Management Consulting In The Age Of AI

Reinvention for the Age of AI

Reinvention for Management Consulting in the age of AI is means reconnecting with a consultant’s role as the “counsellor” to senior managers. In the past twenty years, management consultants have followed the money, shifting from advisory services to large scale project implementation. The switch drove unprecedented growth for the industry but has also left it vulnerable to disruption.

Reinvention is creates something by reconfiguring the assets of the past in new ways, to solve the problems of the future.

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The management consulting profit model depends on high utilization of large numbers of consultants. Although some have deep expertise, many are consulting “grunt workers,” performing routine analysis, writing software code, or preparing PowerPoint decks for clients. If AI can write the code, run the numbers, and even generate the deck, what’s left for the management consultant?

My answer is that we need to go back to why clients appoint us to help them in the first place. Senior managers are looking for advisers that can help achieve an outcome that they cannot get from the organization they lead today. In the first generation of consulting this was about being a problem-solver, bringing expert analytics to help clients resolve tough strategic issues.

Reinvention for management consultants

By the late 1990s, these problem-solving skills were diffused throughout organizations, as former consultants moved into management roles and business schools increased their impact. This could have been a threat to consulting firms, but they successfully dodged it by finding a new problem to solve – how to leverage technology to optimize business performance. This era of “digital transformation” brought extraordinary profits and shifted the focus of firms away from expert advice toward implementation.

AI presents a new, more complex threat. It is rich with opportunity but also poses a threat to the business model. Thus, the announcement of layoffs in recent months, as firms start to adjust to the reality of a world that needs fewer “grunts.” My prediction is that the future lies in connecting with the work that AI cannot do, but which clients value above all else: transforming the organizational system.

Organizational change has been relegated to the fringes of many management consulting firms. The “People” or “Change” practices, tend to get called in to help with organization designs, to train people on the use of new IT systems, and perhaps to “change culture.” These teams do good work, though it is often an add on to what management consultants regard as the “real work” of strategy, business analysis, M&A, etc. As if people, behavior, and emotions are not involved in these activities.

AI demands Reinvention

A key question for senior managers is whether the pace of change inside the organization is faster or slower than the pace of change outside. Most know that they are changing too slowly, but struggle with how to respond.

Every organization with an opportunity to leverage AI or robotics also faces a massive adoption challenge. Machine learning, robotics, and other digital technologies have faced a much slower pace of adoption in industrial manufacturing and warehouse that originally anticipated. They faced physical barriers, like the difficulties of introducing robots into warehouse logistics systems designed for humans. There have been technological obstacles, like the infamous IT/OT divide in organizations that made it hard to apply “Internet of Things” technologies to improve industrial productivity.

Most of all they faced human barriers. Managers that perceive efforts to introduce new technology as another department making a power grab. Workers that lack skills to adapt to using new technologies. Customers that want suppliers to deliver on current commitments and not experiment with unproven tech. Senior leaders that fail to commit resources to explore future business models, because they fear damaging the existing business.

Six Principles for Reinvention of Management Consulting

These are the sorts of problems that organizations are wrestling with as they try to stay ahead of the pace of change. The management consulting industry now has an opportunity to renew its relevance by putting these human system issues at its core.

An ability to deliver expert opinion, solve tough analytical problems, and implement complex systems, will still matter. But it is skills skill to navigate human system and enable dialogues that transcend organizational politics that will make the difference.

There are six principles that can guide this reinvented profession.

1. Take a Systemic Perspective – being a counsellor to senior managers is really another way of saying that great management advisors take a holistic view of business. I try to approach my work from the vantage point of the CEO. I try to grasp the full scale of opportunity they want to pursue and acknowledge the constraints under which they operate. These are often far greater than is acknowledged, even in the United States, where CEOs tend to have more authority.
2. Find the Adaptive Challenge – Harvard’s Ron Heifetz talks about leaders having technical and adaptive challenges. Technical challenges are knowable, and answers can be revealed through analysis. Adaptive ones are complex. We can only discern cause and effect in retrospect. The more a consultant seeks to solve an adaptive problem, the more they need to lean on a Process Consultant’s toolkit.
3. Co-create the Answer – an important implication of working on adaptive challenges is that there is no obvious right answer, just many shades of answers that could work. You need to probe for potential answers, read the response in the system, and then scale up the solutions that work. This is a collaborative learning journey for both client and consultant. Experts that advocate a solution based on analytics alone will likely be wrong, so undermining their credibility
4. Make Capability Building a Primary Outcome – this is what all consultants say. But to mean it, you must be ready to accept implications of this approach for your business model. If the client becomes capable of solving their own problems, you become redundant. A common fear among consultants is that their redundancy will make projects end faster. I disagree. I find that building capability creates trust. And if the client trusts you, there is always more value to add – and more projects to take on.
5. Make Impact the Yardstick for Work – Expert Consultants have a defensive reflexive that causes them to generate copious pages of content. They want to prove their value through the quantity of work they have produced. In contrast, a consultant focused on value is confident enough to focus on the quality of the impact they have. Documents should enable clients to better understand facts presented to them, so that they inform better actions. That could mean no presentations at all – just communicating in complete sentences in a white paper, or via discussion.
6. Adopt Language that Reflects the Synthesized Approach – German philosopher Wittgenstein once said: “The limits of my language mean the limits of my world.” Language creates reality. If we use unmodified language of one of the existing consulting types, we will live their reality. That’ why at Change Logic, we never use the words “sales” or “selling” to describe reaching a commercial agreement to serve a client. Selling is the process of convincing people that you have the solution for their problem. This negates the value of relationships that co-create solutions with clients.

Values-led Reinvention

One more ingredient underpins this six-point formula, and that is the values of the management consultant. Over the past seventeen years, my partners and I have strived to make our firm, Change Logic, one that is led by values. Values are statements of what we think good looks like. We have five core values as a firm, and for me, the most important is the value of “Humility: We are proud of our expertise and hungry to learn what we do not know.”

That means that the clients know their business better than we do and can overcome most of its challenges without the assistance of consultants –and our role is not to prove we are smarter than they are. This is not an easy value to live by, especially if you tend to arrogance, as I fear I do. However, without this value our claim to serve clients’ needs rings hollow, and we might as well be installing the latest generic answer off the consulting production line.

Humility does not mean that you do not challenge a client or share your expertise. This is one of the deficiencies of large management consultancies. They have become so wedded to sustaining a client’s revenue stream that they have stopped articulating challenging information to senior leaders. In contrast, I prefer the approach of the late great Harvard psychology professor and consultant at Monitor David Kantor. David used to say to new clients: “I have one rule and a promise. My rule is that you cannot fire me for the first 90 days. My promise is that if I’m doing my job properly, you will never want to!”

I doubt that anyone ever wanted to fire David, but the statement set a norm of authenticity in his client relationships. It takes skill to live with this level of honesty, but this is what gives you the right, as a consultant, to be of service and so generate value that AI will not be able to replicate for a long time to come.

The six principles, plus a values-led approach is what I believe will set management consulting on the path to reinvention. They will enable the profession to reclaim its role at the heart of the C-Suite, so helping to guide decision-making, and improve organizational performance for generations to come.