Will business consulting companies become a big threat to agencies?

The digital marketing landscape is constantly evolving, and businesses have to adapt to keep up with the rapid change. Consulting companies in particular have begun to build their own in-house digital practices, offering a full suite of marketing services.

Management consulting giants PricewaterhouseCoopers (PwC), McKinsey, and Accenture and Deloitte are taking more agency and design responsibilities through mergers and acquisitions. For example, in May of this year, McKinsey bought one of Silicon Valley’s oldest design firms Lunar, whose revenue reached $8 billion in 2014. Last April, PwC completed its acquisition of 100-year-old management consultancy team Strategy& (formerly known as Booz and Company) to boost its digital practice. PwC also initiated the Experience Center in October 2015, which consists of more than 3,000 experienced creative and digital business experts across the globe. Even Ad Age‘s agency list has catagorized Deloitte Digital, Accenture Interactive, and PwC Digital as networks similar to WPP, Wieden + Kennedy, and Publicis Groupe. 

Given that more major consulting corporations are choosing to take an in-house approach to hiring creative to generate design strategy, should Madison Avenue be worried?

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What does a digital practice do?

Companies working with PwC are accustomed to going through major changes in their business, such as a transformation in company culture or organizational structure. So they need to invest in technology, hire talent, and become more agile by working with cross-functional teams.

That’s where digital comes into play, as it helps companies access the universal ecosystem by determining who to work with and how to work with these partners.

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“Business transformation requires executive commitment and working with external vendors in new ways,” explains Matthew Egol, chief strategy officer of digital services at PwC. “If we use a house metaphor, you need to decide who the architect is, who the general contractor is, and who the sub-contractors are. In many cases, companies cannot depend on a single agency or tech vendor to be the architect, and they cannot reply on their creative agency to do all the integration because there are lots of assembling requirements in the process.”

Egol adds that the digital practice at PwC has the ability to provide a wide range of services, from strategy to execution.

On the strategy side, his team focuses on what capabilities companies need to have two or three years from now, how to prioritize tasks, which companies to work with, and what talent they many need throughout in the process. His team also helps companies evaluate select vendors.

Further down the road, Egol’s team helps clients execute their digital strategies, which involves agency services. For instance, while working with a CPG manufacturer that wanted to engage with 15,000 retailers around the world, Egol’s team helped the brand come up with strategy, design, an operation model, and assisted in executing back-end integration. They also built a website for the brand, which is typically more of an agency service.

Friends or enemies?

Building websites is just a small part of creative services that consulting firms are offering. As creativity’s influence is growing beyond the ad industry, digital practices are looking to scale their business by hiring creative talent.

In October of this year, David Krovitz, who served as enterprise innovation consultant for Disney and partner of ad agency PUSH Offices, joined PwC’s digital practice as experience director.

And this past August, Fjord, a design consultancy acquired by Accenture in 2013, hired two senior ad executives from agency R/GA: Steve Weinswig as managing director of national strategic accounts and John Jones as senior vice president of design strategy.

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As consulting companies are looking to be more creative, Egol uses the word “coopetition” to define the relationship with agencies. This is because when brands executive a strategy, they have the flexibility to choose whether they want to work with the internal design team at PwC or external agencies.

“Our clients are on a journey, and we are on a journey as well. We are helping companies to become more agile, multi-disciplinary, and design oriented in their thinking. If you look at traditional agencies, they work in silos, and their clients work in silos with them. We are looking to break the silos. Compared to agencies, we have talent from different disciplines and are more experience with strategic architectural design capabilities and tactical programs,” he says.

“But don’t get me wrong. Ad agencies have very creative talent. Our desire is not to displace the creative industry,” he adds.

Should agencies feel threatened?

Increased competition due to these acquisitions means that the lifespan of a small agencies and ad tech company are bound to be cut short. But Deacon Webster, owner and chief creative officer at agency, Walrus, does not feel threatened by consulting companies, because he believes that top creative talent will still remain at agencies.

“Certain parts of digital practices may work. But when it comes to creative, it’s a strange fad for me, given that traditionally uncreative businesses in the world are looking to suddenly create a creative culture and are expecting that to work,” Webster says. 

“For people who have a creative mindset, I don’t think McKinsey is a top place to go. Meanwhile, I don’t know how these consulting companies can foster the creative culture and continue building creative products,” he adds.

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Looking at a bigger picture, competition has a profound impact on the ad industry. Webster is concerned that mergers and acquisitions conducted by business consulting companies may lead to industry consolidation, because some agencies want to add financial liquidity to their businesses.

But mergers and acquisitions may deteriorate the quality of ad work. Agencies that are bought by ad holding companies like WPP or Omnicom generally don’t do as well as after they are acquired, due to the leadership change and a different company culture.

“All of these things are a big negative,” Webster says. “I cannot imagine my business getting acquired by Accenture. I think consolidation will always happen because people need money, but is it a good thing? Absolutely not.”

Creative culture may be a big hurdle that prevents ad executives from migrating to consulting firms, but agencies cannot ignore their fierce competitors that have more financial sources, more data, and a more diverse talent pool. How to cultivate a great company culture and retain the best people will remain a big question for everyone on Madison Avenue.

Images via Flickr.

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