Consultants pushing into advertising and marcomms space

17 March 2016 Consultancy.uk

Much has in recent months been written about the challenges the big consulting and accountancy groups – KPMG, Deloitte, PwC, Grant Thornton, M cKinsey et al – pose to the established advertising networks. Indeed, in recent times, the big boys have been emulating the likes of WPP and Publicis by snapping up startups and promising small firms left, right and centre. Like the big marcomms firms, the consulting giants are looking to expand their skill-sets and buff up their offerings – by acquiring talent and capability if need be.

Take KPMG, for example. Last May it acquired UK-based consultancy Nunwood, which specialises in customer experience management and feedback technology. Founded in 1996 as a research agency and with offices in Leeds and London, Nunwood was combined with KPMG's Customer & Growth capability to create an advisory business with around 150 staff (80 from Nunwood) and led by KPMG partner Mark Guinibert.

Nunwood had an interesting range of technology products including its Fizz reporting system, and had refocused its business on change consultancy and CEM (customer experience management) by the time KPMG bought it. What’s really interesting is what Richard Fleming, head of advisory at KPMG, said at the time of the buy: “The deal is strategically very important to KPMG as it will enable us to provide clients with the tools they require to be truly customer-centric. Nunwood's understanding of the issues driving customer behaviour, and the way they focus on improving customers' experiences mirrors our approach of putting technology at the heart of everything we do.” This is the kind of thinking that drives a top-end DM or CRM agency, is it not?

Consulting Firms in Advertising

At the same time that KPMG was buying Nunwood, Accenture bought Javelin Group, a UK-based consultancy specialising in retail strategy and digital transformation. One of the things Javelin was very good at was omni-channel retail planning. As a result, Accenture is now able to offer a broader range of digital capabilities to retailers and to help them 'execute large scale change' – as commerce moves online, and retail changes, demand for this kind of service offer can only grow.

Fast forward to February this year, and Capgemini Consulting bought the highly rated design and innovation consultancy Farenheit 212. This is what Capgemini Consulting CEO Cyril Garcia said at the time: “Our shared view of the future of innovation and the inclusion of digital is the impetus behind the combination of our complementary approaches as we step-change the way consulting is defined and delivered. Together with Fahrenheit 212, we'll bring additional value and innovation to our clients and expand our innovation solutions into new industries that are undergoing digital disruption.”

Underneath that opaque management-speak, Garcia is saying that businesses are going through change and disruption, and will be needing advice on strategy and quite a bit of good old-fashioned hand-holding – and his firm intends to be the one doing the holding.

Just as advertising giants like McCann, Y&R and Ogilvy have shifted away from 'just' being ad agencies creating TV spots and posters towards being strategic partners for clients, so the old management consultancies and accountancy giants have also sought to become strategic advisors and partners in the marcoms space, helping brands and clients manage change and present themselves to the world.

We’ve said it before but it bears repeating: Sir Martin Sorrell, John Wren, Maurice Levy et al need to keep their eyes on these companies. As clients increasingly look at customer journeys and customer experience, they are looking for strategic partners, not just ad agencies. There is a real danger that ad agencies lose out to the big consultants, who will snaffle the high-margin strategic work, leaving the traditional agencies with just the execution.

Digital advertising

Interestingly, perhaps the biggest danger to the established order comes not from the 'upstart' consulting outfits, but an old company that is one of the world’s biggest advertisers – IBM. For an example of how companies can transform themselves, look no further than 'Big Blue'. Back in the 1990s, IBM was widely mocked as being an example of everything that was wrong with big business: bloated; mired in bureaucracy, siloed thinking and complacency; directionless; and dependent on increasingly commoditised markets such as PC manufacturing. Worse still, IBM had once had a near-monopoly on PC manufacture, but had lost its lead to low-cost upstarts.

In 1993, it posted what was then the biggest loss in US corporate history – $8 billion. Under the leadership of Lou Gerstner and others, the company sought to change itself. And change it did – divesting itself of commoditised activities such as PC and printer manufacture, simplifying its structures and ways of working, and embarking on a programme of reinvention, moving away from low-margin (thanks to China) manufacturing into high-margin consultancy and research.

IBM has transferred from being an old-fashioned, distinctly uncool maker of PCs and mainframes into a nimble innovator with an aura of cool. Even if you’re not a fan of business books, Gerstner’s memoir, Who Says Elephants Can't Dance?, is well worth a read, because it offers a number of lessons for anyone interested in the future of ad agencies. He describes his arrival at the company in April 1993, when an active plan was in place to 'dis-aggregate' the company. The prevailing wisdom of the time held that IBM's core mainframe business was headed for obsolescence. The company's own management was in the process of allowing its various divisions to rebrand and manage themselves — the so-called 'Baby Blues'.

John Akers, Gerstner’s predecessor as CEO, decided that the rational solution was to split IBM into autonomous business units (such as processors, storage, software, services, printers) that could compete more effectively with competitors that were more focused and agile and had lower cost structures. Gerstner reversed this plan, because he had – in advertising parlance – a crucial insight.

IBM

He realised that the biggest problem that all major companies faced in 1993 was integrating all the separate computing technologies that were emerging at the time, and saw that IBM’s unique competitive advantage was its ability to provide integrated solutions for customers – a company that could represent more than piece parts or components. Gerstner’s counterintuitive decision to keep the company together was correct – and the defining decision of both his tenure as boss and of IBM’s future in an interconnected world.

He realised that IBM’s sprawl gave it the capabilities to deliver complete IT solutions to customers. Services (such as strategic consulting) could be sold as an add-on to companies that had already bought IBM computers, while low-margin pieces of hardware were used to open the door to more profitable deals. There are two important things to take into account. John Akers was a company lifer, overly immersed in IBM corporate culture, remaining loyal to traditional ways which masked the real threats.

Gerstner (who came from American Express) was an outsider. He had no emotional attachment to products IBM had developed to try to regain control of the PC market. He wrote in his memoir that in spite of [operating system] OS/2’s technical superiority to the dominant Microsoft Windows 3.0, his colleagues were "unwilling or unable to accept" that it was a "resounding defeat" as it "was draining tens of millions of dollars, absorbing huge chunks of senior management's time, and making a mockery of our image".

By the end of 1994, IBM ceased new development of OS/2 software and later withdrew from the retail desktop PC market entirely, selling the entire PC business to Lenovo. The other thing Gerstner did was to sack all of IBM’s many advertising agencies and consolidate them into just one, Ogilvy & Mather. At the time it was billed the biggest ad account switch in history – it probably still is. O&M’s work from 1993 onwards played a crucial role in IBM’s repositioning. Gerstner retired back in 2002, but he left IBM in good shape and it continues to prosper, and continues to have a reputation as an innovator and a quality researcher and consultant.

IBM Interactive Experience  - Resource Ammirati

Indeed – in a series of moves that might be cause for concern over at O&M – IBM has been busy acquiring digital agencies. Only last month, it bought two companies: video streaming company, Ustream; and the 300-person digital agency Resource/Ammirati. The Resource/Ammirati deal, which is said to close by the end of the first quarter, is particularly interesting – it is the first part of the planned expansion of IMB's Interactive Experience division which aims to help "clients digitally reinvent to create transformative brand experiences". The division already has 1,000 designers, developers and – significantly - consultants and strategists serving IBM technology clients.

Of the acquisition, IBM Interactive Experience Global Leader Paul Papas said: “Resource/Ammirati has built its own stellar brand and reputation on a long, distinguished record of advancing leading brands in every industry. That portfolio of work and proven expertise is a perfect complement to the experience design capabilities of iX -- where we bring clients a distinct fusion of industry insight, design thinking and end-to-end digital transformation, from the experience of the individual to the core processes of the client's enterprise.” Doesn’t that sound a little bit like what a forward-thinking ad agency would be doing?

And the Resource/Ammirati deal is a very good one for IBM. Founded in 1981 with Apple (!) as its first client, has been known for several firsts in digital marketing - from infamously 'breaking the internet' in 1999 with the Victoria’s Secret Webcast Fashion Show during the Super Bowl, to being the first to tackle Facebook eCommerce capability for the likes of P&G, to creating award-winning apps and the first-ever 'digital personalised circular'. What big marcomms group wouldn’t want an agency like that?

And that wasn’t the end of IBM’s February buying spree. It also acquired ecx.io, a digital agency in Europe with customers including Axalta, Hammer and JAB Anstoetz. The Dusseldorf-based agency joined Resource/Ammirati in the IBM iX (for 'Interactive Experience') unit. Asked about the flurry of deals, European unit chief Matthew Candy told Forbes magazine that IBM’s been “on a journey” to build out its own design studios organically, and through acquisition.

Green Square

The digital practice at IBM now has more than 1,100 designers and 10,000 employees, with almost 1,000 to add just from these three deals. All of a sudden IBM looks like a good place to sell your hot start-up to. In a very telling quote, ecx.io chief Gerald Lanzerits told Forbes: “We’d build websites and ecommerce sites, and the project was done and the customers went away. Now we can focus on bigger accounts more intensively, to plan for the next two or three years.” IBM seems to be moving very aggressively right now, and its timing may be significant.

The transition – begun by Gerstner almost a quarter of a century ago – from legacy hardware and services into a consulting, cloud computing, mobile and security company, continues apace. It seems unlikely that IBM would buy three agencies in less than a month and then sit tight for the year. Expect the buying spree to continue. Digital agencies looking to hitch their wagon to a global business might be smart to reach out while the Big Blue cash is flowing.

And big ad agencies would be even smarter to keep their eyes on the likes of IBM and KPMG.

An article from Barry Dudley, a partner at Green Square, a corporate finance firm to the media and marketing sector.

More news on

×

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

18 April 2019 Consultancy.uk

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.