I bookmarked I Left My Cushy Job to Study Depression. Here’s What I Learned. on Medium.
I bookmarked What Tech Insiders Are Reading Now — Fall 2018 Edition on Medium.
- Ad companies are increasingly responding to the threat from consulting firms by making acquisitions, creating new divisions or reorganizing internally.
- Omnicom nabbed the Dallas-based consulting firm Credera recently, while Grey launched a new global enterprise practice called Grey Consulting just last week.
- Others, like R/GA and 360i, have also made inroads into various types of consulting services.
Ad agencies are starting to fight back.
Giant consulting firms like Accenture and Deloitte have been increasingly encroaching on agencies’ turf. In fact, several have been buying their way into advertising through creative acquisitions .
Now agencies are starting to respond by going down the same route.
A growing number of large traditional ad agencies are looking to lay claim to an ability to offer consulting services — promising not just to make ads and buy media, but help improve their clients’ business.
They are doing so by acquiring smaller consultancies, creating new divisions, dialing up their data offerings or reorganizing internally.
Agencies are promising clients one-stop shopping
Omnicom, for instance, announced that it was purchasing the Dallas-based consulting firm Credera last week. The next day, the ad firm Grey launched a new global enterprise practice called Grey Consulting by tapping into 150 existing technologists and creative and strategic planners to create a new global enterprise network.
WPP’s Kantar, on the other hand, streamlined its consulting services , bringing together four of its existing brands under a single entity earlier this year.
“Agencies are … not taking this [threat] lying down,” said Jay Pattisall, principal analyst at Forrester focusing on ad agencies with a research report detailing this trend coming out later this month.
Agencies are rethinking the scope of their work beyond traditional advertising
From clients cutting back on fees to taking more work in-house, ad holding companies are facing strong headwinds. Thus, with the current advertising agency model under pressure, agencies have been forced to rethink their scope of their services.
“Ads don’t transform businesses,” said Andy Main, principal and head of Deloitte Digital. “So the ad agencies are being put under major pressure to prove their value.”
One way of grappling with the current upheaval is through buying companies with capabilities that complement what agencies already do. This theoretically enables agencies to connect data, analytics, research and their creative offerings in new ways.
Omnicom, for example, acquired Credera to augment its existing creative and data capabilities by adding management and IT consulting capabilities in the mix. The aim was to have as many capabilities that help clients navigate complex technology choices better in-house, without having to outsource the process, the company said.
“We’re very much trying to reinforce and support something we are already doing, and increase the value of a service we’re already providing,” Luke Taylor, chief executive of Omnicom’s precision-marketing group, told Business Insider. “It helps us fill in some of the gaps to drive precision marketing scale for our clients.”
Another approach to establishing a consulting practice is to simply restructure internally, as Kantar did — so that different entities within the company could work together in a more integrated manner.
“We had those assets available for clients for a number of years,” said Wayne Levings, Kantar Consulting’s president. “It was about bringing them together in a way that made them even more relevant for the marketplace, and allowed us to more effectively scale and invest in this area.”
And clients are demanding a more diverse range of services too
A lot of the change is being driven by clients themselves. Marketers are asking for help and thinking that goes beyond communications more than ever, says Leo Rayman, CEO of Grey Consulting, so it makes sense to give them a more concentrated offering.
That is why Grey Consulting was created. The rationale is that the more agencies can enhance their existing capabilities, the more entrenched they can be in other aspects of the client’s businesses.
“It allows us to codify the know-how we have, weaponise our creativity by marrying it with even more commercial strategy and allows us to move upstream, providing answers to the kinds of questions clients ask long before they get to defining the creative brief,” he said.
Plus the consultancy threat means that they must adapt
Of course, consulting giants like Accenture and Deloitte encroaching on agencies’ turf is big factor, whether agencies admit it or not. 73% of marketers said that they were open to using consultancies for digital marketing work, according to a recent Forrester study.
“I think often agencies seem to think they’re disrupting consultancies, but most are in fact having to respond to the very real fact that management consultants are moving downstream into their business,” said Saneel Radia, R/GA’s global head of consulting.
Consulting firms claim that their expertise in tech and business strategy as well as data and logistics helps them meet the needs of modern CEOs and CMOs far better than ad agencies can, which isn’t entirely exaggerated, according to Radia.
“Those organizations are quite good at understanding how to measure ROI, reduce cost, streamline process and leverage automation,” he said. “So of course [them] moving down into marketing is a pressure any advertising agency is feeling today.”
Marketing and consulting are colliding
To be sure, consulting isn’t an entirely new arena for ad agencies. A number of agencies, including R/GA and 360i ,have had consulting divisions for years. French advertising giant Publicis acquiring the consulting giant Sapient in 2015 at a deal valued at $3.7 billion.
And last year, Publicis teamed with tech consultancy Capgemini to help McDonald’s with its digital transformation.
“Marketing services and management consulting collided years ago,” said R/GA’s Radia. “The idea that anything is one type of company’s turf or the other is likely outdated.”
But the pace of change has accelerated more recently. Brands are seeking partners that help them drive efficiency as well as simplify efforts in an increasingly complex digital ecosystem, and both agencies and consultancies are stepping up.
The consultancies remain confident of the value they bring to the table. To transform client businesses, they say, you need everything from strategy, innovation, design, and creative to technology, analytics, organizational design, supply chain and finance — areas which they have owned for years.
“It takes years and years to build up those capabilities,” said Main. “Consultancies such as Deloitte Digital, with in-house creative and advertising capabilities, have much more to offer than ad agencies who acquire small, narrowly-targeted consulting companies.”
Traditional consultants may bring myriad analytical frameworks to the table, but agencies are also convinced that they’ll be able to tackle them head-on. According to 360i president Abbey Klaassen, consulting firms lack hands-on experience in execution and creativity.
“Part of the reason we’ve been successful in our consulting practice is because we’re not just process makers; as a creative and media agency, we’re also process users,” she said. “Being able to understand all the intricacies of a client relationship and how they come together – search, social, creative, media, leading inter-agency teams – makes us more effective as a consulting partner.”
Both agencies and consultancies must evolve their business models to meet changing client demands
Analysts aren’t so sure that agencies can suddenly match consulting firms. It is one thing to have a consulting unit, and another to attract and retain talent and even sell those services effectively, said Brian Wieser, senior analyst at Pivotal.
“That’s one of the biggest challenges for agencies,” he said. “You can do the work if you can sell through at a higher level than the CMO, and most agencies don’t have those connections.”
Agencies also need to focus on integrating their consulting practices within their broader cultural frameworks, said Forrester’s Patissall.
“Cultural integration is the hardest, Publicis is still working through the branding and positioning of Sapient and where it fits,” he said. “What they’re trying to do is build additional structures; the next step is appointing leaders to bring them together globally.”
Either way, what’s certain is that both agencies and consultancies must evolve their business models to meet changing client demands.
“We’re squarely in the era of disruption, many incumbents are investing in their own transformation,” said R/GA’s Radia. “It’s competitive, and the companies that serve as able hybrids will prosper most.”