How AI Is Reshaping the Consulting Industry

This blog has been written by Jason Mlicki, who has been advising professional services firms on marketing matters for over 20 years. He writes about marketing and growth strategies through his weekly newsletter, Momentum. And he co-produces the 2x monthly professional services marketing podcast, Rattle & Pedal.

Jason Mlicki Helps Navigate the AI Spider Web That’s Swallowing Management Consulting

Over the last 12 months, AI has been described as an “existential threat” to the management consulting industry, an impetus to “change the structure” of the firm, and a call to rethink the very “value proposition” of the consultant. At this point, we’re running out of superlatives for its impact.

Deconstructing AI’s impact on the services industry is like trying to pull apart a massive spider web one thread at a time. It’s hard to know where to start. Especially when you feel stuck in the middle of it.

I’ve found the best place to focus is on the areas where AI is having the biggest impact right now – first, as a competitive threat, and next as a tool that’s changing buying behavior.

AI is Creating New Competition for Managment Consulting Firms

One thing that is clear is that management consulting firms are getting squeezed! The rapid investment and expansion in AI across the economy is creating competitors from a wide range of new places. These include:

SaaS Companies

A lot of growing management consulting firms function as channel partners within the ecosystems of leading SaaS providers. There has always been a certain level of channel conflict in those relationships, but it appears to be intensifying in the AI era. Newer players, like OpenAI, are following the lead of established ones like Palantir and IBM in expanding their internal professional services organizations to get close (or stay close) to the customer.

Services-as-Software

Flipping the script a bit, there’s a whole new cluster of hybrid and AI-native firms emerging that are looking to automate portions of work that have been historically done by humans. Some of this is coming from within the industry (e.g., Accenture’s AI Refinery). But much of it is coming from new start-ups (e.g., Bridgetown Research and its use of voice-enabled AI to conduct qualitative research at scale).

Clients Going Alone

Of course, for a lot of business problems, clients are simply turning to generative AI alone to find the answers. Why engage a costly consultant when Chat GPT or Claude can function as a research analyst and thought partner that provides 80% of the value at 2% of the cost?

The net effect is that big as well as boutique consulting firms are getting squeezed — by existing SaaS providers, by their traditional competitors, by a wave of new start-ups, and most notably by their clients themselves.

AI is Reshaping the Buying Process for Management Consulting

Simultaneously, how clients seek solutions to their business problems and identify potential partners is also undergoing rapid change. During the “content era,” clients regularly sought answers to their problems through their peers. Through their networks. And through Google. Being found on Google was as important, if not more so, than any other individual investment a firm might make in its brand.

As a result, a substantial portion of the marketing investment was focused on showing up on Google. This included:

• Elevating the firm around a set of key issues
• Self-publishing a steady stream of helpful, indexable written content around those issues
• Letting clients “find” the firm through Google based on that body of work

As we look ahead at the “AI era,” that approach to buying is changing, as consulting industry trends show. Yes, clients will continue to look to their peers and their networks for advice on how to solve critical business problems.

But rather than arcanely sifting through pages of traditional search results, they’re turning to AI-enabled thought partners like ChatGPT, Perplexity and Google Gemini. They’re leveraging a tailored, coherent answer to their unique problem that is derived from the collective “wisdom of the crowd,” manifested through a conversation with an AI assistant.

In this new reality, firms will need to adopt a two-prong marketing strategy that accounts for:

1. “Bots” – Doing the things necessary to get your firm found for its expertise in the new and emerging domain of AI-assisted search and AI overviews.
2. “People” – Giving reasons for clients to specifically seek out your firm (not just its expertise) based on its reputation in the market.

“Winning” in the AI Era for Management Consulting Firms

While it’s a trickier time to lead a consulting firm than it has been in recent memory, it’s also an exciting time. Yes, the consultant’s value proposition is changing. And, yes, there are a whole host of new competitors coming from a bunch of new places. And, absolutely, how clients seek, select, and hire firms is changing more than it has in twenty years with this digital transformation in consulting.

But with all those potholes come a variety of new opportunities. Opportunities to rethink your consulting strategy in terms of the value you provide and the way you’re rewarded for that contribution. To rethink the nature of the business and the way work gets done. And, to create more value and generate more revenue per employee than at any time in the industry’s history.

To help firms understand how consulting firms can drive digital transformation at our October 21 webinar, I’ll go deep into all these areas, including:

• How AI is disrupting professional services and transforming the client buying journey
• How to get found through generative AI-enabled search
• Smart strategies that the algorithms can’t replicate that drive relevance, preference and growth

I hope to see you online.