Adding new ingredients to keep the dough rising

Like two-bed garden flats in West Hampstead, design consultancies are desirable properties again. There’s a lot of selling going on – Diefenbach Elkins to McCann-Erickson’s parent Interpublic last week, Gerstman Meyers to Omnicom-owned Interbrand, followed by Zintzmeyer & Lux to Interbrand last autumn, and the UK’s MCA Group is on the prowl.

Mixed media agencies, which in recent years have concentrated on advertising and its immediate complementary services, are eyeing up design.

Meanwhile, successful design groups, keen to grow quickly to exploit their lead, are throwing their hand in with these multi disciplinary networks.

The benefits for both parties are obvious: media groups want to be able to offer a rounded service while design groups are after swift expansion and first refusal of a ready-made client list.

But such frantic acquisition as seen in the last year has to be client-driven. Clients under pressure to compete internationally are demanding integrated multinational solutions, says John Elkins, president at Diefenbach Elkins. “The marketplace is developing this and the networks do not want to lose clients.”

Ben Langdon, managing director and chief executive of McCann-Erickson, London, says as clients explore less traditional channels of marketing, advertising agencies’ income is being cut. This is forcing agencies to improve their offer, either by “protecting” their traditional advertising revenue, “or by extending their consumer-led expertise into non-traditional channels” such as design, he says.

“More and more of our jobs are multifaceted,” says MCA Group chief executive Ian McAllister, speaking of clients’ changing needs. McAllister plans to expand his group globally and is on the hunt for all marketing services, including design, to add to a mix which includes Fly Design and new media group Soft Options.

With the recession well and truly behind us, growth at the top of the design tree is mandatory if you want to stay ahead of the competition. Diefenbach Elkins was hungry for expansion, but knew it could not keep up with its clients’ needs through indigenous growth. “The networks offer the opportunity to get there faster,” says Elkins.

“Either you are a [specialist] boutique of seven or eight or you are big,” adds a spokesman for Zintzmeyer & Lux. “Clients want a full service and you must have specifications like brand management for international clients.”

For design groups, the ability to tap into existing client lists is very enticing. “Many networks have spent the last ten years creating worldwide offices and you can use their planning and experience and not make the same mistakes,” says Elkins.

And DE chairman and chief executive officer John Diefenbach says: “Most design groups are not very well run and are unlikely to have the resources to grow a larger franchise” on their own.

But formerly autonomous design groups may find life rather different as the new kids on the block in a corporate family. “You do not want to get absorbed by a large organisation,” says Elkins. “We mustn’t become distracted by corporate activities.”

“The danger is that design groups lose their entrepreneurship,” adds Diefenbach. “You must retain your own brand and client base.”

Interbrand Zintzmeyer & Lux has found that decision-making is slowed as it now has to report to more than one board, the Swiss group’s spokesman admits.

The trick will be for these blooming networks to carry on through the bad times as well as the current good climate. Mc Allister was managing director of WPP-owned Scott Stern until he left the group in 1990, and feels there are important lessons to be learnt from those times.

Heavy borrowing could well lead to another crash, he warns. MCA Group has plans to float, but McAllister avoids borrowing, instead financing all its expansions on its own profits.

Meanwhile, other media groups such as advertising agency DMB&B are sniffing around the design industry and the integration trend is set to continue.

And it is not just the international agencies which are buying into design. Within the industry itself consultancies are flexing their muscles. Stewart McColl has dreams of an empire of design and architecture practices under his new holding company SMC Holdings (DW 24 January).

McAllister, who is now negotiating with a Paris multimedia group, echoes the current mood: “I can feel the industry cooking.”

Diefenbach Elkins – the story so far.

The consultancy was set up in 1991 by John Diefenbach, who was previously chief executive officer of Landor Associates, and John Elkins. Prior to this, Elkins held the same position at future strategy group the Naisbitt Group.

Diefenbach Elkins is based in New York and currently has branches in San Francisco, Toronto and Stockholm, with satellite offices in Chile and Argentina. It has an annual growth rate in excess of 30 per cent and employs around 70 staff worldwide.

Its client base, some of which is pictured, focuses on: financial services, information and communications, ‘retail petroleum’ and travel. The launch of its new logo for South African Airways is ‘imminent’.