Generative AI has become the hot topic within the consulting and professional services sector. For many, it is often described as a new ground-breaking technology that is ‘revolutionising’ data analysis, decision-making, and client engagement. Whilst for others, Generative AI is deemed as a huge threat to the industry that is killing sales processes, negatively affecting investor portfolios and eliminating jobs.

So where do we sit on this divisive subject? Well, in short, we can understand both sides of the argument. Generative AI presents both a great opportunity and significant threat to Professional Services and Consulting organisations. But if you’re not yet utilising this technology – you’re at risk of falling behind.

There is a bigger disruptor wave coming and Generative AI will quickly become the norm.

How to ‘win’ with Generative AI

One thing has become incredibly clear to us all: there is substantial opportunity to develop new Generative AI service offerings. You can leverage the power of AI to add greater business value from your services, solutions and products to your customers.

As the new trend within the Professional Services sector, there has become a huge demand from clients to introduce AI. However, whilst many consultants are riding that new wave of demand, are they really transforming themselves? We don’t think so.

We’re seeing many companies pushing hard to introduce new AI service offerings and capabilities to meet demand, but with very little internal AI transformation of their own businesses. To deliver efficiencies and improvements in service delivery to meet rapidly increasing customer expectations, change needs to start from within.

Very few firms have truly applied Generative AI yet. Everyone is currently just scrabbling to try and ‘keep up’.  You’ll need deep tech and data science skills to achieve proper adoption, but most importantly you need real business skills to drive it.

Those that win will have the right people, capacity and investment in place to implement this, will configure their AI initiatives accordingly to differentiate, and stay ahead of their clients in adopting AI and understanding its implications and application.

The Risks of Generative AI – Where you’re going wrong

With opportunity also comes risk. Many are seeing Generative AI as a massive threat to their business and the sector as a whole. There are clear risks and unknowns that Generative AI brings and guardrails will be needed, however, where AI is causing problems is mostly due to the lack of thoughtful adoption and real transformational change.

Not embracing change fast enough

Customer expectations are escalating rapidly – many clients we see are investing in in-house generative AI capabilities, expertise and pilots at scale, already.  They are expecting the transformational benefits (service quality and costs) to be seen in PS companies offerings now. Those that don’t transform their core service delivery fast enough will fall behind, lose market share, and possibly fail.

It’s apparent to us that PS firms are currently not moving at the speed they should. Sure, everyone is applying and experimenting with the likes of ChatGPT or GitHub (if you aren’t then find help fast), but we’re not yet seeing any true, deep, transformational use in reality.

Re-badging existing products

Technology offerings haven’t yet fundamentally changed either. PSAs are a perfect example – they’re at the heart of many professional services organisations – a businesses’ core performance data is a great area to innovate and potential source of real business value.  However, many vendors are just sticking an ‘AI’ badge onto their marketing, but no one has yet really applied Generative AI into their solutions or services. Most of what we see is just more of the same: existing BI solutions or legacy codified business insight – not true use of the power of Generative AI applied to customer data sets.

If anyone sees an example of real business-led application, please do let us know!

Impact on Talent and Retention

Let’s not forget an obvious worry about AI for many … the talent impacts of AI are not being embraced – or even perhaps yet appreciated.

We’re not sure that the talent implications of AI have been worked through by the industry. As we see some businesses starting to be transformed by AI, we think many types of consulting jobs will be eliminated, and others will be in greater demand. The traditional pyramid will be under threat, and more junior roles will need to be redesigned.

Deep expertise and experience gained over many years will be valued and required – to train ML models, ask the right business questions of the AI, research and apply best solutions, and define safe usage practices. Will graduates be needed in the current form and volume anymore?

The MCA recently conducted a survey on graduate recruitment which potentially reveals a more fundamental and important shift. We must now consider if the move in sourcing graduates away from the usual Russell group universities is truly about inclusivity or is it more about the skills being developed and the relevance of those courses?

Are traditional university programmes becoming rapidly outdated for graduates in a Generative  AI world? How will graduates build the tech and business skills that will truly be in demand in this new world? These are real questions the management consulting sector urgently needs to consider.

How is AI affecting Private Equity Investments?

The speed at which AI is currently evolving has become a huge threat to potential investment opportunities too. Many deals are currently falling through because investors are concerned that some industries may find themselves replaced or the use case of that technology or expertise is gone.

This will be an important due diligence criteria for any mandates we’re involved with. You need to see firms building the deep skills needed to differentiate their services and products with robust and well enabled in-house AI transformation programmes underway. Those that don’t will become increasingly non-investible.

As an investor, you must challenge those that are introducing AI to their products. Do they really get it, are they really doing it, or is it just marketing led ‘re-badging’ of existing technology? We’d encourage investors to dig deeper.

Embrace Generative AI fully or risk being left behind

Generative AI is quickly becoming crucial to the industry. Those that can’t keep up will be side lined and we would expect the market share of leaders to consolidate in their respective sectors.

If you’re thinking of implementing Generative AI into your own business or you’re a Private Equity firm thinking of investing in an opportunity that could be affected, feel free to reach out to our experienced team who will be more than happy to help advise and set you on the right path.