Holding groups need to rethink their operating model, says PwC’s Megan Brownlow
PwC partner Megan Brownlow has told holding groups that opportunities lie within consolidation and centralisation.
Speaking at PwC’s ‘Joining the dots: the future of creativity’, Brownlow told the room of senior marketers and agency executives that holding groups and agencies need to rethink their operating models and introducing a centralised model beyond the “back office”.
Brownlow said holding groups need to focus on centralisation
“There’s an interesting opportunity for the holding companies that often own the creative agencies. Historically, to manage conflicts of interests where you had customers, clients in the same category, you had different brands and through acquisition, you ended up with all of those different client-facing brands. What we will need now is new operating models for those holding companies.
“What it will essentially look like… is centralisation, and not just the low hanging fruit of the back office, which is IT and finance and HR.”
Brownlow said the industry is starting to see some of these changes and these shifts and it is “strategically sound”.
“It is being framed as consolidation, but actually where we are seeing it, it is strategically sound if it can be executed well. It is one of the ways we can expect to see the successful agencies and holding companies operate in the future.”
Brownlow, who has been with PwC for over a decade, said increased collaboration between clients and agencies is also pivotal to the future of creativity.
“With more collaboration within the agencies, within a holding company and with the clients, that’s the path forward.
“This wonderful intersection between data and technology and finding that sweet spot, which unless you have all those things under your roof, requires partnering and more collaboration,” she told the room of industry executives.
When addressing the challenges the industry is facing due to slashed production budgets and growing output channels and expectations, Brownlow said agencies need to turn to technology and marketers should be rethinking budgets.
“More assets are being created, they have to be created, but production budgets are not necessarily increasing and how do you deal with that new world when you have got agencies with high fixed cost structures? Essentially they are a bit top loaded, with really expensive wonderful people. How do you manage in this new world?
“There are two responses, the first is technology is helping. So by streamlining creative, by automating, by using AI all of these wonderful things there are now tools in place to reduce some of the grunt out of making numerous creative.”
The second piece of advice Brownlow gave the room was aimed at marketers: “this one is really on the marketers and it is to rethink budgets”, she said.
“I didn’t understand why the whole idea of online creative was considered so unimportant compared to more traditional creative, it was almost as if this concept of above-the-line and below the line was still a thing. They are not a thing, because the internet has essentially demolished that demarkation, it doesn’t exist really anymore.
“Why wouldn’t you think that good creative isn’t imperative wherever a consumer runs into it?”
Howatson said all ad agencies used to do the same thing
Adding to Brownlow’s points about creativity, collaboration and centralisation, Chris Howatson, CHE Proximity’s CEO, said the industry is facing a crisis and it is because all ad agencies used to do exactly the same thing.
“I wonder if a bit of the crisis we are facing right now is if we look around the room and all the different agencies we represent, do we all know what we are doing? And I don’t mean that in the sense of what we are doing in our jobs, but do we know what our agencies are here for?
“We have all read about the WPP mergers and maybe it is genius or maybe it is a disaster, who knows, but we have seen 130-year-old brands gone overnight, we have come from a world where basically every agency did the same thing, there is a copywriter and art director and suit director and we all basically did the same thing. Maybe now is the moment when we are actually really proud to just do different things.”
Abigail Dawson was Mumbrella's senior content journalist covering event content. She left Mumbrella to move into an agency role in 2020.
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An accountant telling the world about creativity; we are doomed
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Aside from giving an opinion from a company-owned podium, this PwC partner’s experience with creativity and marketing is what exactly?
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Good points Claire. Bang on the money — and big challenges traditional holding groups need to solve. Hard to do in legacy businesses.
On this though. Think it would be prudent for consultancies to focus on the elephant in the room – that Xero is slowly eroding their accounting business.
Is that why they are moving outside finance and into marketing? I do wonder sometimes…
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The big consultancies naturally want to provide expert commentary on the shortcomings of the business models of their competitors – who to be fair are shrinking while the consultancies are growing. But they are not without their own challenges, though, and it seems reasonable that these should be considered too. I reckon those challenges are: (1) sustainable value for money to clients: significantly higher salary and overhead cost base + margin % expectations will often result in a higher cost for similar client outcomes. (2) internal disjointedness of IP and client relationship management as all these new capabilities either compete for precious revenue or work out how the hell all the parts fit together. While they say they’re on top of this and have always been good at it, that’s not always what you hear from people on the inside. And those of us that have had them as clients know that the internal workings are often far from cohesive and client value oriented. (3) one of the big players in particular, I hear, is driving one of its more creative units to be the sales force for the other, far bigger and profitable, implementation units. So let’s not assume that the consultancies are necessarily more “objective” in their recommendations. (4) the downside of clout at the c-suite level, vacated as it now tends to be by the traditional agencies, can be pretty disempowering for people in the functions and a barrier for client centricity at that level with significant discrepancies in relative power.
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The consultancies should consider rethinking their operating model as well:
https://www.afr.com/news/politics/labor-calls-on-accc-to-investigate-deloitte-ey-kpmg-and-pwc-for-cartel-conduct-20180903-h14ut4
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It’s a strange debate this one.
Production budgets are decreasing yet the volume of required output is increasing.
The number of clients using agencies is decreasing and the number of service providers is increasing.
Profit margins are under relentless pressure and more brands are setting up their own creative capabilities using contractors.
Personally I can’t see a long term role for large multinational holding companies at all.
Exactly how do they add value and where are they going to improve productivity to become competitive?
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Strategically sound to merge agencies with conflict clients? Why are we listening to this accountant?
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It is strange debate as Megan is both right and wrong.
She is correct in that the holding company model is broken (it’s practically breaking right before our eyes).
But it is difficult to see beyond this when as Tim points out above, there are arguments that the consultancy operating model is also broken (or more accurately, never got there in the first place).
For example, let’s ask Megan how the PwC Experience Centres are holding out in APAC? I hear the HK “creative” team (an acquired local agency) is down to its bare bones. China is even worse. Overall PwC is having a very tough time convincing clients to pay premium rates for non-premium services. Packaging them with more traditional consultancy services has not been a success, and a stand alone “agency” offering is a non-starter.
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Hhmmm,
Well, as desperate pitch from an accounting fiorm that think they have a role in a creative world – beyond “creative accounting”. Maybe they should have run this past the PwC CMO Advisory Board, before going public (OMG what a fail!).
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Exactly. Whoever you are, you’re absolutely spot on.
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…and Marketers need to think beyond budgets because today measurement is key. More importantly I think we need to acknowledge marketing is having its own crisis and is in decline for all the right reasons (having been one myself). It’s the perfect time for reinvention. Behavioural economics gives marketers a new lifecycle, longevity and a new entry point into business. It leapfrogs the AIDA model and goes straight to behaviour change. Powerful and game changing.
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Megan’s not an accountant. Best check her creds before you make a comment like this.
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It interesting that someone who hasn’t been a senior client,nor senior on the agency side, offers such view points. Like many consultants, lots of theory, but little view or clarity on operationalising the rhetoric.
I think increasingly clients will wise up to the fact that many of the consulting firms have little experience in ‘real’ marketing, but are instead either tech consultants or strategy consultants.
I’ve never played tennis, but have watched Wimbledon a few times. I reckon I’m a qualified coach.
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Go check her CV out dude, she one of the most respected people in Media, being the Deputy Chair of Screen Australia and the Deputy Chair of the Media Federation of Australia, ex producer of enough rope and more. Megan has done more in two days that you would in twenty years.
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I’m reasonably sure that Russel Howcroft, who heads up PwC’s CMO Advisory consulting business, has plenty of experience in ‘real’ marketing.
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Unless Xero is doing audits or tax advice for the ASX200 companies, I don’t think it’s much of a threat to the Big 4.
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