Is Digital Disrupting Madison Avenue?
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Welcome to Just Clarity, a periodic podcast about Digital. Just Clarity is produced by the team at Digital Clarity Group. We help leaders transform the experience they deliver to customers, prospects, and their employees through the effective selection, integration, and adoption of customer experience management technology. Learn more at digitalclaritygroup.com In this week’s episode, we explore whether digital agencies are disrupting Madison Avenue.
(Jill Finger Gibson (JFG): So we’ve heard a lot particularly I would say in the last year about how two of the largest technologies company in the world, Accenture and IBM have their own what they’re calling digital interactive divisions. There’s Accenture Interactive which is part of Accenture Digital and IBM Interactive and they have been buying up agencies all over the world to expand that part of their business. So you know naturally one of the questions that the traditional advertising agencies are looking at them and saying, “Oh no, they’re coming into our space”. The question is are they really. Are they really taking over Madison Avenue?
Alan P (AP): I think, yeah you’re right and in fact I think you know, you just do a Google search and there’s just article after article of people, it would be like the Madison Avenue side of the equation: ”They’re trying to take us over, they’re going to kill us off,” I mean certainly there’s no doubt there’s going to be a lot disruption and there already is. I mean as you’ve said they’ve already been buying a lot of these companies so that disruption is on the way. I think the bigger question is are they really gunning for the creative work? That’s where I’m struggling because again, okay I’ve got an IT background, but I don’t think they are.
JFG: Right
AP: I really don’t, and I think, this is my opinion, but that’s as much as it goes I guess, but my opinion, they’re after the data. That’s what is exciting and interesting for an IBM or Accenture. Owning, managing, leveraging, mining, commercializing, whatever means you can do with the data.
JFG: Mhmm.
AP I don’t know about you, but to me, the advertising agencies have essentially owned the customer data.
JFG: Right.
AP: A long time, haven’t done a lot with it.
JFG: Yeah, they haven’t.
AP: And I think that to me that’s the problem.
JFG: Yeah.
AP: That they’ve sort of left a door open there.
JFG: Well they’ve been using it for campaign stuff, but not really looking at the relationships of how customers engage with brands and how they make decisions about what they buy or don’t buy and not something as you said, that’s the opportunity. I mean imagine for example IBM’s Watson initiative.
AP: Right.
JFG: Combining that with data they get from all the numerous interactive agencies they now have for example.
AP: Absolutely and I mean that’s data science.
JFG: Right.
AP: So I mean you know, on one level I don’t see it. Certainly, people are interested in the customer data, absolutely. I know as an analyst if we roll the clock back five years probably, six? Five, six years, it was big data everything. Everything was big data.
JFG: Right.
AP: And then people found out that, A: it was quite expensive, B: It was really difficult, and C: it was mainly junk.
JFG: [Laughs]
AP: I mean they were mining the stuff in the hope of finding something of huge value and let’s be honest hardly anybody did. Well we know there’s value in customer data.
JFG: Right.
AP: And we know there is, and we can find it, we can convert it into more sales. It’s the data that was made for big data in the sense outside of the scientific community.
JFG: Right.
AP: But I think the other thing is and I don’t know what you think about this is that I also think the marketing department have more enthusiastically embraced the idea of technology than the agencies themselves. I mean that’s maybe because they think they can do things cheaper. Maybe it’s because like Forest and Gartner has been saying the CMO is going to spend more money than they see IO on technology which I personally don’t believe, but nevertheless that’s, you know it’s been in the market, but to me the companies have embraced the technology a bit more.
JFG: I think so and I think you’re right. You see a lot more companies, the division of marketing, that’s marketing operations have been getting a lot investment over the last couple of years for sure and that’s the side that deals with the customer data and collecting it and how it’s used and so forth.
AP: And maybe the other thing and what the creative agencies haven’t embraced as much as maybe they could have I would argue is the Ecommerce. I mean again certainly since 2008 where people have been watching the pennies. If you’re going to be mining that customer data, does that mean there’s going to be more sales? Is there some way of automating those sales? Is there some way of pulling that together more cohesively and closing more deals more quickly at lower cost, but again that’s not really in the wheelhouse of the creative agencies.
JFG: No it’s not and it’s funny that there are what they call themselves agencies that deal specifically in Ecommerce, but pretty much they see themselves as there’s not too many that have expanded beyond that I know of at least in North America, Europe, that have expanded beyond you know saying, “Oh we do Ecommerce and other parts of the customer experience”. They’re very focused. They have their specific Ecommerce platform vendor relationships. They implement those projects.
AP: Yeah
JFG: So.
AP: But again that’s another opportunity right for the big Systems Integrators. Is pulling or arguably using ECommerce as the front of a digital supply chain essentially because again a lot of ECommerce initiatives historically have been sort of stand alone really.
JFG: Yup
AP: So, yeah. I mean I think at the same time though if I was to, if we turn this around, if I was a large advertising agency I would indeed feel very threatened. Adtech has come along, that has been rather horrible advertising agencies. They’re taking away a lot of that kind of business and increasingly will do so, but at the same time some of the, as we talked about in another podcast, some of the advertising agencies have been now buying essentially smaller System Integrators, SI’s right.
Do we think that’s a good idea? Do we think that would work for them? I don’t know. I can see why they would do it to sort of shore up the defenses.
JFG: I think could work, it would just be… they would really need to understand the types of business they’re going after and who that you know, if they’re buying up these smaller SI’s, what areas of expertise there are and what’s that addressable market that they can feed into because you can buy for example an SI that focuses specially on Ecommerce, you’re not going to be able to then go after web experience types of projects. So I think…
AP: Right and that’s a strength and weakness though isn’t it?
JFG: Yeah
AP: With Accenture that they can do technically anything.
JFG: Right
AP: At the same time if you’re a customer and you bring them into do X, connecting with another division within Accenture to get them do Y can be just as big a challenge as bringing in a new company.
JFG: Right.
AP: All together right? I mean they’re just a huge beam of companies. I was just thinking though I mean they have, I mean Accenture, IBM Global Services, I can’t remember the names of the acquisitions, but I know KPMG, Deloitte, and Ersten Young, even Mackenzie right?
JFG: Yup, mhm.
AP: They’ve been buying these agencies as well. So it’s got to be very worrying times. I think though if I was giving advice to a company, I would be saying: “Yeah if you want to build out a complex supply chain, ECommerce you want to be mining the customer data, Yeah you probably do want to go to an IBM or Accenture or whomever”, at the same time would I want them to be in the creative side of it? Maybe not.
JFG: Yeah, even though.. I mean so their argument would be: “But yeah we have this agency we bought, so you get the best of both worlds” Do you think…
AP: That’s what they would argue and I think you know time will tell, I mean having worked for System Integration myself in the past you know, System Integrators are incredibly sidelined. You’ve got the financial services team, you’ve got the healthcare team, you’ve got this, you’ve got that. So you know I think that’s the challenge with anything like that. If you bring people in to build things, do they have a creative division somewhere, yeah sure, but you may as well be bringing on a new team.
JFG: Right.
AP: I don’t actually know what the efficiency is of using their creative team if that makes sense.
JFG: So it sounds like from what you’re saying that if you’re a buyer and you’re being pitched by an agency owned by one of these big systems integrators that’s been recently acquired and you really need to probe, “Okay you’re gonna do this, but what if my need extends into other areas, how will you bring in the other division, do you have the power do that”
AP: I’m sure they’re going to say yes, but I think that’s a very fair question.
JFG: Yeah
AP: Again and I mean you know, if you’ve ever had to deal with any of these big companies, you know how, well I used the word silo but there are also mini-fiefdoms.
JFG: Yeah
AP: And there’s very little communication at time between them. So yeah I don’t know, I would have to say until it’s all settled down, I think the best advice is to treat their digital divisions as indeed creative agencies.
JFG: Right.
AP: put them through their hoops. If you choose them, great, if you choose another one, great. Again the better will be working on the same project.
JFG: Right, yeah.
AP: But I’m not sold right at the moment that you genuinely get an end to end service.
JFG: No, I’m not either.
AP: And more to the point, any acquisition takes time.
JFG: Right.
AP: And if you’re a tech firm that acquires a tech firm, that can still be a huge cultural clash. What kind of cultural clash are you going to have between data scientists at IBM and the new digital agency. Potentially a big one or maybe they just carry on working their own separate ways.
JFG: Right. Well that’s the reality. I mean when you ask the, in those sort of traditional holding advertising holding companies like you have Publicis and it has scores of agencies, some of whom who actually compete with each other for projects, but the way they put it forward is, “Oh know we work symbiotically, we share infrastructure whatever, but that’s already the model that’s in place”. They don’t often work together just because they’re own by the same parent company.
AP: Correct and you’re 100% there and I see that it’s not that uncommon actually. You will find also on the systems integrator side that two divisions can be competing for the same job
JFG: Right
AP: it happens, it absolutely happens that there’s an SAP job or something. So there’s an SAP team over here bidding for it, but it’s in healthcare, so the healthcare team is bidding for it, but it’s in North America so the North American who’s gotten involved. I mean usually they figure it out, but again having to been on the inside, those kinds of discussions are surprisingly common.
What’s equally common is the people on the healthcare team have never even met the people on the SAP team. So I think the advice here is pretty straight forward isn’t it? Really dig deep. I don’t think either of us are convinced that the Systems Integrators are really, truly, offering fully end to end, I don’t want to use integrated again, but you know sort of a joined up story.
JFG: Right.
AP: I think that’s going to take some time. I think if I was an executive on Madison Avenue I think I would be worried, but I don’t think it’s because they’re coming really after me, I think it’s in the sense that I missed an opportunity.
JFG: Yeah, Yeah.
AP: Somebody’s come along and seen it and grabbed it. So I don’t think they’re gonna go away, but I think that’s going to be tough for them frankly. They’re losing out on the Adtech, they’ve missed out on an opportunity here for the customer data in Ecommerce, but I don’t think that was planned. I think it’s just what it is. I also think that a good creative agency will also be top of its game.
JFG: Right and I think too one of the things that, you know we’ve heard both from our end user consulting side, you know our colleagues who do technology and service provider selections have said that one of thing to be cognizant of is you know, not only is there a need for these agencies, but ones who know your local market.
AP: Absolutely.
JFG: I worked on a project a couple years ago now where it was a big, a real global multinational. They were in you know over 100 countries worldwide and they were trying to find a digital agency slash system integrator that could work with them wherever they were, doesn’t exist.
AP: It doesn’t exist.
JFG: So they came across problems when they asked them, “Oh well what about South America, what’s your coverage there”, and they couldn’t really, you know they said they had it and when it came down to doing the work, there was certain countries where they had maybe one or two people. So that’s something to keep in mind if you’re a buyer, what are the geographic, what’s the real geography spread within the companies you’re talking to.
AP: I think that’s a very good point. I mean from a Systems Integrator point of view, the technology and their expertise in it, that’s fairly transferable wherever you are of course, but at the same time, you know do they actually have a team that’s local to you.
JFG: Right
AP: That’s something a lot of people overlook. Even in the US, they may have a great team out in California, but do they have it in Kansas where you are or are they going to have to fly them all in. So I mean there’s those sort of things, but I think you’re on the creative side. I think it’s even more extreme, right?
JFG: Yeah.
AP: A local agency who really understands your business and the local community surely is going to win out, or should win out every time over a standard approach shall we say.
JFG: Right.
AP: Yeah it’s going to be interesting times. I’m sure there’s going to be a lot more acquisitions to come, in fact I don’t doubt it.
JFG: Oh yeah.
AP: At the rate they’re going yeah, there’s going to be plenty of them.
JFG: Expect in the next couple of months before the end of 2016 they’ll be wrapping them all in.
AP: They’ll be more to come absolutely. It’ll just be interesting to see how these first ones, well moving up actually first, but the ones over the last couple years, I think it will be interesting in a year’s time to look back on them.
So what are some of them, I’ve got some notes here. IBM, they bought Resource Ammirati
JFG: Mhmm
AP: Aperto in Germany.
JFG: Yup
AP: Accenture bought Chaotic Moon, IMJ Group in Japan, etc. I think that will be the thing to watch for in a years, 18 months time. How integrated have they really become? Are they really now a part of those companies, but are they still really separate entities?
JFG: Right.
AP: And until that happens, you have to treat them with caution.
JFG: Absolutely. Alright.
AP: Excellent, thank you.
JFG: Thank you.
You have been listening to another episode of Just Clarity. Produced by the team at Digital Clarity Group. For more information on the topics we discussed today or the subject of customer experience management, please visit us at digitalclaritygroup.com
