Scaling Europe
00:11:16 · Sebastian Johnson, Dimitris Samouris
[00:11:16] S0: That's amazing. And was that an intentional choice? Or were you... It sounds like you were able to commercialize quite early. Yeah. Was were you just able to reinvest that money? Did you look at funding? [00:11:26] S1: Yes. Of course. Yeah. We looked at funding. I I don't want to pretend like this was some plan from the beginning. Like, as part of the accelerator that we got into, like, they're very clear about what they expect from you. Like, build a product, get some customers, go raise a round. Yeah. And we tried that in May 23. We spoke to about 60 funds at the time. No one would give us the time of day, and we can we can talk more about feedback from investors for this market if you're if you're interested. So necessity is the mother of invention. It made us extremely focused on what what we needed to do to get paid. Build a product that someone is willing to pay you for now, right now. We ran the bank down to out of the the 400 k that we had been granted by South Park initially at some point, we were down to a tenth of that. That really focuses the mind. That's amazing.
00:11:26 · Dimitris Samouris, Sebastian Johnson
[00:11:26] S1: Yes. Of course. Yeah. We looked at funding. I I don't want to pretend like this was some plan from the beginning. Like, as part of the accelerator that we got into, like, they're very clear about what they expect from you. Like, build a product, get some customers, go raise a round. Yeah. And we tried that in May 23. We spoke to about 60 funds at the time. No one would give us the time of day, and we can we can talk more about feedback from investors for this market if you're if you're interested. So necessity is the mother of invention. It made us extremely focused on what what we needed to do to get paid. Build a product that someone is willing to pay you for now, right now. We ran the bank down to out of the the 400 k that we had been granted by South Park initially at some point, we were down to a tenth of that. That really focuses the mind. That's amazing. [00:12:26] S0: Yeah. And and, you know, you've had... You've got this amazing in... Inside view to the industry. Right? And we're seeing a lot of talk and commentary about AI in this industry specifically. What's been the internal reaction? You mentioned that you kind of went out to your network initially. You're probably working with customers that you either knew quite well personally or you knew of from your time in there. How are they reacting to these changes? What's the view of kind of AI more generally within consulting and private equity? [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...
00:12:52 · 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.