Pyramid, diamond, pod: Evolution of consulting business

The consulting business, often characterized by its pyramid structure, is undergoing a transformation. This structure, consisting of a partner at the top, managers in the middle, and a large base of junior employees at the bottom, has been in place for decades. The pyramid's design was born out of necessity to amplify a partner's judgment, which is rare and expensive, through the work of many junior hands. This economic model, known as leverage, underpins the industry's profitability.

However, the advent of agentic AI is challenging this status quo. AI can perform many of the low-level tasks currently done by juniors, potentially hollowing out the pyramid. When junior costs become token-based, the traditional spread between cost and billing that has funded the industry could become zero, as services become a competitive market.

The industry faces a strategic choice: to be the one to reprice or to be repriced. Hourly billing may soon become obsolete, as input-based pricing, where clients pay for the output rather than the input, becomes more viable. As juniors are replaced by AI, the pyramid will gradually evolve into a diamond shape, with a thin base, a heavy middle, and a narrow top.

This evolution will force firms to focus more on judgment and fewer on the number of people, potentially leading to a pod structure with fewer but more experienced employees.

The change in constraint is evident: for eight decades, capacity was the binding constraint, with rituals in place to manage it. Now, the binding constraint is judgment, and the P&L will shift from tracking headcount to revenue per person. The industry also faces an unresolved problem: where does the next generation of judgment come from if AI does the work? The pod structure attempts to address this by keeping a single apprentice, who trains on reviewing agent output and running evaluations.

For those purchasing consulting services, the rate card will now serve as a diagnostic tool. A firm still quoting hourly rates in 2026 may indicate that its cost structure remains unchanged, either because its margins are exploitative or its delivery hasn't truly transformed. The market direction suggests a decade of diamond-shaped firms, with many incumbents adopting agents to protect their pyramid shape.