Let me add a history+future note to the many excellent points raised here, both due to Walter Kiechel, author of Lords of Strategy. I will assume you mean "strategy consulting" here. Without that adjective, the question is so broad, it is meaningless.

The short historical answer would be: because the (strategy) management consulting industry pretty much created the demand for itself.

Longer answer, for those who want more than bullet points about the current state.

Contrary to what some people are saying, historically, the prestige of management consulting is NOT a consequence of the prestige of top MBA programs that feed it OR due to the prestige of association with investment banking to which it is a Plan B in some years (the two 2 career paths jockey for #1 position with every new graduating class).

It happened the other way around. Management consulting is pretty much what drove the prestige growth of MBAs, and helped the modern i-banking and financial engineering sectors emerge. Until Bruce Henderson of BCG created the strategy consulting industry in the 60s, the MBA was NOT a prestigious degree. Quoting my own review of Kiechel's book:

The events comprising the origin myth are fairly straightforward and

distinctly American. Bruce Henderson invented the sector by founding the

Boston Consulting Group in 1963. A textbook “maverick idea guy” type,

Henderson pioneered the now familiar practices of hiring the best and

brightest from the top MBA programs, especially those with engineering

backgrounds (driving up the intake IQ and prestige of the programs in

the process, with the result that the MBA slowly caught up, in terms of

respectability, to law degrees and PhDs). BCG, when it began, was

primarily a “high-concept” idea company, relying on carefully-crafted

conceptual insights, applied to specific clients, to drive its business.

http://www.ribbonfarm.com/2010/0...

After that it went chicken-egg. Michael Porter came onto the scene (relatively late), and stole a lot of the thunder by codifiying and academically formalizing a lot of what the industry pioneers at BCG, Bain and McKinsey had discovered. A whole academic-literary-industrial complex was born driven by HBS, the invention of the "business book" as a sector marketing tool (credit: Tom Peters) and a symbiotic relationship between the MBA academic world and the consulting industry.

You could say the same for the investment banking industry. Before Reagan and deregulation, there wasn't much going on. Stock trading was for old-fashioned traders and financial engineering was no more than lowly accounting. Modern derivatives and future subprime disasters were merely twinkles in some people's eyes.

In the 80s the forces of deregulation, corporate raiding, the birth of modern M&A and shareholder activism led to "shareholder value" becoming the dominant metric for corporate success.

Bain, a fork of BCG, had already been headed towards specializing in that, but this trend created an entire boutique consulting sector devoted purely to managing shareholder expectations. Towards the end of the 80s the first wave of Private Equity (or "Leveraged Buyout" sector as it used to be called then) began to appear, and the strategy and finance worlds developed a strong symbiotic link.

Independently, the finance industry had also acquired its modern Gordon Gekko character (the greed is good/bonfire of the vanities ethos).

You could say the modern i-banking sector which draws the best MBAs is the baby of Gordon Gekko/Bonfire of the Vanities culture on the one hand (the father) and management consulting on the other (the mother). The baby quickly acquired all its incomprehensible instruments and financial weapons of mass destruction.

So basically the demand for management consulting in the labor market was artificially created, but it was not empty. It happened because there was a market, once competition and oil shocks started knocking American businesses out of their sense of complacency, and somebody was needed to teach them how to think.

Between the 70s-90s, management consulting WAS solving very real problems that did not really exist in the 50s-60s.

Today the pattern persists. Depending on the business cycle and whether there are more returns on the financial engineering side or the business fundamentals side, graduating students prefer one or the other track. At least most of the sheep-MBA types. The mavericks make up their own minds of course (many go into entrepreneurship these days).

Kiechel also has a recent article where he believes the FUTURE of strategy consulting is basically dead.

http://ribbonfarm.posterous.com/...