Disruption. This battered buzzword is in everybody’s mouth, but people don’t really know where the term was coined and in what context. “Disruptive Innovation” came from Silicon Valley’s Bible, “The Innovator’s Dilemma”, written by Harvard Business School Professor Clayton Christensen. It is often quoted but not so often read.

Clayton identified a pattern in the business world that happens when big companies neglect a specific small, low-end segment (or innovation) in favor of maintaining its profitable position with its high end and deep-pocketed customer base. For example, when film camera makers decided to ignore digital photography, then a low quality and laggy technology, they doomed themselves and disappeared in a decade; or when the music industry decided to ignore the MP3, then a low quality and cheap technology, they doomed themselves to be controlled by digital players like Spotify, Apple and Google. The theory is very solid and very applicable to the modern business world. A must read for everyone, especially the heads of ad agencies.

Ad agencies had a pretty good life during almost all the second part of the 20th century, especially with TV becoming mainstream and growing from a USD 12 Billion ad market in 1980 to an astonishing USD 52 Billion in 2000. Advertising was all hype and glamour; every cool kid wanted to work for an agency (hell, even I did!), earn tons of cash for their ideas, go to parties, meet beautiful people and write books about how cool their life was.

The Internet Enters the Room

Then came the internet. A very nerdy media that, in the beginning, attracted only nerdy people to it, and because of that, its advertising landscape was modelled by them. It was all about horrible, flashy, animated banners and pop-ups (oh, the pop-up era, how I hated it) all focused in one thing: Visits, impressions, conversions, numbers, numbers, numbers… To sum it up: boring, non-creative, non-sexy stuff.

Also, in the beginning, there was no big brand advertising on the internet (well, maybe Microsoft), it was all internet brands advertising for internet people about internet things. Ad agencies didn’t want to have anything to do with that low-end, niche and cheap place (Do you see where I am going here?). But the internet grew bigger and easier to the layman. Non-internet brands got interested in it and the ad agencies promptly invested in it, right?

Nope. In the early 2000s, ad agencies and global groups still saw the internet as a low-end, cheap and cannibalistic channel. Was it a threat? Yes, a little, because it had the public attention while they were looking at a computer at work or at home. But they still had the radio, outdoors, TVs and newspapers. So most of the average joe’s day was not in danger. But by 2005 ad conglomerates already noticed the threat.

“2005 will perhaps be remembered as the year that digital marketing went from niche to mainstream. Underlying the growth of digital marketing are the two monster trends in the global communications business: 1) consumers seizing control of their media and entertainment choices; and 2) marketers stepping up their pursuit of accountability and return on investment.” WPP Annual Report 2005

So they started buying digital agencies, the ones that did the same as the brick-and-mortar agencies did, creative campaigns, but in the online space. They didn’t quite get that the internet was re-shaping more than just the media where the creative ad was being used. To be fair, not even the performance agencies of that time understood it. Today, the survivors paint the history as they all were visionaries and saw “the future of advertising” since 1993, but that’s BS. They pivoted 100 times and are more survivors than prophets.

On 29th of June 2007, Apple unveiled the first iPhone, and with that they jump started the mobile era. Now people could consume & create online content on the go, in cars, trains, buses…Even while walking. Touching the very sacred realm of radio, outdoors and newspapers.

US Media Ad Spending (1980 to 2015) — eMarketer

Consulting Companies Enter the Room (it’s getting crowded)

Management Consulting companies are an omnipresent entity in the corporate world. If you go to any Fortune 500 company you are going to find at least two of them working on various tasks. The first ones to spot the “Digital” opportunity were the IT focused companies (Accenture, Deloitte and IBM) and that’s because they had direct access to the most demanded position in the dawn of digital, the CIO. They jumped from one opportunity to the other; and looking into the horizon, they noticed the trend that some of the big agencies were still trying to contain or simply ignoring: Analytics, performance and the online marketing were at the CMOs’ front door, brought by their kind friends CFOs and CEOs.

This was the opportunity they had been waiting for. CMOs were the last corporate frontier for consultancies, since most of them treated the marketing work more like a form of art than hard science and were very much enchanted by all the glamour the ad agencies were throwing at them. Sadly for them, a new breed of CMOs were being nurtured in the online world.

Where the Value is

Recently, the head of a traditional Brazilian ad agency gave an interview where he stated that “Consulting firms are devaluating our work,” meaning that consulting firms are entering the agencies domain and destroying the perception of value without knowing exactly how creative campaigns work. He was mainly referring to the offline media spending optimizing work, whereas consultancies are making the agencies accountable for sub-optimized media purchases. This is actually the very first touch point of consultancies in the agencies’ turf. After identifying that agencies lacked the quant skills that the digital marketing world needed, consultancies went all in.

By focusing on their offline cash cow and ignoring the low profit online market, ad agencies left the path free for new entrants. Consulting firms saw the trend and the opportunity to enter the CMO agenda and quickly bought their way in. What we will probably see next is consulting firms expanding their offerings towards ad agencies’ turf and ad agencies reacting by entering the consulting firms’ turf. Now it’s up to the future to show which one is easier: consultants being creative or creatives being analytical.