AI is Coming for Consultants

Source: Excerpts from "AI is Coming for Consultants.pdf" (Wall Street Journal, August 2, 2025)Executive Summary:The consulting industry, exemplified by McKinsey, is undergoing an "existential transformation" due to the rapid advancement of Artificial Intelligence. AI's ability to analyze information, crunch data, and generate deliverables quickly challenges the traditional consulting model, which relied on human expertise and billed based on project scope and duration. McKinsey is responding by aggressively deploying AI agents, re-evaluating its business model, changing client engagement strategies, and shifting its hiring priorities to emphasize adaptability and collaboration. While AI is seen as an "existential good" for the profession by some, it necessitates a dramatic shift in how consulting firms operate, potentially impacting junior roles most directly and emphasizing the value of "distinctive expertise" over "mediocre expertise."Key Themes and Most Important Ideas/Facts:1. AI as an Existential Threat and Opportunity for Consulting:* Existential Challenge: AI's capability to perform tasks traditionally done by highly paid consultants (data analysis, report generation, summarization) in minutes poses a direct threat to the consulting business model. Bob Sternfels, McKinsey’s global managing partner, states, "AI is now a topic of conversation at every meeting of McKinsey’s board." Kate Smaje, a senior partner leading McKinsey's AI efforts, explicitly asks, "Do I think that this is existential for our profession? Yes, I do."* Existential Good: Despite the challenge, Smaje also believes it's an "existential good for us," implying AI can elevate the profession and its impact.* Early Test Case: Consulting is highlighted as "an early and high-profile test case for how dramatically an industry must shift to stay relevant in the AI era."2. McKinsey's Proactive AI Deployment and Integration:* Rapid Deployment: McKinsey is "rapidly deploying thousands of AI agents" to assist consultants.* Specific AI Agent Functions: These bots "assist consultants in building PowerPoint decks, taking notes and summing up interviews and research documents." The most-used bot helps employees "write in a classic 'McKinsey tone of voice'— language the firm describes as sharp, concise and clear," and another popular agent "checks the logic of a consultant’s arguments."* Vision for AI-Human Ratio: Sternfels envisions a future where McKinsey has "one AI agent for every human it employs."* Headcount Adjustments (Partial AI Influence): While not solely due to AI, McKinsey reduced its headcount from 45,000 to 40,000 between 2023 and 2025 through layoffs and attrition, partly to correct for pandemic hiring, and has since rolled out "roughly 12,000 AI agents."3. Shifting Business Models and Client Expectations:* Beyond Strategy Advice: Clients are increasingly looking for consultants to help "put new systems in place, manage change or learn new skills," rather than just strategy advice.* End of "Arrogance" and "Suit with PowerPoint": Nick Studer, CEO of Oliver Wyman, states, "The age of arrogance of the management consultant is over now." He adds that companies "don’t want a suit with PowerPoint. They want someone who is willing to get in the trenches and help them align their team and cocreate with their team."* Partner, Not Adviser: McKinsey's Sternfels is "trying to cement the notion that the firm is a partner, not adviser, to clients."* Outcomes-Based Arrangements: "About a quarter of the company’s work today is in outcomes-based arrangements: McKinsey is paid partly on whether a project achieves certain results."* AI Consulting as Revenue Driver: Advising on AI and related technology now constitutes "40% of the firm’s revenue."4. Impact on Workforce and Skill Requirements:* Junior Roles Most Affected: AI "speeds up projects" and means "many can be done with far fewer people." Pat Petitti, CEO of Catalant, notes, "Junior employees will likely be affected most immediately, since fewer of them will be needed to do rote tasks on big projects."* Slimmer Staffing Across the Board: This "slimmer staffing is expected to ripple through the entire consulting food chain."* Changing Team Structures: A traditional project might need an engagement manager, four consultants, and a partner. Today, it might require "an engagement manager plus two or three consultants, alongside a few AI agents and access to 'deep research' capabilities."* Value of Distinctive Expertise: Kate Smaje emphasizes, "You can get to a pretty good, average answer using the technology now. So the kind of basic layer of mediocre expertise goes away. But the distinctive expertise becomes even more valuable." Partners with decades of experience become "more indispensable."* Hiring for Adaptability and Collaboration: McKinsey is seeking "fast learners" because "increasingly, you’re going to have to learn over a career at a rate you and I have never seen." They also prioritize "People who can work well with others," as "it’s an increasingly important skill if you want to drive change in an organization."* New Work Streams: McKinsey is targeting projects like "helping companies to identify and groom future executives," which Sternfels believes "will not be disrupted by AI."Conclusion:McKinsey's response to AI is a microcosm of the broader industry transformation. The firm is not merely adopting AI as a tool but fundamentally re-evaluating its value proposition, operational structure, and talent acquisition. The move towards AI-assisted work, outcomes-based billing, and a deeper partnership model signifies a proactive effort to remain relevant and competitive in an era where AI can quickly automate many traditional consulting tasks. The shift promises a focus on higher-value, distinctive expertise and a workforce defined by continuous learning and collaborative problem-solving. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit chaoticconfluence.substack.com/subscribe