Nonetheless, since then, most agencies and agency groups have continued to build management consulting capabilities. Some (Ammirati, Publicis, Omnicom, Young & Rubicam) hired ex-consultants. Others purchased well-established boutiques, such as St. James Associates (now WPP Group's Landor St. James) and Capital Consulting & Research (acquired by Y&R, now part of WPP).
Most, at a minimum, retooled some of their identity, market research and account planning folks into virtual brand consultancies and began offering them to clients a la carte. The most visible has been WPP Group-which has seven companies that do what it calls "strategic marketing consulting." That count doesn't even include the sizable consultancies tucked down inside the WPP agencies at OgilvyOne and Landor Associates.
All this has taken place because, from the agency perspective, it seems like a no-brainer. The economics of management consulting are eye-popping. It is an open secret that Fortune 500 clients such as AT&T Corp. and Ford Motor Co. often have $100 million dollar consulting budgets. The mark-up on new consultants at a blue chip firm is 200% to 300%. And it doesn't look all that hard-IBM Corp., Andersen and Marsh & McLennan have all built large, successful consulting arms. In a time of shrinking commissions, dreams of tapping this huge new pot of money sends shivers of excitement down the spines of agency chief financial officers.
But there is an even more important reason driving agencies to build management consulting businesses. The large consulting firms, such as Boston Consulting Group and McKinsey & Co., have finally re-engineered their way through the rest of the organization and arrived at the doors of the marketing department, the last frontier. Slowly but surely, consultants have begun to displace the agencies as counselors of choice on marketing issues.
DEFENDING THE HIGH GROUND
Agencies have made numerous attempts to defend the high ground. They hired account planners-clever young people from Des Moines and Toronto who've spent months pouring over old British movies to get the accent down. They produced glossy brochures detailing proprietary strategic processes. They have invested millions in global research studies. These have stopped the consultant invasion the way cheesecloth stops bullets. So agencies decided that if you can't beat them, join them.
Most did. But none of the agency efforts have been huge successes-at least not on the scale of an IBM or Andersen. Why not? I think it is because consulting and advertising look so much alike and yet are as fundamentally different as astronomy and astrology.
* What clients buy is different. In consulting, clients buy analysis. In advertising, clients buy intuition. Sure, clients ask about the agency's strategic process. But let's be honest: If the creative answer is good enough, you can always spin a story about how it ties to the strategy. In consulting, analysis is the product and the product is analysis.
* What you sell is different. In consulting, you don't really have to prove past successes because you can duck behind the curtain of client confidentiality. In advertising, your reel instantly reveals who your clients are and what you did or didn't do for them.
* Who creates the value is different. In consulting, the "suits" provide the insight. In advertising, the suits get coffee for the folks who provide the insight. (As we were building our new consulting firm, we briefly employed a very senior agency alum. During one painful report writing session, he sighed, "I'll be glad when we get big enough to hire some folks to do the work." He quit when we explained that we were those folks.)
* The cultures are different. In agencies, fun is an OK thing. Consulting firms may give lip service to having fun, but the reality is we're stiffs. No matter how hard we shake our Dockers-clad booties, no one is ever going to mistake us for members of the band.
* The long-term objective is different. In advertising, getting fired is a disaster. In consulting, if you're doing your job, getting fired is an inevitability. (Hopefully later, not sooner.)
All these differences have meant that the upside has proved elusive and integration tough. Someone may yet master the combination, but so far no one clearly has.
Now the consulting industry is in its worst dip in decades. (Layoffs at Booz-Allen, capital calls at McKinsey, cancelled hiring at Mercer Management Consulting, office closures at Scient, et al numero.) Based on the resumes turning up in our e-mails, it seems the agency-owned consultancies are suffering as well. It will be interesting to see if agencies ride out the storm, or take this as an opportunity to spin off these ventures without dishonor. That's what the big accounting firms are doing.
Yes, agencies still need a way to get the CEO's attention and show the value of their strategic counsel. But it probably won't be management consulting. And, anyway, it looks as if agencies already have some better ways-media optimization and trend-spotting.
It was a fine experiment, but not all experiments work.
Mr. Hill is co-author of "The Infinite Asset: Managing Brands to Build New Value," Harvard Business School Press, October 2001, and president, Helios Consulting, Chicago. Prior to Helios, he was a client partner and chief marketing officer of Booz-Allen & Hamilton in Sydney, Chicago and New York, and chief strategic officer of D'Arcy Masius Benton & Bowles, New York.