In order to understand how the emergence of digital technologies will impact the management consultant companies, first let’s take a look at the value they seek to provide to their clients (aside from making them feel good, as illustrated in the Dilbert cartoon below).
Management consultants according to Dilbert
What is it really that management consultancies like BCG, McKinsey, and Bain do anyway?
- Information access: A client can benefit from using consultants to obtain specified information that is hard to obtain internally. This includes data that is hard to come by (e.g., customer preference analysis) and topic expertise/knowledge of industry best practices that the management consultancy has built up over time by working with other companies in the industry (e.g., post-merger integration for a company that has not merged before) .
- Diagnosis and recommendation: Some clients face challenges where they can’t solve the problem by requesting information, because they are uncertain how to define the problem in the first place. In this case, management consultants bring value by using past experience across industries and specialized analytics capabilities to better diagnose problems and likely consequences of each possible solution to better form a qualified recommendation, by being able to provide an outside 3rd party objective opinion on major decisions without the biases a company would have (e.g., to enter a new market to grow sales) .
- On-demand brains: A client can find a lot of value in being able to quickly deploy a dedicated team of smart and unbiased people to deeply focus on one issue. The types of people can be hard to hire internally and/or expensive to retain continuously if needed only for specific, temporary tasks (e.g., a due diligence for a private equity firm) . Finally, an external team is useful if embarking on a highly sensitive and/or confidential project (e.g., an organizational change).
What are the challenges caused by the digital wave?
Source: HBS DIG IT course wrap slide (Apr 20, 2018) – modified by author
The first value-add to be threatened is #1 information access starting with the information that is easily quantified and thus easily shared digitally (e.g., market share data or analysis of product line profitability) [3, 4]. Before the emergence of the internet, consultants spent most of their time gathering data . Now, this is outsourced to companies like GLG (controlling a network of subject matter experts), Euromonitor, and IMS Health that are easily accessible directly to the clients. Best practices are rapidly spread as information flows more quickly across regions and countries.
“The Googles, Amazons and Microsofts of the world may take over from the McKinseys, Boston Consulting Groups, and Bains … Consultancies are built for two-by-two matrices. AI’s matrices are a million by a million.”
– Roy Bahat of Bloomberg Beta 
Second, AI is becoming being better than consultants at analyzing information to build predictions. Much of the work of consultants do is to gather, clean, process, analyze, and present information gathered externally and inside the client’s organization – work that AI can do much faster and is already performing in the financial services industry . Once AI becomes more advanced moving from information gathering to providing advice based on synthesis data, “prediction” or value-add #2 diagnosis and recommendation will be threatened too. The more easily quantifiable problems will first be taken over by AI (e.g., “Alexa, how should I allocate my marketing spend to maximize ROI?”) .
When a diagnosis and recommendation task occurs frequently on routine, client’s will have a larger incentive to invest in a software provider because #3 value-add (on-demand brains) falls away. For instance, Salesforce.com to continuously update the customer relationship strategy in software the employee’s invest in learning to operate rather than have a team of management consultants visit once a year to revise the strategy. New specialized software providers are threatening the generalist management consultancies by providing software that integrates with the client’s business and can be used continuously – also after the consultants leave. For instance, Salesforce.com provides analyses and recommendations on customer relationships , IBM’s DemandTec analyses the client’s data (feeding directly from their data warehouse) to provide recommendations for their pricing strategy , GE is developing software embedded in its hardware to provide optimization recommendations, e.g., in operations and manufacturing , and even Google recently launched “Advanced Solutions Lab”, part consulting service part tech bootcamp, to help clients who can send a whole team for several weeks to work alongside Google engineers to build and operate customized cloud solutions for the client .
Opportunities ahead and how BCG is responding
While both information access and prediction capabilities are likely to threaten the consultancies, information and diagnoses requiring qualitative data is more likely to stay a value add for management consultants. Alexa could tell you how to allocated your marketing spend, but it will be a harder problem to solve algorithmically questions such as “Alexa, how does my company do a successful post-merger integration?” or “Alexa, what is the best strategy for my toothpaste to enter the Indonesian market?”. Consultancies can better deliver on these questions due to the difficulty in quantifying this data and the consultancies’ advantage in drawing on experiences with multiple players across the industry (which AI installed at a given client would not be able to gather from others) and their broad experience in handling the “soft factors” (like how to influence people) in the action step on the chart above (aka implementation).
Even if we envision a future where AI can do these things as well, companies first need to transfrom to acquire these capabilities (… until AI becomes intelligent enough to advise on its own implementation). This provides an opportunity for BCG, which is well-positioned to guide clients in their digital transformation due to their (strategy and implementation) experience with companies across industries. Clients will benefit from using a management consulting company over the supplier itself (e.g., Google, AWS, SAP) because the management consultancy can provide objectivity, linking digital transformation to overall business strategy, and knowledge of how other firms in the industry have transformed digitally (across solution providers). BCG has invested in building these capabilities:
- Advising companies on digital transformations: BCG has capitalized on the need for large companies to react to digitization themselves by offering consulting services on how best to transform digitally.
- Technology Advantage practice area: BCG has a consultant team dedicated to helping clients transfrom to the digital age and develop a digital strategy .
- BCG Platinion: IT architecture and solutions unit that covers the more technical side of a digital transformation, like implementation of large IT systems .
- Helping clients build new digital businesses: For clients seeking to re-invent their businesses digitally, BCG is building business units that focus on exactly that in a start-up environment.
- BCG Digital Ventures: In 2014, BCG launched “BCG DV” to help client companies incubate new digital companies, innovate, and also invest in new businesses . In 2016, BCG DV and Starbucks co-invested in a joint venture together called “Takt” – a personalization based platform for consumer-faced businesses .
- MAYA Design: In July 2017, BCG acquired Maya Design to add human-centered UX and UI design and R&D to its portfolio of capabilities .
BCG Technology Advantage practice area video
BCG Digital Ventures introduction video
On one hand the advancement of AI does give prediction powers that exceed what (junior) consultants doing analyses could do today. However, for clients without the money to invest in their own AI, management consultancies can themselves harness AI by enhancing their #3 value-add “on-demand brains” with AI capabilities in the analytics. For this reason, BCG is investing heavily in building up its analytics capabilities and starting to build proprietary software for cases that have frequent re-use (e.g., pricing strategies).
- Becoming an analytics/software provider:
- BCG Gamma: A team of 300 engineers dedicated to advanced analytics, data science services, and AI. Used both internally in consulting cases alongside consultants requiring advanced big data analytics and also directly works as an independent team directly with client companies to strategically decide which analytics use cases to focus on and help the client built out AI capabilities (process and actual code) .
- MSP Catalyst: For its Marketing, Sales, and Pricing practice, BCG has developed a cloud-based software platform that clients can use to get customized software to help analyze their business (e.g., how the pricing strategy is performing) that stays with them after the consultants leave .
BCG Gamma introduction video
BCG MSP Catalyst introduction video – B2B pricing tool example
BCG has already played well to their strengths by offering clients advice on their digital transformation. To have success in the digital age, the company must further invest in its Big Data analytics/AI capabilities by further investing in the Gamma team as well as ensure that its generalist consultants receive proper education in the methodologies, so that BCG can truly offer a “holistic” approach to advanced analytics/AI that best fits with the overall business strategy in a way that specialized providers would not be able to.
In addition, BCG must double down on their software offers for clients. If they do not move into this space, specialized providers such as IBM DemandTec for pricing strategy and Google for geospatial analyses are likely to move up the value chain to not only be a data/analysis provider, but also provide the recommendations for overall business strategy. The only efforts publicly available (there may be more under way – the management consultancies are notoriously secretive) were the MSP Catalyst, which is a cloud-based tool for Pricing and Marketing, but software tools are relevant in many other functions such as operations and HR. As data analysis becomes more and more integrated with companies allowing for a higher repetition of strategic exercises (e.g., developing a pricing strategy), BCG will need to develop a broader suite of offerings to go with their consulting, so that they remain relevant for these tasks.
BCG has made the choice of keeping its new digital business units BCG Digital Ventures separate from the general consulting staff by locating BCG DV in Manhattan Beach, Los Angeles and letting Maya have a separate office. This is a good move to preserve the hoodie-wearing innovative start-up culture that could clash with the suit-wearing consultant culture. In contrast, BCG Gamma and MSP Catalyst seem to be co-located in the same offices as the generalists (the BCG website lists Gamma locations in the same office places), which makes sense given that these units more naturally work together with the generalists as enhancements to the existing business.
For both the junior and more senior consultants (i.e., the partners), BCG should provide training sessions on how best to leverage Big Data and AI analytics on cases, so that the generalist team is fully aware of the new resources at hand and how the offerings can enhance the consulting work. To bring cohesion within the firm, however, BCG could start programs where generalist management consultants for some time can switch to work at one of the digital business units. This would help build a collaborative culture and for the generalist part of the business to better understand how to best leverage the new colleagues.