The changing needs of marketers and brands has given rise to the demand for full-service offerings from agency and management consultancy partners.

This article originally appeared in The Serve Issue, our October/November 2017 print edition of Marketing magazine.

 

In Marketing’s July 2012 issue, a feature titled ‘Digital Darwinism’ discussed how agencies found themselves competing against a wider range of firms, how a culture of ‘big data’ was invading organisations, and how the power of digital was being recognised in the boardroom. Agency and consultancy professionals interviewed at the time predicted a landscape where agencies would take a more active role in the end-to-end development of client campaigns, where marketing teams would work more closely with tech departments, and even where the digital agency would evolve into the experience agency.

Fast-forward to 2017, and big consultancies are getting bolder in their efforts to provide creative media and content solutions to cater to an ever-growing list of requirements.

Similarly, in a consumer landscape where traditional media advertising forms a smaller and smaller portion of fragmenting marketing mixes, and where campaigns are expected to be built on a solid foundation of consumer data, the ad agency model of old has given way to firms that offer a wider range of services and closer client collaboration.

This year alone we’ve seen a lot of big moves. In May, Accenture purchased one of Australia’s largest independent creative advertising agencies, Sydney’s The Monkeys, and design business Maud. In August, PwC bought a majority share in Thinkerbell, an agency that only officially opened in June. Also in August, Isentia shut down King Content (the content agency it had acquired in 2015 for $48 million) due to poor performance.

So, despite the apparent demand, success is far from guaranteed.

Corporations are investing significant sums in the race to bolster their set of skills, but what’s standing in the way of success?

The convergence of consultancies and agencies – and the mergers and acquisitions, successes and failures that dot its timeline – is not a new trend, but it’s big moves like Accenture’s and PwC’s that have many saying it’s closer to being complete, that the roles of ‘full-service’ firms on both sides are closer than ever to being one and the same. “It’s not that we’re trying to create a new trend,” says Patricio De Matteis, managing director at Accenture Interactive Asia Pacific, “or a new model.

“Our clients are looking for something new, our clients are looking for that integration.

“As forms of interaction keep evolving, our clients need to keep evolving.”

 

In the last five years, says Jason Dooris, CEO of Atomic 212, agencies have begun positioning themselves as business partners to their clients. “Partners who focus on understanding the key dynamics of what drives their clients or holds their business back,” he says. “The difference today is that we’re actually having to do that, whereas in the past we’ve simply used that language.”

Until recently, agencies have been vocal about their desire to work closely with clients, and become more involved in understanding their business, but nobody really invested or made hires in that space, Dooris says.

“The intent was very good” – identifying client needs. Clients’ businesses have in the last five years, says Dooris, dramatically streamlined, “with IT coming closer to marketing because of digital, and marketing departments going from a 50-person department to a seven-person department.

“All of these different things – bringing CRM closer, bringing technology closer – have meant that clients’ marketing offers, that typically connect to the agency offer, have completely changed.

“But the agency offers haven’t changed that much. You can see that if you look at a structural diagram of staff that are employed by your average agency. They’re very similar to what they were five, 10, 15 years ago.”

Client needs, of course, have changed, and that has created a gap for someone to fill. “Who else is there out there that has a point of view on business in general, and is equipped – in theory – to take a problem and solve it? The management consultancies in that space, which are very evidence-based and have problem solving as part of their business model,” he says.

Changing client needs are a reflection of changing consumers, and technology, connectivity and data have played no small part. Brands today are committing to providing a seamless customer experience across all touch points.

 

It’s for this reason, says Rob Pardini, chief data scientist at WPP AUNZ, that consultancies with significant footprints in digital CX are more appealing for brands.

“The work being done by consultancies – whether it’s at a strategic level or a CX level – has become more important over recent years and, in my experience, is something that clients are much more focused on than they were a few years ago.”

That is: understanding that consumer experience should be fuelled by data for clients that are leveraging the potential and the opportunity that goes with the customer data assets currently available, and that in itself should be laddering through all the touch points, irrespective of who is working on them,” Pardini says.

 

Agencies, like everyone else, are looking for new opportunities and new revenue streams. “Content today is being created by people in their lounge rooms,” says Matt McGrath, CMO at Deloitte Australia. “It’s also being created by media companies. You can go to Snapchat, for example, and they’ll create you a campaign. You can go to Channel Ten or Seven, and they’ll create a campaign for you.

“Creative is coming from different sources, so it’s natural for agencies to try and broaden their scope. Consultants are doing the same thing, and that’s where the convergence is coming from,” he says.

 

Accenture Interactive Asia Pacific’s Patricio De Matteis says, “Clients are voicing more and more the need for integrated capabilities.

“We are uniquely positioned to bring creative brand strategy, creative service design, digital marketing service, and digital technology at scale,” he adds, of his brand, which has made a number of key acquisitions in recent years.

 

‘Full-Service’ solutions

“Full-service is one of those terms that’s been going around for a long time,” says Agostino Giramondo, sales and strategy director, OEM (original equipment manufacturer) and media at Carsales.com.

“There is always an appetite for full-service,” he says. “If you’re shown a way that everything can be done through one area, then you’re going to look at that favourably.”

Consultancies are, says Giramondo, “romancing” the CMOs. Using his own industry as an example, he says consultancies see the opportunity to layer support to companies, which may struggle in the creative and media space, and may be nervous about agencies.

“More manufacturers are now appointing CMOs who are qualified marketers,” he says, but this has not necessarily always been the case.

“For a long time, the person who’s been the marketing head at an OEM is more than likely someone that’s moved up through the ranks and was once in planning, once in sales” – as opposed to someone with a marketing background – and that’s where consultancies have seen opportunity.

“They’re talking to people who are actually rather naive in the whole marketing game. That’s why they’re moving in.” More frequently, manufacturers who today appoint staff with marketing backgrounds, see that new hires bring more experience of agency relationship dynamics.

These experienced marketers have been hired to manage brands and campaigns and are less likely to be ‘seduced’ than marketers from different backgrounds.

 

Cultural cringe

Isentia’s recent shutdown of King Content is testament to the fact that acquisitions can be risky, and success is far from guaranteed.

Ogilvy Australia CEO David Fox says it’s got a lot to do with culture: “Acquisition is easy, integration is hard,” he warns. When consultancies purchase creative firms, they purchase a culture, too.

Consultancies making acquisitions must change models that they buy to extract higher margins, to guarantee a return on investment.

“The minute you start tinkering with it – the staff, the culture – it shifts slightly. It changes the whole culture of a lot of creative companies. You’ve fundamentally changed the reason you bought that company.”

“A lot of the time, they tinker with the model, and it fails.”

“Culturally, you’ve got an accounting type consultancy firm buying one of the most creative agencies in the country. It’s much more difficult than just buying a design agency and leaving it be.

“People leave.”

Despite the inherent risks of acquisition strategies, these really are the only successful ways, believes Fox. “Is it the right thing to do? Absolutely.

“To start a design agency, or a creative agency, or a digital agency from scratch, you’re left out of the game. It takes too long.”

“Acquisition is the right strategy, particularly if you’ve got money in the bank. Just don’t underestimate how many times it’s been done and failed, due simply to the inability to integrate cultures.”

“How do you retain that superstar staff that you bought, that are very creative, and how do you keep them now they’ve suddenly become part of a management consultancy?

“Very difficult,” he concludes.

 

Accenture is a key current player in the discussion. It acquired Fjord in 2013 and The Monkeys and Maud this year. De Matteis is not so concerned by cultural clash, since his brand as it currently stands was borne out of a number of acquisitions. “Mergers and acquisitions and cultures within cultures… have been part of our DNA for the last 14 years,” he says.

“We’re not new to bringing in new talent, new capabilities and larger cultures.

“It is a fine balance, and we don’t take it for granted.”

His recipe for success involves giving each company and culture an opportunity to be itself, and an opportunity to succeed in the marketplace independently.

“We work on it every day, those communities of practice are connected across our studios, and connected across our client engagement.”

He wants Fjord and The Monkeys to continue to work autonomously. “They’re brands within brands,” he says.

Just months into The Monkeys acquisition, he’s excited about the way integration is tracking.

“We’re already working on new client pitches as an integrated business,” he says, “and we’re also bringing Fjordians into their practice to work with their design capability.”

Plans are underway to expand The Monkeys with a Melbourne office, “something that we’re going to treat as an acquisition in itself,” De Matteis adds.

 

David Angell, general manager and head of media at TrinityP3, also recognises that acquisitions and mergers can cause cultural problems.

They have the potential to “disturb existing client relationships, reduce nimbleness of creativity, and actually result in a departure of talent,” he says.

On the other hand, he says – under the right circumstances – an increasingly diverse range of skill-sets, and more resources can potentially result in an increased ability to secure and retain top talent, a ‘pro’ for clients.

Another ‘con’ for clients he points out is the possibility of an escalated cost model across core agency services. “Any margin pressure placed on an agency by a new consultancy partner or parent may end in the client being asked to pay more for core services and outputs,” he says.

“It is hard to imagine that consultancies paying millions of dollars to acquire agencies will not want to maximise their ROI.”

 

Convergence, competition and threat

So, should agencies be threatened by these management consultancy moves?

“Of course,” says Ogilvy’s Fox. “I wouldn’t be as arrogant to think that they’re not a threat, because there are smart people in there.

“We take that threat quite seriously. It just sharpens us.”

 

“I wouldn’t say we feel any sense of competition with, say, a Monkeys/Accenture,” says Will Halliday, executive strategist at George P Johnson (GPJ) Australia. Halliday’s in a unique position to comment, having worked at consulting groups – such as Accenture and PwC – and also at agencies – including Host, Wunderman and Imagination.

“There are certain skill-sets we have that those guys just don’t have,” he explains.

While consultancies don’t necessarily pose those a threat, he believes agencies such as his can learn a lot from management consultancies. “There is a lot to learn from them in terms of justifying our ROI for our client budgets,” he says.

“We need to be more rigorous about our measures of success and making sure that we can prove what we do is actually effective, something most event and experience agencies have been pretty lame on to be honest, and need to up their game. We’re investing in data.”

 

Atomic 212’s Dooris is a little more confident. “I see them as a slow train coming towards me,” he says of management consultancies.

“My personal view is they will fail,” he says, “because they’re so slow.

“It looks like they’re fast, because people are talking about them now, and saying, ‘Wow, they’re all doing stuff, this is exciting,’ but actually they’ve been doing it for 10, 15 years, so they’re not fast at all.

“They’re actually diabolically slow… because their appetite for risk is really, really low,” he says.

 

“We see there’s a massive opening for consultancies,” says Carsales’ Giramondo, “but if we know agencies well – and we do – they fight back really quickly.

“There’ll be some disruption, there’ll be some wins, but usually advertising agencies are very good at responding.

“The good ones survive, and the casualties are the ones that probably shouldn’t have been in business in the first place.”

 

 

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Image credit © Wan Chiang Tan 123RF