Circles

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Three circles, that is. This week we look at the three circle graph and think about how agencies and consultancies can ward off the big tech players with AI.

Let’s go shopping

About a month ago I wrote a Cloudy about acquisitions I thought were going to happen in the AI space. There were some crazy predictions about Microsoft, Adobe, Apple and others. When I finished writing it, I took a step back and realized if you don’t follow the AI space with religious conviction, you aren’t going to jump out of your seat because I think Microsoft is going to buy an obscure chip maker.

One the of the more “jump out of your seat ideas” I floated was Amazon buying Boston Consultancy Group, or really any management consultancy. Since AI is going to touch every part of a business, why shouldn’t a highly skilled AI company charge insane amounts of money advise others in need? Amazon has applied AI to many different parts of their business, from logistics to security to retail and buying a consultancy would allow them to immediately introduce these methods to different companies.

Turns out, Amazon doesn’t need to buy a consultancy

Two weeks after I wrote that, The Economist wrote a piece called “AI providers will increasingly compete with management consultancies.” The premise of the article is that since these technology providers have all of the pieces to navigate digital trends, why would companies reach out to the traditional consultancies for help? Others seem to agree. Roy Bahat of Bloomberg Beta, a venture-capital firm said quite pointedly “The Googles, Amazons and Microsofts of the world may take over from the McKinseys, Boston Consulting Groups and Bains.”

The article also highlights the Google Advanced Solutions Lab, which when you poke around their website, it sounds like a consultancy. Their website reads “The Advanced Solutions Lab (ASL) allows businesses to partner with Google Cloud to apply Machine Learning to solve high-impact business challenges. Their bold, not mine.

Three Circles

The second reason I thought Amazon was going to buy a consultancy is it would put Amazon into the three circles of the “three circles graph.”

The three circles graph (it’s not actually a “thing”, although maybe this Cloudy will make it one) is chart that Publicis used to feature in their annual reports. It painted an optimistic picture of the opportunity Publicis had in three key markets, worth up to $1.5. This is the 2015 version of the chart:

If you think about the progression of the three circle graph, it used to look like this:

Then, the rise of digital platforms and cloud computing came along, and you now have this

Then AI and Amazon’s advertising ambition, and Microsoft buying LinkedIn bring you here

The current state is a complete mess. Companies competing with companies anywhere and everywhere.

What to do about this?

The question becomes, what should agencies and management consultancies do about this? Management consultancies/agencies could start buying AI shops to counter the trend. Acquisitions like MicKinsey buying QuantumBlack and Dentsu buying Merkle are steps in the right direction, but that won’t be enough to compete with the thousands of engineers Google has. The big tech players are also keen on acquiring, shelling out billions for AI companies, paying an absurd rate on a per employee.

If consultancies/agencies are serious about buying AI, their acquisitions should be focused and targeted. They are not going to shell out $500mn to buy DeepMind, but shelling out $10mn for a company specializing in AI applied to customer engagement, or Rubicon’s acquisition of bid optimizer nToggle are interesting plays. Each AI acquisition or acuirehire needs to be focused and targeted to improving some sort of marketing need.

If you can’t beat them, join them

The other option would be for consultancies/agencies to strike up significant partnerships with big tech. Microsoft will essentially be the AI for Marcel and it wouldn’t surprise me if others have secret projects under wraps. Cloudy does not have any sources close to the situation about these projects, mere speculation.

At the end of the day, agencies/consultancies will need to enhance their strengths in AI to counter the three circle threat. They are not going to create the world class AI that the Googles/Amazon/IBMs of the world have, but by narrowing in on how AI can improve marketing, they have a chance to compete.

All we are saying, is give peace a chance.

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