As consulting firms adopt AI-solutions and digital tools to enhance their competencies and add digital service offerings to their portfolios, the consulting business model will need to be revised. In her fourth piece, Cocoa Gao, CPA, CA looks at the relationship between artificial intelligence and new operating models which have gained relevance.
Stay tuned for her final article next week which will analyse the impact of artificial intelligence on the new competitive landscape.
Introduction
As consulting firms adopt AI-solutions and digital tools to enhance their competencies and add digital service offerings to their portfolios, the consulting business model will need to be revised. Consulting firms should start testing new business models before they are forced to adapt. The current business model will not function effectively in the mid to long-term due to the following inherent qualities of the management consulting industry.
- Labour intensive: The current model relies heavily on human processes as the main source of research, data collection, and analysis. With increased application of AI solutions in their logistics, consulting firms will be able to rely less on humans.
- Billable hour model: With the increased usage of AI solutions in the service delivery process, billable time-based models are no longer a fair representation of the fees charged.
- Knowledge democratization: Models, templates, and management knowledge acquired are no longer private to each firm. Turnover from prestigious consulting firms averages 18% to 20% a year. These consultants may start their own boutique consulting services or work as freelance consultants.
New Consulting Business Models
We have explored three potential business models which traditional consultancies can leverage.
As-A-Service Model
This model allows consultancies to engage with clients on a continuous basis, by performing longer term and smaller projects. It also enables the clients to receive on-demand services at a lower cost. As a result, subscription pricing or pay-per-use models will be able to replace the current billable time-based model. The service package does not only offer consulting service but also allows for the sharing of a variety of tools, benchmarks, and databases with the clients.
Crowdsourcing Model
The crowdsourcing model (also known as the gig economy) establishes a network of freelance consultants who can be matched to a clients’ specific needs. To start a crowdsourcing network, a few consulting firms can collaborate on client projects. New freelance consultants can only be invited to the network after careful selection. The partners of the network will focus on identifying new engagements while freelance consultants will execute the projects based on their availability and expertise. This model facilitates long-term and extensive knowledge sharing and eliminates fixed corporate expenses.
Partnership Model
Research companies have the most updated data and relevant benchmarks for many industries. Consulting firms can establish a partnership model with these research companies so as to leverage their extensive and real-time big data in order to provide high-quality recommendations. This model allows consultancies to leverage the technological innovations of their partners.
AI’s Role in the New Consulting Business Models
Employment of various AI solutions and business intelligence tools will assist management consulting firms to transition to the new business models more smoothly.
As-A-Service Model
Firms adopting the As-A-Service business model can engage natural language processing (NLP) technologies to better manage their invoice processing. NLP can extract critical information from the large quantity of unstructured forms and generate invoices without human intervention. In addition, the As-A-Service model requires consultants to respond to client requests in a timely manner. With the help of NLP, consultants can navigate through internal knowledge databases quickly to search for data and benchmarks.
Crowdsourcing Model
RPA technologies can execute the repetitive administrative tasks for consulting firms which operate under the crowdsourcing business model. RPA technologies can also help partners of the network oversee the freelance consultants’ working schedules, track hours, and manage payments more easily. Freelance consultants can also boost their productivity by using off-the-shelf business intelligence tools. These tools will allow them to automate short and simple daily tasks.
Partnership Model
Research companies have databases with abundant information. It can take a long time for consultants to search for information using keyword search technology; in many cases, the results are not ideal. Expert assist AI solution will enable consultants to retrieve information from their partners’ database in a highly efficient manner. Expert assist uses automatic clustering algorithms which perform clustering on large-scale data sets without prior knowledge or additional guidance from human data (known as unsupervised learning).
Conclusion
While many management consulting firms have advised their clients to leverage new technologies, few apply these to their own firms. Asking an established consulting firm that is operating across several continents to change its business model (which is fundamentally driven by billable hours and intellectual capital) is challenging. However, with the development of technology, the change in operating models will eventually become inevitable for consulting firms.
Further Readings:
Christensen, C.M., Wang, D., and Van Bever, D. “Consulting on the Cusp of Disruption.” Harvard Business Review, October 2013 Issue. [https://hbr.org/2013/10/consulting-on-the-cusp-of-disruption].
Co Match “The changing landscape of consulting: Three new business models.” 2017. [https://www.comatch.com/en/comag/changing-landscape-consulting-three-new-business-models/].
Kaplan, Soren. “The Business Consulting Industry is Booming, and it’s about to be Disrupted.” In., September 11, 2017. [https://www.inc.com/soren-kaplan/the-business-consulting-industry-is-booming-and-it.html].
Mutimer, Jeff. “How digital transformation will change consulting business models.” 9Lenses, 2017. [https://www.9lenses.com/consulting-business-models/].
