Vertical integration among management consultancies and implications for ad agencies

The digital technology has been exploited by management consultants to expand their services into managing marketing services for themselves and their clients. It has opened up the landscape and suddenly, the ad agency space is not as complex as it seemed to be in the past. Besides, the digital world is making it possible for organisations to be able to coordinate a wide range of activities effectively. This is in addition to them being able to engage in data analytics and understand consumer preferences in the market. It is a strategic management challenge among the ad agency managers.

One of the factors that make management consultants a formidable source of competition for ad agencies is trust. Having interacted with their clients over time, they have been in a position to build trust. The organisations trust them and give them all the relevant information needed to inform their operations. The nature of management consultancy is that they have to understand the strengths and weaknesses of the client organisation, its strategic focus, and operational approaches among others. They would of course need to understand every aspect of the business before they can advise on what needs to be done. In the event that a management consultancy has guided an organisation from being a loss making venture into being a profitable venture, it builds trust. Such a management consultant can advise the organisation on what needs to be done to market effectively and the organisation will quickly adopt the solutions presented. In other words, competition against newly integrated management consultants would be very difficult; especially where the client organisations have been served effectively by them in the past.

This changing landscape leads to the question: what should agencies do to survive the increasingly complex landscape? The answer to this is simple: a defence-by-attack strategy. This is where a rival attacks the domain of competitors in order to survive. A pure defence strategy where ad agencies desperately try to cling to their market share may be unsuccessful as the newly integrated management consultancies are bound to make inroads. Organisations conduct a lot of research before they decide on whom to contract. They would most often be swayed if they are aware of a consultant that has helped in transforming and growing other organisations within the industry. Besides, word-of-mouth would work to the advantage of successful management consultants. These factors lead to the assumption that if ad agencies opt to simply defends their territories; they would lose in one way or another.

The defence-by-attack strategy works by invading a rival’s territory. As the industry converges to bring together ad agency services and management consultancy services, the ad agencies have to integrate forward. They must develop the capabilities they need to become effective management consultancies. This is the essence of strategic management: dynamism and pragmatic decision making. A change in the competitive landscape warrants a change of strategy. This is what needs to be done by ad agencies.

The same advantage that has worked for the management consultants is likely to work for them as well. The agencies that have successfully served their clients and led to them growing sales and market shares are likely to trust them and refer them to other clients. In addition to this, these ad agencies have the option of increasing value per customer. This can be done by providing management consultancy services to the same organisations that they have acted as ad agencies for. This is because they already understand them and trust has already been developed between them.