From Unstoppable Growth to an Abrupt Halt
For a decade, McKinsey was an unstoppable force. Between 2012 and 2024, its revenue doubled in a deliberate and aggressive expansionary wave. This growth was fueled by a strategic pivot beyond pure advisory services into implementation. The firm heavily invested in its digital practice, acquiring at least 16 technology consultancies and building out capabilities in operations, procurement, and supply chain management. However, this golden era has come to an end. In the last year, revenue growth is estimated to have slowed to a mere 2%, and the firm has shed roughly 5,000 employees since late 2023, signaling a dramatic reversal of fortune.
The Surging Rival: How BCG is Closing the Gap
While macroeconomic uncertainty is a factor, it doesn't tell the whole story. McKinsey's biggest rival, the Boston Consulting Group (BCG), has continued to grow robustly. Both firms pursued similar strategies of expanding their digital and implementation offerings, but sources indicate that BCG has been far more successful at deploying and retaining the specialist talent required to make these services work. The consequences are stark: in 2012, McKinsey was twice the size of BCG by revenue; as of last year, it was only about 20% larger. On the current trajectory, BCG is projected to overtake McKinsey as the world's largest strategy consultancy the year after next.
The New Disruptors: AI-Native Competitors
An even greater challenge is emerging from a new class of competitors, particularly in the realm of Artificial Intelligence. As CEOs grapple with implementing AI, they are turning to new partners:
- Palantir: Nominally a software company, Palantir's model involves deploying its own engineers directly with clients to help them embed technology and utilize data with AI models. With its revenue growing nearly 50% year-on-year, this hands-on approach puts it in direct competition with McKinsey's AI consulting services.
- OpenAI and other Tech Providers: Even the creators of the foundational models are beginning to offer consulting-like services, recognizing the need to be "in the trenches with clients" to help them make productive use of AI and, in turn, improve their own tools.
How AI Threatens the Core Consulting Model
The rise of AI presents a fundamental, existential threat to the traditional consulting business model. Strategy projects have historically bundled two components: high-level strategic thinking and a vast amount of "grunt work"—crunching numbers and preparing PowerPoint slides, typically performed by junior consultants.
AI is poised to automate this grunt work. While a senior partner might see this as a cost-saving measure, it also means that clients can access the same technological capabilities themselves. This is likely to lead to significant "fee compression," as clients become unwilling to pay premium rates for work that can be largely automated. McKinsey and its peers are betting that their vast libraries of proprietary intellectual property will provide a protective moat, but it would be a mistake to underestimate how quickly sophisticated AI models can improve and replicate that knowledge.
An Uncertain Second Century
As McKinsey heads into its second century, the path forward is unclear. While consultants have an incredible knack for adapting to the latest management fads, the disruptive power of AI is different. The industry is undeniably headed for a period of immense change. The optimistic view is that once AI tools are democratized, McKinsey can return to its core role as a high-level strategic adviser for a newly complex world. The pessimistic view is that the very foundations of its value proposition are being eroded. What is certain is that the next decade will be the most challenging in the firm's storied history.