The Billing Model Just Broke

McKinsey is moving 25% of its global consulting fees to outcome-based pricing. Bain says 30% of its work is already AI-enabled and heading to 50%. Clients are watching AI compress 40-hour analyses into 15 minutes, and they are refusing to pay for the hours saved. The billing model that built this industry is breaking.

This matters to me because it changes how I think about Improving's value proposition. When fees are tied to time and headcount, the incentive can run sideways from what the client actually wants. When fees are tied to outcomes, the incentive flips entirely: get to the result faster and better than anyone else, and share the benefit. It's a win-win (although not a panacea). AI accelerates that flip. It doesn't cause it, but it makes the old model worth reconsidering.

The firms moving fastest on outcome pricing are not doing it out of generosity. They're doing it because it's defensible. AI compresses the production side of consulting faster than any other input in history. A firm that locks in outcome-based contracts before that compression fully lands is locking in margin durability and making an explicit claim about the value they deliver. The firms that wait will find themselves explaining why the client should pay for time the model is compressing. There are absolutely reasons to pay for time; just be sure they're understood and defensible.

The value shift is to judgment, not production. If AI handles the production, the billable thing is the decision about what to produce, how to frame the result, what question to ask next. That judgment doesn't compress because the models can't do it. It may actually become more valuable as production gets cheap and it's why we continue to need humans in the loop.

So, where are you adjusting your mental models and billing models to align with what we're seeing shift in the market?