Alan Mitchell: Marketing services take on management consultancy

Two developments over the past few weeks have suddenly got consultants, in marketing services and management consultancy alike, twittering. The first is McKinsey’s acquisition of US brand strategy consultancy Envision: a clear signal, as the Financial Times put, that the “turf war” for the prize of top brand consultancy is hotting up.

The second is Procter & Gamble’s entry into consultancy. Its Project EMM (Enterprise Marketing Management) is focused more on efficient marketing operations – such as organising and co-ordinating global marketing campaigns – than strategy, but the thrust is clear. As one senior P&G executive said last week: “We know more than most of the consultants who present to us. They’re not teaching us, we’re teaching them.” And the endless brain drain from P&G (the headhunters are always circling) means that the know-how it does develop is always leaking to other companies anyway. So why not use a consultancy to keep some of the talent while capturing the fat margins it delivers?

Initiatives such as this grab headlines, but there’s more going on behind the scenes. Take strategy consultants Roland Berger, which has invested vast sums developing a proprietary – and very powerful – profiling technique which analyses brands and consumers according to 20 core consumer needs. Its profiler can be used in anything from brand strategy to analysing the creative details of ad campaigns. Then there’s the alliance between KPMG and the Peppers & Rogers Group, of one-to-one marketing fame. And let’s not forget McKinsey’s hiring of ad agency veteran William Eccleshare to help clients integrate their business and brand strategies.

Closer to marketing services’ home, every ad-based grouping, panicked by the loss of “the chief executive’s ear” has set up its own “media neutral” brand consultancy. Meanwhile, new non-advertising led groupings are emerging. At Tempus for example, Chris Ingram is creating a new beast which brings marketing consultancy Added Value under the same corporate umbrella as media experts CIA. At Chime, Chris Satterthwaite is building another group around PR (in the broadest sense of the term) with companies such as Bell Pottinger plus advertising (in the form of agency HHCL & Partners). Kevin Murray, chief executive at Bell Pottinger, likens all this activity to the film Close Encounters of the Third Kind, where people from all corners of the earth found themselves compelled to converge on the same strange peak, at which aliens eventually appeared.

Who will reach the peak first? Traditional ad agencies are hamstrung by three weaknesses. First, they’ve fallen into the same trap faced by most of their clients. Because they have an asset base to feed with orders (it doesn’t matter whether this asset base consists of expensive plant or expensive people) they are driven by the internal logic of “what do I make, and how can I sell it?”. Hence the long-standing jibe about agencies: “The answer is a 30-second commercial. Now what’s your problem?”.

Management consultants aren’t any better in this regard. The essential quality of successful management consultants is their ability to shoehorn every client’s problem into their company’s particular proprietary methodology (the presentation just happens to be waiting on their laptop). But the consultants have struck lucky because clients’ preoccupations have moved in their direction.

David Court, who heads McKinsey’s US marketing practice, hit the nail on the head when he commented smugly that while ad agencies focus on communicating the strategy, consultants focus on the brand delivery. The problem: when it is your operations, rather than your communications, that are key to your brand’s standing, ad agencies don’t have much to offer. Their response so far – to broaden the offer to include any and every marketing communications specialism under the sun – still doesn’t really address this issue. That’s their second weakness.

Their third weakness is their intellectual abdication to the number crunchers. Yes, measuring the bottom line effectiveness of marketing and the value of brands has a place. But the fact is, most existing measurement and valuation methodologies will never succeed because they operate within an out-of-date stewardship reporting framework. They assume that intangible assets and value – such as corporate reputation, employee know-how and creativity, not to mention brand equity – can be owned and controlled by shareholders in the same way that tangible assets such as factories and products can.

But they cannot. Assets such as these reside in individuals’ heads, and individuals have an awkward habit of wanting ownership and control of their own heads. Put simply, the stewardship reporting framework can never resolve the issue of intangibles, because they subvert the foundations upon which the whole edifice stands.

This is where agencies should be exercising thought leadership.

Intellectually speaking, the accountancy-driven consultants are emperors without clothes, even if most are still living in denial. When value comes from relationships with people via intangible assets such as insight, empathy and communication, traditional agencies come into their own.

So where do we go from here? The obvious answer is not a turf war but alliances and joint ventures. Mergers and takeovers, even; because the two sides’ core skills are complementary. Roland Berger consultant Tom Ramoser puts it like this: traditional consultants focus on the rational side of things, while advertising agencies focus on the emotional side. “The sweet spot is in the middle,” he says.

As “intangibles” move centre stage, traditional strategy and brand strategy are converging, says Enterprise IG chief executive Dave Allen. Your brand plans sum up your direction as a business, its investment priorities, the “core competencies” it wants to build, the alliances it wants to forge, the value propositions it offers, the sort of people it employs and the culture it wants to flourish, and so on. Brand communication is vital to tie the whole caboodle into a coherent whole, internally and externally. You need both traditional strategy and brand strategy skills.

A marriage between ad agencies and management consultants would produce a horrendous culture clash. The end result would probably be alien to both sides, as Murray implies. But that may be precisely what’s needed.

Alan Mitchell’s book, Right Side Up: Building Brands in the Age of the Organized Consumer, will be published by HarperCollins at the end of this month