May, 2025
A historical perspective of management consulting...
Management consulting developed in the late 19th century as a response to the budding demand for strategic advice from organisations to facilitate their growth and expansion. This demand was a by-product of the Industrial Revolution, which had seen new companies form and existing companies grow at an unprecedented speed, driving the creation of new business management disciplines.
In fact, the early management consulting firms — Arthur D. Little (founded in 1886), Booz Allen Hamilton (1914), and McKinsey and Co. (1926) — were founded by university professors from accounting and business management disciplines. Their ability to see how the Industrial Revolution had shocked the market and opened a gap for strategic advice allowed them to grow management consulting into the USD $300 billion industry it is today.
As they grew quickly, consulting firms made it a practice to hire new graduates with a Master’s of Business Administration and all from top schools (the first degree was from Harvard in 1908), to staff their projects.
This was a distinct change from hiring experienced personnel from industry (note this point!)
Over the next 60 years, extraordinary growth driven by technological advances began to characterise the consulting industry. But this growth meant consultants now had to engage beyond the strategic core of the companies they were advising, working instead with parts of businesses that directly involved technology and operations. As a result and in parallel, the field of management consulting evolved and expanded, leading to engagement in lower cost, higher volume, longer-term transactional work such as technology and process simplification and re-engineering.
Consulting firms grew in size and multiplied in number and as they did many of their offerings became commoditised, process-driven, and repeatable (or “Productised”). This reduced the cost to serve their clients, allowing consulting firms to maintain and then increase their margins as they also pushed certain services offshore to make the most of labour arbitrage opportunities. But amid this focus on process, real research, development and innovation began to stagnate. In recent decades, many consulting functions have actually been taken in house by more forward-thinking companies whose internal consulting teams could match it with more expensive external suppliers who weren’t bringing new thinking to the table anymore.
From an industry focused on disseminating top business advice to corporations, it became one focused on growing profit margins and delivering really whatever work needed to be done, even augmenting staff into a clients business, executing day to day tasks alongside the clients employees.
Not really high value, strategic impact consulting.
The consulting conundrum ...
Since the turn of the millenium, it feels like the more years one spends consulting, the further away from clients and their wicked problems one gets. More senior consultants have become absorbed in managing the mechanics of the consulting firm instead of actually consulting (to clients!), becoming slaves to spreadsheets and back-office admin teams.
It feels a million miles away from where it all started.
Now in 2020, the world faced one of the most challenging economic environments in decades: COVID shocked the global system and fundamentally shifted belief systems and expectations across multiple parameters - the role of small and large businesses, of different sectors and industries, societal and cultural networks, interpersonal relationships, the mandate of government, cross-border commerce, globalisation, technological advancement, our impact on the world and our environment.
Organisations world-wide had an urgent need to tap into deep expertise AND experience to compliment their internal skills and knowledge as they navigated the white water ahead. The typical operating and commercial construct of many organisations and the environment they operated in had shifted and the delta was large. Buzzwords like transformation and simplification and re-engineering were not enough to navigate the shift.
Consulting struggles...
The cumbersome, one-size-fits-all consultancies struggled to mobilise the right skills quickly enough to meet their clients challenges. Genuine strategic thinking based on the tripartite structure of frameworks, expertise, and judgement itself - often mined from years of experience - was in scarce supply.
The management consulting model had morphed into a provider of technology driven consulting or implementation services. This lends itself to pyramid models of junior staff generating the volume of chargeable hours needed to keep the lights on, with the more senior experienced practitioners “managing” the operation.
The original "thinking and strategic advice" that once powered consultancies had been buried and many existing consulting firms built models incongruent with a more strategy led approach; they became victims of their own success in building a headcount heavy, transactional, systems implementation driven approach.
And now AI has arrived ...
The arrival of AI has again shone the light on the larger consultancies and the "regurgitation driven" approach to problem solving. AI tools in a generative world are able to replace the early engagement work completed by cheaper, more junior resources. This in turn puts pressure on the more senior consultants to conduct strategic synthesis for lower rates to keep prices down. And some agentic AI bots are now being built who can actually do the synthesis pretty damn well.
So experience again becomes key (as it once was). The rusted on wisdom of having "been there, done that" becomes a valuable differentiator. Being able to overlay insights from many engagements, from success and failures, being able to connect dots and pattern recognition become invaluable skills.
A rebirth ...
A renewed ability to orchestrate teams of experts and those with deep experience is required. Bringing experts and their strategic insights together with their clients on technology, enabled platforms will remove the friction of collaboration while enabling the sharing of information and commercial outcomes, accelerating engagement and execution. This offers up the Holy Grail of allowing teams of experts with deep experience to engage directly with clients on their most challenging problems. And all while utilising the ever improving AI toolsets to shape the problem definition and conduct early stage research and analysis from multiple global sources.
The result of this will be a new and flexible value-based revenue model where both the client and expert share the benefits commercially and organisationally. Done right, this may see the return of management consulting to its original purpose, where external expertise was acknowledged, respected and appreciated. And bringing that to bare at speed, working with agentic AI toolsets will be expected. And valued.
Experts will get back to doing what they actually want to be doing — solving the world’s most wicked problems. In turn, clients will get what they actually want — access to world class knowledge and wisdom to compliment their internal capabilities as they grow and reshape their businesses.