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The Future of Agencies

The future of the behemoth ad agency seems in doubt, lately. It’s not only that the shock departure of WPP’s founder and CEO, Sir Martin Sorrell, has brought open speculation that there is more value in breaking up the sprawling empire than simply putting it under the helm of a new ringmaster. There are also deeper, troubling trends afoot, as management consulting firms have been aggressively moving into the creative agency space. McKinsey, Deloitte, and Accenture have all lately gobbled up agencies that normally would have been bought by one of the big 4—Omnicom, WPP, Publicis, and IPG.

True, consulting firms have been ‘borrowing’ ideas, methods, and strategy from creative agencies for decades. But the consulting industry’s collective spend on marketing and advertising reached more than $1 billion in 2017, showing they’re dead serious about offering creative services. Will giant ad agencies survive the challenge?

Businesses need creativity, and vice versa

There’s no reason to think the need for creativity has gone away, nor that it can be handed over to business-oriented consultants. Consider the analogy of a high-end restaurant. You’d be hard-pressed to run a successful restaurant without creatively appetizing food, but you wouldn’t expect a chef to design the menu, take reservations, deal with the credit card machine breaking, and pour drinks. In the multi-billion world of advertising, marketing and branding, it’s best to stay sensitive to the delicate relationship between creative heart and business brain.

At the root, management consulting firms solve different problems than the ones creative agencies address. But, just as restaurants woo genius chefs, why should management consulting firms not buy their way into the creative industry business? The answer, plain and simple, is they lack the credibility to stretch into being both the facilitator of business innovation and the creative spirit that can combine business strategy and brand purpose into a shining, branding pole star.

Are clients demanding a hybrid product?

So, what’s driving the change? Is there is a wider move to include creative thinking where it has not traditionally resided? What are we to make of IBM’s announcement that it is training its entire staff to think like designers?

Like most industry shifts, at least some of the impetus has come via pressure from clients. Several high-profile clients have lately decided that their creative agencies, leadership scandals aside,  just aren’t delivering results. Big media spenders such as Booking.com have moved that function back to an internal agency arrangement, but are struggling to find the right balance of creativity and performance. Mark Pritchard, Chief Growth and Brand Officer at P&G has been openly critical of the agency model, arguing that advertising hasn’t changed much in decades and that agencies still operate like an archaic “Mad Men” model.

The Financial Times recently noted that “the fast-moving consumer goods companies… are cutting back their spending. A more deep-seated threat is that Silicon Valley will deal direct with advertisers, cutting out agencies altogether.” Clients in all businesses want a rigorous accounting of where their money is going, and may well be tired of paying through the nose for what one agency head describes in Forbes as mediocrity.

Agencies must step up their game

The new paradigm is likely to play out for a while, against the backdrop of the fast-moving dance between media and technology, where big data, machine learning and AI offer dramatically effective ways to gauge and predict what people want to buy. In theory, this might make the intuitive capabilities of agencies simply less valued than before. New agencies are taking an unashamedly hybrid approach. “Our model makes us more open to coming in to solve a problem, not to sell an idea,” said Seema Miller, CEO of Wolfgang a creative consultancy.

For branding, digital, advertising, and other creative agencies, the best survival strategy is to make sure they’re unimpeachably culture-savvy, as well as technologically hip, and then hold on tight. Management consulting firms may bring plenty of business acumen, data analytics and now digital marketing prowess to the table, but creativity is not in their DNA. Creative agencies have weathered storms and industry-wide upheavals before, and the smart, nimble ones will survive this latest iteration.

Business and brand are two sides of the same coin. Though they are distinct entities, they must inform one another in an ongoing, engaged conversation that ultimately benefits the client. By conflating the two through acquisition, the precious distinction is in danger of being lost.  It’s almost impossible for a management consulting firm’s culture to cook up the creative secret sauce that truly makes brands delicious. But their business acumen is essential too. Companies building and protecting brands need to push back, demanding excellence in both.

 

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