Management Consulting’s AI-powered Existential Crisis
Smart technology is as much a threat to strategy consulting as it is proving to be to Wall Street.
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We all understand that AI is a disruptive force in the market, but it still takes some convincing for many of us to accept just how deeply AI will affect even highly skilled knowledge-based industries.
Management consulting offers a prime example. A $250 billion industry filled with some of the smartest people on the planet, consulting tends to view itself as an elite, untouchable echelon of the business world. But it is vulnerable to the same market forces that are disrupting services everywhere.
Most skilled services follow a common pattern: Gather data, analyze it, derive insight, and communicate recommendations. And from doctors to drivers, service industries are facing disruption.
To that end, a recent article in The Wall Street Journal caught our eye. It was about Goldman Sachs, where traders and quants have become nearly indistinguishable. The roles have converged, with each skill set becoming essential to the job of trading securities. Adam Korn, a Goldman Sachs managing director, says, “You say ‘trader’ and I don’t even know what we’re talking about. Everyone who comes to sales and trading needs to know how to code.”
This talent shift, a response both to concerns about ethics following the financial crisis and the rise in quant-driven funds, is upending the pecking order of the trading floor and is creating a talent war as Wall Street seeks to lure coders away from Silicon Valley. Rather than hiring traders with deep market knowledge and good instincts who relied on their own human intelligence, organizations are shifting to savvy coders who can create programs to learn the patterns and make decisions independently in response to the latest and greatest data.
As artificial intelligence takes over the capital markets, will consulting be far behind? The similarity between the two lies in their core: data. Just like traders, consultants offer a data-driven service. And, historically, data challenges have ensured the necessity of a human interface to the data. Data is messy. It is hard to process. Key data is often missing or hard to access. These problems created a situation where companies seeking data-driven answers to key strategy questions required experts (consultants) to create, combine, clean, analyze, and interpret data.
But things are changing. For one, companies have seen the light on the value of data and are beginning to gather more of it on their own.