Saudi Arabia a lucrative battleground for management consultants

27 May 2016

More than 90% of the revenues of the Saudi government is currently derived from oil. Under the reign of Prince Mohammed bin Salman, Saudi Arabia has launched ambitious plans to end its long term reliance on oil. To support the design and rollout of strategies and large complex programmes, the country’s policy makers and corporates are increasingly turning to management consultants – total fees paid to consulting firms in the Kingdom has grown by 12% to hit $1.3 billion.

Saudi Arabia has seen its healthy government budget surplus, of around 15% of GDP in 2012, fall by a total of 30% to around -15% last year. The intervening period, from around mid-2014, saw a massive glut in global oil and a nearly 60% drop in price; the ‘black gold’ accounts for 90% of government revenues. 

Under the new leadership of the Kingdom, led by Deputy Crown Prince Mohammed bin Salman, who among others heads the Ministry of Defence, Saudi Arabia has established a long term strategy that seeks to diversify the country’s government funding away from oil. One of the major hubs where planning for the country’s economic transformation is taking place is at the Al Khozama Center, located in the heart of Riyadh. The hub hosts state officials and a large cohort of top tier consulting firms such as McKinsey & Company and The Boston Consulting Group, which are taking an active role in developing plans for the country’s transformation. McKinsey, for instance, was hired to by Bin Salman to support ‘Vision 2030’, while BCG, has, according to the firm’s own statistics, to date worked on over 200 projects in the Kingdom.

“I wouldn’t underestimate the historical significance of this transition,” said Jonathan Woetzel, Director of McKinsey Global Institute, the research unit of the consultancy. “Because of the demographic pressure and the ticking clock on oil prices, Saudi Arabia’s change is being accelerated. A transition in the economic model that had been expected to take 10 or 20 years is now expected to happen in just 3 to 5 years.” 

Saudi Arabia is a lucrative battleground for consultants

Consulting fees
The diversification programme has been a considerable boon to the consulting industry as the country seeks external expertise across a range of topics related to the transformation. According to Source Global Research, the Saudi consultancy market has seen a fee increase of 12% over the previous year, with total income hitting $1.3 billion at the start of 2016.

"The focus is on Saudi like never before,” said Jodi Davies, General Manager of Source in the Middle East. “The opportunities for consulting firms are huge. Consultants are working to transform an entire country." 

In a bid to capitalise on the growing demand for advisory services, a range of players has entered the market to advise Saudi business and the government about strategy, management and transformation. McKinsey, which recently released a report on the diversification challenge the Saudi government faces (including a calling for $4 trillion in investment), leads the pack in terms of strategic work. The US firm, said to be the most prestigious consultancy in the market, has won the largest share of contracts from the ministries – and is, state consultants within the country, working on identifying opportunities to cut costs and boost revenue on a number of large scale projects. In a wide-ranging interview with The Economist in January this year, Prince Mohammed himself acknowledged that “McKinsey participates with us in many studies.”

According to the Financial Times, McKinsey’s presence is so dominant in the higher echelon of the Saudi’s government ranks that businessmen have sarcastically dubbed the Ministry of Planning as the “McKinsey Ministry.” 

McKinsey’s largest global rival, The Boston Consulting Group, is active in the country across a range of sectors and project types. BCG is, for instance, lending support to the development of a start a state-owned mortgage firm to provide a secondary market for home loans. The firm has enjoyed double digit growth in the country, and is actively expanding its Riyadh office, which opened in October last year. “The establishment of BCG’s office in Riyadh is a very positive development in the relationship, particularly as the Kingdom continues to diversify its economy,” said Abdullatif Al-Othman, chairman of the board of directors of Saudi Arabian General Investment Authority (SAGIA), during the inauguration of BCG’s 82nd global office.Strategy consultants play key role in transformation of Saudi Arabia's economyA.T. Kearney has been active in Saudi Arabia for years, and late 2014 relocated to a new office in Kingdom’s capital to meet growing demand. The firm holds a strong position in the Oil & Gas industry, with SABIC – Saudi’s largest listed company – one of the firm’s top and longest standing clients. Oliver Wyman and Strategy& both have offices in Saudi Arabia, with in particular the latter firm able to build on a strong heritage in the region. Strategy& has an established foothold in the Middle East, leveraging the leading position it already had under its Booz & Company era (prior to being acquired by PwC and the rebranding), operating from its offices in Beirut, Cairo, Doha, Dubai and Riyadh (2 offices).

Other consultancies that have a physical presence in Riyadh include Accenture, Arthur D. Little, Capgemini Consulting, Korn Ferry Hay Group and several of the larger US and Indian IT service providers. Several advisory firms do not have an on the ground hub in the Kingdom, yet service the Saudi market through operations in the region, with typically the United Arab Emirates (UAE), Jordan and Lebanon serving as the fly-out hubs. Bain & Company for instance has a base in Dubai, PA Consulting Group has three offices in the Middle East, while German origin Roland Berger operates from Lebanon and the UAE.

The large professional service firms, including PwC and Deloitte, are also enjoying strong regional growth. PwC’s Waddah Salah, the leader of its Middle East consulting business, acknowledges that the firm has recently won a number of contracts for government ministries. Deloitte has also become more active in the country, with its consultants drafted in from European bases to fly in and out of the Saudi capital. Ben Hughes, Dubai-based Director of Capital Projects at Deloitte, said: “There has been a huge flight of consultants to Saudi Arabia from Dubai, looking at all aspects of the economy. This is against the backdrop of lower oil prices, increased military spending and a new ruler.”

Heating competition
The rapid influx of consultants, in the slipstream of the buoyant market, means that – much like with the oil glut – supply is starting to outstrip demand. This is turning the lucrative market for management consultants into a battleground, resulting in firm competition for contracts. “Fees are very competitive, more so than in other parts of the Gulf Cooperation Council,” remarked Hughes. “It’s a buyer’s market. People are increasingly trying to undercut one another, and equally clients recognise their advantage in this regard.”


Accenture's push into the creative sector is an identity crisis

18 April 2019

In its latest push into the creative sector, Accenture Interactive acquired New York and London-based ad agency Droga5 earlier this month, adding illustrious clients such as HBO, Amazon and The New York Times to its roster of clients. With the latest in a long line of similar purchases, Accenture Interactive further demonstrated its ambition of becoming the globe’s leading trusted advisor to chief marketing officers. Yet according to Ben Langdon, Chairman of Class35, Accenture’s strategy may be heading in the wrong direction.

A press release on Accenture’s website announcing the acquisition sits next to a quote stating that “brands aren’t built through advertising” – a huge contradiction from a consultancy firm hell-bent on becoming the ‘CMO agency of choice’. It’s not alone of course. The entire consulting industry wants a piece of the creative pie right now. In addition to Accenture Interactive, recent acquisitions by PwC Digital, IBM iX, and Deloitte Digital meant that in 2017, for the first time ever, four of the world’s ten largest creative agencies were consultancies.

So just what it is that Accenture wants to achieve from this? For one thing, it’s clearly trying to be a digital transformation business. A one-stop creative shop rivalling more traditional models, it wants to lure CMOs in with the promise of lower ad spend and a “more impactful customer experience”. At the same time, though, it’s still in thrall to those same slinky, shiny branding and advertising agencies it’s attempting to disrupt. The Droga5 acquisition and that of Karmarama a few years before are both testament to this.

There’s a fundamental problem with this, though. Digital transformation businesses don’t sell to CMOs. These people have enough on their plates trying to transform their own marketing skills in order to keep up with an ever-changing market – they just don’t have the time or the energy to concern themselves with digitally transforming a whole business. If Accenture’s purpose is digital transformation, then going after creative agencies is barking up the wrong tree.Is Accenture's push into the creative sector an identity crisis?

Worlds apart

Perhaps more importantly, these two industries are worlds apart in terms of the way they think. Creative agencies are all about ideas, campaigns and consumers. Digital businesses, on the other hand, are customer-driven – they think in terms such as lifetime value, measurement, and efficiency. Customer-led thinking is an entirely different beast to consumer-led thinking.

The reality is that the arrival of digital and an all-encompassing obsession with technology, measurement and social has led to the death of agencies in a reductive, zero-sum, efficiency-focused battle with brands. Indeed, agencies have become so obsessed with the latest tech fads, they’re beginning to forget how brands work. Worse still, they’re beginning to forget how brands are built. And, by forgetting, they’re destroying their own values.

Killing creativity

All things considered, it really feels to me as though Accenture is a chip leader in a game it doesn’t understand. Expensive acquisitions like these show that they’ve got the big money, but they don’t appear to have any idea what they’re doing with it. Take talent, for example. The best talent in the creative industry right now is out in the market; it’s not tied to any one agency. Both agencies might well be at the top of their game, but why would a consulting firm waste so much money on buying them when they could hire high-quality creative talent on a contingent basis instead?

As their presence in the top 10 creative agencies shows, there is a growing trend in which Accenture, like many of the other big players, are buying up agencies as if they were nothing more than keywords. What they’re really buying, though, is a collection of credentials, clients and IP. Unfortunately, the talent that created those credentials aren’t going to stay at the business, the clients that hired the agency in the first place won’t be interested in buying what is basically just another part of Accenture, and the IP never really existed to begin with.

Droga5, for example, was one of the few agencies that did great brand work the old-fashioned way – undoubtedly something that made it attractive to Accenture in the first place. The irony, though, is that by leading it further away from the way of working that made it so special, the consulting giant will kill its creativity.

“Accenture Interactive has been dazzled by its ambitions to become the CMO agency of record…. But, in flashing its cash, it is spending millions on acquiring nothing of any value.”

If pressed, the recently acquired agency staff at Accenture will tell you just how dysfunctional the new arrangement is. They’re largely unfulfilled. Rarely do they feel their work has any sort of meaning or purpose. What’s more, the different disciplines have found little or no common ground, and find it hard to work together as a cohesive whole. It’s not surprising, then, to see talented people leaving in droves.

Beyond the window dressing 

It’s clear, then, that consulting firms and creative agencies are no easy bedfellows. But in his company’s defence, Accenture Interactive’s Senior Managing Director for North America, Glen Hartman, described its culture as being “far, far away from what a stereotypical consulting firm would look like. Our office and studios look a lot like Droga5’s.”

In demonstrating a belief that office design equates to workplace culture, this statement serves as an illustration of how confused Accenture is right now. It wants to justify its new strategy so badly, it’s started dressing like a creative agency. But if you look beyond the window dressing and see that you and your partners are speaking a different language with a different purpose, selling to different people in a different market, there’s no getting away from the fact that you’re different.

Accenture Interactive has been dazzled by its ambitions to become the CMO agency of record, and it wants to dazzle others with its new direction. But, in flashing its cash, it is spending millions on acquiring nothing of any value.

Related: Space between consulting firms and creative agencies is converging.