Digital consultancies are making inroads with marketers against traditional ad agencies
Robert Schwartz, global leader of agency services at IBM iX, is convinced that two factors have brought the marketing community to a decisive existential moment. “Simply put, we see this as the single greatest time to be a creator,” he says, citing the power of technology and a never-before-seen ability to overturn brands and disrupt entire industries and categories. Conversely, and as a direct result of that first factor, it’s also the most difficult time to be a business, Schwartz says, “especially if you have existing infrastructure, brands, products, or services.”
Schwartz’s pedigree — two decades of senior marketing positions at major brands (IBM, JPMorgan Chase, AT&T, Century 21) and ad agencies (WPP, Ogilvy & Mather) — lends credence to his observations.
Even as he, no doubt, has a vested interest in that particular point of view because it presents “a real need (by marketers) for a different kind of strategic partner,” and IBM iX is just such a partner.
IBM iX is one of four digital consultancies now ranked among Ad Age‘s 25 largest agency companies worldwide, along with Accenture Interactive, PwC Digital Services, and Deloitte Digital. While most big marketers have, or have had, relationships with these agencies’ parent companies, this new breed of digital consulting firm is bumping heads with traditional advertising agencies more and more frequently and in more and more areas.
From their perspective, the reasons for the digital consultancies’ increasing inroads and success are obvious.
“In short, we sit at the intersection of creative brand innovation, digital transformation, and business strategy,” says Alicia Hatch, CMO at Deloitte Digital. “Like a traditional advertising agency, we have the creative capabilities that help companies thrive, but we also offer the business acumen, technological capabilities, and industry insights needed to truly transform businesses and spur long-term growth.”
In fact, while this issue is often portrayed as an “us-versus-them” competition between traditional ad shops and digital consultancies, framing it that way completely misses the point of what it all means to marketers, according to Glen Hartman, lead for global digital marketing and transformation at Accenture Interactive North America. “Big brand managers are changing the meaning of creative, and even our Fortune 50 clients are already changing their definition of what an agency of record is,” he says.
Creative performance is no longer just about brand affinity and brand effectiveness. It’s about brand engagement and understanding how that helps drive different behaviors. “The brands that get that, the clients that get that, they see us and want to work with us to help them make that change,” Hartman says. “CMOs see brands as a set of promises. The delivery of experience across the full customer journey — marketing, sales, service, loyalty, any interaction a customer has with the brand — is how those promises are kept.”
Everything is linked through technology and data and analytics, which are not typically part of the traditional agency makeup, and that has created a need for a new kind of experience provider. “We didn’t just decide to get into this business,” Hartman says. “Our clients asked us to do it. We created Accenture Interactive about 10 years ago as a response to the increasing complexity of marketing.”
Not surprisingly, executives on the agency side argue that digital consultancies simply cannot compete with traditional agencies in the creative realm.
“Advertising is all about the talent,” says David Moore, creative director at Bozell. “The creative, innovative thinkers who come up with stuff like ‘Just do it.’ and ‘Got milk?’ are attracted to the advertising industry. The type of people attracted to consultancies are number crunchers, pattern seekers, and analytical types.”
Schwartz and Hartman both scoff at such statements, reporting that top creative talent actively seeks them out. “I understand where the agencies are coming from; they have the history here,” Schwartz acknowledges. “But in every conversation I have with a prospective creative or designer — many of whom are coming to us proactively, by the way — they tell me that the idea of being connected to something involving technology, data, cognitive science, and a broader horizontal palette on which to deploy their creative skill is extremely appealing to them, and that’s what we offer.”
Creative people are coming to Accenture “in droves,” Hartman insists. “They want to be part of this bigger model, not just do creative ideas. They want to be in an environment where they can see those ideas translated into meaningful experience and have global influence.”
And it’s not just individual creatives making the switch. Hartman points to the digital consultancy’s recent acquisitions of entire creative agencies like The Monkeys and Karmarama, noting that the latter chose to join Accenture Interactive despite being wooed by numerous ad agencies and holding companies. “These are above-the-line agencies by any definition, and they want to be part of this new breed of integrated agency we are creating,” he says.
Just as digital agencies claim parity, or better, in the creative realm, many ad agencies and holding companies insist they match up well in the digital realm. “Data and tech assets owned by GroupM and WPP give our agencies unique strengths to deliver client value,” says David Grabert, director of global communications at GroupM. “We compete head-to-head with new competitors around their offers in data insights, tech, and digital capabilities, but our agencies deliver more than that. Our talented people — more than 29,000 worldwide — have expertise with all media platforms in almost any market in which a client needs to win, 150 markets in all.”
When all is said and done, however, a strong argument can be made that digital consultancies might have the inside track when it comes to meeting most or all of a marketing organization’s critical needs. As Hatch of Deloitte Digital notes, “It’s important to remember that creative, impactful branding is no longer generated in a silo. Orchestrating every aspect of the customer experience requires expanded capabilities that reach far beyond the traditional CMO role. Customer-centric companies are winning, and the CMO has the clear advantage when it comes to helping organizations transform around the customer.”
Even some on the ad agency side agree, up to a point. “As both industries are now scrambling to service clients better — and, not coincidentally, more profitably — there are stark differences in what is being sold and at what level,” says John Barker, founder and chief idea officer at BARKER, an advertising and digital agency. “The upper hand goes to the consultancies, because they generally own relationships higher up in the client’s C-suite.” But, he adds, in the nature of a true creative, “What agencies have that will always tilt the scales is magic. What the agencies have, and perhaps always will, are the magicians.”
Ultimately, what tips the scales in the digital consultancies’ favor may come down to dollars and cents. While consulting firms have the reputation of being generally more expensive than traditional ad agencies, their willingness to experiment with unique compensation plans and their ability to evolve marketing ROI to a level where it reflects specific business outcomes rather than just marketing performance metrics could change that.
Hartman offers the example of a multiyear contract Accenture Interactive has with an automobile manufacturer. It involves “a couple thousand” people working on every aspect of the brand’s global marketing — every channel, social, mobile, website, email, etc. “We get paid on net new cars sold, not time and materials, not fixed price contracts,” he says. “This is a massive undertaking. This is a whole new way of looking at things.”
Performance-based compensation is not a new concept, but the idea of being able to commit to it at such scale across multiple channels is unusual, and it has far-reaching implications, Hartman says. It fundamentally changes the role of the CMO and his or her standing within the organization. “Instead of measuring success by ROI on marketing, the CMO now has increased relevance,” he says. “CMOs can walk up to the chief sales officer and demonstrate that specific marketing activities drove specific business results. They can do reverse engineering around the customer experience, and that is an entirely different way of having impact on the business.”
For the time being, it seems likely that marketers will continue to avail themselves of the services of both Mad Men and Organization Men, but it’s clear that the lines between traditional advertising agencies and digital consultancies will continue to blur. Might the future bring some mega-mergers between big agency holding companies and big consulting firms? That doesn’t seem beyond the realm of possibility.
Right now, however, there’s no doubt that digital consultancies are the primary agents of change in the marketing space. “We’re redefining the industry itself,” Hatch says. “It will be called something entirely different in the near future. It is very likely that the word ‘digital’ will go away, because, already, ‘digital’ is really just business.”