Disrupting the consulting industry with AI
Responding to discy.ai, leverage, utilisation, distribution and disrupting the business model
This is a short post. Think of it as a prequel to some wider ideas about AI. It was inspired by the guys at discy.ai. I know Tim and Joel well and I love what they are trying to build. In a recent blog post they asked “What would be a profound change in consulting? and… in what timeframe might this happen?”
Three things struck me in response:
The key to the profitability and thus the business model of large consultancies is leverage. Defined as the number of chargeable staff per partner. What happens when AI is good enough to disrupt that business model? If AI means 10 people can do the work of 15, maybe not much. What if 10 people can do the work of 100? Is there a market for this scale of increase in capacity?
The other part of the profit equation is utilisation. In order to maintain margins, everyone needs to bill enough hours per annum. If AI is doing 90% of the work, do utilisation and timesheets matter any more? My experience of the tech industry suggests not. So what does the new business model look like? Is the partnership model still sustainable in this world?
The big firms currently have complete control over distribution. Led by partners, they have incredible networks and brands give them a safe reputation. Part of this is built on the knowledge that a partner is an assurance of quality and delivery. In a world where you are selling service as a software, not people, will that distribution model get disrupted? Or might it become even more entrenched?
I don’t have an answer to the time frame question. AI will disrupt industries not affected by previous tech waves. Previous experience suggests not all the incumbents will survive in the new world.