READING TIME: 4 MINUTES
The shifting competitive set agencies are playing in will go down as one of the key topics of 2016 as we all debate whether agencies are about to be put out of business by consulting and professional service firms.
In Australia, it seems that media agencies are the ones with the most to fear. Last month, a reporter in The Australian wrote that media agencies are “under pressure from big consulting firms such as PwC, Accenture, Deloitte and KPMG. These firms are aggressively moving in on some of the territory” occupied by media agencies.
In the US, however, creative agencies are also feeling the heat. Avi Dan, founder of agency search consulting firm, Avidan Strategies, wrote in Forbes that eight of the top-10 ad agencies on Madison Avenue, as ranked by Ad Age, are “not those legacy names that might visit your home nightly with their TV commercials. Instead, they are consultancies like Deloitte, Accenture, KPMG and PwC. Even McKinsey is slowly building an agency arm. Tech companies like Adobe, Oracle and Epsilon have added a service component in the form of an agency to their core product offering.”
Here in Australia, Kimberlee Wells, CEO of Whybin\TBWA Group says agencies such as hers haven’t been pushed out by consultancies. Yet. She says: “We certainly feel their presence but at this point, the impact is mainly on enterprise-wide digital solutions. This is not a space a tier one agency generally plays in, however, I’m sure the specialist digital agencies are feeling the pinch.”
Digital solutions, and indeed digital transformation, are the bread and butter for firms like Accenture Interactive as they can offer scale beyond that of local digital agencies through their vast global networks and outsourcing. But even they face disruption in this area that’s in high demand as fully outsourced offerings look to undercut them. And then there are tech-based companies looking to get in on the act with today’s agencies finding themselves talking to brands at the same time as companies like Adobe.
Like creative, media and digital agencies, consultancies can’t necessarily do everything for a brand.
“The key to the future is going to be partnership,” says Wells. “Try as they may, no single agency can be great at everything. Interestingly, the conversations I’ve had with clients about the management consultancies is they are great at the technical piece, not so great at the creative piece and too expensive to sustain long term.”
They might not be up to speed with the creative piece for now but it could be only a matter of time before they hire the right people and develop the skills to change that. Consider that in June Accenture opened a 10,000-square-foot content studio in New York’s SoHo with the plan to develop marketing creative for its client base.
Of course, there is the argument that agencies and consultancies can play in this space together each focusing on their areas of strength.
Jason Dooris, CEO of media agency Atomic 212 says: “Agencies need to find their niche and provide solutions that are indispensable to clients.”
Perhaps there is scope for this to be a two-way street with agencies learning from consultancies, borrowing systems and methodologies from them.
In May, AdNews wrote about Omnicom Media Group’s consulting arm, Annalect and how it represented “a necessary reinvention that media agencies are facing to take full advantage of digital consulting opportunities in an increasingly competitive market”.
More broadly, though, agencies could follow the lead of IBM, a company with around 50% of its workforce minus an official office as they adopt the view work can be performed anywhere so long as client outcomes are being delivered. Consultancies are also known for employing flatter structures which give clients access to more senior people from the organisation.
As we shine a light on the existing agency business model, surely there are learnings to be had from how other businesses are achieving greater efficiency and who better to turn to for wisdom in this area than consultancies.
Whether these professional services firms are about to eat your lunch, Atomic 212’s Dooris says: “Agencies need to re-define revenue and income streams to continually adapt to the changing landscape.”
And we can rest assured that whichever way this plays out, one thing that’s guaranteed in this industry is change.
Hear from Accenture Interactive’s Michael Buckley at the Agency Leaders Symposium as he joins media and creative agency CEOs to discuss today’s business models and the shifting competitive set.
Brooke is the former editor of Encore and B&T Magazines. She is a writer, producer and marketing communications consultant.