R "Ray" Wang
R "Ray" Wang
Monday's Musings: In An Age of AI, Death To The Pyramid Model, Long Live The Diamond
The Traditional Pyramid Is Under Attack. AI Arbitrage Is Here
Most professional services firms have operated in a pyramid model where the most senior owner of a P&L would have a staffing ratio of 1:3 to 1:5 and their next reports would have a staffing ratio of 1:5 to 1:10. This pyramid structure would continue until the last level. There could be as many as 8 to 10 levels in a structure that looks like this with billable rates per hour that would correspond to seniority and level of expertise.
- Managing Partner/ Senior Vice-President ($1500/hr)
- Partner ($1200/hr)
- Senior Director ($750/hr)
- Director ($600/hr)
- Senior Manager ($400/hr)
- Manager($300/hr)
- Senior Consultant ($200/hr)
- Consultant ($150/hr)
The Diamond Is The New Staffing Model
As more and more work becomes automated and a range of lower-level and higher-level tasks are replaced by AI, the need for a classic command and control pyramid structure goes away. In fact, automation and AI break off chunks of the pyramid. As more humans manage more bots, the pyramid look more like a diamond. Workers on the bottom levels of the pyramid are replaced or even age out. And in many cases, new product or service offerings hasten the reduction of humans as the level of automation increases.
The Bottom Line: Services Firms Look More Like Software Firms In An Age Of AI
If one was to create a new services firm startup, the biggest target market would be the BPO business of legacy services firms. Why? Well defined processes, established exception handling, and large contracts could all be turned into AI-driven smart services and software. The future services firm must compete on bot efficiency and human ingenuity. Software driven approaches will trump traditional labor intensive services. Expect AI to augment work while automation software will play a big role in operations Services firms that fail to make this transition will cease to exist.
Your POV
Do you expect your services firms to deploy more bots or more humans? What's your expectation on contracts in 2024?
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