I’m sure you’re all seeing reports about the decline of huge consulting firms: salary freezes, layoffs, reductions in recruitment. Particularly for strategy engagements, clients are realizing that consulting fees based on bloated hourly rates lead to profoundly misaligned incentives and lousy outcomes. Meanwhile AI is reducing the need for the entire middle tier inside strategy consultancies.

I’m seeing early indications of promising new directions for strategic advisory services. First, firms like 808MPH, LLC hire actual entrepreneurs and execs, rather than bright but inexperienced MBAs. Next, hot new strategy firms create an optimum combination of white-glove services and AI solutions (have a look at the offer from https://ascendancy.co/). And finally, I love seeing companies get past the babyish time-and-materials business model. Watch for firms with the confidence and guts to offer performance-based compensation such as Creative Dock Group.

My pal Shar Broumand likes to remind people that the entire consulting system was built on the assumption that time = value, and for many endeavors AI is bringing the cost of incremental cost of effort to zero. This is an AI-driven change of paradigm that is so profound that it’s hard to think through its implications, but I know they are staggering from my experience in similar paradigm shifts. 20 years ago SaaS changed business math forever by hugely reducing the incremental cost of production to nearly zero, and by enabling seamless international expansion through the cloud. Now, AI is changing the math by making the incremental cost of ‘effort’ minimal for many activities. What in the hell does this mean?