What made strategy consulting valuable now makes it obsolete

Understanding why strategy consulting has been failing holds the secrets to how it should evolve.

For the short(er)-form version, see my article featured on fastcompany.com. But I warn you, you’ll miss a lot of the fun.

As the AI craze captivated the business world, many have predicted doom for strategy consulting. But while today’s critiques rightly point to the pressures AI poses to strategy consulting’s business model, few are digging into why its core value is threatened, and fewer are proposing how it should evolve. Those that do might see what I see: strategy consulting is failing because clients’ needs have long changed, and the consulting industry simply has not evolved to meet them.

Over the last 15 years, I have benefited from an accidental professional experiment that has given me a unique perspective on strategy consulting. As a bright-eyed, bushy-tailed analyst for a “strategy” consultancy, I learned all the traditional business frameworks and formulas, and diligently annotated my copy of The McKinsey Way in an attempt to become a professional advisor. After several years, I left to join an “innovation” agency, with lineage in consumer insight and design, where I had to unlearn a lot of what I had absorbed and understand a very different way of practicing the same craft. Then, in an interesting twist of fate, my innovation agency was acquired by the very strategy consultancy I had left. Suddenly, I found myself leading the integration, navigating the synergies and tensions that arose between two, mostly different, strategy schools of thought.

What resulted from this experiment was an unrelenting stream of learning, viscerally experienced. Not only from the years of leading the integration, but from studying the origins of the different streams of thought, garnering client feedback, and immersing in critiques of the general profession. Synthesizing all of this learning helped me understand why strategy consulting is failing, and how it should evolve.

The Client Context

Let’s start with some necessary, albeit obvious, context. The biggest strategic challenge facing clients is delivering results today while, simultaneously, adapting for tomorrow. Trying to keep their organizations successful while (largely technological) change constantly breaks the core business conventions on which they are based is, well, a challenge.

The effect on the strategy demanded of the day should, therefore, also be obvious. While “traditional” strategy extrapolated from the past, today’s must anticipate the future to keep pace with the oncoming change. While traditional strategy assumed stable business conventions, today’s must consider new models enabled by new technologies. And while strategy always required evidence to survive the scrutiny of leadership and boards, today’s must defend unprecedented approaches for a less predictable environment.

Even though foresight, criticality, and experimentation have been long understood, businesses are still challenged—culturally and structurally—in developing transformational strategies. Misaligned incentives, organizational silos, pressure to utilize established infrastructure, and general conservatism to protect a scaled core business keep leaders trapped in the “tyranny of today.”

It’s not for lack of trying, hence the efforts over the last few decades to become more “agile,” or, post COVID, commonly referred to as being more “resilient”. Being at an innovation agency, I have had a front row seat to many efforts to develop and embed an innovation function and culture, to varying degrees of success. In the circumstances of failure, the structural or cultural dynamics of the business discussed previously win out in one way or another. But even in the circumstances of success, they are more often than not small wins that do not affect the overarching strategy and direction of the business.

In 2015, I worked with a global brewer to understand who the consumer of 2020 would be, and what impact that would have on the pipeline of products the company should develop. Even back then, we were already seeing signs of what is obvious today: fewer people wanting to drink alcohol. I continued to work with the client to try and adapt the company for what was to come, including developing a separate organizational unit focused on growing and acquiring sub-scale products, and designing and launching new products, many of them non-alcoholic.

Despite these efforts, the company faced a multitude of challenges to adapt. The requirements of the scaled, profitable core business continued to funnel focus and resources away from new unproven efforts. Fantastically skilled brewmasters pushed back on non-alcoholic beer succeeding, given the inability to recreate the exact taste profile of alcoholic beer. And when new products required different raw materials to be successful, formulations changed to use the raw materials that were readily available, even when evidence showed consumers would reject it.

In short, large businesses struggle to adapt to change. However, while it’s challenging for large businesses to maintain an eye toward the future, think outside the conventions that are ingrained in the business, and find the incentive and space for tinkering in unproven directions, external partners are not under any of the same constraints. With the freedom that comes with being outside the organization, strategy consultancies are incredibly well positioned to provide exactly what today’s strategies require.

Yet they are failing to deliver.

The Failure of Strategy Consultancies

In The World’s Newest Profession, Christopher McKenna chronicles the history of management consulting. McKenna highlights how management consulting arose not as an evolution of early efficiency engineers and scientific managers, but as an unintended consequence of the Glass-Steagall Banking Act of 1933. The legislation prohibited rival professional groups (e.g., lawyers, accountants, engineers) from continuing to act as consultants, thus creating a jurisdictional void in professional services that were filled by the first management consultants. This history is valuable in understanding why strategy consultancies are struggling to deliver what today’s strategy requires.

McKenna describes management consultants’ core value as providing “economies of knowledge,” or in a word, expertise. Consultants provide experience and functional specialty that arose from similar cases on previous assignments, therefore acting as institutional conduits of new knowledge to the client organization. These economies of knowledge did not diminish when shared, as providing the same knowledge over and over again did not decrease its value—and at times even increased it.

The historical value of providing economies of knowledge is still the core value management consultancies offer their clients to this day. While the knowledge they broker has changed over time, management consultancies still stress expertise, touting industry and functional specialization and utilizing case studies as proof points. It is for this reason that new waves of information democratization—whether the “big data” push of the 2010s or the AI craze of today—stir up discussions of consulting’s decline.

But this point of view focuses on what consultancies offered in the past, not on what clients need now. For clients needing help developing a strategy in today’s environment, knowledge brokering is not what they need. Today’s strategies require an understanding of the future, not the past. They require the critical thinking to break conventions and orthodoxies, not adhere to them. And they require constant experimentation to learn in the latest version of the world, not rely on expertise formed under previous circumstances.

Businesses grappling with AI are the perfect example. Last year, a newly hired executive from a major media conglomerate approached my consultancy’s strategy division. With a fresh perspective, he realized the company was using AI to modernize within the current business structure—limiting the technology’s potential to drive transformation. When presented with this challenge, our traditional strategists pitched deep media expertise and proposed using a new AI tool developed to evaluate the business against the traditional media value chain. Privately, the executive expressed his disappointment to me. The proposed solution relied on people and tools steeped in the very media orthodoxies he needed help breaking.

For traditional strategy consultancies, changing a century-old value proposition hasn’t been easy—for cultural and structural reasons alike.

McKenna explains that because consulting was not a field innovated by new skills, but rather by institutionalizing professional practices within a protected market, it took measures to legitimize itself as a profession. The industry linked themselves to professions with perceived authority (i.e. engineering, accounting, law), by, for example, creating professional organizations, hiring exclusively from elite universities, employing a challenging “up or out” system of career progression, and even discouraging individuality of outward appearance in favor of collective professional conformity. These measures formed an extremely homogeneous cultural backbone for the profession—one that still exists to this day.

In my first years in consulting, partners required me to be clean-shaven every day as I worked from the client site the traditional Monday through Thursday. I have a thick beard, which is painful to shave daily. As a consulting analyst I spent a whopping $500 on beautiful, but more importantly, professional-looking tortoiseshell glasses in an effort to distract partners from the slight five o’clock shadow that would appear every other day. Unfortunately, it didn’t work. A partner noticed my shadow and told me to go back to the hotel and shave. (I still wear the glasses to this day trying to recoup my investment.)

As innovation and entrepreneurship have become more en vogue, some of the appearance policies may have relaxed, but many of the policies that maintain conformity and homogeneity are still very much present. Decades of brokering the knowledge of their most experienced people has reinforced a firm hierarchical structure, where more junior consultants look to more senior leaders not only for direction, but for the content they base their client recommendations on. Consultants are organized in deeply specialized practices, often industry-based, and therefore mostly work alongside like-minded colleagues with similar experiences. And given the size many consultancies have grown to, bureaucracy and policy act as a deterrent on a culture of curiosity and experimentation.

Just before my relatively small innovation agency was acquired, we had finished a project developing the first transatlantic experience strategy for a major U.S. airline. To generate the insights that would help lead us to our recommendation, we turned a room in our office into the fuselage of an airplane – complete with seats and overhead compartments, food service provided by an actual flight attendant, iPads that functioned as in-flight entertainment seat-back screens, and sounds and lighting consistent with a plane en route to Europe. (It felt so real we had one experiment participant fall asleep in his seat!) We ran iterations of our experience with consumers, from the meal services to the prototype on the “seat-back screens,” using the learning from our experimentation to support our recommendation.

But after we were acquired by the much larger consultancy, there were fewer examples of this type of bold experimentation. Project teams resorted to simpler tactics, such as basic ethnographies or digital A/B testing, whether or not it was the optimal way to gather insights. Upon investigating this phenomenon, we discovered that the effort required to navigate the large consultancy’s procurement procedures was too high, and the unique items we requested for various experiments were often outright rejected for purchase. Needing to stick to timelines, our teams defaulted to experiments that were common and acceptable to procurement, even if less effective in what they taught us.

Strategy consultancies, while theoretically well positioned to help their clients develop strategy fit for the times, are challenged to do so. The core value proposition of offering economies of knowledge, in addition to being weakened by the continued democratization of knowledge through data and AI, is not the value clients require for strategic advice in today’s environment. Furthermore, today’s strategy requires a culture that encourages individuals to depart from the norm, to challenge long-held industry beliefs, to understand a broader picture to make disparate connections, and a structure to be able to experiment with new ideas at speed. With the legacy of conformity, embedded hierarchies, organization by specializations, and structural blockers to doing new things in new ways, strategy consultancies will continue to struggle to become the partners their clients need.

The Failure of Creative Agencies

In The Cult of Creativity, Samuel Franklin investigates the surprisingly recent history of creativity, from its origins post-World War II to its study by psychologists and educators, as well as its applications in the business world. By the middle of the 20^th century, having achieved the productive capacity far beyond what was necessary to meet everyone’s basic needs, the strategies of the business world began shifting away from efficiency and toward marketing and innovation. Now that necessity was no longer the mother of invention, creativity was needed both to differentiate products serving similar purposes and to develop new ones nobody asked for. In addition to the (more well-known) renaissance in Advertising, the adoption of creativity produced Synectics, the first boutique consultancy specializing in applying creativity to the product and R&D space—the predecessor to many design and innovation agencies of the present.

While management consultancies were maintaining conformity and strict professionalism to evolve from their cost accounting roots into organizational and growth strategy, advertising and innovation agencies leveraged creativity to provide marketing and product strategy. Given that today’s strategy work requires leveraging the art and science of foresight to anticipate the future, expansive thinking to break established orthodoxies, and consumer insight to build confidence in new strategic directions, one would think that creative agencies would be well positioned to lead where traditional strategy consultancies have failed.

Creative agencies have, in fact, gained significant ground in helping clients with strategic questions once posed only to strategy consultancies. Evidence of this includes the growth of “innovation consulting” firms in recent decades, and the subsequent acquisition of these firms by strategy consultancies themselves throughout the 2010s. However, creative agencies have struggled to deliver on the needs of today’s strategy, albeit in far different ways from strategy consultancies.

In documenting its history, Franklin highlights the ambiguity of creativity. The same paradoxes that made the term difficult to research and make scientific conclusions for psychologists and educators made for its mass appeal and frequent application. Creativity was both playful and practical, extraordinary and everyday, artsy and technological, exceptional and common, and mental and material. This ambiguity can, in part, explain the inconsistency across creative agencies in delivering on today’s strategic needs of clients. Agencies that lean too heavily on a vague notion of creativity may not understand why aspects of it are valuable for developing strategy, and therefore fail to apply it correctly to client needs. These agencies often become the facilitators of what is negatively described as “innovation theater,” or creativity for creativity’s sake.

For example, while creative agencies are much better at incorporating an understanding of the future into their work, it often remains stuck in the abstract. Flashy utopian or dystopian futures are presented as provocative stories, recycled trends are reported, and predictions are boldly pronounced without humility—a dynamic eloquently chronicled in Nick Foster’s book Could Should Might Don’t. But this lazy futurism often fails to be applied to the client’s business, sometimes being divorced from the present entirely, preventing clients from using the foresight in any meaningful way. In the same way the endless market research of strategy consultancies is chastised as collecting dust on shelf, so too are stories of future technologies or consumer behaviors left stuck in the theoretical.

Creative agencies can also lack a certain criticality in their work. In his history, Franklin exposes the lineage of creative processes and methods, from brainstorming to design thinking. He identifies a couple through-lines across these methods, including a series of replicable steps, signature literature, materials, and tooling, and being linked to quasi-academic centers. These creative processes are certainly helpful in describing and scoping time-definite projects between agencies and clients. But in practice they work to deemphasize the rigor in thinking needed for strategy development. Steps of a process are followed blindly; ideation happens needlessly; things are broken simply for the purpose of breaking things.

While today’s strategy does require “creativity” in a sense, creative agencies must understand the burden of evidence that their clients are under to do something unprecedented, and work to meet that challenge of confidence. They must apply “creativity” where it is needed for strategy development, but not forget to directly apply it within the context of the client’s business. They must follow the well-intentioned principles of their processes, but not blindly follow the process itself expecting rigor to always result.

All of which raises the question: what exactly are the qualities needed to develop strategy today? For clients, what should they look for in a partner? And for strategy consultancies and creative agencies, how should they evolve?

The Qualities Needed for Today’s Strategy

Consultants—traditional strategy consultancies and creative agencies alike—have a knack for using overly complex language when describing what they do. They use processes that may go by different names, but are often the same. They tout useful proprietary data sets and unique tooling, useless if used the wrong way.

To highlight what matters most—beyond any process or tool—I’ve attempted (emphasis on attempted) to distill today’s essential strategy qualities into three:

1. Understanding Why: In an environment of constant change, strategies must incorporate foresight by understanding why things are changing, not just what is changing.

2. Centering on Tomorrow’s Needs: As conventions break, strategies must employ criticality by focusing on tomorrow’s needs rather than adhering to today’s orthodoxies.

3. Experimenting in Pockets of the Future: Facing uncertainty, strategies must generate new learning by testing with future customers, not analyzing past data or relying only on expertise.

Understanding Why

The most valuable piece of strategy work is not the answer it concludes, but rather the questions it surfaces, especially in an environment of constant change. If Eisenhower was right that ‘plans are worthless, but planning is everything,’ the focus should be on what is learned in the process, not the resulting plan itself. And what should be learned in planning is not the fleeting what that already exists in the world, but the evolving why that will direct novel future actions.

Traditionally, this has been the job of market research. Consultants past and present have been expert in exposing what exists today (e.g. markets, competitors, technologies, etc.), within the domain of the scope in question. But what exists today may not exist tomorrow, and what exists tomorrow might enter from outside the domain of today. Market research, knowledge being made much more accessible by AI today, is only as good as the foundational context it provides.

Strategists must work to understand why what is happening is occurring, to recommend what to do going forward. They must understand the breadth of what is happening in the world to better understand causality and capture what is blind from the purview of the immediate domain. They also must understand the depth of what is happening not at the market level, but at the individual level. Markets don’t demand things—people do, when they have problems, needs, or desires.

There is no one technique or process that accomplishes this. I’ve seen successful understanding from more common techniques like strategic foresight and design research, but also less common techniques like philosophical research and design fiction. Frankly, there are as many foolproof processes for understanding as there are fully confident answers found in today’s learning journey. And processes may surface the required inputs, but those inputs must always be synthesized into an understanding.

When a global media and entertainment conglomerate asked us how they should create the theme park of the future, we desperately needed to understand the why. While strategy consultancies would have dove into the theme park market and creative agencies would have started predicting future technology-induced utopias, the first step for us was a deep understanding of why. Why do people come to theme parks today? Why will they come tomorrow? By synthesizing a wide variety of inputs, we concluded the most important part of our work: our perspective on the value the client must provide park-goers of the future. From the richness of that understanding, we were not only able to define how the theme parks should tangibly evolve, but also how the media-entertainment flywheel should be transformed as a whole.

Centering on Tomorrow’s Needs

The breaking of business conventions will not cease, as new technologies emerge, consumer behaviors change, global policies get implemented, and new events occur. So, how does one identify the conventions that will break, or should be broken? Do they list all the conventions that exist in the world and decide if, and if so how, they should be broken? Sounds laborious and inefficient, but how else can one be comprehensive?

Human-centered design enthusiasts will recognize centering around problems or needs as a core tenet to designing new products and services. In developing strategy, I believe centering around needs plays a slightly different purpose: it allows strategists to better apply their foresight and critically identify the conventions worth breaking.

After having developed an understanding of why the world is in its current state and why it is anticipated to be in its future state, we need to apply that understanding to what is relevant to the strategy at hand. Ultimately, people are what is relevant, whether they are people as end-consumers, or people operating a customer business, or people as continuants of a country or locality. Envisioning how their lives will change—and identifying what new needs will emerge—takes foresight from theory to application. And focusing strategies on how to solve for those needs in a future state will naturally ignore the business conventions that restrain today.

This is easier said than done. It needs to balance the expansive mindedness to project needs into the future with the humility of the practicalities and feasibilities that will still exist. It is for this reason that I believe it is important for external advisors to be generalists with respect to the industries in which they work, working hand-in-hand with the ultimate specialists of the client’s business: the clients themselves.

In his book Range, David Epstein details the value of generalists in a specialized world through numerous examples and studies. He highlights the value of the generalist-specialist team, citing studies where optimal teams included specialists that were able to focus on difficult problems and anticipate obstacles, while generalists added value by integrating insights from one domain and applying them to another. To me, the combination of clients as specialists in their business and generalist advisors being appropriately naïve to orthodoxies of the present (that specialists might have ingrained in them) is the right combination for today’s strategy work. (Note: AI, the superhuman specialist, will be ingrained in teams if it isn’t already, further making the case for external advisors as generalists.)

I was initially uncomfortable as I transitioned from the specialist-valuing strategy consultancy to the generalist-valuing innovation consultancy, especially when working in highly regulated fields such as pharmaceuticals. But in my first work with a pharmaceutical company, I saw the value in being unencumbered to the orthodoxies of the industry. My work involved preparing for the launch of a new therapeutic, which was very expensive, required refrigeration, and a physician to administer. In solving for the challenge of coordinating the drug, the patient, and the physician being in the same place at the same time, the client was working on a tracking application. But, having just finished work with a snacking company in which typical vending machines played a role, I naively suggested creating a device that could store pre-prescribed inventory of the drug on site. Our clients initially challenged the idea for several reasons, all valid given how the industry worked to that point. But together we solved the constraints through the application of new technology, and working through legal hurdles. This is the value of generalist-specialist collaboration: generalists unconstrained by industry norms offer new conventions, while specialists leverage their expertise to make them feasible.

Experimenting in Pockets of the Future

There is an inherent level of uncertainty in any strategic decision concerning the future. Yet, business teams need to be able to make informed decisions with confidence, and provide the support needed to convince their stakeholders to make investments—especially those in directions that are atypical for the business. To do this, we must generate new data to support how our strategy will fare in the future.

Of course, data and expertise grounded in the past is valuable information and a wonderful place to start. I’ve also worked with synthetic data generated by AI, but it should be noted that this data is, by definition, extrapolated from the past as well. How can we attempt to understand net new strategic directions, at worst, in the most recent present and, at best, in the future?

Experimentation is not a new concept. Born of the ‘fail fast’ era of lean product development, it enables teams to learn by trying something new. However, I have found that this concept has not been applied to strategy nearly enough. If the ‘future exists, it’s just not evenly distributed,’ then experimenting in pockets of the future is the best tool we have to learn about future strategic directions.

When working with a major shipping and logistics company to understand the future of digital commerce and develop a new strategy to stave off commoditization in shipping services, we employed this type of experimentation to form the strategy with company leadership and legitimize it to the board. After using strategic foresight to develop a perspective of the future of commerce, we designed ‘sacrificial’ concepts meant to test different strategic value propositions the company could offer to differentiate its services. We experimented and iterated these concepts, not with the typical customer but with the customer indicative of the future. We bypassed the client’s biggest current customers for those that were new, digitally native, serving more demanding—read: younger—generations, and in unique and growing industries. By doing so, we exposed the next wave of value sought by the future mass market, rather than surfacing issues of technical or operational debt with legacy services. By experimenting out in the world, we increased our confidence in how to move forward and strengthened our narrative to stakeholders.

I remember when I first became a strategy consultant, decades ago, how much confidence I had in supporting my recommendations with data grounded in the past or present. No longer—I need to provide firm leading indications that a new strategic direction is the right decision. Today’s consultancy or agency must be able to extract what needs to be learned effectively, design experiments that deliver that learning from pockets of the future, and have the means to create the necessary stimulus (physical or digital) to capture how the strategy would manifest tangibly. All in the interest of building confidence in a strategy fit for today’s wild world.

A New Value for Strategy Consulting

Even before the most recent challenge from AI, strategy consultancies and creative agencies failed to provide the value clients needed to form strategies in today’s environment. Strategy consultancies do not provide value by brokering knowledge, nor do creative agencies provide value by being creative. Both can provide value by helping businesses overcome self-imposed limits to transformation: understanding the broader world, challenging long-held assumptions, and learning—outside the comfort of their offices—to shape new strategic directions. Taking a step back, isn’t this what an external strategic advisor should intuitively do?

While AI has forced a reexamination in strategy consulting I wholeheartedly welcome, my fear is that most are missing the point. Instead of reevaluating their offer for what clients need, the focus to this point has been on ‘AI-ifying’ what already exists: faster deck building; automated searches of proprietary knowledge bases; productizing processes for as-a-service offerings; and moving from pyramid-shaped teams to obelisk-shaped teams. These actions are warranted only if you assume a century-old value proposition—one actively challenged by democratizing specialist knowledge—should stay the same.

So then, what should the new value proposition of strategy consulting be?

Even if I were brash enough to formulate a new value proposition for an entire industry it likely wouldn’t change much, as large consultancies, ironically, have the same problems their clients have. Pursuing the relatively massive revenue opportunities afforded by economies of knowledge—in areas where it is admittedly still valuable, such as technology implementations—is more attractive than transforming themselves to excel in the smaller strategy market. But as clients continue to take issue with strategy work that is not visionary enough from traditional consultancies, or applied enough from creative agencies, new propositions will emerge to fill the gap.

Naturally, though, I do have my hunches.

In their book The Big Con, Mariana Mazzucato and Rosie Collington describe many issues with consulting as an industry. At the core of their critique is the idea that because the real value of consulting is difficult to ascertain, consulting is more concerned with creating an impression of value than actually delivering it. Consultants create this impression of value through their powerful networks, with case studies and recycled frameworks, the qualifications of their people and quasi-academic thought leadership doubling as marketing material. I would assume the authors of The Big Con would support the reexamination of the industry’s historical value proposition, as they challenge the industry having valuable and scarce knowledge assets in the first place.

Reading The Big Con as essentially a career consultant was a paradoxical experience for me. On the one hand, I agreed with nearly everything that was written and even found myself applauding some of the authors’ most cutting points along the way. Yet on the other, were all the positive experiences I have had with clients and the impact I believe my work has made. It wasn’t until I read a specific critique of consulting from The Big Con that a resolution to the paradox was triggered: that consulting steals interesting work and learning opportunities from employees, and thus challenges the ability for organizations to take on important skills.

That critique resolved my paradox by revealing what I’d been mistakenly focused on. When searching for my most impactful work, I had been focused on what we delivered (knowledge and insight, the strategy itself, commercial outcomes that resulted) when the real impact came from something else entirely: the effect on individual clients. My greatest impact was when individual clients—freed from their organizational constraints—developed their own new understanding and advocated for a new direction forward.

Simply put, my work is at its best when I successfully create the conditions to develop and apply a new understanding.

Businesses need external partners to help them transform while they perform—this hasn’t changed. Understanding why the world is changing, centering on tomorrow’s needs, and experimenting in pockets of the future remains essential to developing strategy fit for our times. But the only way businesses can sustain transformation at scale is when their people possess the capacity to continuously understand what is new and adapt to change. Therefore, strategy consulting’s new mandate must be two-fold: develop the strategy that’s right for today while simultaneously building the team’s ability to adapt that strategy over time, with new applied understanding.

Consultancies and agencies face a choice in delivering strategy work for clients: fight a losing battle against AI to continue providing economies of knowledge, or undergo the difficult transformation required to offer value clients need.

Clients, meanwhile, must evaluate partners differently. In a new world where specialist knowledge is easily accessible and traditional outputs can be developed with a few quick prompts, they’ll need to evaluate partners based on their ability to combat the constraints of the organization and build a new understanding capacity across their team.

For me? The irony isn’t lost: the threat of artificial intelligence has only accentuated the disconnect between client’s strategic needs and current strategy offerings, and, in its place, exposed a fundamentally human capacity—the capacity to understand—as what is of value.

A value I intend to pursue.