Best of LinkedIn: Strategy & Consulting CW 06/ 07

00:00:00: provided by Thomas Allgaier and Frennus, based on the most relevant LinkedIn posts about strategy in consulting from CW six-and-seven.

00:00:08: Frenness specializes in B to B market research for strategy and consulting teams with a focus on tech and ICT.

00:00:14: You know usually by mid February The business world has kind of settled into a rhythm.

00:00:19: you've got your budget Your Q one targets And just you execute.

00:00:23: but looking at the strategy and Consulting Feeds From Weeks Six and Seven Of twenty twenty-six I just don't see any rhythm, i see a scramble.

00:00:30: Scramble is probably the polite word for it!

00:00:32: It feels more like floorboards are being ripped up while everyone still trying to dance?

00:00:36: Exactly

00:00:37: and that's what we're unpacking today with our listeners in private equity M&A and venture capital.

00:00:43: We aren't looking at incremental trends.

00:00:44: No

00:00:45: not at all

00:00:47: structural breaks in the data.

00:00:49: First, the economics of AI have shifted from pilot mode to infrastructure and that has a massive price tag attached.

00:00:57: A price tag?

00:00:58: And it completely new way of valuing companies

00:01:01: right.

00:01:01: second The geopolitical map isn't just messy.

00:01:05: It is fundamentally rewired into something people are calling a multi nodal system.

00:01:10: hmm We'll get into that.

00:01:11: and third the operating models the way humans actually do the work or just creaking under the pressure of all this change.

00:01:18: It's a heavy mix, but I think we have to start with AI piece because The shift in tone on length and this week was well it Was undeniable?

00:01:26: They

00:01:26: really was.

00:01:27: for the last two years the safe sea.

00:01:28: sweet talking point was We're exploring use cases

00:01:32: were running a pilot

00:01:33: Exactly.

00:01:33: Yeah, but Jim Rowan highlighted the twenty-twenty six chief strategy officer survey from Deloitte and I mean that era is just over.

00:01:41: The numbers are stark.

00:01:42: rowing notes that ninety five percent of Chief Strategy Officers say AI Is materially shaping their priorities this year?

00:01:47: This

00:01:48: here not next year.

00:01:49: right now exactly.

00:01:51: But you know the key insight Rowan draws isn't Just the percentage it's the categorization.

00:01:56: Right...This no longer a capability discussion It's A competitive Discussion.

00:02:00: That is such a huge distinction.

00:02:01: A capability discussion is, can we install this software?

00:02:05: A competitive discussion is if we don't build this do we cease to be relevant?

00:02:10: precisely it's the difference between buying a typewriter and uh buying a printing press.

00:02:16: one helps you write faster The other changes the entire business model.

00:02:20: And this lines up perfectly with what Hannah M Mayer reported from the McKinsey Tech CXO conference.

00:02:25: Yeah, she noted top performers are increasing tech budgets by over ten percent.

00:02:30: But and this is critical for investors listening.

00:02:32: they aren't just buying more chatbot licenses

00:02:35: They're betting on agintic AI

00:02:37: Agentic AI.

00:02:39: that's the buzzword of The Quarter but we really need to define it because It changes the capital requirements completely.

00:02:44: So if I'm understanding the post correctly We're moving from a bot That answers the question To an agent that actually executes workflow

00:02:50: Correct.

00:02:51: It's the difference between asking, how do I reconcile this invoice?

00:02:54: and telling the software reconcile all invoices from Q four?

00:02:58: And flag any discrepancies.

00:03:00: that's a huge leap.

00:03:01: it is an mayor notes That half of all companies now prioritize This above every other tech investment and interestingly she also mentions that two-thirds Of CTOs are now stepping directly into corporate strategy roles

00:03:13: which makes sense.

00:03:13: i mean if The strategy Is the technology then the cto is effectively the co CEO

00:03:20: right.

00:03:20: Anna Weisinger had a really beautiful phrase for this, also from the McKinsey conference.

00:03:25: She said, I

00:03:28: flagged that post too.

00:03:29: it's so good organizations without edges

00:03:32: right.

00:03:32: if intelligence is infrastructure you stop having these rigid handoffs between marketing sales and finance.

00:03:38: The data just flows end-to-end because agents can talk to each other.

00:03:43: but in here where we need get into weeds for our PE listeners yeah building infrastructure is incredibly expensive.

00:03:50: This is the Jevons paradox point that Diana Kern's Manolatos from Deloitte brought up, right?

00:03:55: Yes

00:03:55: exactly!

00:03:56: The Paradox being as a technology becomes more efficient and cheaper you don't use less of it You Use Exponentially More.

00:04:02: So your unit costs go down but total consumption explodes.

00:04:07: It explodes.

00:04:08: Tokens are the new kilowatt hours, that's the unit of cost measurement now.

00:04:11: and as models get cheaper companies integrate them into every single process.

00:04:16: suddenly your cheap AI pilot turns in to a massive operational expense line item

00:04:22: which brings us to Mark Byer Schroder's analysis.

00:04:25: I thought this was the most actionable piece of advice for investors this week.

00:04:29: he argues you have to stop governing AI like software where you just pay license fee.

00:04:36: He actually puts a number on it, which is rare.

00:04:57: Once you cross that

00:04:58: seventy, eighty billion mark the cost of renting just becomes prohibitive.

00:05:03: At that scale ownership of the infrastructure become structurally cheaper.

00:05:07: That is a massive signal for due diligence.

00:05:10: If I'm a VC looking at scaling sauce company...I have to be asking What's your token burn rate?

00:05:17: You HAVE TO!

00:05:18: Because if they're at one hundred million tokens and still paying open AI or Anthropic every single call They are bleeding margin.

00:05:25: Fireshoda calls it strategic self-harm.

00:05:27: You're basically subsidizing your provider's profit margin instead of building your own asset base.

00:05:32: But the shift to intelligence as infrastructure doesn't just change the cost-base, it changes how we value the output of the Kerm itself.

00:05:40: Oh

00:05:41: yeah...

00:05:42: There was a fascinating if a little terrifying take from James O'Dowd about something called the oblong theory.

00:05:47: Ah yes!

00:05:49: The death of the pyramid.

00:05:50: This hits professional services sector so hard.

00:05:53: For decades this model has been a pyramid A few partners at top A layer of managers and a huge base of juniors billing hours to do the grunt work.

00:06:02: And that model works because leverage is profitable, you pay the junior X You build them out at three x simple.

00:06:08: but Odoud argues That egenic ai just flattens that pyramid into an oblong shape.

00:06:14: The AI does the research.

00:06:15: the Ai builds the slide deck?

00:06:17: The AI runs the basic audit.

00:06:19: so the base of the pyramid the junior revenue engine.

00:06:22: it just It evaporates.

00:06:25: It doesn't just evaporate it becomes a cost center.

00:06:27: if the client knows AI can do The grunt work they won't pay for those junior hours,

00:06:31: right?

00:06:32: Odell's point is the value shifts entirely from time to judgment and architecture.

00:06:37: Yeah most valuable people are the ones who can scope the problem and orchestrate the agents.

00:06:41: This is so critical For M&A If you're buying A consultancy or an agency in twenty-twenty six And its valuation Is based on headcount leverage.

00:06:49: You're buying a depreciating asset.

00:06:51: your buying a legacy model that's about To hit a wall.

00:06:54: The winners will be the firms that productize their IP and move to outcome-based pricing.

00:06:58: If you're still selling effort in an era of instant intelligence, You are in trouble!

00:07:03: Big

00:07:03: Trouble

00:07:03: Okay.

00:07:04: so we've got a world where Intelligence is expensive infrastructure And the economic models of services Are being totally rewritten.

00:07:13: But Infrastructure has to live somewhere.

00:07:15: It needs data centers it needs chips it needs energy...

00:07:18: ...and That brings us To our second theme.

00:07:20: The map itself Is changing

00:07:22: the geopolitics piece.

00:07:23: Yes, and I know usually when business leaders hear geopolitics they think risk management

00:07:29: right avoiding sanctions

00:07:31: exactly.

00:07:32: but The sources of this week are saying it's deeper than that.

00:07:35: the entire global operating system is being reinstalled.

00:07:39: Peter Jonathan Jameson from BCG had the best term for this.

00:07:42: he called It a multi nodal patchwork?

00:07:45: It's a great mental model.

00:07:46: There's this narrative out there that globalization dead.

00:07:49: You hear it all the time,

00:07:50: but Jameson argues that's just wrong.

00:07:52: trade is actually growing faster than global GDP.

00:07:54: The stuff is still

00:07:55: moving.

00:07:55: It's just moving differently.

00:07:57: its rewiring Its moving through these specific nodes.

00:07:59: you have the US node.

00:08:00: China know the plural lateralist node the bricks plus block.

00:08:04: so instead of a flat world we Have a clustered

00:08:06: World?

00:08:07: We do and Mark Gilbert takes this to his logical conclusion with a prediction That might sound A little dramatic.

00:08:14: I think they know which one he mean

00:08:15: But I think he's spot on.

00:08:16: He says that by twenty-thirty, the multinational corporation with a central P&L is dead.

00:08:22: Don't stop me in my tracks!

00:08:24: Dead is a strong word...

00:08:25: It is.

00:08:25: but think about the logic.

00:08:27: if The world is split into these distinct nodes With different regulations Different data privacy laws Different tariffs You can't optimize for A single global P& L anymore.

00:08:38: So you have to run it as separate businesses.

00:08:40: You effectively have to running a US business, China business and an India business as seperate entities An aggregation of regional models not one global machine

00:08:50: Which really complicates things for investors?

00:08:51: You aren't just buying global exposure anymore

00:08:53: No!

00:08:54: You need know specifically which node your exposed too.

00:08:57: And looking at the data from Janssen Sainjaya who analyzed a McKinsey report The center gravity for those nodes is shifting east Hard.

00:09:06: The numbers are undeniable.

00:09:07: Sanjaya highlights that up to fourteen trillion dollars in trade value could shift corridors by twenty thirty five.

00:09:13: Fourteen trillion!

00:09:14: But look at the specific industries, he points out that thirty three of the world's forty largest semiconductor corridors involve Asia.

00:09:21: Thirty-three

00:09:22: out of forty?

00:09:23: I mean just think about it.

00:09:23: we spent our first segment talking how AI is a new infrastructure while AI runs on chips.

00:09:30: If eighty percent of the chip corridors run through Asia, you cannot divorce your tech strategy from your Asia strategy.

00:09:37: And Sanjay also mentioned that India is evolving.

00:09:39: it's not just a back office anymore.

00:09:41: No he calls it an innovation nerve center.

00:09:44: India is hosting seventeen hundred global capability centers.

00:09:48: New investment is just flooding into India Japan Vietnam.

00:09:52: These aren't just factories they're R&D hubs.

00:09:54: This raises very uncomfortable question for our European listeners.

00:09:58: If the US is a node and Asia is massive, where does that leave Europe?

00:10:04: That was the defining question at the Munich Security Conference.

00:10:07: Dr.

00:10:07: Mirko Worschen and Dr.

00:10:08: Matthias Faldato from Kearney shared insights in their session there.

00:10:12: The theme was basically Europe player or playground?

00:10:15: Ouch!

00:10:16: Playground implies you're just terrain with real powers compete.

00:10:19: It's harsh reality check.

00:10:21: They hosted Florence Galb from the NATO Defense College, and the takeaway was that you have to assess assets through this lens now.

00:10:28: How so?

00:10:29: Is the company in a player region that sets the rules like data standards, AI safety protocols trade tariffs or is it in a playground region where just has to comply with rules set by others.

00:10:41: That's critical due diligence item.

00:10:43: You're not buying a companies cash flow.

00:10:45: Your buying its regulatory sovereignty.

00:10:47: Exactly Jameson put it best.

00:10:50: You need to assess real exposure, not just theoretical uncertainty.

00:10:53: Don't worry about world peace generally.

00:10:56: Map your specific supply chain against these notes.

00:11:00: if you're chip supply comes from a node you are politically estranged From?

00:11:03: You have a solvency problem Not a sourcing problem.

00:11:06: Okay let's zoom back in.

00:11:07: We've got the AI revolution demanding massive capital.

00:11:10: we've Got a fragmented multi-nodal World map but at The end of day companies Are run by people And looking at the sources on operating models, it feels like the human element is a point of failure right now.

00:11:23: It's The Friction Point!

00:11:47: Cosgrove argues most operating models are just too rigid for this.

00:11:51: They're designed for stability, not speed.

00:11:53: and Heather Stockton notes that finance is actually leading the charge to change This.

00:11:58: she says CFOs are going all in on embedding a genetic AI into finance functions

00:12:03: Which makes sense?

00:12:03: The cfo controls the purse strings And the data.

00:12:06: if you want to force the operating model to evolve You start with the money.

00:12:10: but here's the problem.

00:12:12: You can't Just mandate adaptation from the top down.

00:12:14: no

00:12:15: you can.

00:12:15: And this brings us to the trust gap.

00:12:17: John Romeo from Oliver Wyman shared a statistic that I think every CEO needs to tape their monitor.

00:12:22: It

00:12:22: is staggering!

00:12:24: Romiya reported that seventy-five percent of executives believe they understand the problems their frontline employees face

00:12:30: Which sounds nice and confident.

00:12:31: Until you ask the employees, only one in five workers feel understood.

00:12:35: That's as a fifty-five point gap.

00:12:37: Leaders THINK THEY GET IT.

00:12:39: The workforce is saying YOU HAVE NO CLUE

00:12:41: And Romeo connects this directly to transformation risk.

00:12:44: If you're trying to deploy agentic AI, which scares people because they fear for their jobs or if your shifting a supply chain to Vietnam You need the front line to execute

00:12:53: and if they don't trust you They won't help you

00:12:55: it creates a silent resistance.

00:12:57: Yes Exactly!

00:12:58: The pressure move fast is only widening that gap.

00:13:01: Gideon Slifkin had provocative post about enterprise architects and ignorance is bliss

00:13:06: trap.

00:13:07: I love that title.

00:13:08: Strategists always want more data before they decide.

00:13:11: We crave certainty, but Slifkin's argument is that in a world moving at the speed of AI waiting for perfect data is death.

00:13:19: he suggests That a simplistic attitude making a decision based on what you know now Is often better than paralysis?

00:13:26: But that speed can alienate The workforce even more.

00:13:28: if You're not careful it's A real tightrope.

00:13:31: It is, and we see this tension in specific sectors too.

00:13:34: Johannes Blumell wrote about the energy sector.

00:13:36: he says flexibility as the operating system now.

00:13:39: Meaning what exactly?

00:13:40: Meaning it's not about building one static power plant and walking away...it's about monetizing distributed flexibility.

00:13:46: EVs heat pumps storage units you need an operating model that can handle thousands of moving parts constantly shifting its dynamic not static.

00:13:56: And in retail, Marco Perone from KPMG highlighted that while CEOs are obsessed with AI, .. two percent say supply chain resilience is their biggest headache which

00:14:08: brings us full circle.

00:14:10: yeah you have the digital layer of the AI speeding up but the physical there.

00:14:13: The supply chain is getting harder to manage because of the geopolitical nodes we talked about.

00:14:17: this CEO is pressing the gas pedal on AI But the wheels are stuck in the mud at the supply chain.

00:14:22: That's a great way.

00:14:24: There is one more layer to this human element that we should touch on, specifically for our listeners managing assets in the EU or looking at global compliance.

00:14:32: Evan Benjamin posted about The Rights Gap.

00:14:34: Yes!

00:14:35: This is the regulatory curveball.

00:14:38: Benjamin points out that AI oversight isn't just a technical challenge it's A Human Rights

00:14:42: Challenge.

00:14:43: Okay

00:14:43: He argues that technical audits are not enough.

00:14:46: You need active involvement of equality bodies and national human rights structures.

00:14:50: So you can't have your IT guy check the code for bugs, you have to check the output for structural discrimination.

00:14:57: Exactly!

00:14:58: If your buying a company that relies on AI or hiring and lending or policing You will have massive liability risk if black box violates human rights laws.

00:15:08: It's not just PRRU it is legal one.

00:15:11: So let us try to synthesize all of this.

00:15:13: We've covered a lot ground from token economics to asian chip corridors to psychology of front line worker.

00:15:20: If I'm partner at PE firm What's my Monday morning memo?

00:15:22: I think it comes down to structural redesign.

00:15:25: You can't just tweak your way through twenty-twenty six, okay.

00:15:27: first on AI stop treating It as a tool.

00:15:30: govern in his capital.

00:15:31: watch that eighty billion token threshold.

00:15:34: if you aren't owning Your infrastructure you are leaking value

00:15:37: about it.

00:15:37: second

00:15:38: second on geopolitics Stop trying to be a global firm.

00:15:43: Be a collection of regional firms.

00:15:46: pick your nodes US Asia Europe And build resilience within them, not just between them.

00:15:52: Third and third on the organization You have to close that trust gap.

00:15:57: if your people don't believe you understand their reality They will break under the speed of the change you're trying to drive.

00:16:03: It really feels like The era Of the generalist strategy is over...you can't Just apply a standard playbook.

00:16:09: I think Josh Emdy put it perfectly in one of the posts Architecture is business strategy now.

00:16:13: That's

00:16:14: the line to underline, you can't design a strategy in a boardroom and then hand it to IT later.

00:16:19: The architecture that data flows, security, AI agents defines what the strategies are capable of.

00:16:26: If I get this wrong, they're just a PowerPoint deck

00:16:29: Exactly

00:16:30: And on that note we'll wrap up A huge thank-you for everyone who shared their insights.

00:16:35: We literally couldn't do this show without that collective intelligence.

00:16:38: Absolutely, it's fascinating to watch the conversation evolve in real time.

00:16:42: If you enjoyed this episode new episodes drop every two weeks.

00:16:45: Also check out our other editions on private equity venture capital and M&A.

00:16:49: Thanks for listening And we will catch You On The Next Deep Dive.