Will Generative AI change the Business Model of Consulting?

Ever since the launch of ChatGPT3.5 on 30th November 2022, Generative AI has been catching the attention of all businesses. Consulting business is also not aloof from this phenomenon. Many people believe that the very business model of consulting may undergo a paradigm shift due to adoption of Generative AI in consulting business. But can Generative AI really revolutionize how consulting business is done?

What Generative AI can do?

According to a McKinsey Report (June 2023), Generative AI has the potential to contribute US$2.6 to $4.4 trillion annually to the global economy by 2030. A report by PWC (September 2023) cites the capabilities of Generative AI in generating, summarizing, rewriting and extracting content in the form of text, images, video and even software code. The generating capabilities refer to the ability to generate text such as writing product descriptions, drafting e-mails and writing articles. The capabilities to summarize include generating paper extracts and collating reporting & compliance documents. Rewriting encompasses the ability to contextualize communication according to the audience. Lastly, extracting refers to the ability to extract key information from a document or from an image.

Specifically, with regard to the consulting business, the content creation capabilities of Generative AI have been considered very useful for activities such as proposal writing, report writing and preparation of presentation material. Generative AI can help in increasing the productivity of consultants by automating repetitive tasks such as extracting data from documents, analyzing data, identifying trends and patterns and making predictions. Marketing of consulting services can be facilitated through creation of attractive marketing brochures, using the content creation capabilities of Generative AI. Other possible uses of Generative AI in consulting business, as mentioned in the literature, include reviewing references and resumes, creating white papers and benchmarking, etc. Some other possible applications of Generative AI by large consulting firms include training consultants on the new technologies, project management and for making client communication more effective. It is also claimed that Generative AI can support idea generation, explore different scenarios, evaluate potential solutions, enhance knowledge sharing and facilitate collaboration. Major consulting companies have reported significant increase in the productivity of their consulting professionals using Generative AI. But does this amount to a paradigm shift in how consulting is done? To answer this question, one has to understand the basic attributes of consulting business and evaluate whether and to what extent, the strengths of Generative AI are aligned with these basic attributes.

Why Consulting?

In order to dive deep into how exactly Generative AI can support the core activities involved in the consulting profession, it may be useful to dissect the reasons why client organizations seek consulting services. Very often, client organizations seek consulting support since external consultants possess certain specialized knowledge which is not available within the client organization. It is apparent that Generative AI can’t substitute for the specialized knowledge possessed by the individual human consultants. Often, consulting support is sought to provide an external validation to the beliefs of the top management of the client organization regarding their diagnosis of the problem and the desired course of action. Generative AI has no role to play in this since providing external validation to the beliefs of the client’s top management team is a matter of trust which the client organization wishes to demonstrate to its stakeholders.

Another important reason for seeking consulting services is that the consultants can provide an external, unbiased and objective viewpoint to the client organization. Yet another important reason is that the consultants can facilitate problem solving in the client organization by enabling them to have a structured dialogue. Both these reasons have been explored below in greater detail.

Can Generative AI help the client organizations in obtaining an external, unbiased and objective viewpoint from the consultants?

As stated earlier, Generative AI can support the consulting firms (as well as the client organizations themselves) in analyzing data and information related to client’s industry, markets and competition. It can help identify trends and patterns and thereby enable them understand the big picture. It can also be useful in generating different scenarios and perspectives. Such analytical and predictive capabilities of Generative AI can be of immense utility in critically evaluating different scenarios that may be developed. However, it has to be remembered that Generative AI is essentially a set of tools. The effectiveness of these tools is as good as the human consultant using these tools. It is important for the human consultant to ask the right questions, interpret the results with their human capabilities and use the insights developed with the help of Generative AI meaningfully.

Can Generative AI facilitate “Structured Dialogue”?

Structured Dialogue is a facilitation method for diverse stakeholders to identify, discuss and solve complex problems collaboratively, creating shared ownership. This approach is helpful in guiding conversations, ensuring inclusivity and focus. Techniques to facilitate structured dialogue include, for instance, brainstorming, mind mapping, nominal group technique, appreciative enquiry and open space technique; these techniques help stimulate creativity, identify key issues and reach consensus. Generative AI can support the structured dialogue processes in several ways. It can be used to provide tailored prompts and background information to stimulate discussions on various topics. It can support summarization and analysis of diverse ideas that get generated. It can also support fact checking to verify the information shared during the discussions. It can help formulate concrete action points based on the analysis of diverse ideas generated.

However, its success would depend upon transparency and trust that can be built around its usage. The Generative AI tools to support the structured dialogue process may also have to be customized to the specific needs of the client organization and other stakeholders. Unlike skilled human facilitators, Generative AI can’t address unforeseen situations during the structured dialogue process. It lacks human nuances in terms of understanding human emotions, biases, unspoken cues and body language. Therefore, the need for human oversight in overseeing use of Generative AI in the structured dialogue process is critical.

Consulting Skills and Role of Generative AI

Consultants are expected to possess certain important skills, including analytical skills, communication skills, ability to relate to business goals of client organization, skills of synthesis and networking & relationship building skills. There is no doubt that Generative AI can enhance the analytical skills of human consultants, as discussed earlier. Generative AI can also support written communication skills, though the same can’t be said about its ability to support oral communication. As regards the ability to relate to the business goals of the client organization, Generative AI, left to itself, is not capable of even understanding the business goals of a client organization, though it can generate alternate scenarios based on prioritization of business goals, a function best left to the human consultants and/or client’s top management team. However, it lacks the ability to understand the nuances of business and organizational complexity, which remain in the domain of human consultants and/or client’s internal management teams.

Generative AI can be said to have only moderate skills of synthesis. It has good written communication skills; it can summarize information and identify key themes, but it lacks human judgment and context awareness to provide the necessary direction which only a human consultant can provide. Further, Generative AI can’t be expected to have the ability of networking and relationship building, as it lacks human touch and doesn’t have the capacity to understand and deal with the subtleties of human communication expressed through tone, humour and emotional intelligence.

Can internal resources substitute for external consultants as a result of Generative AI capabilities?

Internal consulting teams have deep organizational knowledge, a strength which can be further enhanced using Generative AI in streamlining tasks such as data analysis. Generative AI can foster knowledge transfer amongst internal stakeholders. However, internal consultants may still develop ingrained biases and blind spots. They have limited expertise in new areas. Moreover, external consultants are likely to have an edge over internal teams in project management; they can be effective catalysts in change management and they can provide excellent implementation support to the client organization. Therefore, just because Generative AI can augment the strengths of internal human resources, the role of external human consultants can’t be done away with.

Risks in using Generative AI for Consulting Business

There are certain inherent limitations of Generative AI. These include, for instance, the risk of hallucinations, bias and doubts about being grounded on facts and being fair and ethical. These limitations have the danger of reducing trust on the outputs of Generative AI. The analysis generated by Generative AI often lacks transparency and no rationale is made available for making specific recommendations. Besides, there is the risk of security of the private data of the client organization. There is also a risk of more or less similar or less differentiated solutions developed using such Generative AI tools, which one may term as “commoditization” of recommendations.

Data Sets for Generative AI in Consulting Business

A key limitation of Generative AI tools is that the data sets on which their foundation models have been trained, are typically derived from scraping of universal internet-based data. These may not be robust enough to cover business-grade data. (However, some consulting firms claim to have created proprietary Generative AI tools trained specifically on business data). Conversely, it may be feasible for consulting firms to generate proprietary data sets for the client organizations and offer the same as a service. Some consulting firms provide services such as use case identification; selection of Generative AI tools unique to client’s needs; preparing and using enterprise-specific proprietary data for generating customized foundation models and Generative AI solution development. Some consulting firms also claim to offer “enterprise intelligence” solutions based on the proprietary internal organizational knowledge of client organizations. Such services can be of immense value in meeting specific needs of the client organization.

However, it is a moot point whether the data sets on which Generative AI is trained can be a good substitute for the tacit knowledge of consultants with real life experience. This raises a more strategic question whether Generative AI can really capture the tacit knowledge of experienced consultants. Obviously, human traits are still critical in providing situational intelligence.

Conclusions

Generative AI will increasingly support consulting firms in their business, be it for marketing, situation analysis, developing recommendations or making presentations to the client organization. It will augment human skills in conducting data analysis and will help increase consultants’ productivity. This can make a difference in terms of reducing the headcounts at the level of junior consultants. However, Generative AI can’t replace the creativity, out-of-box thinking and ingenuity expected out of consulting firms and therefore may not make a major dent in the business model of consulting firms. Nevertheless, it will get increasingly integrated into the way consulting is done. To optimize the benefits accruing from Generative AI, it will be prudent for consultants and consulting firms to clearly define the respective domains of Generative AI and the human consultant so that the respective strengths of both can be synergized.

As regards client organizations, Generative AI will be of equal help as to the consultants in conducting data analysis, identifying patterns and building scenarios. But if a client is seeking an objective and unbiased viewpoint, then the engagement of external consultants will be vital. Similarly, if the need for structured dialogue involving different stakeholders related to a problem situation has been perceived by the client organization, a facilitation by skilled human consultant would be critical and Generative AI can have only a supporting role to play in this.

References

1. AjileBytes, “Unveiling the Impact of Generative AI in Consulting: Industry Use Cases and Leading Innovators”, June 26, 2023

2. Colin Fraser, “Generative AI is a hammer and no one knows what is and isn’t a nail”, Medium, Date Not Mentioned

3. EY, “The Future of Consulting in the Age of Generative AI”, 29th July 2023

4. Ghiston De Pierrefeu, “The Age of Augmented Consultant”, Wavestone, 12 Dec. 2023

5. Lila Benhammou, “How GenAI will transform consulting services to generate more RoI on Projects?”, July 20, 2023

6. McKinsey Global Institute, “Economic Potential of Generative AI – The Next Productivity Frontier, June 2023.

7. PWC India, “Breaking Creative Boundaries: Generative AI and its Applications”, 5th Sep. 2023

8. Syed Ali, “The Unseen Revolution in Consulting: Is GenAI an existential threat to the Industry”, 30 Jan. 2024

9. Tim Hafkey, “Generative AI in Consulting”, AlphaSense, Nov. 9, 2023

10. Website of LeewayHertz, a Generative AI Consulting Company, Date Not Mentioned.