Shownotes
Ian and Mike take a look at recent news items from around the consulting industry, reviewing both economic trends and the human factors that shape workplace dynamics.
Mike and Ian unpack the recent fluctuations in consulting revenue and client spending, drawing attention to the broader implications of these changes for consultants. They discuss how firms have recently been reallocating funds towards technology investments, including AI.
The hosts also delve into the generational tensions that characterize modern workplaces, examining how Millennials and Generation Z approach work differently from their predecessors. By encouraging dialogue about these generational shifts, the episode not only highlights the importance of understanding diverse perspectives within consulting but also suggests practical strategies for firms to foster a more inclusive and adaptable work environment.
Finally we get a tantalising glimpse of some consultant-baiting humour that's going to feature in our Luminaries episode!
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The Consulting For Humans podcast is brought to you by P31 Consulting LLC
Transcripts
Welcome to Consulting for Humans, a podcast all about life in consulting.
Mike:You're with Mike and with Ian, and in each episode, we'll be shining a light on a new topic that gets to the heart of what makes consultants happy and successful.
Ian:And we think this career of ours gets easier the more human you are.
Ian:So on the Consulting for Humans podcast, it's our mission to add a little more humanity to the lives of consultants and maybe bring some of the skills and perspectives of consulting to other human lives, too.
Mike:Yes.
Mike:Well, Ian, we've had a great time in our first four episodes talking about what makes a perfect.
Mike:We'll put that in air quotes.
Mike:Consultant.
Mike:So tell me, though, what are we going to cover in today's episode?
Ian:Well, Mike, we're going to take a step back and introduce something that we might make a recurring segment.
Ian:Let's see how it goes.
Ian:We're just going to take a quick look at news and trends in the consulting industry.
Ian:There are a couple of things that have caught our eye.
Ian:So, for example, lots of parts of our industry have seen big changes in business success, in revenue, in headcount in the last year or two.
Ian: now here we are at the end of: Ian:Is this the time when we're going to start to see maybe some more stability, maybe even a recovery in the industry that we're all working in?
Mike:And like everyone, we've seen a huge amount in our newsfeeds and on our socials about exploiting generative AI by consultants for themselves and by consultants on behalf of their clients.
Mike:And we'd like to ask, where's this come from and why does it seem to be coming to a head right now?
Ian:Great question, Mike.
Ian:Finally, another thing we've seen a lot of in our feeds, also in some of the conversations we've had with our listeners as we've got started on the show, the crossover in the consulting working environment between the generations, between Generation X, the millennials, Gen Z, even the occasional boomers still around.
Ian:Right, Mike.
Ian:And we want to ask how real this is and where are we in this transition now and what should we make of it?
Ian:Because people are still writing about it and I think we're still hearing people talking about it as well.
Ian:So, Mike, we've got a lot to get into.
Ian:Let's dive in.
Mike:I think in just a moment or two, we're going to talk about this sort of boom in AI.
Mike:But let's start by setting the stage, because a boom in anything in consulting right now would be really welcomed.
Mike:I mean, during the pandemic, we had incredible double digit growth.
Mike:2023 saw a scale back from that, a significant scale back.
Mike:2024 was projected to be a 6% growth year.
Mike: many companies coming out of: Mike: an to cut consulting spend in: Mike:Not what we wanted.
Mike:I mean EY laid off 100 US partners.
Mike:That's almost unthinkable.
Mike:I'm trying to remember when we saw carnage like that.
Mike:If ever one executive noted the country club is no longer safe.
Mike:And we had drops all around, big drops.
Mike:For example, merger and acquisition work down 15%.
Mike:Many clients, again hearkening back to our AI discussion we're about to have here, started taking a lot of management consulting spend and shifting that to their own technology spend.
Mike: iant McKinsey had already cut: Mike:They told partners to expect a reduced payout at the end of 23 in order to help them weather what they saw as a really oncoming storm in 24.
Mike: s ended on a historic high in: Mike:So brings us back around.
Mike:I mean I could talk about all the cutbacks, all the deferred hiring.
Mike:I could talk about a lot of other firms that had layoffs as well as well as partner reductions.
Mike:So you know, it's been dire.
Mike:But this seems to be perhaps a late at the end of the tunnel that we hope doesn't turn out to.
Ian:Be a train indeed.
Ian:Like you say, Mike, we've seen it in the kind of economic activity that's driving lots of our clients and our clients clients businesses.
Ian:We all I think were living high on the hog in that kind of post pandemic boom.
Ian:In all the economic activity that followed that and business transformation and consulting that drove off of that.
Ian:I was looking again from Source Global Research at some of the most recent trends in revenue.
Ian:And like you say, there is a bit of light at the end of the tunnel.
Ian:We're seeing some revenue growth directions ticking positive again, especially in a couple of sectors.
Ian:I'm looking at their website here and it looks like the financial sector is still big, although not yet completely recovered to previous levels of growth.
Ian: p already in the last half of: Ian:Also energy.
Ian:So, Mike, the fundamental things that people need, they need to light their homes and they need to get well when they're sick.
Ian:Those things are kind of bouncing back.
Ian:It could be right here because you and I depend for a little bit on some of that activity.
Ian:We've really, really got our fingers crossed and maybe lots of our listeners have too.
Ian:It seems like there's going to be new growth coming.
Ian: positive for the beginning of: Ian:Now, like you say, Mike, lots of what our clients have been spending their money on has been on technology rather than on billable hours for people in professional services.
Ian:Let's talk a little bit about these trends.
Ian:You know, we can analyze it from month to month, but also we can step back and look across the decades.
Ian:And the thing that everybody seems to have been talking about for the last 18 months to 2 years is generative AI.
Ian:Where do you think that comes from?
Ian:And how does this compare with other big shifts in technology?
Ian:What do you think?
Mike:Well, it is a monster.
Mike:Ian, you're absolutely right.
Mike: ind of date this back to late: Mike:And that's, I think, what exploded onto the public stage.
Mike:But it really goes back a long way before that.
Mike:We're going to do an episode, AI and consulting.
Mike:So let's just hit some highlights here.
Mike:I think when we talk about AI and consulting, we got to think both, as we mentioned earlier, about consulting firms using it themselves as well as assisting their clients in using it.
Mike: So I remember as we hit: Mike:People are talking about this and there were a lot of folks that were imagining, oh, wow, on the one hand, I could press a button and build a slide deck like, just like that.
Mike:Oh my gosh.
Mike:And I'm thinking this is almost perhaps automating lazy consulting like we talked about last week, to the point of devaluing the profession and its practitioners.
Mike:But other folks were looking at it as, wait a minute, this could be a really smart tool attempt.
Mike:What if we could use AI powered tools as consultants to analyze huge data sets to uncover hidden patterns and deliver transformative recommendations to clients?
Mike:Now that really changes the nature of our work.
Mike:Some people would say this could be a dream, a much easier life for consultants.
Mike:Some people might say, I don't know Maybe a nightmare.
Mike:Why would clients need consultants?
Mike:And what would they be willing to pay for consultants if they believe that all our results were essentially push button due to generative AI?
Ian:Well, Mike, I think if I'm a partner or a managing partner in a big professional services firm, I see a really big economic prize.
Ian:Exactly the kind of economic prize we talked about in our lazy versus hard work episode to be able to proceduralize and semi automate some things.
Ian:I'm not sure.
Ian:And I was with some people this week in the pharma industry talking about the impacts of proceduralizing and automating very, very mundane but highly structured research tasks.
Ian:There are going to be some transformations in terms of time to get done, some transformations in terms of how much it'll cost to get things done.
Ian:I don't think it's going to be the big orders of magnitude that people are talking about and lots of people defending the value of the role of the person in the loop, the human in the loop.
Ian:And I think that's exactly right.
Ian:The human thinking about context, the human judgment, I think is still going to be part of what clients value in our professional services, where in the lifecycle of a project the judgment comes in and how it gets delivered and who appreciates it and how we represent it.
Ian:Will it still be in a PowerPoint slide?
Ian:Will it be some other way in a data mining tool?
Ian:I don't know.
Ian:But I think some of those essentials about giving advice, we'll still be around, but we'll just be able to do it faster and maybe with different resources and maybe also therefore a little bit cheaper.
Ian:But who knows?
Ian:We haven't been very good at making ourselves cheaper over the decades, have we?
Mike:If you look at who the highest billing rate consultants are, it's right now some of the people around these tools and data and analytics and some of that stuff.
Mike:But it's always fascinating to me, having lived through a technology inflection or two, how much we look forward to what's going to happen.
Mike:I could go back to what automated decision making was going to do and how we'd all be working a day or two a week and everything else would be handled by the machines, but even a little bit more, more concrete and tangible.
Mike:I remember being on keynote panel after keynote panel arguing with people who were telling us that, you know, brick and mortar retail was a thing of the past because of another disruptive technology.
Mike:You know, this combination of the Internet and the world Wide web and E commerce.
Mike:And you know, I'm looking back now 30 years later going, yeah, I don't think we really saw that.
Mike:Did we hear, Mike, I'm going to.
Ian:Inject a note of.
Ian:Is this cynicism?
Ian:Yeah, I guess it is cautious cynicism.
Ian:One of the reasons that this could all be coming to a head.
Ian:And I spot a similar thing with what happened with E Commerce.
Ian:I spot a similar thing with what happened with all the big kind of user generated digital content platforms like YouTube and all of the social media things that these big waves of technology were invested in by the big tech giants at a time when there was VC around or private equity around and money was cheap.
Ian:And at some point in their subsequent history, payment had to come back.
Ian:Maybe we're partly at that stage as well with AI.
Ian:People have made the big investments, they managed to do it, you know, before the most recent financial squeeze when money was cheap.
Ian:And now, ladies and gentlemen, we're all going to have to pay and we're all going to have to start using these services and they're going to be commercial and when they're integrated into platforms like Google and Microsoft, they're not necessarily going to come for free.
Ian:And I'm one of the kind of cautious optimists about AI tools in the practice of consulting.
Ian:I am sure they are going to have an impact.
Ian: ,: Mike:Yeah, yeah, it's fascinating because I've been looking at this and thinking about this and watching this as it developed and kind of.
Mike:McKinsey, let's just take them as a little bit of a case study here.
Mike:I mean the whole industry has invested heavily and I'm thinking now about like use of AI in consulting firms.
Mike:So McKinsey developed relatively early on in this thing an in house generative AI tool, Lilly, an attempt to aggregate the firm's knowledge and capabilities.
Mike:And I'm thinking back, oh my gosh, I remember all these in house information capturing systems we were building 10 years ago, 20 years ago, 30 years ago, so we could kind of put our fingers on all that and not just have to be, who do I know in the firm who can call somebody who knows about this and find somebody?
Mike:How can I get this there?
Mike:And when they released their original press releases and discussed this, they talked about being able to aggregate this knowledge and capabilities.
Mike:Order and the quote was to allow us to spend more time with clients, activating these insights and recommendations and maximizing the value we can create.
Mike:And I thought, sounds good.
Mike:I mean, at least we're on the right thing.
Mike:What value is getting created here?
Mike:And you kind of watch them roll along.
Mike:And I won't go through the whole history of McKinsey here.
Mike:It took this idea of what we're doing internally and then moved it externally as well to say, okay, we can do this to help ourselves.
Mike:How do we do this to help our clients better?
Mike:Just like McKinsey wanted to avail itself, so did a ton of their clients.
Mike:They've made a number of acquisitions.
Mike:They'd made an earlier data and analytics acquisition.
Mike:Quantum Black formed a strategic partnership with Cohere to provide tailored solutions in generative AI to help clients improve performance.
Mike:And I think.
Mike:Right, yep, that makes sense.
Mike:Here we go.
Mike:That's what we've got to see here.
Mike:And if you look across the big firms and some mid sized firms as well as some startup, we're seeing substantial investment activity.
Mike:A lot of acquisitions, a lot of partnerships between consultancies and AI related firms.
Mike:We're seeing just a full spread of AI related hardware, software, services, things.
Mike:I think there's good reason for that.
Mike:Because the pool is again, a monster.
Ian:Yeah, it certainly is.
Ian:And it's funny, the idea of increasing speed, freeing up free time, it's something that we've been telling ourselves in previous generations of technology transformation have promised this.
Ian:Some of them have genuinely generated new reservoirs of free time and free resources.
Ian:I think generally as an industry, we've been pretty bad at converting ideas and efficiency and working practices into lots and lots of leisure time.
Ian:We've been good at converting it into other things.
Mike: billion invested in AI from: Mike: billion on AI by: Mike:So part of this is, yes, we've been bad at it, but we're going after it in a big way.
Mike:And I think we've really now reached that point that you're alluding to earlier is clients said, okay, so we put in chat, we've had all these experiments, we've done all this and now we've got to actually ring some real profits out of this.
Mike:We got to get some real return on these huge investments.
Mike:So how do we do this beyond the chat box?
Mike:How do we start to integrate this into our own data how do we get past issues of transparency and hallucinations and all that?
Mike:How do we really move it across our organization and bring our organization together?
Mike:Those are all issues that we're going to dig deeper into in a future episode of the Consulting for Humans podcast.
Ian:Absolutely, Mike.
Ian:And the other transformation that's come up as we've been scanning the news articles and looking at trends lately, is people still, still writing and talking about and discussing this generational shift, this generational tension, if you like, between the millennials and the Gen Z at the younger end of the working spectrum and the Gen Xs and the Gen Alphas at the older end.
Ian:And you don't have to listen to our conversation for too long, Mike, to know which ends you and I represent in this conversation.
Ian:But there's an interesting thing for us to figure out here.
Ian:Is it just like the way it's always been, that each generation looks back a generation or two and kind of raises their eyebrows and goes, well, you guys clearly screwed up a little and we're not going to screw up in quite the same way.
Ian:Hold my beer, watch while I make it better.
Ian:And there's going to be a little bit of that.
Ian:There's also a little bit of the older generation looking over the younger generation and rolling horizon going, kids these days.
Ian:I wonder, though, if something more fundamental is happening that's changing in the way people view themselves and the way they view work.
Ian:I've been reading lots of the thoughts and listening to lots of the thoughts of folks like Simon Sinek talking about how millennials and Gen Z care about and need something very different in the way that they work.
Ian:They need to be persuaded in a different way.
Ian:I was looking at an article the other day about how young decision makers, younger managers and leaders in big firms are expecting to be persuaded, to be brought on board, if you like, with new initiatives and new business changes in a very different way from Mike, your generation and my generation.
Ian:I think it's quite fundamental.
Ian:I think that there is a very different way of looking at work.
Ian:The roles of economics and the roles of purpose and the role of community are all now being mingled together in work in a very different way.
Ian:It's not just that we want to work a little harder or a little less, or that we want to work more in the office or more at home.
Ian:I think we want to work for different reasons and to achieve some different outcomes.
Ian:Now, we can put out some of the links to the articles that we've been looking at, but we'd love to hear from listeners as well, especially if you feel very strongly that you're at one end of the generational spectrum.
Ian:What's it like from where you sit?
Ian:How do you see your workplace changing?
Ian:And are some of the fixes in consulting firms going to come easy or are they going to come hard like you say?
Ian:Mike, we're going to have to dig deeper into this in a future episode.
Ian:I just want to take a moment to point out one more thing that we've noticed that we don't have time to talk about today.
Ian:It's been all over my socials.
Ian:It's actually a couple of years old now, this article.
Ian:But there was a great article in the Bartleby column of the Economist magazine and if folks don't read the Economist, why do you not read the Economist?
Ian:The puns in their headlines are worth the entry price all by itself.
Ian:There's an article called Advice from a Retiring Consultant on the subject of how to use consultants.
Ian:Well, it's funny, we're going to dig into it because a bit of anti consulting humor is absolutely our jam here.
Ian:If you're interested in that, watch out for that in your socials and we will pick up on that in our Luminaries episode that's coming out at the same time now if you'd like to hear more about that Economist article.
Ian:If you want to hear our first ever round of listener questions and answers, all of that's going to be in our Luminaries bonus episode.
Ian:You can access it for free by going to the seven day trial in our Luminaries tier.
Ian:We'd love to have you with us.
Ian:All the details of how you can do that are in the show notes.
Ian:And Mike, next week we might even get to share with you our first ever Consulting for Humans expert interview.
Ian:We can't wait to bring that to you.
Ian:Join us then, if you would, next time on the Consulting for Humans podcast.
Mike:The Consulting for Humans podcast is brought to you by P31 Consulting.
