BCG: Digitally disrupting … or disrupted?

Will management consulting be disrupted by AI bots?

In order to understand how the emergence of digital technologies will impact the management consultant companies, first let’s take a look at the value they seek to provide to their clients (aside from making them feel good, as illustrated in the Dilbert cartoon below).

Management consultants according to Dilbert


What is it really that management consultancies like BCG, McKinsey, and Bain do anyway?

  1. Information access: A client can benefit from using consultants to obtain specified information that is hard to obtain internally. This includes data that is hard to come by (e.g., customer preference analysis) and topic expertise/knowledge of industry best practices that the management consultancy has built up over time by working with other companies in the industry (e.g., post-merger integration for a company that has not merged before) [1].
  2. Diagnosis and recommendation: Some clients face challenges where they can’t solve the problem by requesting information, because they are uncertain how to define the problem in the first place. In this case, management consultants bring value by using past experience across industries and specialized analytics capabilities to better diagnose problems and likely consequences of each possible solution to better form a qualified recommendation, by being able to provide an outside 3rd party objective opinion on major decisions without the biases a company would have (e.g., to enter a new market to grow sales) [1].
  3. On-demand brains: A client can find a lot of value in being able to quickly deploy a dedicated team of smart and unbiased people to deeply focus on one issue. The types of people can be hard to hire internally and/or expensive to retain continuously if needed only for specific, temporary tasks (e.g., a due diligence for a private equity firm) [2]. Finally, an external team is useful if embarking on a highly sensitive and/or confidential project (e.g., an organizational change).

What are the challenges caused by the digital wave?

AI process in steps and how consulting could fit in
Colored by level of threat from AI to consulting business

Source: HBS DIG IT course wrap slide (Apr 20, 2018) – modified by author

The first value-add to be threatened is #1 information access starting with the information that is easily quantified and thus easily shared digitally (e.g., market share data or analysis of product line profitability) [3, 4]. Before the emergence of the internet, consultants spent most of their time gathering data [3]. Now, this is outsourced to companies like GLG (controlling a network of subject matter experts), Euromonitor, and IMS Health that are easily accessible directly to the clients. Best practices are rapidly spread as information flows more quickly across regions and countries.

“The Googles, Amazons and Microsofts of the world may take over from the McKinseys, Boston Consulting Groups, and Bains … Consultancies are built for two-by-two matrices. AI’s matrices are a million by a million.”
– Roy Bahat of Bloomberg Beta [8]

Second, AI is becoming being better than consultants at analyzing information to build predictions. Much of the work of consultants do is to gather, clean, process, analyze, and present information gathered externally and inside the client’s organization – work that AI can do much faster and is already performing in the financial services industry [4]. Once AI becomes more advanced moving from information gathering to providing advice based on synthesis data, “prediction” or value-add #2 diagnosis and recommendation will be threatened too. The more easily quantifiable problems will first be taken over by AI (e.g., “Alexa, how should I allocate my marketing spend to maximize ROI?”) [4].

When a diagnosis and recommendation task occurs frequently on routine, client’s will have a larger incentive to invest in a software provider because #3 value-add (on-demand brains) falls away. For instance, to continuously update the customer relationship strategy in software the employee’s invest in learning to operate rather than have a team of management consultants visit once a year to revise the strategy. New specialized software providers are threatening the generalist management consultancies by providing software that integrates with the client’s business and can be used continuously – also after the consultants leave. For instance, provides analyses and recommendations on customer relationships [5], IBM’s DemandTec analyses the client’s data (feeding directly from their data warehouse) to provide recommendations for their pricing strategy [6], GE is developing software embedded in its hardware to provide optimization recommendations, e.g., in operations and manufacturing [7], and even Google recently launched “Advanced Solutions Lab”, part consulting service part tech bootcamp, to help clients who can send a whole team for several weeks to work alongside Google engineers to build and operate customized cloud solutions for the client [8].

Opportunities ahead and how BCG is responding

While both information access and prediction capabilities are likely to threaten the consultancies, information and diagnoses requiring qualitative data is more likely to stay a value add for management consultants. Alexa could tell you how to allocated your marketing spend, but it will be a harder problem to solve algorithmically questions such as “Alexa, how does my company do a successful post-merger integration?” or “Alexa, what is the best strategy for my toothpaste to enter the Indonesian market?”. Consultancies can better deliver on these questions due to the difficulty in quantifying this data and the consultancies’ advantage in drawing on experiences with multiple players across the industry (which AI installed at a given client would not be able to gather from others) and their broad experience in handling the “soft factors” (like how to influence people) in the action step on the chart above (aka implementation).

Even if we envision a future where AI can do these things as well, companies first need to transfrom to acquire these capabilities (… until AI becomes intelligent enough to advise on its own implementation). This provides an opportunity for BCG, which is well-positioned to guide clients in their digital transformation due to their (strategy and implementation) experience with companies across industries. Clients will benefit from using a management consulting company over the supplier itself (e.g., Google, AWS, SAP) because the management consultancy can provide objectivity, linking digital transformation to overall business strategy, and knowledge of how other firms in the industry have transformed digitally (across solution providers). BCG has invested in building these capabilities:

  • Advising companies on digital transformations: BCG has capitalized on the need for large companies to react to digitization themselves by offering consulting services on how best to transform digitally.
    • Technology Advantage practice area: BCG has a consultant team dedicated to helping clients transfrom to the digital age and develop a digital strategy [9].
    • BCG Platinion: IT architecture and solutions unit that covers the more technical side of a digital transformation, like implementation of large IT systems [10].
  • Helping clients build new digital businesses: For clients seeking to re-invent their businesses digitally, BCG is building business units that focus on exactly that in a start-up environment.
    • BCG Digital Ventures: In 2014, BCG launched “BCG DV” to help client companies incubate new digital companies, innovate, and also invest in new businesses [11]. In 2016, BCG DV and Starbucks co-invested in a joint venture together called “Takt” – a personalization based platform for consumer-faced businesses [12].
    • MAYA Design: In July 2017, BCG acquired Maya Design to add human-centered UX and UI design and R&D to its portfolio of capabilities [13].

BCG Technology Advantage practice area video

BCG Digital Ventures introduction video

On one hand the advancement of AI does give prediction powers that exceed what (junior) consultants doing analyses could do today. However, for clients without the money to invest in their own AI, management consultancies can themselves harness AI by enhancing their #3 value-add “on-demand brains” with AI capabilities in the analytics. For this reason, BCG is investing heavily in building up its analytics capabilities and starting to build proprietary software for cases that have frequent re-use (e.g., pricing strategies).

  • Becoming an analytics/software provider: 
    • BCG Gamma: A team of 300 engineers dedicated to advanced analytics, data science services, and AI. Used both internally in consulting cases alongside consultants requiring advanced big data analytics and also directly works as an independent team directly with client companies to strategically decide which analytics use cases to focus on and help the client built out AI capabilities (process and actual code) [14].
    • MSP Catalyst: For its Marketing, Sales, and Pricing practice, BCG has developed a cloud-based software platform that clients can use to get customized software to help analyze their business (e.g., how the pricing strategy is performing) that stays with them after the consultants leave [15].

BCG Gamma introduction video

BCG MSP Catalyst introduction video – B2B pricing tool example


BCG has already played well to their strengths by offering clients advice on their digital transformation. To have success in the digital age, the company must further invest in its Big Data analytics/AI capabilities by further investing in the Gamma team as well as ensure that its generalist consultants receive proper education in the methodologies, so that BCG can truly offer a “holistic” approach to advanced analytics/AI that best fits with the overall business strategy in a way that specialized providers would not be able to.

In addition, BCG must double down on their software offers for clients. If they do not move into this space, specialized providers such as IBM DemandTec for pricing strategy and Google for geospatial analyses are likely to move up the value chain to not only be a data/analysis provider, but also provide the recommendations for overall business strategy. The only efforts publicly available (there may be more under way – the management consultancies are notoriously secretive) were the MSP Catalyst, which is a cloud-based tool for Pricing and Marketing, but software tools are relevant in many other functions such as operations and HR. As data analysis becomes more and more integrated with companies allowing for a higher repetition of strategic exercises (e.g., developing a pricing strategy), BCG will need to develop a broader suite of offerings to go with their consulting, so that they remain relevant for these tasks.

Organizational challenges

BCG has made the choice of keeping its new digital business units BCG Digital Ventures separate from the general consulting staff by locating BCG DV in Manhattan Beach, Los Angeles and letting Maya have a separate office. This is a good move to preserve the hoodie-wearing innovative start-up culture that could clash with the suit-wearing consultant culture. In contrast, BCG Gamma and MSP Catalyst seem to be co-located in the same offices as the generalists (the BCG website lists Gamma locations in the same office places), which makes sense given that these units more naturally work together with the generalists as enhancements to the existing business.

For both the junior and more senior consultants (i.e., the partners), BCG should provide training sessions on how best to leverage Big Data and AI analytics on cases, so that the generalist team is fully aware of the new resources at hand and how the offerings can enhance the consulting work. To bring cohesion within the firm, however, BCG could start programs where generalist management consultants for some time can switch to work at one of the digital business units. This would help build a collaborative culture and for the generalist part of the business to better understand how to best leverage the new colleagues.



















Wayfair – A Zillion Things Home

Student comments on BCG: Digitally disrupting … or disrupted?

  1. Interesting post, thanks for your insights! I was doubly keen to read this because in a different class that I took this semester, Managing the Future of Work, we had one of the partners of a top consulting firm come in and talk to us and he spent a long time speaking to exactly this question. According to him, with the increase in capabilities of big data, consulting firms will no longer need the swarms of post-college, pre-MBA consultants that they have been hiring to date, but instead, will be able to hire one data scientist with a PhD who will be able to manipulate the data and get the same results that a whole incoming class of post college hires would do. One of the questions that this made me think about, and your blog post furthered that questioning, is what will happen to those potential employees? Are there other functions within the companies that they can do, or would the consulting firms simply not hire them anymore? What will happen to the client facing aspects of consulting? Will the type of person be hired be someone with strong inter-personal skills as opposed to analytical skills?

  2. Great post! Like Eliza, I was also left wondering about the employee composition of a digitally transformed BCG and further- how does this affect how they charge clients? Based on the value proposition for traditional management consulting (the #1-3 you outlined above), if the client is no longer hiring BCG for manual labor of #1 and 2 then how does that change the pricing structure and margins? I worked for a public accounting firm before school which is going through a similar transformation, and I think one of the biggest challenges will be adapting the long established revenue/cost structure of hiring clients.

    1. Hey! Thanks for your comment. Agree – my understanding is that a lot of the firms are moving from a fee-based model to more of a % of value-add fee after the impact has been measured, especially on the types of cases that are more easy to quantify like operations improvement or pricing strategy. As analytics become more advanced to measure impact, I’d think more cases will be billed this way.

  3. This is an interesting post, thanks! As a future BCG employee, I am very interested to see how consulting companies will integrate AI and new digital technologies into the service they provide. One point in your post that I question is whether or not consulting companies are best suited to double down on their software offerings for clients. I think consulting companies should focus on providing strategy or qualitative recommendations and partner with software companies for the implementation. If they focus too much on bringing these software capabilities in house, they may lose their competitive edge and become more like everyone else.

  4. Thanks for the post. As someone entering management consulting as well, it’s certainly on my mind. However, I am not concerned about AI replacing human consultants any time in the near future. AI could certainly supplement consultancies who seek a different angle for problem solving, but will never replace the creativity and critical thinking human consultants provide clients. As the world becomes increasingly digitized, I think it is very wise of firms like BCG to build up their digital practices – a lot of current and potential clients are struggling in these areas as the world around them changes.

  5. Great article and discussion. Certainly interesting to see how client-facing services change with tech advances. While machine learning could replace a lot of the manual data crunching, I believe that human judgement still plays a huge role. As we saw in class, judgement regarding the input data, variables to optimize, and overall interpretation / implementation of data requires experienced business people. Yes, while function of data collection and analyses might be replaced by AI, the role of junior consultants will morph to working with internal data scientists and the client’s own staff to prioritize and shape business strategy. The ultimate value I see is not getting the right answers through data, but being able to ask the right questions. That’s where human expertise is still needed.

  6. Thank you for the post! I completely agree with you that BCG has to disrupt itself or it will be disrupted by the large software providers (and they already have leg-up in the game with their advanced software products). I think in order to keep its clients, many of which struggle with digital transformation too (think large old-fashion companies like Disney, General Mills, Havas), BCG should embrace the role of an educator – be the first (instead of Microsoft and alike) to introduce data-driven solutions to the client, work together to generate best practices and use-cases for the products it has to offer. It will thus build adoption and trust. Finally, looking at their long-term strategy, I believe it is inevitable that BCG will be digital-first. Because of that, they need to start integration already now, and while for the moment it makes sense to keep units like BCG Digital Ventures separate, the company should start blending it with the general practices very soon.

  7. Great post, ABC! Regarding BCG DV, do you know how BCG captures value through that model? Is it also a % of value-add as you mentioned to Haley? BCG DV seems more of an incubator/VC-type business, and thus I wonder if they could capture value by getting a stake in the new business. Since those firms are usually kept separate to preserve their “hoodie-wearing culture”, as you mentioned, it’d be feasible value the company standalone, although exits could only come once the company decides to integrate and “buy out” BCG. With that model, they also seem to be moving towards more of a talent recruiting play, since they need to put management in place once the BCG PMs and developers leave. Anyway, fascinating read! Thanks.

  8. Great post! After having worked with BCG DV, I’m skeptical that the old consulting model can coexist alongside newer models like DV. My experience was that the two cultures did not mesh and the result was a project that did not deliver expectations. I wonder what other steps BCG can take to ensure tools such as BCG DV are more successful. Keeping the organizations separate is one approach, but then you miss out on synergy opportunities such as shared learning. Maybe, to your point, training is the answer!

  9. Great post and also a little scary for all of us entering the consulting world post MBA. I completely agree that there should be some sort of rotation or fellowship where BCG employees can rotate through the digital business units. I think this helps each group understand what type of work is being done and what capabilities each unit has so that they can go to market together more smoothly. I think it would also be helpful to have trainings for all employees on what cabailities each unit has so that traditional BCG employees can spot opportunities to sell work through the digital business units. There could then be some type of benefit like a referral bonus.

  10. Thanks for the post! We spend a lot of time talking about automation of more manual tasks (e.g., manufacturing), but probably don’t spend enough time talking about automation of higher value / higher knowledge tasks like consulting. I think the model, at least in the near and medium term, is for consultancies to transform more into tech-enabled service businesses rather than pure service businesses – in these types of businesses, the solves a bunch of the more manual tasks (e.g., excel data crunching), but isn’t able to operate on a higher level when it comes to insights or judgment. You rightfully mention that a bunch of the input piece of the equation has become more democratized by things like Euromonitor, but as we’ve seen in some of the other data cases, there is plenty of judgment that needs to even go into finding the right inputs to put into the decision algorithm in the first place. I’m also less pessimistic on the decrease in more junior staff – when I was hired into McKinsey after college, I felt much of what I added wasn’t just the manual excel manipulation, but also the thought it took to do the right analyses and put the right information together on a page to show the client – I would have loved for something to make those things more efficient and free up time to do real problem solving!

  11. Great post! I feel very proud to see such an analysis on BCG Digital Venture as an ex-BCGer. But at the same time, I can’t help but compare BCG’s action towards McKinsey’s. As far as I know from some discussions with McKinsey fellows, it is going down a different route, which is to directly recruit many programmers/coders into the consulting team to deliver dedicated solutions to clients, including writing real codes for them. However, as I experienced BCG Digital Venture in the past, they were more like strategy consultants who have business expertise in digital technology. I wonder which model is more effective when we compare the 2 models.

  12. Great post! Industries like financial services are also dealing with similar issues as AI and Machine Learning are used to automate more redundant, mundane tasks and time is freed up for junior bankers to perform more value added services. The challenge comes in the implementation though – as many view their jobs to be at risk. I agree with the suggestion that a rotation within BCG Digital Ventures will help employees understand that their jobs aren’t at risk but instead their role is shifting from simply performing data analysis to instead providing insight and judgment to clients. BCG may also want to consider realigning incentives and reviewing employees based on their use of digital technology in analysis and integration with the BCG Digital Venture team. That way, the team is viewed less as a threat and more as a partner.

  13. Great Post. And given the number of comments, it has obviously piqued the interest of our classmates. I actually think that the digital transformation will actually make the role of strategy consultants more important. Many companies will need to radically reinvent themselves, and in walks BCG. However, i actually wonder whether firms like Accenture and others that specialize more specifically on technology might be well positioned to take market share from the big three. Reading your post made me think back to flashion, and the need to treat data and AI as both an art and a science. perhaps BCG is best positioned to become the artist, leaving the science to others.

  14. Thanks for the post! As someone going into consulting post graduation, I am grappling with these issues and it was great to see your analysis so far. As you mentioned, data gathering used to be an essential part of a consultant’s job, but now machine learning and other techniques make it much more efficient to gather and analyze data without relying on the work of humans. That being said, I wonder how big the threat will be for consulting companies when large data-driven companies such as Google, Facebook, or Amazon have their own consulting arms now.

  15. Thanks for a great post! As someone who’s joining consulting full-time and had prior big data work experience, it was very informative for me to understand better on consulting firm’s take on digitalization. I’ve heard a lot about BCG’s digital initiative – it’s great to learn more about it.

  16. Thanks for an interesting read, Rain. Indeed the widespread application of data analytics and machine learning has upended how businesses approach problems and how and/or they would prefer to hire external consultant to fulfill the job. It would be also be interesting to see how consulting would change its hiring strategies (generalist vs specialist, strategist vs data experts) in light of the change of customer demand.

  17. Thank you so much for this great post. I didn’t know that BCG has such a wide range of initiatives in digital space. As an ex-consultant, I wonder how traditional consulting firms can adopt a new approach to solve clients’ problems. In McKinsey, the firm I used to work for, some generalists struggled adopting themselves to the new approach. For example, while many generalists take a hypothesis-driven approach, the approach by big data scientists are often like “let’s put all the data, and then the algorithm will tell you the right answer”. It is especially important for partners, who worked for the firm for a long time, to unlearn the traditional approach and adopt to a new problem solving approach.

    1. Great post ABC and very insightful comment Taka.
      As a former consultant myself, who was fortunate to touch on the topic of how to react to this trend with Consulting Partners, I spent countless hours debating the impact on firm culture itself. As it so happens, and often overlooked, these trends will have very significant impact on internal processes and what “business as usual” has been for the better part of the last century. Going forward, it seems that these consultancies will have to renew the “social contract” that links them to their employees. And this is no small feat.

  18. Really interesting! It seems like BCG is doing a pretty good job preparing to “disrupt itself” by investing in the next generation tools and capabilities that you outlined in your post. While I imagine it’ll be incredibly difficult to disrupt itself, BCG (and the other large consulting firms) is likely somewhat uniquely positioned since it has such broad insight into trends and things that matter to companies and customers around the world. The firm would certainly be smart to accelerate efforts to develop these capabilities since you can bet that others will if they sense the opportunity. They must be careful, however, where and how they invest in these efforts, since it is not entirely clear where makes the most sense to focus investment. A lot of resources and energy can be wasted, which could distract the business and make it less effective in what’s already a highly competitive space. I can’t imagine a time at any point soon when management consulting firms will entirely cease to exist, but you can definitely see how AI and machine learning could dramatically adjust how junior employees at the firms spend their time. Likely, in the future these firms will end up being much smaller and provide more specialized advice.

  19. Interesting post! To the “What it is the MBB really do” section I would add: 4. Access to benchmark data. These firms play an important role as trusted aggregators of companies internal and highly guarded private data. Then they share it back with their clients as long as it is anonymized. To achieve this, new entrants and AI powered ones among them – would have to achieve access to these amassed databases. In a way this might be a data barrier to entry.

  20. Great post! I think there may be a bit of an overreaction to the disruption that big data will provide. I think we will still need people to be able to explain and understand the outputs of big data, and consultants will shift towards this. One data scientist may find correlations, but that does not mean causation. Also, there is an assumption that all clients have enough data to leverage these platforms. Having spent some time in consulting, I was amazed at how poorly a lot of very large companies organized their data. I think we’re a ways away from big data leading big consulting firms to recruit only data scientists and not MBAs.

  21. Great post – thank you! My concern is whether management consultancies will continue to use their current business models in the new future of work. If AI and data become increasingly important and the opportunity for consultants’ value add lies in digital transformation, teams need to be more nimble and volume needs to be the larger play. Given the current dependency on human capital, BCG may have a hard time with the very digital transformation it wants to advise its clients on. In addition, many traditional companies have been slow to adapt on the digital transformation front to date. I wonder if BCG’s traditional clients will continue to support BCG or move to more specialized agency services to help with the digital transformation.

  22. I wrote the similar blog about Deloitte. I am more positive about industries’ respond to disruption. They should embrace the mission for being agent of change and making future more evenly distributed. An overarching vision will emotionally and strategically engage everybody in the organization. Aligning the firm around this mission after getting strong buy-in from top executives is critical.

  23. I’ve been interested in how consulting firms are responding to the capabilities of their clients increasing over time as well–as you point out, access to basic information raises the stakes for consultants providing value. In addition, as the digital sphere makes forming companies easier, consultants must find ways to get involved earlier in the company formation process. BCG’s DV acquisition is a good example of this–in addition to using new digital capabilities, it puts them in a very different relationship with clients, as a co-founder and co-investor in new products. McKinsey’s Recovery and Transformation Services (RTS) similarly changes the traditional client-consultant relationship, with the firm acting more closely with the client as an operator in some cases in addition to the traditional advisory role.

  24. Very interesting post and discussion! While you mention the role management consultancies are currently playing in guiding firms through digital transformation, I think it is a little underplayed — my understanding is that this will be a big business area for many years to come, with much of it unaddressable by AI tools. As we saw in several of our cases there are deep change management issues associated with digital transformation (e.g., helping the Flashion pricing staff to accept alogorithmic output/ finding new staff that do). My hypothesis is that management teams will look to consultants to support them on these types of organizational change management efforts over the next several years. Hopefully the consultancies will be able to leverage the insights from these efforts to achieve transformational change within their own firms. Some very interesting points above regarding talent as well. Consultancies are in a scramble to hire/ acquihire data scientist types — while this may not eliminate the need for generalist hires (who will still often be needed to act as translators) it could certainly reduce that need. It will be very interesting to see how the industry evolves over the next several years and who comes out on top!

  25. Thanks for the great post! It seems to me that we are underestimating the brand value of these consulting companies. While information is becoming more easily available, this is leading to new problems like sorting through the wealth of information and knowing which to trust, how to synthesize, and communicate it. It seems to me that consulting firms will still be relied on for information, but more for secondary research than primary. Additionally, projects will likely become less of diagnosis and more around implementation. This will mean consulting firms need more hands on deck, so the fresh college graduates who were getting their hands dirty in number crunching will likely be getting their hands dirty in the field.

  26. Building on MMidd´s and Taka´s comments, I tend to agree that Consulting firms will continue to play a relevant advisory role,IF they are able to adapt to the new technologies and still tackle their clients´ key problems (which might be shifting, for ex. to Digitalization). The key questions for consulting companies, is aimed at the heart of their competitive advantage, and is if their actual pool of talent will be the appropiate one to solve for these new issues.

    And I believe the answer to be somewhat balanced. On on side, consulting recruitment practices have allowed such companies to capture some of the brigthest young professionals, many will probably adapt (and quickly!) to these new trends, but maybe this will also open a new window of opportunity (or challenge!) to embrace diversity further and amplify the skills that will be valued in future candidates. On the other side, there are clear capabilities that these companies lack. On this last issue, McK has been playing a stronger hand in acquiring Big Data companies, to step in more aggresively in the Digitalization play. BCG is doing some efforts in the same direction, as seen in this post. Bain, at least publicly, has not yet deployed a very clear strategy on how will it be positioned.

    Which consulting company will win in advising on distrupting strategic solutions for digital companies is yet to be discovered. And who knows if new players won´t emerge. What is your bet?

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