption, with junior and outsourced workers the first in the automation firing line.