The entry of management consultancies into the marketing communications arena has been predicted for at least five years but anyone still doubting their intent should be aware that between them Deloitte, McKinsey and Accenture spent $1.2 billion acquiring marketing agencies last year.
On the face of it, it’s a strange move, the margins in consulting are way higher than the kind of execution work that agencies are good at, so why dilute?
The intent is more likely to be create a new kind of consultancy that combines the top end of the space occupied by agencies who combine creative flair with trusted advisor status and the rigorous data driven strategies for which the management consultancies are renowned.
For these operators, the messy, lower margin work of tactical delivery can be done by others, which doesn’t sound very appealing.
How can the PR sector respond to a threat that is growing and is directed entirely at the most lucrative parts of their market?
The first big step would be to behave like consultants, not service deliverers, where the recommendations to clients are shaped and constrained by the skills of who is on the payroll.
PR agencies wish to be true consultants to their clients but generate most income from execution work done by employees arranged in a traditional pyramid hierarchy. A quick read of the PRCA annual census reveals that most work done in PR is still tactical delivery.
The problem is that the higher up the pyramid you go, the less time you spend advising clients directly.
Meanwhile the work that agencies are capable of carrying out is limited by the skillsets of the team. This is the Law of the Instrument – when you have a hammer, everything looks like a nail.
This has several outcomes, none of which help the agency facing competition from a creative strategy led rival, unencumbered by a focus on execution.
1. Your best people are spending too little quality time talking to clients about future direction and being truly expert in their clients’ industry.
2. What you are selling to clients is shaped not by what the client needs, but what your team are capable of delivering, a production led approach to marketing, not a customer led approach
3. What you are selling to clients is shaped also by when your team are capable of delivering – multiple large projects at once can push a team beyond its limits
4. You have a strong incentive to push work down to the least experienced (cheap) resource which brings innate risks to the quality of what you are delivering
It’s unlikely Accenture or Deloitte will come waving their cheque books at agencies who are weighed down this way.
They will more likely be hiring small teams of creative strategists or individuals who feel stifled in traditional agency hierarchies, because for them career progression means *less* time being creative, *less* time with clients, *more* time in internal meetings.
Escaping that into a high paying, highly stimulating environment is more than tempting so staff retention of your brightest and best will become harder.
How to respond? Fight fire with fire.
Adapting an agency structure to new competition and the changing expectations of a workforce that is not as interested in hierarchy need not be a leap into the unknown. It can be a measured, low risk migration that fits into the natural process of staff moving on.
Now that it is easy to hire PR freelancers with exactly the right combination of skills and experience, you can spend less time trying to fit clients to the skills you have on the payroll and more time behaving like a true consultant by responding to them with recommendations untainted by the resources you need to utilise to make money.
A strategic approach to PR freelancers not as a stop gap measure but as a planned resource that allows you the freedom to be the true consultant you want to be, offers a surprisingly low-risk, transition from the traditional agency structure that is now fading fast, a theme explored in more detail in my last blog about the trends shaping the PR industry
The competition from management consultancies will not be a sudden arrival in most markets - the list of articles predicting this goes back at least six years, but it is happening and for the agile, open minded agency owners it presents a strong opportunity.
Taken together, the competition coming from a more flexible creative strategy offering (from a sector that is deadly serious) and a shifting of the plates towards working patterns that are incompatible with most PR agencies’ pyramid structures is unavoidable but not necessarily to be feared.
The PR Cavalry is here to help.