Deloitte Digital just announced the acquisition of San Francisco-based digital marketing and advertising agency Heat this week. Capgemini's acquisition of New York-based digital innovation boutique Fahrenheit 212 was announced only two weeks before that. Whereas these and other recently acquired digital agencies (such as digital design boutique Lunar, acquired by McKinsey in 2015) occupy different niches in the broader market, they share three common traits:
- Creative capabilities. Although the acquired firms all have valuable tangible and intangible assets (e.g. methodologies, analytics tools), the people are the core asset being acquired in these deals, and the reason why these people are highly sought after is because of their creative skillsets. For the established consultancies to continue to expand their activities in the digital consulting market, it is crucial that they bring on board and integrate digital consultants with the right creative skillsets.
- Customer experience focus. These firms are all focused on some aspect of the (digital and physical) customer experience. In a world where many markets and industries are facing increasing commoditization of the core product or service, differentiating on the customer experience has become even more important. The digital consultancies plan to deploy the creative capabilities of their newly acquired digital agencies to help their clients offer distinctive experiences to their customers.
- Insufficient scale. By definition these deals reflect a tacit admission by the digital agencies that they lack the sufficient scale to take their businesses to the next level of growth, at least within an acceptable time frame, without teaming up with a larger partner (Heat's professed ambition is to "kindly take over the world"; they have evidently concluded that this will be easier to achieve as part of one of the world's largest digital consulting firms).
Deloitte Digital sees this merging of the creative and the digital consulting worlds as leading to a new model they refer to as the "creative digital consultancy". What the creative firms typically bring to the table in these deals is the creative talent with skills in areas such as content creation, digital marketing, customer experience design, or digital innovation, an entry point into the marketing department, and often some specific IP assets. The consulting firms in turn bring scale, global reach, deep industry expertise, client relationships outside of the CMO, and deeper technology and implementation capabilities. For the digital agencies that have been struggling with an uncertain business climate and increased competition, the acquirers also bring shelter from the storm that's been buffeting their industry.
This is all happening within the wider context of an ongoing macro trend towards consolidation in the industry and the continued blurring of the lines separating digital consulting and the digital marketing and advertising markets. Expect more such deals to come.
