Best of LinkedIn: Strategy & Consulting CW 40/ 41

00:00:00: Provided by Thomas Allgeier and Franus, based on the most relevant LinkedIn posts about strategy and consulting in calendar weeks forty-and-forty one.

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00:00:33: Right.

00:00:33: so imagine a massive big for consulting firm Telling its enterprise clients that you know they're no longer billing by the hour.

00:00:40: Wow Yeah

00:00:41: They're building by the outcome.

00:00:42: And then the process there doubling their own gross profits while actually working like eighty percent less.

00:00:47: That is wild

00:00:49: it is And today's deep dive is really extracting the top strategy and consulting trends across LinkedIn.

00:00:55: Our core mission here, to unpack how AI is just entirely ripping up the Consulting Playbook.

00:01:01: Exactly

00:01:02: We're looking at how firms price their services.

00:01:04: What young analysts are actually being taught now?

00:01:08: The massive data realities hiding behind all this AI hype.

00:01:12: You know, if you're listening to this and your an investment professional analyzing these businesses or maybe a partner at big four firm trying to defend your margins.

00:01:21: This deep dive is going connect those dots for you?

00:01:23: Oh absolutely

00:01:25: Because I mean really just can't navigate the landscape If don't understand how fundamental economics of professional services are shifting.

00:01:32: The billable hour is basically dying, and these integrated outcomes are taking its place.

00:01:37: Which is exactly where we need to start.

00:01:40: Fernando Pacheco brought up this fascinating academic research from Brynjolfsson in Petropoulos.

00:01:45: Okay what did they find?

00:01:47: Well the pointed out that agentic AI so AI doesn't just chat but actually executes workflows.

00:01:54: it's forcing a hard pivot toward hybrid pricing models

00:01:57: Makes sense.

00:01:58: Yeah, because the core question is if an AI agent does in two hours what used to take a human consultant twenty hours?

00:02:05: What exactly is the client paying for?

00:02:07: well Let me push back on that first.

00:02:09: second sure Because my immediate thought isn't this just a race to the bottom for consulting fees?

00:02:13: How do you mean

00:02:14: like it feels Exactly Like The Music Industry Shifting From CDs To Streaming?

00:02:19: Suddenly The Thing Is Infinite and Cheap right.

00:02:21: so If I'm the Client i'm Just Gonna Demand A Massive Discount.

00:02:25: It's a Completely Logical Fear.

00:02:26: But the data shows something totally different if firms restructure correctly.

00:02:30: Really?

00:02:31: Yeah,

00:02:31: Donald Barrowman actually ran the math on this outcome based AI pricing.

00:02:35: Okay walk me through it.

00:02:36: So say a firm charges ten dollars for project using human labor and they make three dollars in gross profit.

00:02:42: right

00:02:43: now They deploy ai to do like eighty percent of that work.

00:02:47: The delivery cost just plummets.

00:02:49: so keep the client happy.

00:02:51: maybe they lower their price to eight dollars

00:02:53: Right!

00:02:53: So top line revenue takes ahead

00:02:55: Exactly.

00:02:55: At scale, say a hundred million outcomes top line revenue might drop by two hundred million dollars.

00:03:01: Ouch

00:03:02: Right.

00:03:02: but and this is the crazy part because of the cost to the AI delivering that outcome as practically zero your gross profit actually doubles.

00:03:11: Wait really?

00:03:12: Yeah You're making vastly more cash while literally charging the client less.

00:03:17: That's massive.

00:03:18: I mean structural changes like they change at whole firm.

00:03:21: And actually Prateek Guladia was posting about it too.

00:03:25: Yeah, he noted that AI is completely blurring the traditional Big Four service lines.

00:03:30: Right no more silos!

00:03:31: Exactly it used to be consulting or tax or risk but now its all converging into integrated outcome models.

00:03:38: create transform protect assure operate

00:03:41: because The AI can handle the execution across ALL of them

00:03:44: exactly which ties perfectly in what James O'Dowd was saying.

00:03:47: He pointed out heavily into these embedded recurring managed services.

00:03:53: All right, running the critical functions?

00:03:54: Yeah and think about it, running a client's Critical Functions creates massive switching costs.

00:03:59: that is perfect sandbox to deploy AI at really high margin?

00:04:03: Oh for sure.

00:04:04: And we're seeing financial proof of this right now.

00:04:07: Soxie Singh and Sushant Kumar both highlighted EYs recent numbers.

00:04:11: oh The FY'a-twenty six report.

00:04:13: yeah global revenues are fifty seven billion dollars

00:04:16: insane.

00:04:17: But the kicker is their sales from AI services grew by forty-nine percent.

00:04:21: Wow,

00:04:22: almost fifty per cent growth!

00:04:24: It's not a pilot program anymore.

00:04:26: but there was flip side to this.

00:04:28: The cost?

00:04:29: The internal costs.

00:04:30: yeah.

00:04:30: Chaitanya Cal shared that McKinsey literally had roll out usage alerts for its consultants.

00:04:35: Wait like data warning on your phone.

00:04:37: Basically

00:04:38: They hit five trillion AI tokens of month.

00:04:41: Five trillion

00:04:43: Right.

00:04:44: And so the shift to per-token AI billing means, The experimentation phase is kind of over.

00:04:49: AI as a strict finance line item.

00:04:51: now

00:04:51: Which brings us To next massive theme here?

00:04:54: Because if AIs doing heavy lifting and modeling and consuming all those tokens What Is human consultant actually Doing in room?

00:05:02: That's million dollar question.

00:05:03: Yeah

00:05:04: Ashutosh Daspande shared great example.

00:05:06: He was talking about an SAP Consultant who realized the new AI agent Jewel I think it's called It can build standard configurations in seconds.

00:05:16: But the takeaway wasn't that the consultant is dead, it's that AI kills the configurator but not the functional consultant.

00:05:23: Right because AI doesn't understand office politics

00:05:25: Exactly!

00:05:26: AI doesnt speak corporate politics or you know manage human chaos.

00:05:31: And Sri Raj Tendhameti reinforced perfectly.

00:05:34: He pointed out that AI answers questions.

00:05:36: sure...but someone still has to ask which question.

00:05:40: AI doesn't sense the tension in a room when two client teams want completely different things.

00:05:45: Okay, but let me ask you this if we're moving from consultants being like spreadsheet doers to essentially Being therapists or detectives right how on earth?

00:05:55: Do you train a twenty-two year old fresh out of college to do that?

00:05:58: it's incredibly difficult and Peter Matthews who runs training at EY Parthenon talked about This exact shift.

00:06:05: what are they doing?

00:06:06: They're not focusing on Excel modeling anymore

00:06:09: Because copilot does it?

00:06:11: Exactly.

00:06:11: Copilot handles the first eighty percent, so instead these young analysts are trained entirely on judgment storytelling and reading The Room

00:06:20: which has to be So hard when the room is just a grid of muted tiles On A team's call.

00:06:25: well

00:06:25: It's nearly impossible.

00:06:26: yeah by the way if you want To stay ahead Of These massive shifts in how Firms hire operate And You know build value make sure you hit subscribe so you catch all our future deep dives.

00:06:36: definitely And regarding that new talent, Yannick Schreuer made a really good point.

00:06:42: New consultants have to adopt a totally different mindset now.

00:06:46: How so?

00:06:47: They have to focus on questioning how processes should work

00:06:50: tomorrow

00:06:51: rather than just learning how they worked today.

00:06:53: Right and as the speed of all this work accelerates Emma Beck had great insight.

00:06:59: She said The trust built through actual human interaction.

00:07:02: you know mentorship shared experiences actually becomes the ultimate premium product.

00:07:07: Because you can't fake trust with a language model?

00:07:10: Exactly, but okay let's transition a bit because we keep talking about agents transforming the business But there is a really harsh reality check here The

00:07:18: data wall...the

00:07:19: massive unglamorous data and governance wall.

00:07:22: Yeah Mark Byershroeder brought up a recent BCG study on this.

00:07:26: If you just give people AI tools You only get about ten to twenty percent efficiency gains

00:07:31: Which is nice Not revolutionary.

00:07:33: Right, but if you redesign the workflow entirely around the agents You see thirty to eighty percent gains.

00:07:39: Wow

00:07:40: So leaders need to stop asking how much time does AI save?

00:07:44: And start asking which work should disappear entirely.

00:07:47: But there is such a huge danger in moving that fast.

00:07:50: The BCG applied AI index twenty-twenty six a few people like Michael Brickle and Dr.

00:07:55: Michael Gribba shared, it showed that while forty-two percent of companies expect agents to make autonomous decisions by twenty thirty...

00:08:02: Which is right around the corner?

00:08:03: Yeah

00:08:04: exactly but only five percent have actual controls in place today.

00:08:08: That's

00:08:08: terrifying!

00:08:09: But Dr.

00:08:10: Katarina Hefter found putting enterprise wide agent control in place actually triples value a company gets from agentic AI.

00:08:17: Because they trust it.

00:08:18: It's honestly just putting high performance brakes on a sports car.

00:08:23: Okay, I like that

00:08:23: right?

00:08:24: Like you don't install them so you can drive slowly.

00:08:26: You install them So you could drive aggressively without flying off of cliff.

00:08:29: exactly.

00:08:30: but if the card does crash who gets blamed?

00:08:32: The AI?

00:08:33: well Lucas quarter shared some data from an MIT and BCG panel on that exact question.

00:08:38: Seventy-two percent of experts agree that governance frameworks That treat AI agents as autonomous decision makers will just fail

00:08:46: because regulators won't accept

00:08:47: that.

00:08:48: Regulators will always look for a human to hold accountable.

00:08:51: You can't put an algorithm in jail, right?

00:08:54: And then there's the final bottleneck which Holger Harris highlighted from some McKinsey research.

00:08:59: For eighty percent of companies The thing blocking agentic AI isn't the models or the budget

00:09:04: it's the data.

00:09:05: It's always the data.

00:09:06: data limitations are at the wall

00:09:08: yeah and Valentino Costa From KPMG had a stark observation about that.

00:09:12: It's a genetic AI just exposes years of informal sloppy data governance.

00:09:18: Oh, totally humans are the glue holding bad systems together

00:09:21: exactly.

00:09:22: and as Costa put it everyone can rent A better AI model but nobody can rent trusted Data.

00:09:29: that is such a profound point.

00:09:31: you cannot buy a shortcut for clean data.

00:09:33: You really can.

00:09:35: So to leave you with a final thought here As AI models become completely commoditized Accountability is really going to become the ultimate luxury good in B-to-B services.

00:09:45: Oh, that's a great way to put it!

00:09:46: In the future clients might not pay you for your answers.

00:09:49: they're gonna pay you For your willingness to take the blame if those answers are

00:09:52: wrong.

00:09:53: If you enjoyed this episode new episodes drop every two weeks.

00:09:57: Also check out our other editions on PE fundraising PE exit strategies PE value creation venture capital and M&A.

00:10:05: Thank You so much for joining us.

00:10:06: And yeah make sure to subscribe.

00:10:08: we'll see ya next time.