Transcription
So, the industry getting advice from a consultant is an annual half a trillion dollar industry. That's $500 billion. And the biggest company, when you think about consulting, you think about McKinsey. If you work for one of these Fortune 500 companies, decide to go to McKinsey, and you say, "We want them to get a 200-page report. We're thinking about doing this, but before we do so, let's see if McKinsey thinks it's a good idea or not." How much would it cost you? Well, you would need to hire them for six months with a team of eight to twelve for an engagement of two to five million to get a 200-page report.
By the way, if this sounds like a big, "Oh my god, $2 to $5 million?" Yes. You know what the US government paid McKinsey since '08? $1 billion. Do you know Saudi Arabia, the country, you know how much they've paid McKinsey the last 10 years? $500 million. But they're changing it. Why? Here's why.
Today, the same 200-page slide deck that you wanted for $2 to $5 million, today an AI-powered analysis can deliver a real-time dashboard with actionable insights within 48 hours. You know, for how much? $10,000. You know what happened when this took place? McKinsey's let go of 5,000 of their consultants, employees, just in the last 18 months. And the entire consulting industry is being disrupted. And the market's wondering, "What the hell happens to these guys next?" We're going to talk about that today.
All right, if you get value out of this video, give it a thumbs up and subscribe to the channel. If you're somebody that's part of the 51% community who consumes our content and hasn't subscribed, it would mean the world to us if you do. So, having said that, let's get right into it.
If you're a consultant or you're trying to get into this business, I have things I want you to think about at the end on how to be competitive. But before getting into that message, let's get right into it. So, it isn't just McKinsey. I'm not taking shots at McKinsey. It's everybody. Deloitte, PwC, KPMG, that they're laying people off because they have to find a way to adjust this entire game plan. But the challenge with this is the relationship with the client because there's a part of it where the market is like, "We don't mind paying you consulting fees. We don't mind paying you a little bit, but if you tell us you're doing 40 hours of work, but you only did four hours using your own AI, that's a problem for us." And that's kind of what happened with McKinsey.
So, let me get right into it. Remember when I told you the US government has had a billion dollars of contract in consulting with McKinsey since 2008? $450 million of it was just with the Pentagon. And as you look at year-over-year, 2014, $55 million. Then next year, $70 million, $85 million, $110 million, $130 million, $142 million. All this stuff. Recently, President Trump's administration, they came out with the directive and they started kind of looking at what everybody else is doing. It says, "Listen, listen. All this stuff you guys are paying to these consultants, time out, guys. We cannot do this." So, it's even gone further lower recently.
But let's get into a couple of the challenges that McKinsey has. So typically, when you hire these consultants, you pay $300 to $500 an hour for junior assistants, market research, basic financial models, format PowerPoint presentations, the one kind of we talked about earlier, which is not a problem. But the problem is what used to take two weeks of manual labor now is taking four minutes. And McKinsey customers are saying, "Wait a minute. We know you created something new called the Lily, the AI assistant. We know 72% of your workforce is handling over 500,000 prompts per month of Lily. We know you're using this. This is public info. We know about it. By condensing weeks of research into seconds, it has saved the firm an estimated 1.5 million hours of manual labor." So, that's the integrity. The integrity is you're doing $1.5 million of payment you want from me times $300 to $500 an hour, but it's taking you minutes to do. So, I have a very big problem with this.
So now they have to kind of find a way to pivot and make adjustments. So that conflict led to people getting upset saying, "If you don't fix this here, we're going to a different place." So they came back and they made a couple adjustments. Moving forward, watch this. McKinsey is moving rapidly towards performance-based agreements. Approximately 25% of its global fees are now outcome-based rather than time-based. Bain is 30% of its consulting revenue from AI and tech-driven initiatives, targeting 50% in the near future. And BCG projects that AI-related strategy and tech integration will represent 40% of its revenue. That's obviously very important because the companies are saying, "Look, we'll pay you $2 to $5 million. We'll pay you $50 million if it's based on the kind of targets we're going to hit as well." Well, no, we're just in the advice business. Well, no, I want you to tie to my success.
Okay, so this is the part where conversation could lead to. Because back in the days, they had equity structures that they did with different businesses. We know Bain, BCG, they're all integrating AI. So it's not like they're not doing it, but people simply want to know, "Don't charge me for work you're not doing that I can do myself."
So what are companies learning? This is what companies are learning. They're saying, "Instead of me hiring you and paying you $200 to $5 million, I'll go recruit four or five of your guys that you're paying them five, six, $700,000 a year. I'll bring them over to my company. I'll set them up on the AI with Claude and I'll say, 'Give me all the prompts that you guys use,' and permanently I have that on my system as an internal McKinsey company. I don't have to pay the $2 to $5 million. I got permanent guys that are here with me." That's what they're doing. So they're recruiting their people away to help them feed the AI the prompts that McKinsey's been using for decades. So companies are getting smarter.
So this is causing McKinsey and other companies to be like, "Maybe we need to create a partnership together instead of the relationship that we've had." And on top of that, some customers have a little bit of a bad taste in their stomach, which is like, "We don't forget what you did to us with ESG and DEI. You knew it was a bad idea, but you made us pay you millions of dollars to get us to be more ESG qualified." Or, "Hey, let us help you become DEI approved so you attract diversity, equity." You could have told us this is BS. You know, this is BS, but no, you wanted to be politically correct. So, that was bad advisory. So, people haven't forgotten these games that were played a little bit with all these people that were at these big consulting firms.
So folks are kind of burned out from that. And now when everything is out there on the table, people want to know, "What have you personally done?" Let me tell you what I learned. I've paid millions of dollars in consulting, accounting, lawyers over the years. Gladly, I paid it. But for me, it came down to three different letters on who I paid and who I didn't pay.
If you were a T, I qualified you as a theory consultant. This is somebody that got a degree. This is somebody that read a lot of books and is giving me theories of what John did, the theories of what they learned in a school of an MBA, theories of case studies. And I'm not, this is the lowest money you'll get from somebody that's just giving you theories. You know what the second one was? Witness. Somebody who they witness, who they worked with. So if you worked with Steve Jobs and you're telling me, "Let me tell you how Steve Jobs ran board meetings," that's valuable to me. Let me tell you how when we sold the company, what John did when he sold his business for $1.1 billion and I was there helping close a deal. You're a witness. So, you're sharing with me what you did. That is very, very valuable.
But you know what's the last one that's most valuable? A person that actually did his theories. This is the guy that sold the company. This is the guy that started a YouTube channel. This is the guy that grew a marketing campaign. This is the guy that went and sold a business or did the deal themselves. Because the person that applies their own principles, they've witnessed others, and they have their own theories. These are the guys you pay premium for. So instead of paying $300 to $500 an hour, I would much rather pay $200,000 for somebody that knows what they're talking about because they've done it. They're in the arena. If you want to learn how to fight, do you think you're going to get good advice from Mike Tyson or somebody that just kind of read all the books on boxing? This is it.
So when it comes down to this, look for TWA consultants, not the theory folks, not the witness folks. If you have a trifecta, pay premium for these guys. And most of these consulting firms that I believe in the future that are going to come out and do big things are going to be companies that are driven by people that are applying their thing. I, I paid a half a million dollars to a lawyer, guy named Chris, when we were selling the company because he had sold tens of billions of dollars of companies. You know what he told me? "Here's what's going to happen. They're going to do this. When they do, let me be the bad guy. They're going to try to add these seven terms in there. Let me negotiate it. They're going to say this to you and make a separate phone call. Get off the phone and call me immediately." Everything he said happened. That half a million dollars I paid him, that seemed like a lot of money, was the difference between me selling the company for $200 million and $250 million. You think I'm worried about that for half a million? No.
Or when I went and talked to a couple of these guys, it was this one accountant that had a YouTube channel with 300,000 subscribers. Big guy. I met him at an event and he comes up to me and said, I asked him, I says, "So how'd you get to 300,000 subscribers?" And he says, "Boy, I run a consulting firm that I teach smaller YouTube channels." Me and Mario were like, "Let's do it." We had multiple calls with this guy. He taught us the most basic things that we never thought about. Like this, we went to 100,000 subs. You think it was a word of mouth? Yes. Why? He's a, what? He's an application guy, not a theory guy, not a witness guy. He's a trifecta. So I think the market of those who win, it'll be those who have had moral authority of having done it themselves. That's what I think the direction the market's going to go to. And a lot of these other MBA guys, they have to either team up with somebody that's done that or find a way to differentiate themselves because this model that they have, one, it'll fully go away, but they're going to get disrupted in a massive, massive way.
So, if you're watching the same path, we'd love to learn more about our consulting firm, Bid David Consulting. There's an 18-minute video that explains the five challenges entrepreneurs face at five different phases. If you've never seen it, go to biddavid.com. You'll see the video all the way below. But if you want to talk to somebody at the home office of Bid David Consulting, just call the number 561-726-8955. Again, 561-726-8955. They will tell you all about our consulting firm and how we're different than our peers and competitors.
If you got value out of this video, give it a thumbs up and subscribe to the channel. If you're part of the 51% community that watches the content but hasn't subscribed, it would mean the world to us. Again, if you do subscribe and if you enjoyed this video, you want to watch another video I did on the entire consulting industry, click here to watch that video. Take care, everybody. Bye-bye. Bye-bye.