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The Face off between Consultancies & Communication Groups

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Steve Jobs is once known to have said, “We do no market research. We don’t hire consultants”.

So obviously Steve Jobs didn’t have much faith in either but for some time now marketing trade magazines have been publishing articles on what might be described as a face off between the consultancy firms and the communication groups like WPP and Publicis.

The latest salvo came from WPP’s third quarter earnings report where WPP dismissed the threat from management consultants as “overhyped”. Analysts may tend to have agreed.

And yet just last month, Jerome Bodin, an analyst at Natixis shocked the communication group community by saying that WPP and Publicis were potential take over targets. He seemed to suggest that consultancy or IT services companies like Accenture or Capegemini could be shopping.

Bodin said that WPP and Publicis were potential take over targets and that Accenture could be a possible buyer. “Amid strong pressure on advertising agencies’ business models, a consolidation deal is a credible scenario,” Jerome Bodin, an analyst at Natixis, wrote in his research report. Bodin said a merger was one possibility, but more likely were acquisitions by a consultancy or IT services company like Accenture or Capgemini. Brian Whipple an ex-ad agency executive from Accenture Interactive said, “We don’t believe brands are built from advertising anymore. “They are built from an amalgamation of customer experiences, so that is what we are focused on.” That statement unveiled the possible threat on the horizon for communication groups. Cognizants buy out of Zone Digital in the UK just two weeks ago perhaps was a good example of what Bodin might have been alluding to.

In their third quarter earnings report this year WPP accused AdAge of carrying “wildly inaccurate” estimates of the consultancies’ digital marketing revenue in comparison with the industry’s agencies or holding companies. (Earlier Ad Age had reported that four consultancies have already cracked Ad Age’s ranking of the 10 largest agency companies in the world.)

“Where the consultancies may have made some inroads is their focus not so much on the digital area, but more importantly on client concerns about cost,” WPP said.

So WPP seems to have gone to great lengths to justify that the consultants were indeed no threat to WPP. They seem to have won more pitches and the more important ones in terms of size.

Do services of the communication group and the consultancies really overlap?

If one looks at it objectively there is no real overlap. Communication groups have mostly focussed on communication and creativity and the consultancies have been focussing on business expertise and advice to clients. This has often been alluded to as the consultancies being more left brained and the communication groups being more right brained. Why then this furore over the consultancy and the communication group face off? One of the reasons perhaps that there is some degree of overlap is the new field of ‘digital’ that has attracted both the consultancy and the communication groups, which considered it a natural extension of their earlier services since main media like TV and print have been slowly down and giving in to digital media, that is in some countries taking over a lion’s share of the market. For example, when it comes to news, digital media because of the penetration of phones and tablets and computers has been catching up with TV and newspapers in developed countries like the UK and others.

Ofcom’s report in 2014 for the UK first showed a trend that would soon catch up in other countries as well.

Andy Main, Chief Executive of Deloitte Digital which is entering India says ” We are transformation partners for our clients, while an advertising agency is a communication partner offering only creative solutions and talking only to marketers. Through our work, we try to impact the business of a company by bringing a change in its balance sheet quickly. I don’t think a television ad has ever transformed a business. We can work with the brand’s chief executives, supply chain, sales, finance and even human resource managers.

Deloitte Digital brings capabilities like digital technology, experience design and linkage to back office systems. We can manage the company’s data leveraging new-age technologies like artificial learning and cognitive technology apart from connecting with the brand’s consumers through advertising”.

So there is no doubt that the consultancy groups are taking the high ground with clients by claiming to be transformation partners for clients. Once upon a time, agencies also claimed to be transformation and business partners for clients, but it might be something the communication group has forgotten along the way. After all who would deny that Bill Bernbach transformed the Volkswagen business in the United States with the launch of the VW Beetle. Or deny that Ogilvy transformed the business for Rolls Royce and many others?

Unfortunately that may no longer be true. Declining margins in the advertising business, have forced agencies to do just that much and no more. They have also enveloped themselves into the comfortable cocoon of ‘creativity’, thereby limiting their transformational abilities.

Sometime ago Sir Martin Sorrell posed a rather rhetorical question when he said that consultancies can’t buy culture. He added that one is a science and the other is an art. I agree with that. But communication groups have not been happy with art and all the recent additions to their portfolios have been in the area of science. In fact, WPP boasts that less than a fifth of their revenues come from mainline advertising. The rest is data, media, research and digital which probably falls under ‘science’. So it is justified perhaps that the time has come for the consultancies to chase art as well.

On the question of buying culture, my piano teacher used to say that it is easy to buy culture. She once pointed out that the easiest way to buy culture for the nouveau riche was to buy a piano and study classical music!

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