Moving in on the design-side

As more and more management consultancies form alliances with design groups, Mike Exon asks whether these coalitions truly work

Every couple of years we hear about the outbreak of a new “turf war” waged by management consultancies against the marketing services sector. The cohorts of business heads, according to the pundits, will have their sights on the ad agencies, the new foe, and often the branding and design sector is implicated, too.

Following recent deals, such as the McKinsey & Co acquisition of US branding group Envision, or AKQA’s alliance with Accenture (formerly Andersen Consulting), a new round of speculation has been triggered that business strategists are wading uncomfortably deep into the branding arena. Rumours abound within the design industry that management consultancies are on the prowl for profitable design-side groups.

So is this a genuine indicator of things to come? It depends whether management consultants seriously want to run creativeled businesses, or whether creative groups have got the capability to reach these giants of business strategy.

Such relationships are actually nothing new. Management consultancies have worked in tandem with the big branding consultancies for the past decade or more. Both professions have been forced by necessity to increasingly interact as businesses have become more brand-led.

More recently, technologists have added a third dimension to the quandary: the new e-business groups have sought to offer a one-stop shop for technology, creative services and business strategy.

To these, management consultancies have responded by building substantial e-business capabilities. So, a convergence of skills across the professions is very real.

“The boundaries between management consultancy and design are definitely blurring,” says Ticegroup chairman Ian Cochrane. “Management consultancies are really in need of the creative and visual skills to make an impact on clients. Clients don’t want rocket science, they want practical application instead They want less of the maths of space travel and more of the spaceship that will transport them.”

Jim Surguy of Results Business Consulting has witnessed the convergence between marketing services groups and management consultancies. He says the importance of branding is certainly not lost on the marketing directors of management consultancies.

“Increasingly, companies and businesses are one and the same. Just look at McDonald’s, for example. The battleground around branding is where there is a turf war between ad agencies, design companies and management consultancies. All are vying for the ear of the board,” he says.

Some branding groups have good friendships on the management consultancy side, but it is usually management consultancies that call in the branding consultants, rather than the other way round.

There are plenty of examples of harmonious relationships between branding and management consultancies. The Identica Partnership has good working links with Accenture, and Enterprise IG worked on its first project with McKinsey & Co ten years ago, according to Dave Allen, Enterprise IG chief executive.

“What’s been happening over the years is that brand strategies and business strategies have been developed in tandem. A brand strategy can bring a business strategy to life and vice-versa,” says Allen. “We’ve worked pretty actively with all the main management consultancies, but I don’t think we would want to get into a formal partnership with any.” He is concerned about the fact that an alliance would make you feel obliged to introduce your clients.

He says that ten years ago, most management consultancies would have dismissed what branding consultancies do, but that has slowly changed and the relationships are now based more on “mutual respect”.

Allen agrees that management consultancies and branding groups have come closer and closer together, and now employ a margin of similar consultants at the overlap.

“There is a very simple reason,” he says. “During the 1980s [client] value creation came from cost reduction and rationalisation activity. From the mid-1990s value creation has emerged increasingly from intangible factors such as brand creation.”

But are management and branding consultancies really interested in hunting each other?

If they are it will not be easy. The partnership status of most management consultancies means they are not at all suited to acquisitions, says Surguy, so, in order to grow, they usually merge.

The bigger management consultancies lump the bulk of their marketing services activity into their Information, Communications and Entertainment divisions. For them, these creative sector projects are pretty small beer, compared to a meaty public utilities contract or a blue chip corporate restructure, that requires considerably more time, more manpower and consequently, much heftier fees.

“Design companies work on smaller, shorter scale projects and they tend not to have the same, longer term relationships with their clients as management consultancies do,” Surguy says.

Furthermore, the profit-gearing of management consultancies is so much higher than most marketing groups’ profitability that it compromises permanent tie-ups. They simply don’t make enough money, on the whole.

“The return on investment in a design or branding business is so low compared to a management consultancy. Fees per partner are around five times that of a design business,” Cochrane points out. Nevertheless, there are some exceptions.

But recent acquisitions such as Envision by McKinsey can easily be explained as specific one-off cases and so are perhaps not indicative of a general trend at all. Envision’s unique combination of social psychologists and marketers will spearhead a new order of branding practice within McKinsey that is a natural extension of its analytical expertise. The question is whether McKinsey plans to continue the buying spree and if so, whether its rivals will follow.

If management consultancies do start throwing their weight around how will they breach the culture gulf between these creative and analytical businesses? As the Tutt Consultancy’s Simon Rhind-Tutt tactfully puts it, “Running creative people requires great skill and tenacity.” And many believe a leopard cannot not change its spots.

What can tie-ups offer management consultancies and design groups?

Design and branding groups:

more chance of getting into clients higher up the food chain

no stockmarket pressure

complementary left-brain thinkers

less duplication and rivalry than joining a marketing network

Management consultancies:

better client retention

consumer expertise

access to creative skills-sets

technological components

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