Will AI replace management consulting? Short Answer: Yes. Long Answer: It Depends.

Consultants! Few things unify opinion like management consultants do. With the arrival of Generative AI, the realm of management consulting is under scrutiny. AI capabilities are growing in leaps and bounds. Several questions that we may ask of a consultant, can be directed towards Gen AI, which will give an adequate response.

The question is: Will AI replace management consultants? The answer is it depends. This is not avoiding the question and no, it does not depend on the domain of the consultant, their personal manner, soft-skills, or prowess. Instead, it depends on the nature of their consulting.

In my view, management consulting can be categorized into two broad categories: Imagined consulting, and Actual consulting. These are not terms people may have heard before, but they reflect operational reality.

I explain both below. To be clear, this posts only looks at management consulting, and not any other type of consulting or contracting.

Imagined Consulting

This is what the layperson imagines consulting to be. It’s the idealistic view of consulting, perhaps how it should be in reality. The consultant is a problem-solver who is hired to study the problem and devise a solution. While consultants provide advice, they don’t usually implement the solution. The main reason is because it’s usually beyond the capability of a single consultant or a small-team do to this.

Study the problem, identify options, deliver a conclusion/strategy for action. This is what we would imagine consultant are hired for. Except that many times it’s not. For this reason, it’s called imaginary consulting — expected in theory, but rare in practice.

Actual Consulting

While consultants are ostensibly hired to solve problems, in reality they are hired for 3 things:

Consultant engagements often have political underpinnings. They could be hired to do some unpopular work (e.g., restructures) or as part of politically inspired move. The top levels of every organization, staffed with people who have budgets to hire expensive consultants, are fertile grounds for politics. The “work” of the external consultant here is to basically provide a facade for something else.

If the first aspect is cynical, the second is the opposite. Consultants are often brought in mid-way when things go really wrong. A project could be struggling, or a defining roadblock may have hit. The expertise of consultants is hired here, often at top-dollar, to respond to this SOS call and deliver the desired solution. Unlike the end-to-end problem solving we envisage (in imaginary consulting), this is about coming mid-way to salvage a situation.

The third reason consultants come in is for justification. This is particularly common in government departments or large corporates, where a decision has been made, and consultants are brought in for external validation (rubber-stamp). They effectively justify a pre-decided solution instead of doing original analysis.

Before we get wrong idea, this is not a reflection on ethics of consulting, but on operational reality. Often people don’t know what they want, or don’t want to solve the real problem, or simply want a cover. This is how it pans out in reality. Some of it relates to human inadequacies, other to human power plays. Some of it is of course, genuine problem-solving.

Impact of AI

AI is advancing at an exceptional pace. There should be no doubt that very soon, it will take over all knowledge work. My earlier post on that is here.

Where does that leave management consulting?

If anyone is operating in the “imagined consulting” AI has already made them redundant. Is human input valuable? For sure it is. However, the competing proposition, paying $0 for AI tools, or even $200 per month for “Pro” versions, is just too tempting. Sure beats the $100 per hour or $16,000 per month charge. Nothing personal. Just business.

If anyone is working in the realm of what I can “actual consulting”, they are mostly safe. This is because their real value comes from the facade they provide, or their ability to step in mid-way to fix things, albeit at exorbitant prices. AI cannot reach these places. It cannot provide a reliable facade — unless we reach a time where literal robots become hirable consultants. Same with fixing things. AI can help in showing actions but not with actual execution.

AI will end management consulting that is based purely on knowledge work. Management consulting on assignments with ulterior motives will continue, although, except for rescue jobs, this can hardly be called true “advisory” or “knowledge work”.

On the whole, it’s perhaps not so bad. The consulting market globally is worth around $300 billion. If AI can even halve this, that means $150 billion less spending on consultants, that businesses can use in operations, or ideally in innovation.

In the 60s, Peter Drucker coined the term knowledge work. The term came in vogue again in the 90s, when Drucker foresaw the explosion of the knowledge economy post the turn of the century. Drucker incidentally is also famous for another quote, saying that the purpose of business is to generate a customer, and therefore, its core jobs is innovation and marketing. Despite the pretensions of management consultants, their sphere of work is advice, not innovation or marketing. These two only arrive through hard work and inspiration of those involved deep in a field.

To be clear, this is not a hit job on management consultants. Many do provide incredible value and help out businesses. The thing is AI is here. It better at knowledge work than any human can ever be, and is getting better. Importantly, it’s also set the price cap for the market rates: $200 per month, or whatever the Pro version of the biggest Gen AI tool costs.

**AI will soon become the management consultant. The human variants will mainly be there for keeping up appearances.