Much has been made over the past few years of the threat posed to traditional ad and marcomms agencies by the management consultancies.
This was especially true when Karmarama, one of the last remaining London indies of any scale, was snapped up not by a WPP or Omnicom, as one might expect, but by consulting giant Accenture in November 2016. The result was perhaps the first 'cagency'.
However, the expected rash of similar 'big four' ad group takeovers never really happened. The reasons for this are complex and we’ve written about them before, so I won’t go into depth on those here.
But suffice to say that there are few big entities left to acquire. Accenture’s big rival, Deloitte Digital, acquired no fewer than nine marketing services agencies last year, but the likes of Market Gravity and Acne can hardly be said to be McCann or O&M-size operations, whatever other qualities they may have. And there is undoubted resistance among creative types to being gobbled up by a management consultancy.
I don’t think the consultancies’ interest in advertising is over, or that a big move or takeover won’t happen, I just don’t think the world is quite ready just yet, but there is an increasing number of brand owners showing a greater interest in the consultants’ approaches.
Instead of going over that old ground, I’d like to put a different spin on things. What if the next generation of hot shops to be circled by the M&A world were not traditional funky London, Amsterdam or Portland startups, but mini management consultancies?
It’s not as outlandish an idea as it might first seem.
Just recently my Green Square colleagues and I have been working with an impressive disruptor operation called ORCA, and the way in which they work got me thinking about what the hotter than hot, eminently M&A’able startup of the near future might look like.
ORCA describes itself not as a marketing services agency… but a “brand growth agency”. It doesn’t fixate on making old-fashioned ads, but instead begins with a set of fundamental and challenging questions around brand and business, operating to five key ORCA principles, all designed to deliver clients growth and help them manage change in a fast-changing world.
It specialises in a number of areas, not all of which one would associate with the more old-school advertising agency: identifying growth areas and potential; business planning; brand strategy; “course correction” (helping a brand or client change its direction or strategy, if necessary); branded content, activation and “brand guardianship”; identifying future opportunities; tracking performance and planning/executing responses as necessary.
The ORCA founders – Craig Wills (an agency strategy leader and startup entrepreneur) and Simon Pont (a former agency group chief strategy officer and best-selling author) – say they don’t focus on creative output as such, but on “brand growth and competitive advantage” – which sounds like the sort of thing a consultancy would say it does.
Wills is singularly direct when he says, “The way brands can and should be built has changed. There are smarter ways of working, thinking that doesn’t follow the tramlines of past convention, and new ways of activating brand strategies with an urgency and impact that is commercially quantifiable and culturally profound.”
ORCA takes a very “scientific” approach, using all the technological goodies – AI, predictive mapping, data science – at its disposal.
So, in a four-step process, the agency gathers intelligence and analysis on the brand, its customers and the wide landscape; it then uses the intel to identify opportunities (or threats); creates a programme to deliver the opportunity; and monitors its progress, adapting if appropriate. Of course, many of the skills it brings to the table – such as copywriting or design – would be part of any traditional agency’s remit; but others (road-mapping, packaging, trendspotting, cultural change programmes) wouldn’t necessarily be.
As Pont candidly challenges: “It’s 2018, meaning clients want an evolved set of agency skillsets – and they want partnership on a different set of terms. As opposed to paying punchy monthly retainers, agency resources are something a client should be able to dial-up and down, based on commercial targets, budget and funding rounds. A true partner business needs to be smart, strategic and simpatico."
Interestingly it can offer both a “consultancy model” (a fixed-term contract) or the more familiar “agency retainer”, with a licensing model for the tools. How this is put together depends on the client, its needs, the task and the budget. It’s a flexible approach that will win you friends in an era of huge disruption.
The Orca approach seems to be working as it is experiencing positive traction with new clients operating in a broad range of categories from financial services to B2B, tech to education and global luxury consumer brands.
Why is this? I think it’s for a number of reasons. It will use – or seek out – everything (not just creative or strategy but market data, business intelligence, legal requirements) to shape the vision of all the stakeholders – and then put it into action.
The big management consultancies have been doing something like this for decades. They attempt to solve problems and manage change or transition. Where they don’t possess the internal skills to manage this, they’ll bring in external contractors or partners.
Some forward-thinking agencies do this as well. In some quarters this approach is known as the 'Hollywood model'. The 'agency' acts as a kind of movie producer or director, assembling the right team of talents to bring the project to fruition – it’s the way Hollywood has largely worked since the collapse of the old studio system in the 1960s, when most of the big stars started to sign up for individual projects rather than being tied into long-term projects with a particular studio. Movie makers realised it was much more profitable to draw on a vast pool of freelance talent than rely on a large in-house workshop.
And so it is with smaller agencies, especially startups. Marcomms outfits like Orca are morphing into miniature consultancies. They will be more (relatively) profitable than a big shop with fat payrolls and infrastructures, and they can be much more nimble, which, in a fast-moving digital world, clients like. The clients also like the greater transparency offered by the “consultancy” model – they can see who’s being paid how much and for what.
But Orca and shops like them also bring something to the table that the big consultancies usually don’t – an understanding of consumer or customer behaviour. There was an interesting piece in the FT recently about the long and largely ignoble history of rebranding and corporate makeovers (Post Office to Consignia, Dunkin’ Donuts to Dunkin’ et al). These expensive makeovers are usually well-intentioned and often done at the urging of consultants; what one ends up with is usually something meaningless, and or long-winded (it actually takes longer to say “WW” than the pre-makeover “Weight Watchers”) and unpopular with the most important of a brand’s stakeholders – its customers.
A decent ad shop would look at the strength of a brand, understand the customer’s feelings about it, and act accordingly. Consultancies tend to look at other metrics and stakeholders, such as investors – a rebrand might lead to a short-term stock price hike, but overall, it has little effect; for consumers, the effect is often negative and usually results in much mockery from the media.
Earlier this month, researcher Forrester shared its CMO predictions for 2019. One of the interesting things Forrester found was that 2019 “will be the year CMOs prioritise strategies that harness their customers’ energy and then use that collective vivacity to reinvigorate their brand”.
The other thing Forrester predicts is that CMOs will be looking at “old school” marcomms – in other words, after years of focussing on tech and data, the way to cut through clutter is to concentrate on brands and their promises and essences again. Customer experience, not piles of data or split-second programmatic ad placement, will be what counts.
This is something the very best “old school” agencies do very well, and it’s something consultancies couldn’t. To do it, they are having to learn, or buy in. Buying in (or up) is easier.
There was another move in this direction last month (31 October) when PA Consulting acquired Essential Design for an undisclosed sum.
PA Consulting describes itself as a “global innovation and transformation consultancy” (with offices in the UK, Europe and the Americas) specialising in strategy, innovation, product design and engineering and manufacturing process improvement. PA’s clients include Virgin Hyperloop One (transport) Skipping Rocks Lab (sustainability) and Monica Healthcare (pregnancy monitoring).
As such, Essential is a perfect fit. Based in Boston, USA and formed in 2001, Essential has clients in the consumer (Shure, Altec Lansing, Dell), life science (Robot Futures) and healthcare (Philips) sectors. Its team of researchers, designers and engineers “inform and translate innovation strategy, to create breakthrough physical and digital products”. Essential’s work has won international recognition and received numerous industry awards for excellence in design research, design strategy and design development.
As a visit to its website will confirm, Essential does much more than just “design” products. It offers research, strategic consulting, quality and project management, engineering and, of course, industrial and service design. Pretty much a consultancy-style “end-to-end” solution. But with a healthy focus on customer experience and brand promise.
How, you might ask, are outfits like Orca and Essential marcomms agencies? The answer at its heart is simple. Advertising and marketing isn’t that complicated – it aims to do two things: solve problems (for the client and end user) and change behaviour.
For the end user, this might, for example, manifest itself as providing information or entertainment (or some other 'reward') so that they buy Product A, or buy more of Product B; or getting them to recycle more, or stop smoking or eating too much fatty food. For the client, this might mean changing internal or cultural practices so that identified problems can be solved, or that end users can be better engaged.
This is essentially what the consulting firms do (if they’re doing things right, of course), but there are crucial bits of the jigsaw missing, which is where the convergence we’ve been exploring comes in.
This morphing of startups into consultancies is an interesting development – but it’s just one of many mutations happening right now.
Barry Dudley is a partner at M&A advisory Green Square