Scaling Europe
00:12:52 · Dimitris Samouris, Sebastian Johnson
[00:12:52] S1: That's a great question. The way I think about this is I I feel like AI is a Rorschach test. You know, the the inkblots that psychologists... [00:13:02] S0: Kind of see see... Yeah. Wait. It says more about you. [00:13:04] S1: Correct. And so there's a very wide range of reactions from people who are like, this is gonna be transformational for the industry and is a huge opportunity to other including by the way for very senior partners who are very scared and fearful, about what this means. My perspective on this is if you thought that your job as a consultant was force amplification, I e Client needs more bodies to get more work done sooner or faster. Mhmm. You have a very negative view on the outlook of the industry. You're never gonna compete with a language model. If your view of what you did is I am a trusted adviser that helps my client think through very difficult problems, you're very bullish on what AI means for the industry because you know what this means is that you can give better advice faster to more clients and address segments of the market that previously you were not really going to pay attention to because they couldn't pay your fees. There is no consistent like or consensus view on this. Those are [00:14:13] S0: the two extremes that I've laid out. And how do think the broader consulting model will change given that there will be new tools available to the kind of trusted advisers?
00:14:23 · Dimitris Samouris
[00:14:23] S1: It's already changing mostly on the hiring front. Yeah. One thing we can talk about is what this means for the staffing or operating model that used to be a pyramid and now... I mean, I hear a new shape every week. Some people talk about diamond, other people talk about an obelisk or rectangle. I think the reality is that you will need fewer junior staff to get to the same piece of work. The more ambitious consulting firms are thinking, well, we hire really smart people and there's a lot of work to be done. So how can we position those people to do more better work for more clients? I think that's the first like area in which the operating model is going to is going to change is that the way that you staff a case is going to be very great is already becoming leaner now than it Another interesting trend is output based pricing in this concept of a retainer models. Retainer models have been around for for a while, but I think there is one thing I think there's true consensus on is like billable hours at some point or billable day or billable week at some point is going to go away. Mhmm. We think we are very well positioned at Junior to help consulting firms make that transition to output based pricing. I think it's a truly existential question for the industry. If you price by the hour, you're gonna be in a tough spot. If you can price by outcome or by the service that you're offering, you will be resilient, and you'll be able to actually achieve a margin uplift versus where you are versus where you are today. No one's made that transition yet, but customers are in various bits of the curve as to like how far along they are and their things.
00:16:16 · Sebastian Johnson, Dimitris Samouris
[00:16:16] S0: So people are thinking about it. [00:16:19] S1: Oh, yeah. [00:16:19] S0: Is is it a if not when or when not if? Do they know it's gonna come or the... [00:16:26] S1: It's a when it's a when not if. [00:16:27] S0: And are people aware of that or are they sort of...
00:16:30 · Dimitris Samouris
[00:16:30] S1: Very much so. Yeah. I don't think there is a clear answer on how you get there. Yeah. And we're still... If I took take a look across the entire industry, we are still at a stage where most of the large firms are trying to figure out how do I solve for the individual productivity use case. I... How do I make SEB 50% faster when it comes to cutting a market model or synthesizing expert call notes or making a slide? That's not the real question. Right? That is that is a step along the way of how I get to output based pricing. At some point, you will be able to shave enough hours off of the individual work stream and get to a point where I can drop in a scope of work, press a button and get an 80% complete piece of work that it is the job of the human to review now instead of create a first draft of. When you when you get to that point where it's I push a button and I get an 80% draft, that's where I think you'll be able to start charging based on on output based on the diligence or assurance or I think for other types of consulting and by the way, this is a model that's already existed for a while value creation work for example, where they will get paid on the outcome after the fact, I. E. If I help private equity fund achieve three four percentage point increase in gross margin, we get an outsized share of the rewards, not just a project fee. Think you're gonna start seeing a lot of that as well, which is great for the industry. It can like fully aligns incentives be between adviser and and principal.
00:18:14 · Sebastian Johnson, Dimitris Samouris
[00:18:14] S0: Where do you think AI will never play a role in consulting or advisory work more generally? Yeah. If if there's any part of it that it won't touch. [00:18:24] S1: Okay. I'm gonna betray some of my misgivings about this tech when I'm gonna give you this answer. I get personally very pet peeved at this use of, like, reasoning or reasoning models or thinking machines. Perhaps this is just my ignorance as someone who's non technical and come... Does not come from the machine learning world, but I like... I do not think that there is true deductive reasoning behind these next token predictors. They're like extremely powerful. One way I like to think about it is a steerable printing press that produces like cogent analysis. But anyone who has used language models for their work knows that they're off a lot of the times and you have to spend quite a bit of time refining the output to what you want. So anything that requires higher order thinking, lateral thinking, judgment, prioritization, I think that is going to remain the preserve of humans for a very very long time just because of its very nature as a next next token predictor. The more senior you go up in the consulting pyramid, the more likely that your work is... Which is sitting down with a client, being the trusted adviser in the room, helping coach them through what is often very emotional and stressful process. Like people come to consulting firms with big problems that are existential for their enterprise. That's not going away anytime soon.
00:19:59 · Sebastian Johnson
[00:19:59] S0: Do you get the impression that the that the clients of the firms, are they starting to view it differently? You know, are they starting to have different expectations around the outputs of the consulting firms or the prices? Are you getting to see any any view into that?