The AI Daily Brief: Artificial Intelligence News and Analysis - How Consulting Reveals the Real Pattern of AI Disruption

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Starting point is 00:00:21 And if you need a spark, hit I'm feeling lucky and we'll help you get started. Head to AI.studio slash build to create your first app. As AI-related layoffs make headlines, today we are exploring why the consulting and broader professional services industry is a perfect case study in how AI disruption is actually likely going to take place. The AI Daily Brief is a daily podcast and video about the most important news and discussions in AI. All right, friends, quick announcements before we dive in.

Starting point is 00:00:56 First of all, thank you to our sponsors, Gemini, robots and pencils, Blitzy, Rovo, and assembly. To get an ad-free version of the show, go to Patreon.com. slash AI Daily Brief, or you can sign up on Apple Podcasts. And for information about sponsorships, shoot us a note at sponsors at AIDailybrief.A.I. One more quick reminder, our end-of-year ROI benchmarking study is live at R.O.iSurvey. And I would so appreciate it if you would contribute a use case or two. Welcome back to the AI Daily Brief. I am traveling this week for my anniversary, so we are using that as a chance to do some slightly different types of shows that we normally don't have time for with the

Starting point is 00:01:30 ever-pressing crush of AI news. Now, today's topic actually in many ways does connect to a key story that we've been tracking, which is the rise of layoffs that claim to be and in many cases are actually related to artificial intelligence. Specifically, though, I want to hone in on a particular industry where for many people, the narrative is and has been that it is absolutely doomed in the era of AI and is exemplary of the white-collar catastrophe that is coming down the pipeline. I'm talking, of course, about consulting and professional services. You couldn't throw a stick this year. without hitting a story about how consulting was going to die.

Starting point is 00:02:07 Fast Company back in January, consultants beware, AI is coming for your job. This Tuesday from the economist this summer, who needs Accenture in the age of AI? They pointed out that between February and the end of June, markets had wiped around $60 billion off of Accenture's market cap. In August, the Wall Trade Journal writes, AI is coming for the consultants. Inside McKinsey, this is existential. The subtitle captured the concern, if AI can analyze information, crunch data, and deliver a slick PowerPoint deck within seconds, how does the biggest name in consulting stay relevant?

Starting point is 00:02:38 Making this worse were very high-profile screw-ups, we're the one where Deloitte in Australia had to give back a bunch of money for a government contract because of an AI-era-riddled paper that they handed in as their work. You're also increasingly getting stories about the new legion of startups that are trying to disrupt some part or all of the consulting model. And this drumbeat just goes on and on. Reuters published a piece just last week called AI sets up Kodak Moment for global consultants.

Starting point is 00:03:05 Now, I have talked about in a previous episode from I think back in maybe May, how I think AI is specifically going to change professional services firms. Today, I want to take the conversation in a slightly different area and talk about why I think, on a broader level, consulting is actually a pretty perfect case study in how AI disruption is likely to take place across a number of different dimensions. So what I'm going to do is go through 13 thoughts related to AI and consulting, that as I said, I think show how AI disruption is going to play out

Starting point is 00:03:39 in practice across professional industries. And if your eyes are now bleeding from the horrifying cheesiness of these images, I'm sorry, but I couldn't resist just generating the most absolute horrifying stock photo slop that I possibly could. You're welcome. All right. So first note, one of the things that AI is going to do is it going to make what you're actually paying for really clear. The reason that there is a conventional wisdom aspect to the idea of consultants being disrupted is that a big part of what businesses have historically paid consultants for is scarce expertise and scarce information. Well, guess what? AI makes both expertise and information abundant rather than scarce. And if that was truly all consultants were offering, well, I think they'd be

Starting point is 00:04:27 screwed. However, that is, of course, not everything that consultants are offering. There are actually many different dimensions to it, not least of which is the brand value and cloud cover for executive decisions. It is not a knock on McKinsey or BCG or KPMG or Accenture or EY or any of these other firms to say that part of the reason that they get hired is so that executives can double-check their own thinking, validate and support their decisions to their higher-ups, and frankly, have someone to blame if things go wrong. In almost all circumstances, people don't get fired for hiring McKinsey. And that sort of brand value and cloud cover for decisions is not something that AI just ups and replaces. In fact, AI creates this whole new scary category of transformation where that brand

Starting point is 00:05:12 assuredness is extra valuable. But again, if we're zooming out and trying to generalize for a variety of white collar industries, one big theme of disruption is that AI is going to very quickly make it clear what are all the different things that you're actually paying for when you're buying a product or working with a particular type of company. Number two, it is absolutely the case in the consulting and professional services industry, and I believe in many other industries as well, that AI has tailwinds for both legacy and challenger brands. Going back to the theme that we were just speaking about, legacy brands have a high trust quotient that is incredibly useful right away. Initially, that brand trust was valuable because one company,

Starting point is 00:05:53 were looking for guidance, it was natural for them to turn to partners they'd already worked with. And I think that is even bolstered now as we move from pilots and experimentation into the full deployment phase, as companies realize that a big part of their success is going to be contingent on the way that they organize and interact with their own data. And that sort of privileged, important, and private data is likely to further incentivize them to work with brands that they already trust. Hence, tailwinds for the legacy brands. At the same time, as we'll discuss a little bit later, there are lots of new categories of spend, new business line, new activities, each of which creates a new brand opportunity for a challenger. They won't necessarily be able to seize it,

Starting point is 00:06:31 and in many cases they'll be competing with those legacy brands for those same areas. But there are many times that even if a big company wants to work with a trusted partner on important, complex, and high-level issues, they also might want the new energy and insight from a challenger for a new frontier that they're pushing into. Now, when we're talking about top-tier brands, we're really talking about a power law distribution. For all those companies that I just rattled off, there are hundreds, if not thousands of others that are part of the industry longtail. I think in these types of moments where transformation is scary and happening fast, the top tier of brands have a chance to reinforce and even extend their position, but the long tail

Starting point is 00:07:10 of legacy players is going to struggle. What can change that is, of course, hyper-specialization. If a company has a really specific focus, and if they can then be the translator of that, focus in this new AI paradigm that's extremely valuable for the exact client or ICP that wants what they have to offer. Being extremely niche and narrow, but focused, is, I think, a much better position than being in the generalist long tail. Let's talk about delivery, though. Something that I think is true for consulting and will be true for many other industries as well, is that AI is going to bring down the cost of delivery, as well as speeding up the time of delivery. This one is pretty self-explanatory.

Starting point is 00:07:51 Whether you think this leads to an industry being disrupted entirely or not, it is simply absolutely undeniably the case that information can be collected faster, data can be analyzed more swiftly, and PDFs can get created a heck of a lot faster with far fewer human hours. Which brings us to our fifth point, you better believe that customers are going to expect

Starting point is 00:08:12 those savings to be passed onto them in the form of lower prices. This, I think, is one. one of the most important nuances that tends to get lost in this discussion of to be disrupted or not. Using professional services partners is a spectrum. And sometimes these articles seem to act like it's either you use them for everything in the same way you always have, or you've now decided that you're going to roll everything on your own and you use them for nothing. The reality, of course, will exist in the muddy middle. And one of the ways that customers and enterprises will move forward initially,

Starting point is 00:08:44 as they explore just how much they want to change their relationship with these types of partners, is that they will very quickly expect to see changes in many parts of how those services are provisioned, but certainly in the form of cost. Not too long ago, I had a meeting with a large professional services company who had just gotten out of a conversation with their single biggest client. In that meeting, which was a planning meeting for the next year, the client told them in extremely simple terms that they expected that going into the next year, they would get all of the exact same amount of services, and they wanted it at half the price. I think that sort of conversation is going to be increasingly common. And again, not just in the consulting

Starting point is 00:09:22 industry, but in any industry, where again, AI is going to bring the cost down and speed delivery up. AI isn't a one-off project. It's a partnership that has to evolve as the technology does. Robots and pencils work side by side with clients to bring practical AI into every phase, automation, personalization, decision support, and optimization. They prove what works through applied experimentation and build systems that amplify human potential. As an AWS-certified partner with global delivery centers, robots and pencils combines reach with high-touch service, where others hand off they stay engaged, because partnership isn't a project plan. It's a commitment. As AI advances, so will their solutions. That's long-term value. Progress starts with the right partner.

Starting point is 00:10:11 Start with robots and pencils at robots and pencils.com slash AI Daily Brief. This episode is brought to you by Blitzy, the Enterprise Autonomous, software development platform with infinite code context. Blitzy uses thousands of specialized AI agents that think for hours to understand enterprise-scale code bases with millions of lines of code. Enterprise engineering leaders start every development sprint with the Blitzy platform, bringing in their development requirements. The Blitzy platform provides a plan, then generates and pre-compiles code for each task. Blitzy delivers 80% plus of the development work autonomously, while providing a guide for the final 20% of human development work required to

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Starting point is 00:11:46 If you Rovo, you know. Discover Rovo, your new AI teammate power. by Atlassian. Get started at ROV as in VictoryO.com. If you're building anything with Voice AI, you need to know about Assembly AI. They've built the best speech-to-text and speech-understanding models in the industry, the quiet infrastructure behind products like Granola, Dovetail, Ashby, and Cluley. Now, as I've said before, voice is one of the most important modalities of AI. It's the most natural human interface, and I think it's a key part of where the next wave of innovation is going to happen. Assembly

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Starting point is 00:13:03 that AI more or less just takes over, certain root functions that are easy to automate, certain types of back office tasks, whatever the specifics are, it will be the case that even in a world where the consulting industry continues and even flourishes to a degree that it hasn't been able to before, it will not be exactly the same consulting industry that it once was, and there will be categories that are simply gone. The flip side, of course, is that there will also be entirely new capabilities that were simply impossible before. And in this case, I'm not just talking about totally new lines of business,

Starting point is 00:13:36 which is something I'll talk about in a little bit, but just the ability to do something in a way that is radically different than what was possible before that really changes the landscape of the possible for those firms. Frankly, superintelligent lives in one tiny little example of this. When you think about an information discovery process, the type of thing that kicks off almost any consulting engagement, there are inherent tradeoffs in any way that you gather information, especially human information. You can interview people, which is amazing for getting context, but it's terrible for scale. There's simply not enough time and not enough money to interview everyone that you'd actually

Starting point is 00:14:10 want to. Now you can survey them, and that's great for scale, but it's not very good for context. The core premise of the way that we deliver agent readiness planning is that voice agents make it so that you no longer have to choose between scale or context. You just get both. Interviewing everyone in a company used to be an impossible task. Now we could do it all of the same time and have it done in a single day. Across not only consulting and professional services, but every industry, for all of the areas and categories of work that are just gone, there will be new capabilities that unlock totally new types of work that we simply don't see yet. Now again, on the theme of being real, it is the case and we should acknowledge that some,

Starting point is 00:14:50 Some ambitious clients will use AI to cut consultants out. I mean, heck, we even see some companies like Klarna rolling their own software to cut SaaS providers out. It will absolutely be the case that some enterprises will look across the suite of their professional and partner relationships and say, we can just do that now thanks to AI. But once again, there is a flip side. The costs coming down, those costs that, as we said, customers will demand come down, as the cost of goods sold thanks to AI comes down, also opens up the possibility to bring

Starting point is 00:15:20 new customers online. There are right now many enterprises who would like to work with a McKinsey or a KPMG or another big firm, but who can't really consider it because of the cost profile. So even if, yes, there are some firms that decide to go be ambitious and do this themselves, which there absolutely will be, the reduced overall cost of services delivery will likely come down enough that there will be first-time buyers or expansionary buyers of professional services as well. I think one really fundamental note, an important thing to remember is, is that in many, if not most cases, AI won't change underlying demand dynamics. And what I mean by that is that professional services don't exist

Starting point is 00:16:00 because enterprises couldn't have those capabilities. It's because of specialization, one of the foundational principles to our economy. There are areas where firms don't want to specialize. They don't want to have to be great at tax compliance. In many cases, they don't want to have to be great at marketing. Professional services exist not because companies could, couldn't theoretically do the things that those professional services firms do, they exist because companies don't want to do them because they're distracting from whatever it is the main thing that

Starting point is 00:16:28 the company actually is meant to do. I don't see AI changing that very much. Like I said, I think its impact is much more likely to be around expectations for things like speed and cost. And if we grok with the idea that companies are still going to want to work with professional services firms because of that differentiated specialization, it is also very clearly the case that there is real value as a potentially disruptable industry in faster adoption of the tools that might sow the seeds of your own destruction. And certainly if you look at the story of consulting and professional services, these are some of the most aggressive early adopters across the enterprise sector. There is not a single big consulting firm or professional services firm that is not

Starting point is 00:17:09 thinking about AI both as an internal change mandate and as an external transformation force at the same time. I think that there is going to be a direct correlation between the industries where it most seems like AI could disrupt them, and which industries get out the fastest to figure out how to leverage AI to turn into whatever the next version of that industry is before they get disrupted. It's also important to remember

Starting point is 00:17:31 that beyond just new capabilities, like Super's ability to help companies do discovery faster and in a much more expansive scale, there really will be entirely new categories of business that we just don't even know exist yet. Now, frankly, of all industries, Consulting and professional services may have the clearest example of this right away in the fact that AI transformation is now a service and a very important high-growth service

Starting point is 00:17:59 for many, if not most of these firms, that didn't exist four years ago. What I think is important is not that particular line of business, but the fact that in any process of creative destruction, ultimately we see the destruction much sooner than we see the creation. But there will be inevitably creation as well. So as you can tell, I do not think that consultants and professional services are going to be wiped off the face of the planet. I think that there are going to be extraordinary pressures on them to evolve and iterate very quickly in terms of how they provision their services, the speed with which they deliver those services, the lines of services they offer, and more than anything else, the cost at which they deliver them.

Starting point is 00:18:38 But I don't think they're going away. However, just because I don't think they're going away does not mean I think that incumbents will be able to fill all of the guests. apps. As fast as they try to move, and as much as they want to claim all these areas, there will be categories of work that existing firms just aren't going to be as good at as the market demands, and that creates big opportunities for disruptors. The very obvious one to me, at the risk of alienating all of my big consulting firm friends, is actual last-mile tech delivery and integration. There are some great technologists and developers who work inside the big firms, but they are not AI-native engineers. Right now, those big firms are still winning last-mile

Starting point is 00:19:21 implementation and engineering type of deals, but only because enterprises feel like they don't have any other choices. The contender firms so far are simply too small and too fresh, but I think that that's going to change very quickly. In this one specific category, there is an entire new legion of firms that are totally peopled with AI-native engineers, who, if their priorities changed, would be building agents for some startup like us, but who happened to have made themselves available in the context of these new latter-day agentic dev shops, and those companies are going to grow extremely fast.

Starting point is 00:19:55 What's more, the more scale they get, the more enterprises they'll tip over into being able to work with them because of their increased capability to deal with at-scale deployments and growing credibility that comes from more experience, bigger revenue numbers, and a bigger body of work. Now again, the specifics don't matter as much here as the fact of the general lesson, that as we've seen, both for consultants and in many other knowledge worker-type industries, there are actually a lot of advantages that incumbents have.

Starting point is 00:20:21 There are tailwinds for them going into this new era. But that doesn't mean that they'll be able to fill all the gaps, and they'll either have to cede those areas or find a way to co-op the disruptors. So this being a presentation about consulting, we have to close by turning it into a roadmap, right? If you are a professional services firm, thinking about your AI and agendic future, fear not. it is very unlikely that just because of AI alone, you are doomed to disruption. However, there are some things you can do to make sure that you not only survive but thrive.

Starting point is 00:20:51 If you are not some huge everyone knows you type of company, find the niche where you are unique in Excel and understand the AI implications for that niche. Whether you're a little company or a big company, lean into brand and the assets that you've built over time that make you a trusted partner for the companies you already work with. In fact, I probably should say lean into trust even more than lean into brand. As you're doing that leaning in, move as fast as you possibly can to AI yourself. Even if the core thing that you sell is going to change over time, there's an opportunity right now to be two or three steps ahead of all the enterprises that you work with and just help them AIify whatever domain that you work in. But the first step to doing that well is

Starting point is 00:21:29 AIifying yourself. Next, do not fight the tide you have to expect cost to come down. By all means, try to get away with as little of that as you can, but AI is going to bring the cost of delivery of almost all knowledge services down, and you're going to have to redesign around that. As you're positioning accordingly with those cost reductions in mind, keep your eyes out for those new business lines, not just the more efficient way to deliver what you're already doing, but the new areas that could be the thing that shapes your business for the next decade. And lastly, weaponize the humility of knowing that there will be challengers who can move faster than you and do things better than you and buy them. Because legacy

Starting point is 00:22:11 companies have one other thing that most upstarts don't, which is a balance sheet and access to more credit, equity, and debt than those new companies coming up. Weaponize, humility, and buy companies that are better than you at whatever niches you think are important in this new AI world. So like I said, this is nominally all about consulting and professional services, but I do think that you're going to see these patterns of what AI disruption actually looks like play out in a lot of other areas as well. It is going to be as profound and transformative as everyone thinks, if not more. But it's going to do so in weird, jagged, unpredictable, uneven ways that surprise and stretch us and our organizations and will put a very, very high premium

Starting point is 00:22:55 on the fastest learners, the most dynamic strategies, and the most nimble operators. Anyways, guys, I love having a chance to zoom out and do thinky-think episodes like this. Hopefully you enjoyed it as well. If not, I'm sure we'll be back to the news very soon. AI tends not to give me much of a chance to be theoretical for long. Appreciate your listening and watching as always, and until next time, peace.

The AI Daily Brief: Artificial Intelligence News and Analysis - How Consulting Reveals the Real Pattern of AI Disruption

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