Impact of ChatGPT on consulting

Hi there,

The loom came about and everyone panicked about the weaving industry. Result: We got more clothes with fewer people (and those people were paid more).

Tractors and agricultural automation came about and everyone panicked about the agricultural industry. Result: We got more food with fewer people (and those people were paid more).

The assembly line came about and everyone panicked about the manufacturing industry. Result: We got more cars with fewer people (and those people were paid more).

Supply/demand of labor is elastic.

If you couldn't tell, I love both history and economics.

Now, that's the macro level of things. On the micro level, you have to make sure you're not made obselete.

My view ("view", it's not gaurenteed) is that consulting will benefit overall from this. Little changes in terms of # of consultants needed on the ground.

Ultimately, consultants are story-tellers, salesmen, stakeholder managers, and strategic thinkers. ChatGPT cannot do this.

However, AI is a tool that consultancies are going to be able to use. 

I don't see ChatGPT itself as useful for the major consultancies.. However, the next iterations (that can auto-generate powerpoint slides, that can grab/collate research from specific data sources, etc) are the ones that will be a massive productivity lever. The companies in India to which these consultancies outsource powerpoint beautification work, research work, etc. are the ones that are in trouble. 

Hello,

Thanks for asking this interesting question, and an apt one given that we are already seeing how ChatGPT has been upending the education industry recently.

I'm not an expert on language models / NLP, so I'm giving my POV from a lay perspective.

AI and ChatGPT are still not fully perfect yet (at least not to the level of Skynet). And if we take the full extreme of this thought experiment, it's essentially asking “What happens to consulting firms when AI is able to make human-based processing of data & generation of text redundant?”

Consulting firms have had to evolve and innovate over the years

• Over the years, consulting firms have had to change and adapt in terms of scope, quality of work, capabilities, technology, business models
• I'll illustrate this with a couple of facts and some anecdotal insights from industry veterans
  • Today, easily ~20-40% of business in MBB is in some shape or form ‘Digital’. This is drastically different and we've seen how firms have had to adapt and change esp over the past 5-7 years
  • More than once I have heard senior partners mention that our proposals/BD output is more detailed/higher quality than what an actual case output was ~15-20 years ago
  • While it used to be almost all about strategy, today firms are even creating products and launching new businesses (i.e. BCG DV)
  • There was a time when my senior partners actually had to draw their slides out on OHP sheets. Yes, imagine having to change your entire deck the night before the SteerCo

While data and insights are a key part of our work it is, as Moritz mentioned, really a People business

• A very large part of our job involves the convincing, corralling, connecting, and more often than not, clashing with people
• If only it were so easy for clients to just believe and accept robust analysis and crisp communication, I wouldn't have had to stay up burning the midnight oil so often ;)
• I'm 100% sure the seasoned consultants/ex-consultants on this forum have at least one story where the client rejected perfectly laid out logic, calculations and data
• Much of this process of convincing, corralling and connecting involves context and data that is often more qualitative than quantitatively capturable (i.e. a small quip a client said to you during lunch that revealed his underlying concerns)

What does this mean going forward?

• As of now, I do think consulting firms will still be alive and they will not collapse because of AI/ChatGPT
• Although as AI becomes more prevalent and more robust, firms will probably evolve and may not look like what they do today, perhaps leaner and shifting focus to a new expertise
• Not exactly the same, but a similar analogy to me would be in the history of excel/spreadsheets. When it was first launched, accountants did feel threatened and were disrupted greatly, but the digital shift had enabled accountants (and their companies) to refocus and also diversify their attention

Could there be a day where AI perfectly does a human consultants job in terms of data analysis and communicating that? Perhaps. But if we reach that stage, then I think society would have also fundamentally rethought the nature of work. Hard to say what that impact is on society at large - just as how pre-historic humans would probably not be able to understand why so many of us sit down everyday at a desk and stare at a screen for 12 hours :)

Hi there,

I think this is an interesting question that may be relevant for many people. I would be happy to share my thoughts on it:

• In my opinion, ChatGPT and other language models have limitations that may impact their effectiveness in consulting companies. Firstly, these models can sometimes produce false information.
• Additionally, language models are based on past data and as such (most probably) can't generate truly innovative, future-focused solutions, which is what strategy consultants are paid to do.
• Despite these limitations, language models can still be useful tools for consultants by providing information and insights for their work.

If you would like a more detailed discussion on how to address your specific situation, please don't hesitate to contact me directly.

Best,

Hagen

Hi there,

I don't think that the impact will be big from ChatGPT per se but from other AI applications.

It is not a coincidence that McKinsey purchased Iguazio two weeks ago: https://www.mckinsey.com/about-us/new-at-mckinsey-blog/mckinsey-acquires-iguazio-a-leader-in-ai-and-machine-learning-technology

I expect the biggest impact to be in large data analysis.

The role of consultants will also move more towards becoming translators and facilitators between clients, internal analysts, and AI programs (as we are already seeing today).

Cheers,

Florain

Hi there,

What's your hypothesis? Are you seeing consulting being impacted in any significant way? Always good to lead with an idea for others to comment on.

General: For your ‘typical’ MBB engagements, I struggle to see any impact for the way consultancies work, nor for the demand for consulting projects. It's a people business and you can't cut out people from the process.

Specific: There may be opportunities here or there for tech-focused engagements, where a company seeks help to leverage new tech for their products and services or the way they operate internally. However, I would consider this very niche in the grand scheme of things.

Curious to hear what the rest thinks.

Moritz

Great question.

It’s big… it’s powerful – a little scary – but a game changer. In fact – I use it a lot. 

Universities are now struggling with students using AI to write cover letters and essays. Lots of socio, political, economic problems coming from it. Its still very early to say what exactly the impact is going to be on client's businesses and Consulting services but if this sticks, then a disruption is guaranteed i.e. a lot of traditional Consulting type work done by Human- analysis, reports etc wont be needed anymore.

Lets see where this goes :).

I could see this being leveraged in terms of research-heavy project types like due diligences and market studies. 

Whenever it comes to strategy or implementation work, where the stakeholder component is more pronounced, I do not yet see much disruption on the horizon.

But as it usually is, you don't see disruption coming until it punches you in the face. So take my two cents for what they are worth.

In response to your query, I have formulated a reply:

AI systems could automate routine consulting tasks, freeing consultants to focus on high-value work. By handling scheduling, client communications, and data provision, AI would reduce time spent on everyday tasks, enabling consultants to devote more effort to strategic planning and complex problem-solving.

AI technologies could streamline portions of the consulting process, enabling productivity and cost gains. However, AI must reach an advanced level to handle nuanced consulting tasks accurately. While AI may suit routine tasks, many engagements require human judgment that AI cannot easily replicate. As AI progresses, automating consulting parts could be appealing for firms seeking operational optimisation. In this way, AI assistants may significantly impact consulting firms, even if human consultants remain essential.ChatGPT could be used to automate fundamental customer service interactions. The AI could handle simple customer service questions and requests, freeing human agents to focus on more complex issues. The AI could provide personalised recommendations to users based on their conversation history and stated interests. ChatGPT could assist in decision-making in a business setting by summarising key points or pros and cons of options, though human judgment would still be needed for final choices.

While still limited in capability, ChatGPT demonstrates how far AI technologies like neural networks and transformers have come in processing and generating language. As these models continue to improve, they can handle more complex, multifaceted conversations and tasks. However, they also come with risks and limitations, including potential biases or lack of common sense that would require human oversight. As a result, ChatGPT and related AI technologies are likely to complement and augment human capabilities rather than fully replace them in the foreseeable future.

ChatGPT can facilitate data analysis for consulting firms. It gathers data from various sources, processes the information, and generates insights. This significantly reduces the time and effort required for research, allowing consultants to provide clients with better recommendations faster. ChatGPT could offer a more tailored experience than traditional consultants by personalising recommendations. ChatGPT's ability to analyse data and understand customer preferences could allow it to provide customised solutions to clients. This may improve customer satisfaction and loyalty, potentially impacting consulting firms. However, it is essential to note that ChatGPT is still in its early stages of development and may have limitations in its functionality. It is not a replacement for human expertise and judgment but rather a tool to enhance the capabilities of consulting firms.

While technologies like ChatGPT have the potential to automate and optimise many routine tasks currently performed by consultants, consulting firms must thoughtfully implement these emerging AI systems to harness their full potential. By leveraging ChatGPT's language understanding and generation capabilities, consulting firms could significantly improve operational efficiency through automated scheduling, expense reporting, and documentation drafting. ChatGPT could also provide personalised recommendations to clients by analysing their business issues and suggesting solutions tailored to their unique needs. ChatGPT shows promise for enhancing data analysis by identifying key insights and trends in large data sets. However, the impact of ChatGPT on the consulting industry will depend on how firms choose to implement the technology. Suppose consulting firms can thoughtfully integrate ChatGPT to augment human consultants rather than replace them. In that case, the technology could take over routine tasks and free consultants to focus on higher-order thinking.