Huge consulting firms see an opportunity to displace out of touch advertising agencies — and they're taking it

AliciaHatch2017

Advertising is no longer just the domain of Madison Avenue agencies.

Instead, data-rich consulting firms including Deloitte, Accenture and IBM have been moving into the business — pitching themselves as more strategic and tech-savvy advisors.

While most agencies view these tech consultants as a looming threat, the marketing head of Deloitte Digital doesn't quite view it as a zero-sum game. Still, she does believe that many advertisers' needs are no longer being addressed with legacy tactics.

Business Insider caught up with Deloitte Digital CMO Alicia Hatch during Advertising Week last week for a chat about why there's ample space for both ad agencies and consultancies in advertising. Here's an edited version of the conversation.

Tanya Dua: You've been on an agency acquisition spree over the past few years. Where do consultancies like yours fit in the advertising landscape?

Alicia Hatch: The needs of brands have changed dramatically. Every single industry out there is getting disrupted, and advertising is no exception. So this isn’t about consulting coming in to enter a new market, this is about consulting responding to the needs of brands changing.

The needs of big companies are changing dramatically. We are in the business of making them better. What that requires now is working across the entire business. You can't do marketing in isolation, separate from sales and service and business model innovation and customer model innovation...Deloitte Digital is in the business of business outcomes. That’s what we do.

Dua: What specific changes in the industry are you responding to?

Hatch: The role of the chief marketing officer is changing. The CMO is playing a completely different role in the C-suite and in the boardroom now. Over 70% of CMOs now own [balance sheets], which is a huge difference from the days of being marketing as a cost center. So they have to wear a business hat and think very differently about how they are orchestrating all of their activities.

The big shift is that technology budgets are moving over to CMOs, and that’s another change in how they’re operating. The best CMOs right now are using data very effectively at scale, fueled by that technology, to do really precise and powerful marketing that drives growth. So they can actually pinpoint the business impact of what they’re doing.

When you as a CMO can be the growth driver of the business, you have a whole new power. To empower that generation of CMOs, you need a much broader base of capabilities and understanding of business and technology strategy, understanding of depth, data and analytics — that is not what the agency model was built on originally.

We are having to save a lot of companies. 40% of all Fortune 500 companies today will not exist in 2025.

Dua: Agencies haven't exactly welcomed consultancies into the mix. Are they justified in being threatened and accusing consultancies of buying creativity and culture?

Hatch: Creativity is the most important business goal in the 21st century. And the role that creativity plays in a business, is expanding....Historically, it was always an outsourced model, where you send the work out to the agency and you get the deliverables back. So what we’re trying to do is expand the role of creativity. And in that, there’s room for a new model. That’s what we have to add to the industry. What is at play here is that the whole industry is changing, and we just all need to focus on what those changes are, and shift.

Dua: Give me an example of that. What does that new model look like?

Hatch: An insurance company that we work with wanted to rethink its retirement business because they realized that in fact, millennials don’t really care about retirement and don’t want to engage in a conversation about retirement. The advertising creative that they had so far didn’t work because the positioning they had and the topic itself was outdated for the modern consumer.

Our approach was to approach the business differently. We brought in a group of business strategists, creatives, technology strategists and design experts in a room together. We invented a new business concept that we set up within this insurance company, which is a whole new business platform about how you deliver and talk about retirement and start making it relevant to millennials in their 40s, in their 30s.

We found through our research that the concepts of health and wealth are inextricably linked. Instead of just applying that insight to a [single ad], we completely changed how that product was delivered, setting up a whole new division within the company with all of our capabilities coming together to actually enable a whole new business.

Dua: What do you think you do better than agencies?

Hatch: It’s incredibly important now to understand the industry you exist in, as well as the shifts in other industries. This is super important to us in helping brands innovate and deliver their messages. It's a really important part of business strategy that consulting firms and we have the most depth in. That’s the big difference in terms of what we bring to the table and how strategic we can be.

It’s also about technology horsepower....Both the depth and breadth of our technology capabilities set us apart.

Dua: Yet agencies say that they’re seeing consultancies in pitches, but they’re not winning as any yet. And even when they are, they haven’t seen creative come out of the wins. How do you respond to that?

Hatch: I think one thing that’s true is that historically, agencies have been very, very public about their work. That’s how they build their brands. We’re the opposite. We actually work so deeply within companies and have so many [non-disclosure agreements], that we are not used to taking about ourselves or our work. We’re doing the work, just not screaming about it from the rooftops.

Dua: How much of your job involves you trying to change the perceptions surrounding consultancies? Do consulting firms have a branding problem?

Hatch: Contrary to what is said, we have no trouble on actually attracting talent. It is more of a problem on the client side. We are a legacy company as well, historically known for our numbers DNA. There’s definitely a perception challenge.

I think the biggest challenge is communicating our vision for how the old model needs to be redefined. We don’t think that the old model of advertising is what marketers need moving forward, so what we’re trying to communicate is this bigger vision.

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