Huge consulting firms are coming after the ad agency business — here’s how agencies are fighting back

Thank you Tanya Dua!

  • 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 .

2018-02-14-144144863-Deloitte_-McKinsey_-EY_-KPMG_-PwC_-Accenture_-BCG_-IBMNow 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

360i president Abbey Klaassen
Michael Seto/Business Insider

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.”

 

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Why you shouldn’t hire people based on “fit”

Thank you by Suzanne Vickberg and Kim Christfort

Would you enjoy being stuck in an airport with me? If after chatting with me for half an hour you don’t think so, there’s a good chance you wouldn’t choose me to be on your team. This screening technique is commonly known as the airport test, and the basic assumption behind it may be flawed. I suggest using the life-raft test instead.

If you’re lucky enough to have the budget and headcount to add a new member to your team, there are lots of ways to go about making your selection, and many of them involve some element of testing for fit. Like, do you think my working style is a fit for the role? Or, is my temperament a fit for the work environment? Or, is my personality a fit for the culture? If you think I’m a good fit and that you would, in fact, have a great time with me in the airport, you very well might welcome me to the team. But if not, best of luck to me.

This kind of selection criterion can create teams who work together smoothly and really have a great time in the process. But here’s the common problem: People who feel like a good fit are often a lot like you. You might share the same perspectives, prefer the same communication methods, and have the same sense of humor. You might also possess the same strengths and the same weaknesses, too. And I’ll bet you can see how a whole team of people with the same strengths and the same weaknesses may not be the best idea.

But you may be tempted to select teammates this way because it feels pretty good to work with people who are a lot like you. If you’re a creative type, being around other creatives can inspire you to new heights of innovation. If you’re a detail person, it can be a real relief to be around others who get the importance of the little things. But these feel good scenarios can lead to some pretty undesirable outcomes. Too many creative types together can waste a lot of time and money chasing one impractical idea after another and then abandoning each before they come to fruition. If you all see yourselves as the idea people, who is focused on execution? Likewise, too many detailed people can get trapped in a state of analysis paralysis, make very little progress, and end up choking on the dust of their competitors. If you’re all focused on the minutiae, who’s keeping an eye on the horizon and making sure you move forward in a timely way?

This is typically not a recipe for success.

So perhaps you should be looking to add some diversity to your team, right? Maybe you should even select the person you’d least like to be stuck in an airport with? Well, that might be a good start. A team of creative, big picture thinkers could probably benefit from a teammate with a penchant for thinking through the specifics of implementation. (Even if they find their minds wandering during conversations with that person.) And that detail-obsessed team could probably use some encouragement to make their way out of the weeds. (Even if the person drawing them out makes them feel like they’re caught up in a tornado.) But if you just add a teammate or two with a different perspective and stop there, you’re not likely to get the effect you’re hoping for. Because a team with a majority type tends to favor that type’s perspective and way of working, overshadowing those of any token minorities.

Take as a case in point a team I once worked on, full of high EQ types; we prided ourselves on being empathic, diplomatic, and inclusive. But we sometimes had a hard time moving forward, or even choosing a direction, because we valued everyone’s perspective so much, and we were reluctant to appear critical of anyone’s ideas.

Then a new member joined our friendly but floundering team—a more competitive, goal-focused type. And we were excited, thinking he could help us get and stay on track. And he certainly tried, but his communication style was direct, to say the least, and it rubbed us all the wrong way. When he pushed us to move ahead, we felt railroaded. When he pointed out the flaws in someone’s line of thinking, we felt offended. Looking back, I regret to say that we neither appreciated nor benefited from his unique perspective. Instead, we froze him out, thinking, how dare he?! Didn’t he understand how we did things on our team?! And honestly, no, he didn’t seem to understand. In fact, he seemed quite baffled by our reactions to his honest and straightforward approach. “Didn’t we want help making decisions and getting stuff done” he asked? Apparently not. Ultimately, feeling unwelcome, he high-tailed it to the nearest exit. So much for us being inclusive.

Okay, so a team that’s all the same likely isn’t ideal, nor is one with a few token members who are different, if the team continues to work together in a way that’s best suited to the majority. Which brings us back to that airport test, and its alternative, the life-raft test.

Next time you’re selecting a new team member, imagine you’re not stuck in the airport, because your flight is leaving right on time with your whole team on board. But the plane makes a crash landing at sea and you’re now floating in a life-raft with no hope of immediate rescue. Would you want everyone on that raft to have the same strengths and weaknesses? Probably not. Suppose you’re all great at building things out of random items (a really useful strength on a life-raft with limited supplies), but you’re also terrible navigators (a very unfortunate weakness on a life-raft). Would it make sense to select a new teammate who was just like the rest of you? You could build lots of cool stuff together, but you’d be drifting around aimlessly.

Perhaps instead you’d wish for a teammate with great navigational skills, even if they couldn’t build things. And then, instead of expecting them to do things the way you do them, maybe you’d go above and beyond to support that person in doing what they do best. That could be the deciding factor in whether your team survives the life-raft ordeal.

So next time you’re thinking about how to make your team even more successful, take a quick inventory of the perspectives, working styles, strengths, and weaknesses of your current members. And then review how your team’s ways of working may support the preferences and needs of some types more than others. Because your goal should not be just to add diversity, but also to activate and manage it by creating an environment where all types can thrive. Or alternatively, you could just search for teammates who can do it all. But I don’t think unicorn hooves are a great idea on a life raft, not to mention the horn.

Kim Christfort and Suzanne Vickberg, PhD, are the authors of Business Chemistry: Practical Magic for Crafting Powerful Work Relationships, on which this article is based.

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