by Herman Manson (@marklives) We wrap up our Big Q Consultancies series by pulling out the highlights and key insights from the individual contributions.
Eating agencies’ lunch
So the consulting and technology firms have been eating agencies’ digital lunch. Now they’re gearing up to grab a bigger chunk of the marketing budget. They already have reach, and scale, and access to the executive suit. They have a billing model that doesn’t rely on them having to desperately sell R15m TVCs to clients. “But we have creativity,” I hear the ad industry say. Yet it’s not locked up, it’s got a price, and consultancy and tech giants such as Deloitte, IBM and Accenture are buying.
At a guess, the giant Snapchat ferris wheel set up on the Croisette in Cannes during the 2017 Cannes Lions was just the last straw for some execs…
Panel of agency and consultancy executives
Over the last couple of months, we asked a panel of agency and consultancy executives for their sense of what the broader agency and marketing community may learn from the rise of non-traditional firms now operating in the advertising agency space. What processes and practices are giving these firms an edge, and to what would the rise of these players be attributed, in spite of the best integration efforts by the traditional agency networks?
- Jerry Mpufane: Big Q: Can ad agencies take on the consultancies?
- Prakash Patel: Big Q: Agencies, consultancies have much to learn from each other
- Heidi Custers: Big Q Consultancies: You have to understand the context of clients
- Wayne Hull: Big Q Consultancies: Problems used to be more one-dimensional
- Joshin Raghubar: Big Q Consultancies: Difficult to shake campaign-dominant logic
- Andy Sutcliffe: Big Q Consultancies: Ad agency, consultancy biz models converging
Consultants dominate tech, but agencies still own storytelling (for now)
Jerry Mpufane, chairman of the M&C Saatchi JHB Group of Companies, says that, “in spite of the increased competition from the management consultants, it’s not all doom and gloom for the ad agencies.” He argues that it is access to the chief information officer (CIO)’s budget, an area of spend traditionally dominated by the management consultants, that is behind the large revenues claimed by the management consultants.
At the same time, budgets traditionally held by the chief marketing officer (CMO), the ad agency’s historical client, continue to grow, he continues. “My belief is that agencies must focus on their core strength — being that of fostering meaningful consumer engagement through storytelling. The strength of the ad agencies as a supplier partner to brands has never been their size but their ability to connect with consumers through brilliant ideas based on great consumer insight.
“The complimentary skills of the management consultant and the ad agency are essential to create an integrated and interdependent touchpoint matrix for the client organisation,” he concludes.
Yet the agency model still lags
The problem, as Prakash Patel points out, is that agencies haven’t successfully adapted structurally to the modern consumer environment. “The world around us has been changing at a phenomenal rate,” he says. “Yet agencies have barely changed their business models to meet the needs of today’s hyper-connected consumer. Acquisition is short-term. Changing the mindset, strategy and proposition of the future agency is at the heart of the solution to these needs.”
In general, the needs of marketing and brands have fundamentally changed and are no longer aligned to any specific model, let alone agency model, he contends. Agencies need to “reimagine their business models, proposition and services to meet the needs of today’s brands and consumers with, in my opinion, data, analytics, technology and digital at its heart — to see digital transformation as more than a medium but a critical business enabler.”
Consultancies have had a head-start, he argues, in that they’ve have not been hindered by media and understand that consumers don’t see brands or fragmented businesses but experiences. Digital is also not — as agencies seem to believe — about websites and social media but about digital business transformation. “It is time to view consumers through their lens and not the lens created by agency business models,” he concludes.
Consultants have budget to become what clients require
Heidi Custers, the digital transformation strategy manager at Deloitte Consulting, says that brands have been moving more and more of their marketing execution in-house over the past five years as they face greater disruption and competition from digitally enabled rivals.
“In my opinion, the bigger technology and management consulting firms are taking advantage of this shift in a pincer attack on the agencies,” she writes. “Tech consultancies are typically working with CIOs and CDOs to redefine how digital is used to enable business growth, while traditional management-consulting firms are capitalising on their influential C-suite relationships to deliver customer-led strategy to CEOs and CMOs. In both these cases, the consulting firms are tying our work back to the bottom line of the clients’ companies, instead of using awareness or interest success metrics that are still used by some agencies to measure success.”
Says Wayne Hull, the managing director of Accenture Digital for South and sub-Saharan Africa, “In today’s digital world, all these things are integrated and, to solve problems or take advantage of opportunities, the people around the table require a range of capabilities. You need technologists, consultants, storytellers, copywriters, creative people, entrepreneurs, data scientists to make sense of it all, and to have all these capabilities in-house is very rare.”
The existing consulting competence from firms such as Deloitte or Accenture has been enhanced by strategic employment and acquisitions enabling them to offer a truly integrated offering. Marketing agencies, with their relatively lower margins and rate pressure, face an uphill battle to make the necessary investments required to edge the large, influential consulting firms out of the clients’ boardrooms, notes Custer, who feels they may need to take on an ultra-specialist role, a space consultancies cannot compete in.
- Read: Big Q Consultancies: You have to understand the context of clients — Heidi Custers
- Read: Big Q Consultancies: Problems used to be more one-dimensional — Wayne Hull
Agencies haven’t moved from offering creative to offering business solutions (while consultancies now offer both)
Joshin Raghubar, the founder of iKineo, argues that “traditional ad agencies certainly have had a head-start on the management consulting industry to dominate the digital customer engagement and experience services portfolio for clients. However, by not being able to step out and above the ‘creative communication and advertising’ mindset, and firmly into the problem-solving business and leadership territory, agencies have once again ceded the high ground to consultancies.”
Marketing was already evolving then from a campaign-dominant activity to a service-design-led activity, he says. “In this new world, where the power has shifted from companies to customers, marketers and their agencies needed to become service and product designers, strategy consultants, data scientists, user-experience (UX) specialists, intangible product owners, and customer community managers.
“Even though they’ve had at least 13 years since the writing has been on the wall, for many traditional agencies, it has been difficult to shake this campaign-dominant logic,” he says.
But all is not lost — if agencies are willing and able to disrupt themselves. Again, this goes to staking a space in the digital transformation space currently owned by the consultancies and tech companies, as well as the high-value pricing model they enjoy (and which agencies don’t). Traditional agencies should turn the tables and consider buying firms for their C-suite brand share, is his advice.
To remain relevant, marry data and creativity
“CMOs understand that a data-led strategy, not just a creative one, is driving top-line growth,” writes Andy Sutcliffe, CEO and co-founder of 34°. “This explains why business models of consulting and creative agencies are converging. The key, of course, is the need to own high-level business strategy and this is an area in which ad agencies have been found wanting.”
Big consultancies underestimate the value of creativity and the culture, while the agencies under-exploit the value of business analytics. Agencies need to bring in a data-driven approach and marry it to world-class creative if they are to beat the consultancies, he argues. “But we’ve got to grow up and understand that creativity is essential yet only part of the solution business needs today, not the overall solution.”
Herman Manson (@marklives) is the founder and editor of MarkLives.com.
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