Surprise: Those Who Have Money Keep It and Work to Get More
October 29, 2024
Written by a humanoid dinobaby. No AI except the illustration.
The Economist (a newspaper, not a magazine) published “Have McKinsey and Its Consulting Rivals Got Too Big?” Big is where the money is. Small consultants can survive but a tight market, outfits like Gerson Lehrman, and AI outputters of baloney like ChatGPT mean trouble in service land.
A next generation blue chip consultant produces confidential and secret reports quickly and at a fraction of the cost of a blue chip firm’s team of highly motivated but mostly inexperienced college graduates. Thanks, OpenAI, close enough.
The write up says:
Clients grappling with inflation and economic uncertainty have cut back on splashy consulting projects. A dearth of mergers and acquisitions has led to a slump in demand for support with due diligence and company integrations.
Yikes. What outfits will employ MBAs expecting $180,000 per year to apply PowerPoint and Excel skills to organizations eager for charts, dot points, and the certainty only 24 year olds have? Apparently fewer than before Covid.
How does the Economist know that consulting outfits face headwinds? Here’s an example:
Bain and Deloitte have paid some graduates to delay their start dates. Newbie consultants at a number of firms complain that there is too little work to go around, stunting their career prospects. Lay-offs, typically rare in consulting, have become widespread.
Consulting firms have chased projects in China but that money machine is sputtering. The MBA crowd has found the Middle East a source of big money jobs. But the Economist points out:
In February the bosses of BCG, McKinsey and Teneo, a smaller consultancy, along with Michael Klein, a dealmaker, were hauled before a congressional committee in Washington after failing to hand over details of their work for Saudi Arabia’s Public Investment Fund.
The firm’s response was, “Staff clould be imprisoned…” (Too bad the opioid crisis folks’ admissions did not result in such harsh consequences.)
Outfits like Deloitte are now into cyber security with acquisitions like Terbium Labs. Others are in the “reskilling” game, teaching their consultants about AI. The idea is that those pollinated type A’s will teach the firms’ clients just what they need to know about smart software. Some MBAs have history majors and an MBA in social media. I wonder how that will work out.
The write up concludes:
The quicker corporate clients become comfortable with chatbots, the faster they may simply go directly to their makers in Silicon Valley. If that happens, the great eight’s short-term gains from AI could lead them towards irrelevance.
Wow, irrelevance. I disagree. I think that school relationships and the networks formed by young people in graduate school will produce service work. A young MBA who mother or father is wired in will be valuable to the blue chip outfits in the future.
My take on the next 24 months is:
- Clients will hire employees who use smart software and can output reports with the help of whatever AI tools get hyped on LinkedIn.
- The blue chip outfits will get smaller and go back to their carpeted havens and cook up some crises or trends that other companies with money absolutely have to know about.
- Consulting firms will do the start up play. The failure rate will be interesting to calculate. Consultants are not entrepreneurs, but with connections the advice givers can tap their contacts for some tailwind.
I have worked at a blue chip outfit. I have done some special projects for outfits trying to become blue chip outfits. My dinobaby point of view boils down to seeing the Great Eight becoming the Surviving Six and then the end game, the Tormenting Two.
What picks up the slack? Smart software. Today’s systems generate the same type of normalized pablum many consulting firms provide. Note to MBAs: There will be jobs available for individuals who know how to perform Search GEO (generated engine optimization).
Stephen E Arnold, October 29, 2024
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