Will AI Kill Consulting? (w/ IGS CEO Matt Umscheid)

And you need your teams to be able to sort of do something that's achievable. - Right. - If you leave them on the five yard line with, you know, no pads on, they're gonna get killed. - Totally. I left it one week at Pop Warner. I got run over once when I wasn't paying attention. Probably picking daisies. And I was like, that's it. Handed it in my helmet. And like, I'm a lover, not a fighter, man. ♪ It's not venture capital ♪ ♪ It's private equity ♪ ♪ It's the private equity fund cast ♪ ♪ For yourself to drink and have a seat ♪ - Hey everybody, welcome back to the fund cast. We have a good one for you today. We're gonna talk about the state of the consulting industry, especially consulting into private equity. If you see one side of the trade is consulting over for $20 a month, you can just do all the due diligence you need without anybody's help. The other side is anthropic and AI are throwing billions of dollars of building consulting firms to drive humans into companies to make AI work. I've got a great guest. He's been a friend for 27 years. A three time private equity backed CEO. A year ago, he joined to become the CEO of investor group services. IGS is what we call him around here. There are go-to commercial diligence and go-to-market provider. We've worked with him on dozens of engagements. We're engaged with him on something right now. So there's nobody else better to walk us through the current moment and what's happening. Madam Shide, the CEO of IGS. - Thank you. - Excited to be here. - All right, so let's start just quick. Who are you? How'd you get here? What is IGS? 'Cause you could explain it better than I can. - Really appreciate the opportunity to sit down and talk with you about this stuff today. - It's only been 27 years on the making. - Right, right. Devon and I got to know each other. I'd talk many years ago. My background is consulting. I work for Arthur D. Little and then LEK in between I spent time at Tuck, where we got to know each other. I then moved to Parthenon Capital and worked on their operating team for nine years and then moved into operating roles. Various commercial leadership roles and then into the CEO role. IGS is the third private equity backed company that I have led in the CEO role. It's sort of an interesting experience to come full circle to have started my career as a consultant, carried the bag, done the work, and then been a buyer of the services and private equity for many years. That's where I actually got to know IGS originally. And now to be a consumer of consulting as an operator and to have that put in sharper leaf where I feel like consultants can bring value and where there's opportunity for IGS and where I think we can really differentiate ourselves. - All right, well no business is being transformed more or at least threatened more by AI and consulting in general, all different kinds of consulting firms. We've used IGS as our go-to, go-to-market commercial diligence provider for years. That's why I wanted to have you on here 'cause I know what you guys do and I know the quality of the product and we depend on you, pre and post deal. But if you read the headlines, it's over. - Right. - So you need is a $20 a month subscription to Clawed and you can do all your commercial diligence and all your research and all your market diligence with an analyst. We know that's over done, but like from your perspective, CEO of a company that primarily, if not exclusively works with private equity owned businesses, what's going on with AI and consulting? Right, large and then we'll kind of narrow it down from there. - Sure. So let's start with just pace of change. And I would say two years ago from my perspective, AI and the AI opportunity was something that was on people's radar and something that they felt like was relevant to them. But man, it felt like it was going to be something that was hard for them to reach. So maybe you had somebody inside the firm, consulting firm, using the heck out of it and be like, wow, this is transformational, but it was kind of isolated in that one person's capability not spread out across an organization. - Right. And what I'd say over the last two years is we've gone from sort of early adoption across the broad group of consultants, particularly middle market consultants, to a place today where I feel like it's really become embedded in the business. And I'd say there are the large players that you're familiar with who are at the leading end of the curve and scale and investment who have partnerships with large AI players. They've built tools internally and invested in some cases hundreds of millions of dollars. But I would say at the delivery level, what a client experiences probably hasn't changed that much. What I have seen is companies have gone from sort of experimentation, which I think a year ago was something that was either in its early stages or maybe fully developed to a place where, everybody got a clot account, play around with it, let's get together once a week or once a month and talk about what we've learned, share skills, share tips and tricks and all these things. - Figure out how to cheat at your job. - Yeah. - Right. - Get ahead and do work more quickly and more efficiently. Today we're at a place where that is no longer sufficient and not a good approach in terms of really getting something that is additive to your offering. And so where we are today is to have a very clear need for a very clear vision around what that is inside of, we can use consulting firm as an example, how we deploy that. And then within our leadership structure and this goes outside of a consulting firm, I think of it as sort of line management. The line management has to have a view of what this is and where it goes. - Yeah, we've talked in the past about three things you think about when you think about AI is kind of risk and defensibility, how do you value creation, right? How do we move the needle consistently and kind of with impact. And then just internal AI readiness. So give me a little snapshot of each of those three. What does that mean? - Yeah, sure. So I would start at the market level and the first thing that I would consider is to what extent is AI reshaping this market? Is it relevant to the business model and then what are the considerations there? If you then move into the risk assessment on the company side that is digging into, how does it affect the product or the service, how does it change the competitive landscape? - Okay, great. So it feels like one in three, like risk, defensibility, and then AI readiness of the team in the organization, relatively easy for a third party to come in and say we've got our scorecard, we ran it up against a scorecard, you're a two out of 20, you're an 18 out of 20. And we have the same one. I mean, people can go and download on GitHub our AI readiness skill and run a company through it. So what about the middle, this value creation piece? Is AI changing the ability to drive change post acquisition? - Yeah, it really is. From a value creation perspective, we look at leadership and we look at people, we look at their process, we look at the technology infrastructure and to what extent the change can be supported there. You know, I do like the BCG framework that sort of says people in process are 70%. I think that's a good way to think about it. It doesn't matter what technology you have or what data you have if you're not. If you don't have conviction around pursuing this and you don't build yourself a good process, you can't get there. And so from a value creation perspective, the coaching mindset is the most important because you need your operating team, the operators of the business to drive it. I've been in the business for 30 years and there's been these times at which there's the big freak out of hey, we gotta get somebody in here and help us figure this out. So the first was, I started in '95. The internet, we gotta figure out the internet. Maybe it was Y2K, are we going out of business? Then in 2005, 2007, it was China, India. I mean, we laughed at some of the decks we put together 20 years ago about India. I was like, have you been to India? Have you been to China? No, but I'm worried about it. Then it was obviously GFC stuff like, hey, are we dead or are we allowed? We default dead, default alive, kind of figuring that kind of risks thing out. Then it was the cloud, 2012, hey, the cloud, the cloud, the cloud, then it was remote. Oh my gosh, we are COVID, we gotta figure out how to remote and retool the organization and kind of live in a hybrid world. And now it's AI, maybe I missed a couple along the way. But each of these times, we're times when somebody picked up the phone into private equity firm or a private equity owned company and called a group like you and said, give me some perspective. I think that AI is changing businesses more rapidly than any of those things have in the past. Because I think the pace of how it is affecting individual processes through the business, up and down the scale, and the sort of the democratization of that technology means that the change is sort of ubiquitous. It's everywhere. Meaning for 20 bucks a month, everybody's got the most powerful model in the world in their laptop, right at the end of an internet connection, where with China and India or remote or the cloud or whatever the internet, it was like, I don't know, okay, I'll wait for the change to happen. And then I'll adapt to it. There's nothing I can do right now about it. Is that weird? Is that fair? Yeah, I'll use a, well, maybe not a funny analogy, but like I remember pre-COVID sitting in a conference room and Denver, Colorado having a conversation with someone saying, "GD, think COVID's going to come here and both of us looked each other and said, "No, it's not coming here." Well, two weeks later, I was home for months. We were buying a company at that time, an add-on for a company we owned, and the owner was in Florida, and he was like, "This is going to be blown over in two weeks." Yeah. And he was like, "I'm not changing the price. I'm not changing either. Buying it or not buying it." And this was in the aviation industry. So we bought an aviation software business in the spring of 2020 as an add-on to a business we already owned. And it was like, "There are no plates." I mean, this was like the planes were still flying, nobody on them. Yeah, but he was like, "Well, I mean, if you're not still buying, I'm walking and I'm going to go find somebody else to buy it." No, he wouldn't have been able to find anybody else to buy it for a while, but business held up great aviation. The planes got back in the air and everything in that transaction had been fine. But totally same thing. He might be Giants concert, like March, this is dating me, but March 9th or something with my brother who flew in from Boston to see the show at the Vic here in Chicago. And because they canceled the Boston show, we're standing next to a couple who are like, "We flew in here from London because they canceled the London show because COVID's all over London." I'm literally sitting in a room with 2,000 other people breathing each other's air with two people from London where they already shut London down. And we're like, "This is fine." That was my six years ago experience. So I want to talk about red flags and green flags. How do you pick a consultant on an AI project without making a mistake? But before we get that, we got to talk about Anthropic and OpenAI building these consulting firms with billions of dollars of valuations, hundreds of millions of dollars investing, and these kind of like, "Hey, we're going to go and these big private equity firms investing them to bring them to their portfolio." What's your take? Because I have one. I just want an more informed take from somebody actually knows what's going on. Look, I think great distribution opportunity for them to embed their technology. So I think it's a smart strategic move. For the model companies. Yeah, for the model companies to do that exactly. And so, and I think that their biggest opportunity is the largest businesses in terms of transformation, dollars, and scale, and benefit. We live in the middle market. And the middle market is a different place. Most middle market companies are not paying Kinsey or MBB rates. They're certainly not paying it for any kind of transformation. It's a transformation work as far as you're expensive, and it may not even be the right fit. And so, I think what we're seeing is the need for AI technology and real thinking in the middle market. But we're also seeing the need for somebody who can sort of bring to life a strategy. And by strategy, I mean, actually something really tactical. You build a roadmap of stuff to do that you understand, your team understands. And when you're putting technology to that, you have a clear understanding of what you need to build. How much that costs, where your ROI is, and what it's going to do for your business. Yeah, I have two things I say to management teams that are sick of me hearing it. This is a middle market for small companies that are trying to execute every day. And there are strategies for people who hit their numbers. It's your numbers and we can talk about what the strategy is. But we don't need any strategy until you actually go execute the plan. Like save that for later. And then two is there's no difference in a middle market software company between the product strategy and the corporate strategy. They are one and the same. Like your product roadmap, what you're doing with the product is your strategy. So you don't need a whole bunch of other stuff unless you've nailed the product thing and there's other more interesting things to do. Here's what I don't understand about the whole deploy co concept. One, where are these consultants coming from? They work at like PwC and Cap Gemini. And they're like, they got a higher of a bunch of people that like build these companies. They've got billion dollars of valuations with no revenue right now. We know what consulting firms are worth. They're not worth multiples of revenue. Generally, they're worth multiples of EBITDA. Where are these people coming from? Because anybody who's good at cloud is like a week ahead of you. Is that right? Yeah, I think it's a fair question. One of the things we're seeing is that people are entering consulting today around AI services. And they may have been accomplished operators and they may be software developers. But consulting is a real skill set. And engineering is a real skill set. Both of those things, I think, in the world of AI transformation need to come together. And so I think they're going to hire people. Yes, there are trained consultants out there that you can pull from big firms. But I don't understand how that's any different than what they're doing today instead of the firms they are at. You probably can't say this as well as loudly as I can. They're going to hire some amazing people from competitive consulting firms who have this great opportunity to build a new consulting firm, AI first, in the image they want to build it with unlimited funds to do it. Right. Maybe even some of the operators inside these private equity funds that we invested in them would go and join them to help deploy across amazing conceptually opportunity. These are humans. There's process. These is messy. The technology is evolving. Why in the world would any insert large private equity firm portfolio company standardize on one model versus the other? The whole point of the whole challenge with these models is there's zero mode. Each of our portfolio companies, we use a BEDROC across a portfolio. We can swap out any model, open source, foundational model, Chinese model, American model, French model on the fly. So there's no switching costs or so low. I don't get why anybody would lock in on one of these models. And then I assume it's all forward deployed engineers and all this stuff. Where are they coming from? And do they know the business? And we've also had a cross the table from a consultant. You running a company right now and you hiring people to help you when you were in private equity and you hiring people and you were CEO of private business. If you don't know the business cold, you can't sit shoulder to shoulder with somebody in the business. Understand what they're saying. What their pain point is map the workflow, automate the workflow, close the loop. That's really hard for really smart people who've been in the business in the industry for a long time. Here comes Joe Schmo from Cap Gemini, no offense to Cap Gemini, who's just like, hey, I'm your forward deployed engineer and I work with OpenAI. I think that's a pretty hard proposition for me to buy off on. Then I'm going to get a ton of value from it. Maybe two things. One, at the highest level, consultants are trusted advisors and trusted partners to work with. And they build that trust through often a long period of time. And so that's very hard to replicate. The vertical knowledge can be portable. But if you're trying to layer in a completely new approach to that, I think that's very risky. You're likely to come up with an outcome that doesn't meet your expectations. One of the things that we'll get into here at some point is an experience that we had where we hired a firm to build something for us. Smart engineers, great pedigrees. But I would say overall, the arc of that project did not meet our expectations. In part because they were using new tools, they didn't know our business well enough, and they just couldn't go fast enough to keep up with the pace of change in the marketplace today. Let's dig into that here. Again, this is no knock on consulting. I mean, for better or worse, I'm stuck with IGS. I'm happy to be stuck with you guys. But you know us well. You know the types of businesses. You're in the businesses we own from before we even bought them or even some where we wind up not buying because the work we did together. I'm kind of in the place like Matt and the team there are going to figure this out for me. They're going to figure out the tools. And I'm going to get more out of them because they're going to figure it out. All right. So you guys hired somebody. It didn't work out. Tell me a little bit more about that. And I'll tell you about the same experience we had early earlier this year. We have two really I think helpful experiences that I'm happy to share with you know with other operating teams and you know with with other investors as they think about supporting their operating teams. So you know the first one was something we started probably a little over a year ago and invested in building out a sort of a technology I'll say to an AI technology capability and will be any more specific than that intentionally. But we invested we made some progress. We got some benefit out of it. You know we have. You know 4,000 projects that we've done and data that is well organized and we did that through that project. project. But what we didn't achieve was the ability to use that information in the way we wanted to. I think what we found was that that group was constantly relearning our processes. So we did the basics and that foundation is sort of portable for us, but it never reached its full potential because they couldn't really get into the process of what we did and how we use our information and how we deploy that into the work that we do for clients. Over that project, specifically, hey, come in help us build some technology that we can then scale and then deploy across our clients using internally, close the loop, like finish it. What could you have done before you started to make that have gone better? Yeah, that's a great question. I would say we would have probably looked for example work that we could build on and I think we were a first project for them. Who isn't a first? Who isn't a first right now? Show me some project you did like this. It's too early. The models have all changed. We couldn't have done this even six weeks ago, that alone, six years ago. I do think there are people who have done the work with different technologies at different times and who are skilled at learning businesses and building technology regardless of what that technology is. I think we would have been able to assess that better. I think the other thing that's true is our DNA is consulting. We didn't have any DNA of software development inside of our shop. Having run two companies where we did software development at pretty significant scale, what you realize is it takes a great deal of scale to build software and to build technology and deploy it inside of a company and to have a real sense for that oversight and we just didn't take a step back like thinking somebody anybody from the outside could come in and build software specific to your own business probably too hard to put. It's hard. It's hard and it's hard for folks who are hiring those advisors to really pressure test their work. I think one of our core tenants is don't do a consulting project unless you have a strong leader in that function to own it. We've done those and what happens is you learn a lot and then it just sits on the shelf. There's nobody to take it and drive it. Sounds like a similar thing for you as a piece of advice to a CEO or a private equity firm who's thinking about this is somebody inside the firm has to own it and think about it every day rather than, hey, here's the project we could build it for you and hand it off. Absolutely, great. I've got a couple of finer points on that. One is there's sort of leadership and you can have good leaders who are generalists so they can do a good job and you can trust them. I think two other things. One, there is a drive that you have to have around this transformation and that's got to be something that comes from within the company. Secondly, having technology as a specialist or a special capability and depth, then that makes a huge difference. You said there are two projects. That was the one. That was the first one and then the second one and I chuckle a bit because we're now doing this ourselves and it's just remarkably different. The classic strategy and roadmap project and there are many, many consultants out there who will offer to do this for you. These were earnest guys and I think they tried really hard but what we got at the end of the day was a PDF doc that was created by Chatchee PT and there was a lot of jargon in it that I couldn't really penetrate and there was not enough specificity. If you need to come up with an AI strategy, what you actually need is to understand all of the context that we've been talking about for the market, the business, the risks and the opportunities you need to plan. What does that plan look like? That is a set of projects that is a very clear list that can define what the investment is to achieve or build these things and then what the return is going to be in your business. How much time are you going to save? How much faster can you go? What new products or capabilities you're going to bring to market and what's the value of that? If you can't get to that specificity, if the people you're hiring can't give you that list, that roadmap and can't actually bring that to life, then you can't really get going. That was the result of version 1.0 of that. Happily, we took that on internally with a team that we've brought in in mass under a chief AI officer, Justin Bass, who's a accomplished machine learning engineer, who's led technology organizations at scale and deployed enterprise technology. Man, what I see is a huge difference. I see our team marching together. I see very specific investments that I know that we can make and technology that we can build that's going to benefit our business. As disappointing as that project was, sometimes you need to go through that to get to the point where you say, "We just need to do this ourselves." That's maybe what the organization needed. You need to go through that to get to the place where you're like, "We're ready. We can do this ourselves. It's going to be hard. It's going to be distracting. Let's resource it the right way and execute it." I would have been happy to skip it. Scars are well covered, but I get it. But sometimes with your kids, sometimes you just need to go through things and just experience it. You want your kids to actually have some stress in their lives. Diversity and challenge is a good thing. It's a great lesson. It's a great teacher. It's good for resilience. Then you also get the organization rallied around it. I'm not advising that everybody go have a failed strategy consulting project before they take it internally. But again, given where we are and how fast things are moving, you thought it was right and now you pulled it internally. Here's ours. Last fall, we're talking in the spring of '26. The fall of '25, we just got inundated with calls from AI workflow tools that could automate private equity workflows. It was happening in banking and legal and here comes for private equity. Meaning you get a sim in from a banker and a data room. We can build the model, write the memo, do the market diligence, do everything, and you don't need any analysts or associates anymore. Basically, it's the pitch. I don't believe it, but let's demo every single one of these products. A couple of people on my team, we demoed them, we recorded every demo, we recorded every meeting, we posted it on our base camp or our internal intranet we use. So everybody could see everything and then pros, cons, costs, what could it do, what could it not do. We would throw our own stuff at it to see if it worked. We'd get demo accounts and play around with it. What we came to realize is it was very expensive wrappers around chat Gbt or cloud and none of them actually could close a loop. We spent more time QAing what the machine did than we would have done if we just built it ourselves. Let alone the laziness factor of like really ambitious associates who come into private equity, didn't come here just to orchestrate a model and have it do everything for them. But the people were really good, I think the people at Bargergate were like, no, I like doing that and that's how I'm learning. So I'd love something to accelerate, make me go faster, better, further than I ever could have gone on my own like a co-pilot, right? Co-working, you know, kind of like the Ethan Mollock model. We just wasn't there. So we're like, okay, we're not going to spend a couple hundred thousand dollars on one of these tools. Fast forward to December, we're like, let's build it ourselves just like you. So we went and hired a few guys out of a Y-combinator. I'm going to keep them anonymous for this. But like Wicked Smart guys worked in private equity and best in banking and engineering. They were in a Y-combinator cohort and we were going to be like the test case. And again, we have a CTO as my co-founder in the firm, like whereas technical is private equity firms get internally. We use a lot of software, we built a lot of stuff ourselves. We're very technical. I purposely had all the associates work on this instead of having my CTO and me work on this. I was like, you guys do it, you know all the workflows. This is, if this can't make your job ten times easier and get rid of all the boring stuff, so you can spend all the time the exciting stuff, let's not do it. So it was a deal comes in, an email comes in, have that person put in the CRM. If the person's already in the CRM, update the CRM that we, you know, got a deal from them. Pull down the SIM, put it in Ignite, which is our file server, build the data room, build the folder, the file system for a new deal. You know, Draft, do a quick draft of the notes from the, from the SIM and put it in Basecamp where we kind of do everything, and then, you know, update the CRM stuff. Not very hard. Ignite, Salesforce, Basecamp, a couple other tools. LinkedIn. Couldn't do it. Yeah. Literally couldn't do it. And again, these guys were brilliant guys. These people would be forward deployed engineers at any one of these consulting firms. And it's just really hard if you're not in the day-to-day with the workflows. You don't know how it works. This wasn't like super hard stuff. We weren't like, hey, go like write a credit memo and underwrite the deal for us. So we spent a little bit of money. A couple of things happened. One, we learned a lot about workflows and kind of how our own systems are working, where some bottlenecks were. That helped. And we knew we've clawed, co-work really got really good in February. Really good. Everybody was just like, hey, I could just, then we just like went on this like skill building spree. Yeah. While we were working with these guys, so I called Friday, Friday, Friday, AIDA. So every Friday, I told everybody, you have to spend at least two hours, if not four to six, playing with clawed and just seeing what good to do, finding the edges of it. And then on Monday, you had to come in to our Monday meeting and tell everybody what you worked on. You could do it over the weekend. Remember, but you had to come in Monday and show your work. So we built all kinds of cool skills that we've now shared across the team. And people were kind of falling out of love of this YC project. Now, fast forward to today. The model works pretty good. We've built a lot of cool stuff in Claude. None of it perfect. But definitely accelerators. Sealing razors, not floor razors. So making our best people better and doing stuff they normally wouldn't do or wouldn't have paid a third party to do. Now we're coming back around and demoing all those third party products again. And those tools have gotten really good. So here's what we're going to do. It's like, we're probably going to swap out a bunch of our tools for new modern tools. So we're probably going to leave Salesforce and go to something else. We're going to leave a couple of the things and go to something else. We're going to connect all those things through an MCP server or through their own APIs. My sense probably APIs rather than agents rather than MCP. And everybody's really excited to where the technology is now. And kind of invigorated that this nine month project of being deep in the stuff and seeing it, they have way more context and way more excitement about what could happen and their waste murder. The second thing that happened for someone was long. The second one's pretty quick. They have a lot more sympathy for our software companies who build stuff and it's hard. It's really hard to build product that people want to buy and use and get value from. So they now hopefully step into a board meeting with a little more empathy for our CTOs and our engineers who are trying to build stuff for very complex vertical markets where our customers have way more domain expertise than we do. So that was helpful just from a Carmichain standpoint. I love the empathy. Ideal pick up. That's because we want to talk. We love empathy. I mean, there's working guys. It's a good thing. I don't care. It's a good leadership characteristic and this is all forced us to be incredibly light on our feet. There is a short success failure loop that we have to go through. If something's not working and you know it's not working, you got to move away from it quickly. That's not new news. That's early in the private equity playbook. We learn this lesson over and over and over again over and over and over and over. It's bringing your teams along with that agility. I guess. That's a good skill to have as an organization. Let's knock through here real quick. Red flag screen flags. You have an AI project, tactical strategic somewhere in the middle, whatever. You want to bring in a third party. Red flags as we talked about heading into this interview. They lead with technology before really understanding the problem. We've got this amazing technology. That's was our Y-comedy interproblem. We got a, as the Spakoli said in Fast Times of Ridgemont, "I can fix it. My dad's got a bitch instead of tools." You can't fix this car, Spakoli. I can fix it. There's that. The Spakoli look at this cool thing I have. It's a black box. Don't worry about it. Run away. Right. What do you mean by they got to understand the problem? The more specificity, the more depth and the more understanding that somebody can bring just allows them to start further up the mountain and to help you climb faster. Somebody in this world who has solved this problem before, as we say, the future is already here. They've been evenly distributed. There's somebody in the world who's done this thing. Your job is to go find them, not hope that you're going to teach some playing vanilla consultant your own problems. Right. It's your point. This is mapping workflows, understanding automation, deploying, building that automation, and deploying it inside of the firm and understanding holistically how that all fits together. The second one, which is maybe a 1A to that is, to general, you have to be able to speak your language. Your job is to go find the people who can go do that. This is the IGS Parker Gail relationship, which is you know we buy kind of messy, founder-owned deals, often with high-NPS low-market awareness. You're trying to determine, you know that about us. When you're doing customer calls and surveys, you're not raising some red flag for us. It's like, "Oh my gosh, nobody knows who these guys are." Right. We're like, "Yes, nobody knows who these guys are. We can fix it." Right. We're like, "The NPS is cracked." We kind of really got into it. So again, we speak each other's language. We know your team super well. They know our company as well. Management teams feel like we're working together. That's hard for us to, you know, there's some switching costs there. Right. So, anybody who's too general. And again, I have hired some of the big guys for other projects. You know, it was a little, the slides were way prettier. I will say, slides are a lot prettier. There's way more words on them too, holy cow, they can fit a lot of words on those slides. But it was kind of like, it was on the shelf pretty fast. Yeah. So again, I think we learned our lesson there. And then you talked about like, you know, constantly needs to relearn your business. What do you mean by that? Yeah. I think that just goes back to our first example where, you know, we felt like we were teaching our engineers over and over again. What we were actually trying to do. And it just was yield loss. Right. So, you can't go fast and be productive with somebody who really doesn't understand what we're all learning right now. Well, it would AI is learning right now. Boy is that last mile hard. Right. Right. Yeah. Boy is that hard. Right. And you know what? As the models get better, the complexity of what we're asking to do will get harder, will get more and more complex. The last mile is still to be there. Right. Last mile is always going to be there. Right. No matter how good the models get, because we're going to throw more complex problems at them. It's a great analogy. I think that's a great analogy. All right. Green flags. When you're like, yeah, yeah, yeah. So, first one you said to me is they have demonstrated experience of real process depth. So, how can you tell that? Like, you're getting pitched. We're getting pitched. Sounds good. Slides are pretty. People are smart. You know, they went to talk. So, how do you discern that? Yeah. Yeah. Maybe two ways. One, you know, I think, or reference ability of their work, right? Maybe somebody in their past should be able to say, they've done that for me and they did a good job. The other thing you can ask for is anonymize deliverable. There are three slides that I would look for from somebody. And if they can't put those in front of me, then I know they're full of it. Yep. Okay. Second one is engineering capability beyond PowerPoint. Yeah. We talked a little bit about this. You're talking your own book here because you're building it, which we'll get into. Which is fine. Meaning, like, they need, if you're hiring a consultant, you want to see engineers on the team or it's part of the solution. Yeah. I go back to your last mile discussion, right? And so, like, there is a lot of ability, I think, to sort of at a high level discern a strategy around AI. People can do that, right? But for you and what you need, you need someone to take that sort of good, getting more specific, getting more specific, getting more specific guidance to something that they bring to life. And that is where the rubber meets the road. It's the engineering capability. And so, if you're relying on somebody to hand off their assessment to somebody else to build it, it's really hard because the build it guys don't know exactly what the strategy guys were talking about. And if that's not hand in hand together, your estimates probably aren't right. Your timelines not right. Your costs aren't right. And your returns aren't probably wrong, too. And so, we feel strongly that that's critical. Yeah. Well, this episode is like, how do you hire an AI consultant, right? And you're not hiring an AI consultant for strategy or for tactics that actually can't implement the AI tools themselves. Right. Yeah. I mean, you need your teams to be able to sort of do something that's achievable. Yeah. Like, if you leave them on the five yard line with, you know, no pads on, they're going to get killed totally. I got run over once when I wasn't paying attention, probably picking daisies. Where's the debate team in the Latin clubs? Signed me up. So the last one we had here is kind of green flags is focused on results. Yeah. strategy and objectives. That seems pretty basic, but like, you know, what does that mean to use? somebody who's been on both sides of this. >> Yeah, that is somebody who can put that roadmap in front of you with a cost estimate and an ROI estimate. You can think about your enterprise value impact of that, value creation impact of that. And they're able to sort of give you specific examples of deployments that they've done that bring things to life. >> All right, so we've talked about what's happening and consulting in general, right? All the doom and gloom, right also all the, you know, okay, consulting's over, but the two smartest companies in the world growing the fastest have started consulting firms. That should tell you something about the future of consulting. Probably pretty bright for the people who figured out. Talked about how to pick a consultant, red flags, green flags, things to look for. So let's talk a little bit about what you're doing about it, right? You are the CEO of a consulting firm, largely go to market commercial diligence, now AI capabilities across functions. So all right, let's get inside your head. You're at the board room and the exact team meetings. What's happening? >> So, you know, the first thing that I got asked, or the second thing I got asked in my interview with the IGS board was around AI. Fast forward that into joining the business and looking at opportunities. You know, the management team and the board really rallied around this notion that it was an area for us to invest and that we needed real expertise. It was sort of, it was just very clear that we needed our own internal capability. And an internal capability in consulting is people or people. And so, you know, what I think is unique about what we've done is we've brought a team in that has experienced together. And so, in the last 18 months or so, this group of people have done 35 projects together. So, strategy to AI implementation and transformation. You know, they're now embedded in our firm. Our partners are learning that business. They're building trust together. You know, we have hundreds of trusted relationships with private equity firms. And our opportunity is to bring what we think is a really amazing offering to all of them. Whatever we do needs to meet the standard of excellence that IGS has established for 25 years. That's why we have such an amazing business and such so many repeat clients. So, we made that investment and, you know, we're often running. And how did you, you know, explain the why? How do you communicate that to the organization? It felt very natural inside because, you know, in parallel to that, you know, we were trying to break our own trail in AI. And we were, you know, we had a, we had essentially 10% of our organization, you know, really smart young folks dedicated to thinking about how do we improve our work process and our work quality. And they made a, they made a, they made some amazing progress, right, out of their own hard work and their own curiosity. But I think what we all felt collectively inside the business was this growing, you know, wave of opportunity around AI. And I think the need to put a finer point on our direction. And so I think when we announced this internally and when we plugged this team in and went well, I would say that probably the moat, you know, one of the most important things in consulting is culture. And man, from a people perspective, it just, it just fit hand in glove with the team that we brought in. Amazing. Because it wasn't the Mark Zuckerberg move of like, I'm doing all this AI to suck all the value out of your brain so I can automate this, put it in the machine. And then we're going to give you a really healthy severance package on the way out. No, I mean, that's, that is some of the concern across all industries, but consulting too is like, oh no, let's just, let's get context. We're going to fire the context when we feel, when we feed the model. Yeah, yeah. Yeah, we have, I mean, we have to tell that story is like, no, no, no, this is a supercharged to what you guys are doing, not a replacement. Totally. The story we hear from you guys is, hey, we're consulting plus engineering. Right. That's different. So what is, what does that mean to somebody who, yeah, like somebody on the client side, somebody listening from a private equity firm who's like, hey, I need help or a CEO of a company who's like, hey, I've been asked by my board to figure out AI. If you're on the other side of the table interviewing consultants, you should know the answer to this question in the first five minutes, right? So as you hear their backgrounds and as you, as you ask them about their capabilities, listen, listen for a couple of things. There are words around sort of offering a plan and coaching, right? That's one flavor of consulting or we worked with you and we developed, we delivered, we transformed, we helped you with governance and change management. Like, and that, that'll come out in the first five minutes of a conversation. And if the only thing you want are pretty PowerPoint slides, option one is going to get you what you need. But if nobody wants that, that's what they get. Right. And that's the knock on you guys. I mean, we got, private equity's got plenty of knocks. We got all this value creation, but we don't actually help. Right. We just say value creation, value creation, but the way we do anything, like smart, not useful. Right. Kind of that's our issue. Lawyers same knock. Yeah. So, yeah. I know what you guys are good at. We've used you guys forever before you ever even showed up. And now I have even more confidence to work with you guys, given our relationship. So I can put you in front of a company and feel good about it. But for people who are listening before we get to the speed ground, like when should they think of IGS? Like, we're great for what? Yeah, we're great at helping private equity investors and their operating teams from the beginning of an investment to assess the opportunity and weigh the risks and really embed smart thinking into the investment strategy and the investment answer. Through the value creation period, with a very strong focus out of the gates on growth. And we can get very tactical on that side on pricing and go to market. And then through the whole period in terms of transformation, particularly around tech transformation, AI transformation, and then in-exit preparation. And so we can do market work on the exit side. And we can do go to market work, on pricing work, and then help you with AI strategy. And so the total focus on middle market, exclusively private equity businesses are mostly private. Yeah, we're happy to work for non-private equity back businesses. But what we found is that 99% of our work is for private equity firms and their portfolio companies. Yeah, well, hey, multiple expansions dead, debt, and debt leverage, paydown is dead. Operating efficiency, there's only so far you can go. In fact, things are probably going to get more expensive, a lot less expensive. So a margin expansion is hard, so it's all growth. I mean, if you read all the reports-- All growth. --all the value in private equity is coming from growth. Accelerating growth, maintaining high growth. As I think of you guys, it's bringing you in on the front end before you ever own the business. Help you figure out whether you even want to own it, where the growth opportunities are. And I'm hearing now with the new capabilities with the stuff you guys have done the last 12 months is that's a sit shoulder to shoulder with the private equity firm, the operators, and the business, and our engineering team to actually drive it to make it happen. And then before you sell, make sure you check the math and have us run, do the same thing we did before you bought it, and make sure the new buyer feels comfortable that the growth opportunity is still there. Yeah, now's a good time, especially to really take a look at a business that you have, that you've been in for three to five years, and maybe you haven't done a market check. Maybe you haven't really gotten deep on your pricing or go to market capability, or you really don't have validation that the AI progress is where it needs to be. We have a tendency to re-underrate every deal every year. Everything changes so fast and software. It's like what we thought three years ago is useless. What are we trying to do now? No rear view mirror, just go forward, but make the right decisions going forward and kill your darlings. Like don't hang on to some strategy you thought was right that's now wrong, or you're too stubborn to change. Yeah. And having some outside influence just tell like, hey, you're actually missing the boat here. It's helpful. So ready for the speed round? No, see you. All right. You have to answer in the form of a question, it's like Jeopardy. No, I'm giving. 12 months from now, which function do you think inside of a typical middle market business is the most transformed? Oh, that's necessarily AI, but just in general, maybe it's because of AI, but what is it? Well, I think the biggest opportunities in finance. And I have to laugh because my fairly new CFO spends a lot of her time talking to Claudette and having Claudette do a lot of work for her in the background. And so I don't expect this to be a place where we reduce our staff. But as we bring in new platform technology, and as we bring in these language models and their capabilities, I see our ability to scale our work in finance. And in particular, put a much sharper lens on our business, just dramatically accelerate. And I think that's the opportunity. I think it's not on the cost side. It's on the business information side. United and plan this, I 100% agree. One, because finance is the furthest behind, not in a bad way. It's just the tools haven't been good enough yet, where you wouldn't spend more time auditing the answer than you did. You could do on your own. So that's one. Two is the tools are getting really good. And in the middle market, lower middle market, we already have pretty lean finance teams. Let me guess. We've got a pretty lean finance team. And the new CFO didn't come in and be like, hey, I need to hire five people, right? ARAP, you know, FPA and A. All they say is like, yeah, good luck. You're not going to get it. What we have found is again, ceiling razor, not a floor razor, our best CFOs are using the heck out of these tools. The third party tools are getting quite good. AI, co-pilots are going to wrappers around Excel or getting quite good at auditing things. We may get to a place where like the bookkeeping is getting automated. And then you're kind of to a daily close. I'm not putting this pressure on you and your CFO. But we will be at a place in the next few years, if not sooner, where you can do daily closes of the business, largely automated. So what we're finding is our finance teams are doing things they never would have done before because they just have time to do it. Right. Right. We've got a cast as a calendar of all the time in a month. The CFO has the opportunity to be strategic and think all the big thoughts. Not very many days in the month when you're closing the books and doing all these other things and reporting to private equity, etc. There's more and more days in the month where your CFO and you can sit down and be really strategic planning the business, largely because of these tools. So 100% agree 12 months from now. Finance will be the darling of most middle market companies of, hey, look what we can do with these tools. Yeah. In my opinion. Yeah. Yeah. I mean, I'm super excited about it. I think if you've been part of a big company with a significant FPNA function, you sort of know what the art of the possible is and most middle market companies don't have that. Yeah. Big companies are going to use AI to cut costs and small middle market companies are going to use AI to punch away, but they're waiting. Right. So what do you think of prediction for private equity, AI, whatever, where other people would think you're crazy? Yeah. I feel like this is a bit of already made, but there are so many AI native consulting models that are coming out that are all tech focused. And if you talk to very experienced consultants and the people who engage with them in a relationship around important advisory, what it will tell you is the potential of those businesses we're just sealing. And so I think there's a lot of automation opportunity in data gathering and data processing and maybe some assembly. What is still foundational in consulting is the relationship. And I think all these businesses that are sort of pure technology businesses will not supplant what is real consulting. I know some of these founders out there, I think they're super smart guys, but the ones that I see being successful are tech platforms that are automating access to information, not supplanting real advice and real counsel around decisions. And the one thing they lack is distribution and distribution is really hard. AI has got this really close tool. You don't need to consult, and you can do it yourself. You're like, I'm not hiring a consultant for that. It's a whole job to be done thing. What are you hiring somebody for? What am I hiring this tool for? What am I hiring this software for? I'm hiring it to solve my problem. Yeah. I don't really care how it gets solved. Yeah. Like I trust you guys. Here's my budget. Here's my expected outcome. Deliver it. Don't really care what else happens. I agree with you. I think a lot of these things wind up inside other things. But I'm also in the on record is saying enterprise software will domesticate AI. AI will not replace it. But yeah, I'm talking about book two. All right. So you're a CEO, third three time private feedback CEO. You give CEOs of other private equity firms advice. Like what advice do you give them right now on AI or anything? Sure. Well, I'm very humbled by the opportunity to do that. I would say AI is an enormous risk and an opportunity. And I'd say the first thing to sort of recognize is getting going in a meaningful way. And the CEO may feel like they have a conviction around this. What they really need to do is to look deeply into their business and connect with their team to ensure that that is not sort of falling flat somewhere in the organization because it does take the whole organization. I'd say the next thing is which is related is having a plan. So good businesses transform well if they have a plan. And so hire somebody who knows what they're doing to help you build a plan. It's really hard to do it yourself. Get a specialist in. You're going to get much further much faster and you're going to be able to have something that you can use. I think thing three is all of this needs to kind of go somewhere carefully. We run a business that is entirely based on the quality of our work. If we drop the ball on the quality of the work, the business is lost its value. And so we must protect that at all costs while trying to embed the opportunity with AI. And I know other CEOs have businesses they need to protect. And so the governance of how you embed AI needs to ensure quality as well as achieve things like velocity or efficiency in your objectives. So I think that's kind of the top three things that I would stay focused on. It's great advice. Let's end it on that. Matt, 27 years in the making, look at us. We turned out okay. You better than me probably. Thanks for being brave enough to come on and talk about what's going on in consulting with AI. I haven't heard a lot of conversations from CEOs of consulting firms who are in the mix right now, which one side of the trade is saying it's over AI can do everything. And the other side of the trade is saying you still need the humans in the loop. And we're all figuring it out real time. So the fact that you were brave enough to come on and actually talk about it in gory detail and give a bunch of other people advice. I think we're going to get a lot of benefit from. So I appreciate it. Yeah, thank you. 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