For decades, consulting firms have grown by selling expert capacity. Smart people, organised into projects and teams, monetised by the hour/day. It has been an extraordinarily successful business model, and it still generates most of the revenue in many consulting firms.
However, we increasingly see the same challenge across these consultancies: difficulty winning new clients and building a predictable revenue pipeline without compromising on pricing or stretching resources thin by continually customising pitches and project delivery.
This challenge is not temporary. And no type of consultancy is immune to it. These consultancies struggle because of a combination of internal and external pressures that have emerged as the industry has evolved.
While it may not be possible to walk away entirely from the capacity-selling model – nor would I advise any consulting firm to do so – it is worth considering rebalancing it with value-led work. This will help protect existing revenue while facilitating scaling and a healthy pipeline.
The consulting market didn’t change overnight. It has been shaped by years, and sometimes decades, of forces that define both how buyers make their decisions and how consulting firms operate. So attributing the current state of the market to a single element would be foolish.
Having said that, these are the four macro forces that have had the biggest impact on the traditional consulting model in recent years:
Many consulting firms have developed a revenue stream of small, ad hoc projects: quick-turn surveys, basic segmentations, competitor scans, and ‘rapid insight’ decks, ahead of e.g., board meetings or strategy off-sites.
Traditionally, a pyramid of juniors delivered these small, order-take-like projects by designing questionnaires, cleaning data, coding open‑ended responses, and assembling slide decks under senior supervision.
However, the rise of AI and automation tools has been increasingly shifting this type of work in-house. The result? Consulting firms have started cutting junior roles that would normally handle this type of work.
With these volumes dropping, this type of work gets (unfortunately) pushed directly onto senior experts (and sometimes even partners).
The AI double squeeze therefore manifests as:
The AI double squeeze is a new reality in consulting firms (or practices/verticals) of all sizes.
Consulting firms increasingly look and sound alike. AI has made consulting even more sameness-y.
Consulting firms already struggled to differentiate before AI arrived. Now, every consultancy can produce polished messaging, thought leadership, capability descriptions, proposals, frameworks, and insights at unprecedented speed.
The narrative may look impressive, but the market is filling up with more of the same.
Too many consulting firms sit under the same capability roofs, use similar language, and offer buyers too little (if any) reason to understand why a consulting firm is particularly relevant to a specific situation.
That big, ugly sameness creates a huge differentiation urgency.
Client hesitation is the silent deal-breaker of consulting proposals.
Consulting firm leaders tell us the same story again and again. A prospect shows genuine interest, asks thoughtful questions, and even agrees to a proposal. And then… nothing. Calls aren’t returned. Emails go unanswered. Deals drift into limbo, not because the offer was wrong but because the buyer couldn’t decide.
Decision hesitation has become one of the most underestimated barriers to growth in consulting. It’s not a lack of awareness. It’s not even the competition. It’s the prospect’s own fear of choosing “wrong” that stalls momentum.
Recommended reading: How Consulting Firms Can Overcome Prospects’ Indecisiveness
Consulting budgets face greater scrutiny. Buyers are under increasing pressure to justify expenditures on external partners and to demonstrate justifiable business impact of such engagements.
Of course, consulting as an industry is still in high demand. However, buyers have changed how they evaluate consulting firms.
Loosely defined work becomes harder to defend when buyers need a stronger economic case. Buyers are not looking for consulting firms that can help them with digital transformation using cutting-edge technologies. They are looking for high-impact, measurable outcomes that address meaningful business challenges.
In a way, the pressure is less about the budgets and more about the tangible, demonstrable value.
Because these pressures are negatively impacting consulting firms’ revenue, we believe consulting firms need to shift a larger share of their revenue from capacity-led to value-led work.
We increasingly believe the next stage of consulting requires a different design principle: Start with the value the consulting firm wants to create. Then design the business backwards from there.
We call this The Shift.
The Shift is the progressive redesign of a consulting firm around where it creates the greatest client value and how its expertise can repeatedly deliver that value. The ambition is to transform expertise and intellectual capital into repeatable client value and superior commercial performance.
It’s about consulting firms deliberately redesigning how expertise travels through the business and becomes client value.
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