New KPMG group incubates AI

New KPMG group incubates AI-native startups within the firm

Big Four firm KPMG announced the formation of a new group that will develop and launch AI-native businesses that operate like independent startups with their own founders, funding and staff dedicated to creating new product and service offerings. The group, Client Technology and Innovation, was conceived as a way to operate with greater agility and speed at a time of rapid economic change.

"In a 130-year-old firm, we're creating a space where startup speed is possible while drawing on the advantages that have always differentiated KPMG: our people, our expertise, our technology ecosystem and our client relationships. said KPMG chair and CEO Tim Walsh in a LinkedIn post on the announcement. "… CT&I brings together our technology ecosystem, from alliance partners and venture investments to relationships with leading venture capital firms. That gives us new ways to bring ideas to market faster, co-develop products with clients, pursue joint ventures, and scale the businesses we're building."

The group is specifically designed to incubate and scale a portfolio of AI-native businesses and products which, in turn, are mandated to build and scale their own products and services, many of which will be developed in cooperation with technology partners like Google, Microsoft and OpenAI. These companies will work closely with relevant client-facing teams across advisory, tax and audit to offer and implement solutions within the firm's core businesses.

"In other words, these businesses are not intended to operate as a separate destination to which KPMG simply refers clients," said the leader of the group, Todd Lohr, vice chair and head of client technology and innovation at KPMG, in an email. "They will work with KPMG teams as part of the broader client relationship, with most client delivery executed by the relevant teams within our core businesses."

Lohr added that the group will have significant engineering and developer talent, so it will oversee strategic co-development with leading technology and AI partners, including Anthropic, Google, Microsoft, OpenAI and Databricks, as well as with startup collaborators. Innovation, he said, might come directly from the group itself or from the constituent "edge companies." It is generally anticipated that resultant CT&I products and offerings will serve both current and new clients, though actual commercial approaches will vary depending on the specific business and market opportunity.

Legally, these businesses, or "edge companies" as the firm is calling them, will be part of KPMG while they are in the portfolio. However, each one will also be required to have an exit strategy that will guide long-term direction. As each edge company will be different, their exit strategies will be different as well, so there is no single predetermined outcome. They might be folded back into KPMG's core business, but theoretically they could also be spun out as independent companies, sold or continue operating within the CT&I portfolio. The specific path will depend on client demand, market opportunity, business performance and strategic fit. IP ownership would be addressed in the applicable agreements among the parties for each specific product or co-development arrangement.

KPMG will be funding these edge companies through its own strategic investment arm, KPMG Ventures, which already fuels venture investments, purchases of frontier AI capabilities and product development efforts. In addition to supplying capital, it will also provide access to KPMG's enterprise relationships and capabilities. Part of this will include bringing together its existing relationships with other venture capital investors as part of its broader innovation ecosystem. KPMG declined to announce specific VC partnerships in connection with CT&I at this time. It's also not announcing any governance or control rights for outside VC firms in CT&I businesses.

The firm conceived of the new CT&I group as serving an important leadership development experience at KPMG, with rising stars identified to participate in rotations as founders and leaders within the edge companies. KPMG said this will provide an opportunity to build leadership skills, AI and digital literacy that people can then bring into firm leadership roles, positioning them to lead as the professional services market evolves.

"It is also an investment in our people," Walsh wrote in his LinkedIn post. "CT&I will create opportunities for emerging leaders to build and scale new businesses, strengthening the AI, digital, and leadership capabilities that will help shape their careers and KPMG's future."

CT&I will continue to drive KPMG's firmwide AI transformation, which has successfully driven large-scale AI adoption, employee upskilling, and AI guardrails and governance since its inception in 2023. This evolution comes as Steve Chase, vice chair and global head of AI and digital innovation, retires on Sept. 30.

Introductory bullet points created by AI with editorial review.