Generative AI’s opportunities and challenges for consulting firms and consultants

03 October 2024 Consultancy.eu

Consulting firms are rushing to make the most of the generative AI hype – presenting both opportunities and significant challenges for the industry. Amid the scramble to make the most of the new technology, a new guide sheds light on what generative AI can add to firms and consultants, while also explaining on how to navigate the challenges ahead.

For anyone who has been living under a rock over the last two years, Generative AI is a form of technology which can approximate human content, by processing vast amounts of data from creators around the world. This content can be anything from text and images to music and code. Unlike traditional AI models that analyse and interpret existing data, GenAI goes a step further by using this analysis to generating new outputs – helping to brainstorm ideas, draft documents, and even compose melodies.

Since the public release of ChatGPT late 2022, employees in every sector have been invited to wonder what might be coming their way. In the professional services arena, this has seen people imagine a world where consultants, armed with AI-powered tools, might analyse large data sets to uncover hidden patterns; and then deliver transformative recommendations to their clients. Alternatively, consultants can rapidly build slide deck with the push of a single buton.

According to the ‘The Pyramid Upside Down’, authored by Klaas Wagenaar from Canton Capital, such kind of AI use cases are not a distant dream; instead, it’s the future generative AI is creating.

The new in-depth guide contests that the rise of generative AI will “shake the foundations of the professional services industry” and can “topple the entire structure as it is known today”. But as the technology’s use threatens to reshape business models, it could also allow staff to “contribute in ways previously thought unimaginable”.

Consultants are already using AI and Gen AI

Consultants are already using AI and Gen AI

Among the benefits, the guide notes a range of possibilities. Having examined the e-book in detail, Consultancy.org presents a digest of the key opportunities and problems ahead with a focus on the consulting industry – from taking productivity and internal operations to the next level to job displacement and intellectual property disputes.

Opportunities

Enhanced efficiency and productivity
For decades, talk around automation has discussed how technology might one day eliminate the need to devote resources to the least gratifying activities in the workplace. The guide contends that GenAI can be that force to automate time-consuming and repetitive tasks – finally freeing up professionals to focus on higher-value activities that require human judgment, creativity, and strategic thinking.

This could lead to significant gains in productivity and efficiency, allowing consulting firms to deliver more value to clients in less time.

Further reading: ChatGPT most benefits below-average consultants, finds BCG pilot.

Streamline internal processes
Part of this boost to efficiency could come from using AI to streamline internal processes. While spanning business departments and navigating various siloes might have previously been a time-consuming series of negotiations, with an AI that has an overview of all the data generated by every department, consultancies could quickly improve their operations. This could see them build bridges between business development and sales teams, as well as using GenAI to create proposal documents and marketing assets. At the same time, project managers and partners could be aided with overviews and reports in seconds.

Document drafting and automation
The study also asserts that GenAI can generate draft contracts, legal briefs, and other documents based on specific parameters and precedents, significantly reducing the time and effort required for document preparation. Once again, this could shave off valuable time from arduous and repetitive work, enabling consultants to focus on higher-value tasks such as client counselling and strategic planning.

Knowledge management
GenAI can offer a range of opportunities for knowledge management. It can be used to create intelligent knowledge bases, that capture and organise a firm's collective expertise, making it easier for consultants to access relevant information and collaborate on projects. This can also be used to quickly brief a consultant on a new client or engagement, or help them prepare initial reports to kick off a project, saving countless hours of manual research.

Data insights
At the heart of discussion around the technology, there has always been conversation about just how quickly AI can analyse and summarise huge amounts of information. Perhaps most obviously, then, GenAI tools can analyse massive volumes of unstructured data, such as customer reviews, social media posts, and market research reports, to uncover hidden insights and trends. This allows consultants to provide data-driven recommendations to their clients, helping them make more informed decisions.

Improved decision-making
Again, as GenAI can analyse vast amounts of data, identify patterns, and generate insights that humans might miss – or take much longer to digest – it can enabling professionals to make more informed and data-driven decisions. This can enhance the quality of services and lead to better outcomes for clients. At a project level, GenAI can help project managers with reports for better decision making. At a company level, meanwhile, it can help partners with reports.  

Personalised client engagement
The consulting industry is infamous for working from templates and methodologies, used to save time when getting to work for new clients. But with the time saved by AI, the industry will be able to offer a whole new level of tailored service to its customers, with GenAI also helping consultants to create personalised proposals, presentations, and reports tailored to the specific needs and preferences of each client, enhancing the client experience and improving the chances of winning new business.

Beyond the billable hour
GenAI can be a powerful tool for innovation, helping firms develop new products, services, and business models. For example, or consulting firms can develop AI-powered predictive analytics platforms to offer new insights to their customers. This will also accelerate the shift away from the traditional billable hour model of consulting, toward value-based pricing.

As AI automates routine tasks, firms can focus on delivering higher-value advisory services, insights, and outcomes. This might involve charging clients based on the value generated by the AI-powered solutions, the achievement of specific business objectives, or through subscription-based models that provide ongoing access to AI tools and expertise.

Development of solutions
Consultants typically love having a set of go-to solutions, as it gives them recurrent income streams. Gen AI can also help there, opening doors for professional services firms to develop and market their own AI-powered products and platforms.

For example, firms could create AI-driven research tools for specific industries, or offer AI-powered financial forecasting platforms, and even develop AI-driven decision-support systems. These products can generate new revenue streams, expand the firm's reach, and establish it as a thought leader in its field.

Talent attraction and retention
Finally, the eBook suggests that GenAI can make professional services firms more attractive to top talent. Amid an uncertain jobs market, this is particularly important.

GenAI could offer opportunities to work with cutting-edge technology and develop new skills that will prepare young talent for a long career ahead – while also boosting employee satisfaction by “automating mundane tasks and allowing professionals to focus on more fulfilling and impactful work”.

Challenges

Bias and discrimination
There are still challenges to contend with though. In particular, it should be noted that no AI model is perfect – the technology is prone to hallucination, and this becomes more and more of a problem if it is trained on sub-standard data. If this data contains biases, the AI will inherit and potentially amplify those biases, leading to discriminatory outcomes. In professional services, this could manifest in biased hiring decisions, unfair client recommendations, or skewed risk assessments. Addressing this requires proactive efforts to identify and mitigate biases in training data and ensure ongoing monitoring and evaluation of AI systems.

Intellectual property and copyright
The use of GenAI raises questions about ownership and copyright of generated content. Not just because the ‘new’ images or text generated by AI are only possible because it is able to repurpose pre-existing content from other human workers – often without their consent. But also, there are questions of ownership if an AI generates a piece of code, a marketing campaign, or a design concept. Who owns it? How can firms ensure that the original creators whose work contributed to the AI's training data are fairly compensated? These are complex legal and ethical questions that require careful consideration and clear guidelines.

Liability and accountability
At the same time, committing to a course of action that causes harm in traditional business comes with standard repercussions. It is easier to see where accountability lies. But determining who is responsible for errors or harm caused by GenAI-generated content is a critical challenge. If an AI-powered legal tool provides inaccurate advice or an AI-generated financial forecast leads to significant losses, who is responsible? Establishing clear lines of responsibility and developing robust governance frameworks will be crucial for mitigating risks and ensuring trust in AI-powered solutions.

Job displacement and upskilling
Perhaps the longest-running debate around technological advances, fears around job displacement are no stranger to the AI sphere. The automation potential of GenAI raises concerns about wide-spread unemployment – and that is not only confined to those performing routine, repetitive tasks – but also, now, to the creative sector.

At the same time, while GenAI is likely to create new jobs for those displaced by it, those roles will also necessitate significant upskilling and reskilling of the workforce.

Client acceptance and trust
All of the above means that while clients demand efficiency and innovation, they also seek assurance that their sensitive information is handled securely and that the advice they receive is reliable. The consulting industry in the UK has recently been looking to address this with the rolling out of a new chartered consulting accreditation, to assure a level of quality control in the sector. But building trust in AI-powered solutions will be harder to do, and demonstrating the technology’s value proposition to clients will be crucial for successful adoption.

Shadow IT
The widespread availability of GenAI tools can lead to the emergence of shadow IT, where employees utilise personal GenAI tools for business purposes outside the purview of proper IT governance. This creates risks around data security, compliance, and potential liability. Organisations must establish clear policies and provide secure, sanctioned AI tools to avoid the pitfalls of shadow IT.

Falling asleep at the wheel
Lastly, the ease and efficiency of GenAI can lead to over-reliance and complacency. Professionals may accept AI-generated output without critical evaluation, potentially overlooking errors, biases, or ethical concerns. Maintaining a healthy skepticism and human oversight is crucial to avoid blind acceptance of AI-generated content.

Conclusion

According to Canton Capital, GenAI is ushering in a new era for professional services, one which not all companies will survive. The guide warns that firms must adapt their business models, service offerings, and talent strategies to keep pace in the future. But those who can “embrace this technology, leverage its potential for innovation, and build strong partnerships with clients” are in line to not only survive, but lead the way in the evolving landscape.

They explain, “By reimagining their value proposition, professional services firms can not only survive but thrive in the age of AI, delivering greater value to clients, attracting top talent, and achieving sustainable growth.”

Most notably, the consulting firms which adapt most quickly to GenAI will have a “competitive advantage”. Because GenAI offer “more efficient, innovative, and value-driven services”, firms with it integrated in their offering will be able to more-quickly adapt to the perpetual changes of the modern economy, leading to increased market share, higher profitability, and sustainable growth.

Unfortunately, “the firms that cling to the old ways” will be less fortunate. While the current sluggish state of the global economy, and the consulting market in particular, the eBook suggests with Borg-like certainty that “resisting change and fearing disruption” will see them “risk becoming relics of the past”.

That is not to say there are no reasons to worry about how firms invite GenAI into their organisations. GenAI is complex and multifaceted, after all. But by understanding the technology’s impact and dynamics, and proactively addressing the challenges, professional services firms will realise that “GenAI is a tool for augmentation, not replacement”.

As a result, “those that embrace GenAI, reimagine their business models, and empower their people can deliver greater value to clients, attract top talent, and achieve sustainable growth.”