KPMG is building a Silicon Valley

The Big Four consulting and accounting firms and Silicon Valley startups sit at opposite ends of the business spectrum.

On one side are KPMG, Deloitte, PwC, and EY: century-old brands built on reputation, rigorous processes, and dependable, if unsexy, business services. On the other side are nimble and innovative startups that have made a virtue of moving fast and breaking things.

In the age of AI, KPMG is trying to carve out more space for that Silicon Valley mentality.

On Tuesday, it announced the formation of a new division, the Client Technology & Innovation (CT&I) group.

The group will comprise several hundred staffers, and KPMG plans that it will operate separately from its three main business lines — audit, tax, and advisory. Its main remit is to accelerate innovation, both for client products and solutions and within the firm itself.

It will look "like a Silicon Valley incubator within the walls of KPMG," Todd Lohr, KPMG's vice chair and head of CT&I, told Business Insider.

The unit will bring together capabilities previously dispersed across the firm, including innovation, data and AI, product and platform development, commercial teams, and strategic partnerships with tech leaders such as OpenAI and Anthropic.

Centralizing those capabilities will help KPMG move faster at a time when speed has become "paramount" to the firm, said Lohr.

KPMG has roughly 276,000 employees globally and, like its fellow Big Four firms, is built on a structure that doesn't lend itself to speed.

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Rather than a small executive team calling the shots, the firms are topped by a partnership that typically votes on major changes. Underneath the partnership sit layers of consultants, accountants, and lawyers serving different industries and geographies.

"It's not that we hadn't focused on innovation," said Lohr. "It's just we did it within the current course and speed of our business," where client service and the day job always come first.

The launch of public-facing AI tools like ChatGPT almost four years ago sparked recognition among KPMG's leadership that they needed to move much more quickly, said Lohr, and CT&I is designed to lift the barriers that have slowed them down.

Its staff will have more space to build new businesses, hire specialist talent, sign contracts, and develop technology more quickly, while still operating within KPMG's risk and governance framework.

The unit will also help incubate talent. KPMG plans to rotate rising stars from across the firm into CT&I to get "founder-style" experience before sending them back into the business with the skills they need for the AI era.

Hitting back at consulting startups

The clear bid for innovation reflects a broader shift in the consulting industry. AI's progress has been accompanied by a pattern of senior leaders leaving traditional consulting power players for startups or smaller firms.

Several senior figures who made that move have told Business Insider that a faster pace, better promotion opportunities, and a greater sense of influence over how their new firms operate were key reasons for making the switch.

The technology has also led to a new wave of competitors in the form of AI-powered consulting startups that bet they can use tech to do strategy work faster and more cheaply than a traditional team of consultants.

KPMG is coming right back at them with the CT&I group, said Lohr.

"Shame on us if we allow a startup that doesn't have a brand, or access to clients, or access to the knowledge and expertise that we have to disrupt us," he said.

KPMG has advantages that many early-stage companies lack, such as access to large clients, industry specialists, and expertise spanning audit, tax, technology, and business transformation, said Lohr.

CT&I is its bid to combine those advantages with startup speed and create an environment within the firm that can "go head-to-head" with startups' disruptive spirit, said Lohr.

The drive to become more innovative has been helped by regular trips to Silicon Valley. The firm's leadership has been rotating its management committee meeting between New York and the West Coast every six weeks to intentionally meet with Big Tech, AI companies, frontier companies, and startups, said Lohr.

Getting that exposure has been "a big part of helping us think through the culture that we need to create within the firm for our ability to drive that quickly," he said.

KPMG's competitors have also made structural shifts as the industry evolves.

In January, Business Insider reported that Deloitte was changing all job titles to better fit the skills for the "business of tomorrow." EY has set up an "AI Value Realization Office" to centralize its AI strategy, and in September, PwC announced that it was merging its India offshoring hub into PwC India, in part to bring the firm's technology and AI capabilities together at a greater scale.

Amid the changes, Lohr said he remains bullish on the future of traditional consulting and that the need for help implementing AI will only increase demand for consulting.

It's a much-touted argument by consulting leaders, but one that's difficult to measure, given that most do not break down revenue in great detail and technology consulting is closely intertwined with other services.

In Deloitte's global annual results, reported on Thursday, consulting on technology and transformation grew 2.5%, down from 4.7% the previous year. Accenture, a technology specialist firm, said new bookings were down 2% for the quarter in its third-quarter earnings report in June. The company's stock is down 32% year to date.

Consulting's business model is, at its core, built on helping clients think through change, said Lohr, and this is where all industries, businesses, and functions are facing "massive disruption."

The need for traditional support backed by industry expertise will not vanish, but there will be new opportunities to create value for clients that look more like the firm's managed services offering or involve productization and subscription-based offerings.

"To me, it's not an 'or.' It's an 'and," said Lohr, referring to what services the firm offers.