How McKinsey Lost Its Edge

The management consulting industry is facing potential disruption as AI companies enter the advisory business and traditional firms struggle to maintain growth. McKinsey, approaching its 100th anniversary, reduced its workforce by 5,000 employees since late 2023 while its revenue growth slowed to 2% in 2024.

Boston Consulting Group closed the gap significantly, growing 10% and reducing McKinsey's revenue advantage from more than double in 2012 to just one-fifth larger today. Technology companies including Palantir and OpenAI now offer consulting-like services to help businesses implement AI models, with Palantir's revenue growing 39% year-over-year. The shift threatens consulting's core business model, as clients may eventually question paying premium fees when AI can perform much of the analytical work traditionally done by human consultants.

Not a huge surprise

[Mr. Dollar Ton]

If you provide no value at all, the "AI" can easily replace you because they provide the same value for less money upfront.

Simple, really.

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[AleRunner]

Why not both? A good salesman will be able to provide the same value whilst charging more. Probably one of the jobs that you'd find companies don't hand over to AI.

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[Mr. Dollar Ton]

If are a shrewd salesperson and you got nothing to sell, you're better off selling AI services to your former customers. Which would hurt the outfit with nothing to sell even more.

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[Fly Swatter]

In the end we won't need salesmen because your choice when there is only one giant company left will to buy it or don't buy it.

Re: Not a huge surprise

[drinkypoo]

You won't have a choice. You will buy it or be cited, convicted, imprisoned, enslaved.

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[Kokuyo]

I find thwt rather optimistic of you.

Be like the Watergate

[kurt_cordial]

The best abstraction layer is one which appears to cause suffering and ensure impropriety. Palantir is managing nouveau akademia swimmingly.

Call me cynical

[bradley13]

Did McKinsey ever have an edge?

Ok, that's mean. But the two aspects I have seen are (1) expensive reports full of platitudes and questionable advice, and (2) consultants hired by managers so that the managers have someone else to blame for bad news.

Both functions can eadily be replaced by AI.

Re:Call me cynical

[abulafia]

Your (2) is spot on, and a significant side business for them.

(1) is close, but not quite right.

Those reports are their bread and butter. They are nicely packaged industry collusion, freshly laundered and dressed up with a pretty salutation. Senior management gets to know how far off-median they are, can spot if anyone else comes up with anything clever, and shave a few headcount somewhere knowing that's what the rest of the herd is doing, too.

Important life hack: when you see others valuing something much more than you, it is wise to reflect on why. Usually it is a Beanie Baby. Occasionally it is a tool you don't know how to use.

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[xevioso]

I used to work for Boston Consulting Group as a temp fresh out of college with a MA in History. I built those reports you are talking about in Powerpoint for many years after I was hired full-time.
AI can build those in a fraction of the time, and the ability to do it flawlessly is only going to get better.
The only difference between the MBAs and me with my MA is that they found money and business interesting enough to pursue a degree in it, and the fact that doing so got them a starting salary well into th

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[phantomfive]

Important life hack: when you see others valuing something much more than you, it is wise to reflect on why.

Yeah. I can't figure out why anyone would value a McKinsey report.

Re: Call me cynical

[sodul]

The irony is that McKinsey has probably been telling boards and CEOs to go all in with using AI and fire employees. It now circles right back at them.

While I do see value in AI 'agents', my own experience (I've worked in the AI industry), is that it is not nearly as good as advertised, has no common sense, will make things up in a credible manner, and gets confused by anything not covered by its training data.

One concern is that there is so much AI generated content that it is now self feeding and self validating and we will end up with garbage in, garbage out, and back in.

Gartner also

[Anonymous Coward]

I will throw a party when that worthless PoS goes out of business...

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[Tablizer]

But GartnerGPT predicts it will never go out of business.

I'd be curious if it's a relative prestige issue..

[fuzzyfuzzyfungus]

My father was a consultant; and he always told me that there were two very different types of client: Some clients had a decision they needed to make that raised questions they didn't have the expertise to answer, other clients had a decision they had made for which they wanted additional justification. The former wanted actual analysis both of whether the questions they had were the questions they should have and the answers to the questions they should have. The latter absolutely wanted the performance of analysis, clearly shoddy work or an obviously stacked deck(metaphorical or slide) defeated the point and made the cynicism of what they were doing too overt; but they were not hiring you first and foremost to get them an answer they didn't think they could get themselves.

I am significantly less clear on how much benefit the first class of clients is getting from 'AI', allegedly there are some narrow use cases where performance actually lands in the same ballpark as hype; but the second class of clients could absolutely do as well, or better, in terms of adding prestige and second-opinions-were-obtained cred to whatever decision they already wished to arrive at; given the absolute mania for anything you can call 'AI' in management circles at the moment.

If you are basically calling in McKinsey to add gravitas to your layoffs that seems like business they are either going to lose or have to do at pitifully low margins to keep up with the 'AI' guys; I just don't know what percentage of their business is mostly about adding prestige or letting an outsider be the one you can point to when the axe starts coming down vs. actual analysis where asking the right questions and getting the right answers is important; where AI hype could still make landing gigs harder; but the bot will have to deliver or the pendulum will swing back after a bunch of embarrassing failures.

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[methano]

This post, though marked "Insightful", could have definitely used some AI to help with readability.

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[JaredOfEuropa]

I've worked with consultants in a large international corporation, and almost all of them appeared to have been brought in for the second reason: to provide justification for decisions already made. But the real reason was almost always something else (though similar): they needed to sell their decision to upper management. A manager might have come up with a project beneficial to the business, but needed sign-off and sponsorship from those higher up in the chain. So he'd get a consultant to pitch the pr

human first

[noshellswill]

Once a human "meta-analyst" decides what  specific analysis are worth performing,  then she can pass off that task to the local.ai / LLM. Kinda like getting MAPLE/post-doc  to solve a DE you have first  derived. Of-course LLM-speak is still "uncanny" , sing-songy or creepy , so if anyone, but a peon is going to read a final  analysis report then a human scribe will need to edit/re-write output.

The reports of McK's death greatly exaggerated etc

[shilly]

I worked there for 10 years. Among other things, I did work that was in the public domain. It included improving patients' access to family doctors (GPs, primary care physicians) in an impoverished part of East London. The analysis was the trivial part. Get back to me when an AI can take a room full of angry suspicious doctors and other staff on the requisite quasi-grief journey required for them to accept that their current way of working isn't good enough, work through the sadness that causes, get them past the despair of thinking the situation is irrecoverable and then commit to the extensive, complex and subtle behavioural changes required to deliver better access. Could AI have accelerated and deepened the impact my team had on this work? No doubt. Could it have replaced us? Not till it can stand in the room and see the flaring of the receptionist's nostrils while the GP is talking about the patients, and understand what that means, and how to respond.

In a way, this is the same mistake as the PE guys thinking that they have the same skills as consultants, but are better analysts. Then one of them ends up PM - Rishi - and finds out that working really hard and being dead good at Excel aren't the fucking be-all and end-all, and that if you're the kind of twat that's rude to cleaners and secretaries, you don't have the people skills for the job. Not that he actually learned the lesson, because he lacks the people skills etc.

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[phantomfive]

The article is about this company [mckinsey.com], not this company [mckinsey.com].

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[shilly]

I genuinely don't know what you were doing there. Was that an attempt at humour? Anyway, I had the privilege of working with many of the medics who joined the firm via the medical elective program, and they were always very impressive. But then, that was also true of almost everyone else as well.

(As an aside, it's true to say that the healthcare practice felt quite distinct from other parts of the firm in the nature of its work, even from the public sector practice. But it had much more in common with the r

If you sell shovels

[timeOday]

you'd better be selling the shovels people currently want.

Most of these replies are saying McKinsay doesn't really need to use an anyways because it's junk. Irrelevant.

Read this again: "Palantir and OpenAI now offer consulting-like services to help businesses implement AI models." The client doesn't care if the consultant uses AI, the client wants to tell THEM how to use AI, maybe what to do but also how to make it work.

Curiously, a company like OpenAI does have a big advantage over, say, McKinsay, in this area.

Is that "Consulting"? To me it sounds more like what Oracle has aways done (and made a lot of money doing). But I guess if it hurts traditional consulting companies then it is at least of interest to them. Getting replaced by something to which you don't have a direct competitor or expertise is always the worst. Worse than head-to-head.

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[phantomfive]

McKinsey is not in the business of selling shovels. McKinsey is in the business of selling ice to snowmen.