Elisheva Kissin

So the main way that it's allowing smaller firms to compete is that it's eroding what used to be the big four's biggest advantage, which was just scale.

Traditionally, if you wanted to do well in consulting, you needed huge numbers of junior staff because they handle all the research and the report writing, etc., etc.

So setting up a startup wasn't really a thing.

But...

In the last couple of years, we've seen a rash of them and they've been led by really big industry names, big four partners, senior people who've taken this leap.

So what these new small firms are arguing is that because AI can now do a large chunk of the work,

that used to have to be done by armies and armies of people, a smaller consultancy can take on major lucrative projects that were out of their reach before.

And just to give you a sense of scale, the Management Consultancy Association has estimated that smaller firms are seeing growth rates of up to 50% because AI is helping them compete with their larger rivals.

Yeah, so I discovered three main ways that AI is sort of challenging the basic economic foundations for the big four and the other large consultancies.

One of them was those big firms rely on large cohorts of junior people whose billable hours create profits for a much smaller number of partners at the top.

But a lot of the work that those junior consultants used to do is increasingly automatable.

At the same time, AI is undermining the billable hour model.

If an AI system can do the job in minutes, you obviously can't continue charging by the hour because your revenues would collapse.

It's just taking less time.

And then the third issue is around expertise.

Clients can use AI themselves for the first layer of analysis often.

They're increasingly needing consultants more for deep specialist knowledge.

So that plays more to the strengths of boutique firms because they're already very focused on a particular area.

The big firms have specialisms too, of course, but they'll need to move more in that direction of developing those deep, deep specialisms.

So in a couple of different ways, the main one is investment.