Can independent innovation agencies survive the next decade of shakeups!

The consulting model is broken!

A phrase that has been repeated to me more than I can remember. Clients, the Big 4, smaller agencies and thought leaders all have their own views and have tried to solve this issue in their own way. Fixed long term innovation projects that last 5 years are a thing of the past as methods such as agile and lean project management help corporates get results in a few months. As corporations shift to iterative tactics that deliver results faster.

Over 320k organisations have innovation in their names and countless more label themselves as specialists. Innovation has become an overused sales tactic that has shifted how the market thinks and executes new products, services and experiences; including:

• Innovation hubs/ labs
• Innovation agencies
• Research/ insights agencies
• Think tanks
• Strategy houses
• System Integrators / Development Houses / Technology consultancies

The question remains, what does the future look like for innovation as a service. Over 21+ boutique agencies have been acquired by larger management consultancies. All in an effort to build new capabilities and meet the needs of their clients demands, so they stay relevant. As larger management consultant’s frameworks, processes, tools, reports and PowerPoint decks were no longer generating the same results as before.

While many other newer innovation units are taking their places. In recent years, traditional consulting firms are trying to start their own ventures that support their innovation ambition such as IBM iX, Deloitte Digital and Capco Digital.

All hoping to become the future of innovation delivery!

The rise of end to end offerings

With 70% of senior leaders seeing innovation as one of the top drivers for growth. Why has it become so hard to innovate within their own four walls. Corporations have to rely on external experts to help them to reach new opportunities as they might be missing the right tools, skills and mindsets to innovate.

Real corporate innovation can only be best served when it’s being led by the right people and processes internally driving towards a balance of customer empathy and commercial viability. This is something you cannot simply hire or buy in a box from a third party.

Trying to create new value often involves speaking to multiple vendors across the innovation process increasing the risk of disjointed outcomes. Corporations can commission several agencies working on new business ideas. Although each vendor has their own experience and skill set to improve the chances of market success. The potential pitfalls might outweigh any rewards as communication, handovers and time lines can increase the risk.

Not finding one vendor that can support your business can lead to:

• Longer delivery — Increasing amount of time spent to deliver end-to-end projects.
• People-intensive — Requiring a larger workforce/greater manpower to manage vendors.
• Higher costs — Incurring unnecessary/avoidable costs.
• Stilted approach — Managing the process in a siloed manner, necessitating handovers and inhibiting the ability to adapt.
• Increased risk of failure — Risk of proposition dilution as new vendors are introduced at each stage of the process.

At a point innovation projects felt the same as failing. As too many consultants in the building added to the complexity of a project. Things needed to change and they have?

Are partnerships and acquisitions the answer!

If a consultant is with a client too long they have failed!

Following the disjointed trends above. Something had to change as simply hiring multiple innovation vendors to work in silos was just too risky.

Consultants and clients began to explore different strategies to increase sustainable innovation ventures. Consultancy’s models began to shift to long term engagements with clients as partners across numerous projects. Fostering relationships that involves blended teams from the client and consultants working shoulder to shoulder.

Thus, creating mutual benefits as the client can share their expertise, remain engaged and upskilled with the latest innovation tools to execute the rest of the work. While consultants gain a greater understanding of the issue, build long-term relationships and identify new opportunities for further work.

Times are changing as independent agencies that once sold their ability to be nimble and use their culture to accelerate ideas into the market are targets for most ambitious larger consultants. All-in the hopes to create a more end to end journey that leverages the numerous capabilities.

What is next for independent innovation and creative organisations in the future.

New model for innovation

Whether you are on the side of selling or buying innovation. Everyone has their own opinion on how this will impact the landscape going forward. As small innovation agencies are becoming rarer to come by.

The trend to acquire small agencies seems like it could continue into this early decade.

In my opinion the question remains, how sustainable can this truly be for both agencies being bought and large consultancies. Similar to the growing trend of acquiring a hot tech start-up at inflated prices, as majority of employees that made them innovative at the beginning leave.

• Leadership moves on — Senior management stay for the minimum requirement of their contract and set something new up again!
• Young talent goes elsewhere — The junior staff leave pretty quickly if not straight after the acquisition as they find it harder to get things done.
• Everyone else is in it for the money — Any remaining employees are embedded into the corporate culture and lose what made them once unique as an innovation agency

It’s hard to say for sure however the next wave will probably be a mixed model of sustainable and self-management such as Fluxx’s partnership with Bain & Co. As agencies will spinout to become independent again with the backing of their larger consultant owners. Acting as a win-win situation, the agency has more autonomy and can leverage the larger management consultancy’s network of clients. While large management consultancies can stay relevant and tap into specialise talent from the agency.

There needs to be a shared belief in projects so clients and agencies can co-invest and partner together.

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Daniel writes, talks, lives and inspires all things creative, service design, specialising in business models, ecosystems and co-innovation.

LinkedIn: www.linkedin.com/in/danieltuitt

Twitter: @DanielTuitt