AI-human centaurs are galloping into global consulting

You’re the VP of sales at a growing defense firm with core interests in the Persian Gulf. At midnight, your phone buzzes. An alert flashes about a cabinet reshuffle that jeopardizes a pending contract. A day earlier, a Trump tweet criticizing government-funded export financing had already weighed on your stock price. If you are a high-paying client of a traditional political risk consultancy, you try calling one of the firm’s partners — only to be put in touch with one of its New York or London-based regional analysts. That person then juggles your questions with those of many other clients while trying to educate herself on the issue. This talented analyst answers your high-level questions but cannot address your specific circumstances.

Throughout your restless night, reports on the ongoing turbulence flood your news feed. These sources suffer varying degrees of reliability and ultimately offer competing explanations, undermining whatever confidence you had in the aforementioned analyst’s rushed explanation. Overwhelmed by the apparent urgency of your firm’s vulnerability and with the CEO breathing down your neck, you act before fully grasping unfolding events.

This scenario highlights three key trends:

· First, volatility is now ubiquitous — in rich countries as well as developing ones; in cutting-edge sectors, and those once known for stability.

· Second, advances in computing and communications technology and growing wealth in middle-income and developing countries, are empowering more firms to do business in more and farther-away countries. As a result, small shocks anywhere reverberate everywhere.

· Third, the tweet pointed to growing cynicism regarding the social and economic benefits of globalization in the rich-world, leading to anti-trade pressures.

These trends will force businesses to challenge deep-seated assumptions and seek “contextual intelligence” — quick, actionable information derived from expert understanding of local circumstances. Businesses will need this contextual intelligence across many markets and in real-time. This need is catalyzing technology-driven solutions that are already disrupting global affairs consulting. Consulting firms that do not adapt to meet these needs will perish.

The risk industry is heavily reliant on human knowledge

Currently, organizations and investors with business abroad have two options: they can contract with several boutique consultancies, or they can contract with one large firm, like Eurasia Group, that promises everything.

Dealing with many boutique firms is a hassle, and new knowledge gaps may arise at any time. The large firms, whether they depend on process-heavy analytic methodologies or star analysts, are expensive and ill-equipped to maintain truly globe-spanning knowledge in this era of fast change and local asymmetries.

A new breed of technology-driven firms

A new generation of consulting firms is trying to address this capabilities gap. One set of firms is focused almost exclusively on gathering and interpreting big data at a global scale, while another set relies on technology to quickly connect clients to bespoke experts — the “Airbnb” of global affairs consulting. Each approach has benefits and drawbacks.

The big data firms claim early detection of black-swan events and the ability to predict decision-making in response. While their approach can identify trends that are not otherwise apparent, large-scale data forecasting alone cannot make sense of regional and local nuances. These services also cost tens of thousands of dollars per month.

One big-data service provider, Predata, seeks to compute many streams of social media data into risk signals and event predictions. Days before the 2016 U.S. presidential election, Predata stated, “the digital signals suggest that Hillary Clinton is increasingly likely to be the next President of the United States.” Hours before the polls opened, Predata doubled down, concluding that “Hillary Clinton will be the next President.” Of course, Predata wasn’t the only risk firm that failed to predict the outcome of America’s 2016 election, but their certainty highlights the risks of depending on big data alone.

While data firms claim to decipher the world from one room full of computers, the Airbnb-like firms claim a human presence around the globe, and are growing rapidly to achieve it. Catalant, formerly known as HourlyNerd, boasts over 50,000 experts in an on-demand consultancy model, and other offerings to help clients “build an agile workforce” without directly hiring employees. The platform appeals to clients who do not want to — or simply cannot — pay McKinsey prices for quality consultants. Catalant has attracted significant funding, suggesting that aggressive investors already spot the company’s potential to disrupt its industry (arguably one of the toughest in the consulting ecosystem) and the broader knowledge economy.

In the political risk universe, online platforms such as OnFrontiers and Lynk have efficiently constructed on-demand global expert networks that are disintermediating larger expert-on-demand players like Gerson Lehrman Group (GLG) and Guidepoint.

What no organization has yet cracked is how to combine big data, human judgment, and speed. Political risk arises from the decisions and actions of individuals that will never fully be captured by number-crunching.

The next disruption will rise from the successful combination of human subject-matter expertise and machine learning — the “centaur model.”

The Half-Human, Half-Machine Future of the Risk Industry

The centaur model, combining human judgment and machine learning, is made possible by changes in the labor market and technological advances.

Labor changes — The future of work

The rise of the gig economy has redefined how some blue collar work gets done, and white collar sectors are starting to feel the impact as well. According to a recent McKinsey report, professional services such as research, writing, and data-gathering already comprise one-third of the global digital freelance labor market, which grows annually by 25 percent.

“Uberification” has created on-demand employment models across industries that capitalize on fragmented freelance workers. Such platforms bring together hundreds of thousands of talented workers from all over the world.

When it comes to global affairs consulting, that’s where the similarities end. Driving is a common skill, the same everywhere. The ability to provide true contextual intelligence on a given country or industry, however, will always require a wide range of specialized experts.

Technological advances

Technology is redefining consulting in multiple ways. Labor platforms like Uber are supported by smartphones, ever-cheaper processing power, and cloud services. As smartphones and business-class bandwidth become available to more people in middle income and developing countries, consultants will be able to work from almost anywhere. But just as important, the talent pipeline will grow as more people educated in the leading international affairs and business schools return home from the major western capitals, and as local experts can be developed and accessed more easily.

Computer processing power is, of course, the driving force behind the data analytics revolution. As processing power becomes as cheap and easy to access as electricity, new possibilities are opening up. The challenge to the consulting industry is to create the centaur.

The Centaur

It is impossible to fully automate quality analysis in global affairs consulting, as these services demand specific knowledge, and high levels of trust, discretion, and regulatory compliance. Yet it is impossible to provide these services to every organization that needs them at a reasonable price without some degree of automation.

The centaur risk analysis model promises to bridge the gap and ensures quality control by combining top-quality, vetted experts with machine-learning tools.

Today, several firms in global affairs consulting have built platforms, recruited experts worldwide, and written matching algorithms that let clients search for the people they need.

This is the genesis of a centaur. My firm, GlobalWonks, has built these base capabilities and focused on building a low-overhead service that provides answers to relatively simple questions quickly, efficiently, and cost-effectively.

The next steps for any centaur are to develop and deploy a diverse set of automated and machine learning tools.

A centaur can take any of several paths. It can build a set of tools focusing on helping experts provide excellent, polished answers to individual clients. One tool could validate that answers provided are responsive to the question being asked. A simple grammar tool could check written product. Other tools can provide automated feedback to the new consultants to help strengthen their consulting skills. Analytical tools that only work on written products at first will later be applied to recorded calls and video conferences.

The next generation of these tools will derive meaning from a growing proprietary data set while adhering to the highest standards of client privacy, and applicable laws and regulations such as Europe’s GDPR. These tools will learn from how clients use the platform, which markets they explore, and, above all, which questions they ask. This data will improve the accuracy of matches, expand the centaur’s functions, and broaden opportunities for both clients and experts.

A third set of tools will pull in outside data including news and trends and combine it with anonymized proprietary data to anticipate a client’s needs before the client even considers them.

Imagine yourself again as the restless defense contractor. But this time, picture getting quick access to high-quality intelligence and interpretation that’s tailored to your specific needs. While you slept, information was automatically requested on your behalf based on machine analysis of breaking news and an understanding of your interests.

The centaur calculates annual indices that quantify risk in the country’s market and non-market environments and puts them in front of several local experts along with a query as to how the night’s events will affect defense contractors. Three of the experts provide a couple paragraphs each of tailored analysis to complement the data.

When you wake, you already have an email offering you this information at a reasonable price. You take the offer and feel like you’re getting a grip on events, but you still have questions. The original email also let you know that the expert who contributed to the quick briefing you just read has a time slot available for a call at 10:30 AM. You touch a button in the email to book the call and an hour later login to a secure video-conference.

This future is closer than you think — GlobalWonks and others are working to build it.

As our dataset of knowledge transactions grows and new intelligence is mined, data scientists and geopolitical analysts can discern which new pieces of information (e.g., news, expert opinions, deliverables) are most productively weighted in GlobalWonks’ analytic offerings. These analytical tools will be employed to reveal both risks and opportunities to our clients.

Digital platforms combining human expertise with machine learning are positioned to eventually replace traditional consultancies. As argued in Harvard Business Review, (“Consulting on the Cusp of Disruption”), the last decade has pushed the industry toward a profound transformation:

“The same forces that disrupted so many businesses, from steel to publishing, are starting to reshape the world of consulting … The pattern of industry disruption is familiar: New competitors with new business models arrive; incumbents choose to ignore the new players or to flee to higher-margin activities; a disrupter whose product was once barely good enough achieves a level of quality acceptable to the broad middle of the market, undermining the position of longtime leaders and often causing the ‘flip’ to a new basis of competition.”

?