For a vision of the future of marcomms, consult the consultants

Take KPMG, for example. Last May it acquired UK-based consultancy Nunwood, which specialises in customer experience management and feedback technology.

Founded in 1996 as a research agency and with offices in Leeds and London, Nunwood was combined with KPMG’s Customer & Growth capability to create an advisory business with around 150 staff (80 from Nunwood) and led by KPMG partner Mark Guinibert.

Nunwood had an interesting range of technology products including its Fizz reporting system, and had refocused its business on change consultancy and CEM (customer experience management) by the time KPMG bought it.

What’s really interesting is what Richard Fleming, head of advisory at KPMG, said at the time of the buy: “The deal is strategically very important to KPMG as it will enable us to provide clients with the tools they require to be truly customer-centric. Nunwood’s understanding of the issues driving customer behaviour, and the way they focus on improving customers’ experiences mirrors our approach of putting technology at the heart of everything we do.”

This is the kind of thinking that drives a top-end DM or CRM agency, is it not?

At the same time that KPMG was buying Nunwood, Accenture bought Javelin Group, a UK-based consultancy specialising in retail strategy and digital transformation. One of the things Javelin was very good at was omni-channel retail planning.

As a result, Accenture Strategy is now able to offer a broader range of digital capabilities to retailers and to help them ‘execute large scale change’ – as commerce moves online, and retail changes, demand for this kind of service offer can only grow.

My colleague Andrew Moss wrote in The Drum last month about Cheil’s new retail unit, and it seems as if Accenture was thinking along roughly the same lines when it bought Javelin.

Fast forward to February this year, and Capgemini bought the highly rated design and innovation consultancy Farenheit 212.

This is what Capgemini Consulting CEO Cyril Garcia said at the time: “Our shared view of the future of innovation and the inclusion of digital is the impetus behind the combination of our complementary approaches as we step-change the way consulting is defined and delivered. Together with Fahrenheit 212, we’ll bring additional value and innovation to our clients and expand our innovation solutions into new industries that are undergoing digital disruption.”

Underneath that opaque management-speak, Garcia is saying that businesses are going through change and disruption, and will be needing advice on strategy and quite a bit of good old-fashioned hand-holding – and his firm intends to be the one doing the holding.

Just as advertising giants like McCann, Y&R and Ogilvy have shifted away from ‘just’ being ad agencies creating TV spots and posters towards being strategic partners for clients, so the old management consultancies and accountancy giants have also sought to become strategic advisors and partners in the marcoms space, helping brands and clients manage change and present themselves to the world.

We’ve said it before but it bears repeating: Sir Martin Sorrell, John Wren, Maurice Levy et al need to keep their eyes on these companies. As clients increasingly look at customer journeys and customer experience, they are looking for strategic partners, not just ad agencies. There is a real danger that ad agencies lose out to the big consultants, who will snaffle the high-margin strategic work, leaving the traditional agencies with just the execution.

Interestingly, perhaps the biggest danger to the established order comes not from the ‘upstart’ consulting outfits, but an old company that is one of the world’s biggest advertisers – IBM.

For an example of how companies can transform themselves, look no further than ‘Big Blue’. Back in the 1990s, IBM was widely mocked as being an example of everything that was wrong with big business: bloated; mired in bureaucracy, siloed thinking and complacency; directionless; and dependent on increasingly commoditised markets such as PC manufacturing. Worse still, IBM had once had a near-monopoly on PC manufacture, but had lost its lead to low-cost upstarts.

In 1993, it posted what was then the biggest loss in US corporate history – $8bn. Under the leadership of Lou Gerstner and others, the company sought to change itself. And change it did – divesting itself of commoditised activities such as PC and printer manufacture, simplifying its structures and ways of working, and embarking on a programme of reinvention, moving away from low-margin (thanks to China) manufacturing into high-margin consultancy and research.

IBM has transferred from being an old-fashioned, distinctly uncool maker of PCs and mainframes into a nimble innovator with an aura of cool.

Even if you’re not a fan of business books, Gerstner’s memoir, Who Says Elephants Can’t Dance?, is well worth a read, because it offers a number of lessons for anyone interested in the future of ad agencies.

He describes his arrival at the company in April 1993, when an active plan was in place to ‘dis-aggregate’ the company. The prevailing wisdom of the time held that IBM’s core mainframe business was headed for obsolescence. The company’s own management was in the process of allowing its various divisions to rebrand and manage themselves — the so-called ‘Baby Blues’.

John Akers, Gerstner’s predecessor as CEO, decided that the rational solution was to split IBM into autonomous business units (such as processors, storage, software, services, printers) that could compete more effectively with competitors that were more focused and agile and had lower cost structures. Gerstner reversed this plan, because he had – in advertising parlance – a crucial insight.

He realised that the biggest problem that all major companies faced in 1993 was integrating all the separate computing technologies that were emerging at the time, and saw that IBM’s unique competitive advantage was its ability to provide integrated solutions for customers – a company that could represent more than piece parts or components.

Gerstner’s counterintuitive decision to keep the company together was correct – and the defining decision of both his tenure as boss and of IBM’s future in an interconnected world.

He realised that IBM’s sprawl gave it the capabilities to deliver complete IT solutions to customers.

Services (such as strategic consulting) could be sold as an add-on to companies that had already bought IBM computers, while low-margin pieces of hardware were used to open the door to more profitable deals.

There are two important things to take into account. John Akers was a company lifer, overly immersed in IBM corporate culture, remaining loyal to traditional ways which masked the real threats.

Gerstner (who came from American Express) was an outsider. He had no emotional attachment to products IBM had developed to try to regain control of the PC market. He wrote in his memoir that in spite of [operating system] OS/2’s technical superiority to the dominant Microsoft Windows 3.0, his colleagues were “unwilling or unable to accept” that it was a “resounding defeat” as it “was draining tens of millions of dollars, absorbing huge chunks of senior management’s time, and making a mockery of our image”.

By the end of 1994, IBM ceased new development of OS/2 software and later withdrew from the retail desktop PC market entirely, selling the entire PC business to Lenovo.

The other thing Gerstner did was to sack all of IBM’s many advertising agencies and consolidate them into just one, Ogilvy & Mather. At the time it was billed the biggest ad account switch in history – it probably still is. O&M’s work from 1993 onwards played a crucial role in IBM’s repositioning.

Gerstner retired back in 2002, but he left IBM in good shape and it continues to prosper, and continues to have a reputation as an innovator and a quality researcher and consultant.

Indeed – in a series of moves that might be cause for concern over at O&M – IBM has been busy acquiring digital agencies.

Only last month, it bought two companies: video streaming company, Ustream; and the 300-person digital agency Resource/Ammirati.

The Resource/Ammirati deal, which is said to close by the end of the first quarter, is particularly interesting – it is the first part of the planned expansion of IMB’s Interactive Experience division which aims to help “clients digitally reinvent to create transformative brand experiences”.

The division already has 1,000 designers, developers and – significantly – consultants and strategists serving IBM technology clients.

Of the acquisition, IBM Interactive Experience Global Leader Paul Papas said: “Resource/Ammirati has built its own stellar brand and reputation on a long, distinguished record of advancing leading brands in every industry. That portfolio of work and proven expertise is a perfect complement to the experience design capabilities of iX — where we bring clients a distinct fusion of industry insight, design thinking and end-to-end digital transformation, from the experience of the individual to the core processes of the client’s enterprise.”

Doesn’t that sound a little bit like what a forward-thinking ad agency would be doing?

And the Resource/Ammirati deal is a very good one for IBM. Founded in 1981 with Apple (!) as its first client, has been known for several firsts in digital marketing – from infamously ‘breaking the internet’ in 1999 with the Victoria’s Secret Webcast Fashion Show during the Super Bowl, to being the first to tackle Facebook eCommerce capability for the likes of P&G, to creating award-winning apps and the first-ever ‘digital personalised circular’. What big marcomms group wouldn’t want an agency like that?

And that wasn’t the end of IBM’s February buying spree. It also acquired ecx.io, a digital agency in Europe with customers including Axalta, Hammer and JAB Anstoetz. The Dusseldorf-based agency joined Resource/Ammirati in the IBM iX (for ‘Interactive Experience’) unit.

Asked about the flurry of deals, European unit chief Matthew Candy told Forbes magazine that IBM’s been “on a journey” to build out its own design studios organically, and through acquisition.

The digital practice at IBM now has more than 1,100 designers and 10,000 employees, with almost 1,000 to add just from these three deals.

All of a sudden IBM looks like a good place to sell your hot start-up to. In a very telling quote, ecx.io chief Gerald Lanzerits told Forbes: “We’d build websites and ecommerce sites, and the project was done and the customers went away. Now we can focus on bigger accounts more intensively, to plan for the next two or three years.”

IBM seems to be moving very aggressively right now, and its timing may be significant.

The transition – begun by Gerstner almost a quarter of a century ago – from legacy hardware and services into a consulting, cloud computing, mobile and security company, continues apace.

It seems unlikely that IBM would buy three agencies in less than a month and then sit tight for the year. Expect the buying spree to continue. Digital agencies looking to hitch their wagon to a global business might be smart to reach out while the Big Blue cash is flowing.

And big ad agencies would be even smarter to keep their eyes on the likes of IBM and KPMG.