McKinsey and its peers are at a "most dangerous moment": The pyramid model has collapsed, and PPT is no longer the path to wealth in the consulting industry.

The God Translation Bureau is a compilation team under 36Kr, focusing on fields such as technology, business, workplace, and life, and mainly introducing new technologies, new ideas, and new trends from abroad.

Editor's note: The era of making easy money by "selling PPTs" and "hiring high - achievers" is over. When AI can complete research reports in just a few seconds, who will pay for the expensive "junior labor" of consulting firms? The pyramid model is collapsing, and doers are taking the right to speak from academicians. This article is from a compilation.

Just take a glance at the news headlines, and it's hard to blame people for thinking that artificial intelligence signals the end of the consulting industry. It's true that AI is automating most knowledge - based jobs, but it's just one of many disruptive forces. Multiple forces are converging into a "perfect storm" that directly impacts the long - standing business models of large consulting firms.

High interest rates and macroeconomic fluctuations have tightened the budgets for professional services, forcing corporate executives to closely scrutinize consulting expenses. Meanwhile, clients' demands for consulting firms have changed dramatically. They now require a return on every penny spent. They are no longer satisfied with just macro - strategies, nor do they need fancy PPTs, large databases, or research reports - which were once the core values of traditional consulting firms. Nowadays, large language models (LLMs) can generate such content in seconds. Leaders now need customized and executable solutions for their businesses, as well as hands - on implementation support from experts with professional backgrounds and relevant experience.

The converging pressures and transformation waves are hitting the "pyramid model" of traditional consulting firms like a sledgehammer, and these firms are struggling to adapt to this change.

The warning signs are very obvious. Major consulting firms have frozen the starting salaries of new employees. According to The Wall Street Journal, McKinsey has laid off more than 11% of its staff, citing the impact of AI on project staffing and delivery.

Some observers believe that the consulting industry and the long - dominant established firms will simply evolve. An analysis in Harvard Business Review points out that consulting firms may abandon the traditional pyramid structure and shift to a more streamlined structure composed of a small number of senior professionals.

This prediction is generally correct. Large companies have indeed been forced to re - examine their operating methods. However, public comments have underestimated the difficulty and time - consuming nature of this transformation, as well as the competitive opportunities it creates.

The Collapsing Pyramid

This pyramid is not just an organizational chart; it is the financial engine of the consulting business model. Partners are at the top, responsible for business development; managers are in the middle, overseeing projects; and junior consultant teams are responsible for research, analysis, and slide - making.

But if machines can instantly generate higher - quality content, why should clients pay $300 to $500 per hour for the work of junior employees? A study from Harvard Business School shows that compared with humans, AI can complete tasks 25% faster and with 40% higher quality. Moreover, this efficiency improvement will only continue to grow.

The pyramid structure can only work when the company can continuously expand the scale of junior consultants at the bottom. When growth slows down or technology reduces the need for bottom - level manpower, this model becomes unsustainable.

Even industry giants are still exploring what this transformation means in practice. Bob Sternfels, the CEO of McKinsey, recently said that the company currently has about 25,000 "AI agents" working alongside consultants. However, over - focusing on the number of agents may actually expose their anxiety rather than a real transformation. If AI truly improves consulting work fundamentally, the company should emphasize the improvement of productivity, decision - making quality, or client results, rather than just the number of "digital employees" deployed.

The Unsustainable Business Model

This is where the economic model begins to break down, and it's also when corporate executives start to question the reasonableness of the high premiums of large consulting firms.

Junior consultants contribute billable hours that support high profits and also serve as a training ground for future partners. As AI replaces this level, some large companies may evolve into a "diamond - shaped" structure, reducing entry - level employees and increasing the proportion of senior professionals in the middle of the organization. More seniority means higher costs. Moreover, if professional knowledge is not properly utilized, it's difficult to retain senior consultants - currently, large companies relying on the pyramid model do not have the organizational structure and corporate culture to sustainably support these top - tier talents.

For organizations with tens of thousands of consultants globally, restructuring requires fundamental changes to recruitment, pricing, and career development infrastructure. The cost of this transformation is difficult to estimate, but for each traditional company, it may require hundreds of millions of dollars in continuous investment.

Even if large companies can successfully evolve into the "diamond model," they may still not meet the current needs of clients. Companies in all industries are re - examining the reasons for hiring consultants.

To a large extent, due to the power of generative AI tools, companies are increasingly conducting pre - strategic planning in - house, which used to be a major part of consulting projects. Now, clients' needs are shifting from "listening to advice" to "implementation" and "measuring results." Companies expect consulting services that "show me, not just tell me." They need people who can execute solutions, not just those who offer suggestions.

They also hope that experts who have solved similar problems will be in charge, rather than a group of junior generalists who learn on the job. In addition, they want to see results faster. "Speed of impact" has become one of the most important indicators for evaluating consulting services.

For top - tier strategy firms and the consulting businesses of the Big Four accounting firms, meeting these changing client needs means a fundamental change in the talent model - which is a huge challenge. Their "cradle - to - grave" training model, which involves recruiting young analysts and training them internally for many years, has long had difficulty attracting senior doers outside the large consulting system. Moreover, these large companies do not give senior employees the opportunity to directly implement solutions, which is exactly what clients are asking for now: talents who can translate strategies into actions.

Who Will Survive? And How?

As this perfect storm brews, transformation pressures are squeezing large consulting firms from all directions. The question is: What will the future of professional service firms look like? Which model can withstand this storm?

Boutique consulting firms are already trying the "obelisk model," where small teams of senior experts use AI tools to significantly improve productivity, completely get rid of their dependence on junior consultants.

Another increasingly popular model is the platform - based consulting network, which convenes professional experts on demand. These organizations no longer deploy large permanent teams but match companies with professionals with direct experience and expertise, thus providing professionalism, speed, and flexibility.

The global consulting industry spends more than $400 billion annually. Throughout its long history, the advantage of consulting firms has mainly come from their monopoly on professional knowledge and analytical capabilities. But the market is evolving rapidly.

For traditional consulting firms, adapting to this environment requires not only money but also time. Transforming these institutions into a flexible network model will take years of change.

Meanwhile, more agile and flexible organizations built from scratch outside the pyramid model may seize this opportunity.

Artificial intelligence may be reshaping the way consulting firms operate, but ultimately, it's the clients who will decide which companies will survive the transformation. The companies that will succeed in the next decade will not be those with the most AI tools, but those that prioritize delivery speed, professional knowledge, and providing measurable value.

Translator: boxi.