Helen Roxburgh
May 12, 2016

Why big consultancies buy design agencies

Management consultants are increasingly competing with creative agencies and have started acquiring boutique design firms.

New experience: Consultancies integrate digital creative for a well-rounded strategy and execution
New experience: Consultancies integrate digital creative for a well-rounded strategy and execution

The agency world has been facing a new crop of players offering many of their traditional tasks—consultancy firms. In a bid to be more creative and react as new technologies disrupt the marketing industry, more and more consultancies are snapping up boutique firms specialising in creative and design, alongside developing their own in-house capabilities.

In an effort to perform greater transformational work for clients, consultancies have been aggressively acquiring and integrating these design firms, arguing that the acquisitions allow them to meet changing client expectations around ‘design thinking’, along with helping to keep them entrepreneurial and bring in local talent.

Accenture is one such consultancy on the acquisition trail. The firm completed its purchase of   London-based design firm Fjord in 2013, saying their clients needed “to capitalise on the disruptions being created by digital and to sustain engagement with consumers”.

In July 2015, Accenture acquired Chaotic Moon, an Austin-based digital design agency, which will work with Fjord in building its digital services through its digital arm Accenture Interactive.

“It’s about getting the right blend of local expertise and combining that with the ability to tap into an acquisition and lever global talent,” says Patricio De Matteis, MD for Accenture Interactive in Asia. “This helps our clients reimagine their product services and their experiences. And it helps break the gap between thinking of marketing in isolation, sales in isolation and services in isolation. Truly bridging that capability is something we can provide.”

Accenture’s design studios in Asia are currently limited to Australia and Hong Kong, but there are plans to launch across New Zealand and mainland China.

“Clients are moving from a perception that the user experience is just something pretty to an overall business transformation,” says Iñaki Amate, MD at Fjord Greater China. “So you require a high degree of integration and complexity at every single element. That is difficult if you have to integrate with several different agencies. If you are looking to transform your business, you probably want to rely on someone who has a good track record at transforming businesses in this sort of way. I think that is what we are doing.”

The ‘Big Four’ consultancy and accountancy firms have all been active in this area. PwC acquired the Hong Kong-based design and creative agency Fluid at the end of last year, obtaining Fluid’s capabilities in digital, design and strategy.

“Our clients have been asking us for [these types of acquisitions]” says Colin Light, China digital consulting leader for PwC. “We acquired Booz & Company a few years ago, and that gave us strategy capabilities. We’ve had management and technology consulting capabilities for a very long time, and a lot of our clients are saying to us they need the middle bridging from strategy to operational management and execution. Customer engagement and loyalty, and understanding how to get the best out of our brand, and that’s a critical part of what design is. So we’ve created PwC Experience Centres around the world that bring together creative talent, business talent and technology talent, and it puts that business experience and technology together in collaborative teams. We believe that can really unlock that part of the value train.”

Elsewhere, IBM snapped up three different firms that specialise in digital marketing, creative and design earlier this year, and in August last year EY bought digital design company Seren. Deloitte Digital’s global revenue reached US$2.1 billion last year, with about 7,000 employees.

Consultancies says their clients come to them when they are at a transformational stage of the business, and it makes complete sense to coherently link together all aspects of the transformation.

But does this mean consultancies are the greatest threat to advertising agencies?

“There’s been a lot made of companies like PwC going head to head with agencies, and I think we’ve always been clear—we still work with agencies as our partners on a huge range of opportunities,” says Light. “We also have our own creative design capabilities that probably brings a level of business and technology experience that those agencies might not have themselves. Most of our clients are trying to solve some form of transformational problem, and that’s where I think we tend to pick up most of that type of work ... Some of the big ad agencies are big clients of PwC, and we firmly believe in that partnership model. They might have direct influence over the brand strategy or running individual campaigns and social executions and much of that we don’t directly compete on.”

The market is certainly in a period of flux. Many traditional ad agencies have also been buying up technology firms and even product development work—typically consultancy domains. Many predict that the market is set for a period of consolidation and potentially failures.

“I think we still see—depending on the maturity of the market—a lot of marketers going to their small boutiques and digital agencies as a matter of habit and comfort,” says De Matteis. “But I see a lot more consolidation in the future. The reality is that change only comes when you have the maturity and conviction to reimagine your business models, products and services. We are seeing consumers leading the way faster than our clients. With a blurring over how different industries can shape expectations, clients need to think how best to imagine their brand.”


BIG IDEAS
Welcome to the new normal
Jeff Estok, managing partner, Navigare

The emergence of consultancies as direct competitors to agencies is getting attention of late. Some say it’s a passing fad; others say a misguided attempt to grab what rightly belongs to agencies. To those who blindly prophesise the failure of these groups, I have but one word in reply—bollocks!

Not only are they here to stay, they are getting more powerful. Successful mining of the consumer marketing space is not just about opportunity for them. It is business-critical. 

Faced with the decline of their cash cow, which is audit practice, the consultancies have to find new revenue stream.  

The digital economy has provided just that path, allowing them to focus on large-scale digital business transformation, with the customer at the centre: 

l They understand that clients prefer an end-to-end solution. To quote PwC: “PwC has an aspiration to be in ‘Category of One’, where we help our clients all the way from strategy to execution.” Sound familiar? One-stop shop? Or to use Sir Martin Sorrell’s recent moniker, ‘horizontality’?

l While customer centricity has never been core, they are acquiring the necessary capabilities to credential themselves in this ‘new’ space. No different from the path that agency holding companies have long employed, but with a critical difference—consultancies are integrating them into their businesses.

l They focus on acquiring design firms, as innovation is critical to transformation, and design is the catalyst for that. They also acquire digital firms to give them broad channel execution expertise and address the long-held notion that they are only about strategy, not about execution.

Should the adland be worried? Yes. Deloitte would not have spent US$200 million in design acquisitions if they didn’t consider this to be core business. More worrying for agencies is that this puts consultancies in the CMO’s office, not just the CEO. 

As success breeds success, you would expect the consultancies to acquire more firms with broader, scalable skills and continue to marginalise agencies. Welcome to the new normal.


Our view: Creative agencies may have been too slow to develop the capabilities brands need today and are in grave danger of losing out to consultancies. 

 

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