"Consulting firms" and "advertising agencies" – competing and converging!?

"Consulting firms" and "advertising agencies." These two entities, which once served entirely different functions, have gradually begun competing in the business domain in recent years.

This time, we spoke with executives Katsumasa Yagi and Masataka Sugimoto of Dentsu Consulting Inc., which positions itself as a "growth-focused integrated consulting firm," about the new approach to consulting.

Mr. Yagi, who has been involved in numerous new business ventures and service development at Dentsu Inc. and Dentsu Digital Inc. Mr. Sugimoto, who has worked at global consulting firms like Deloitte and PwC.

What value do these two professionals believe consulting firms can provide for corporate growth? And what are the "right-brain × left-brain" talents that hold the key to this?

<Table of Contents>
▼The "Homogenization" of the Consulting Industry is Hindering Innovation
▼Transforming the Homogeneous Consulting Industry! What is a "Balanced Organization" Comb ining Right-Brain and Left-Brain?
▼ Risk-averse KPI setting won't lead to "discontinuous growth"!
▼Visualizing "Creativity" at a Level Useful for Management Decision-Making

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Homogenization in the consulting industry is hindering innovation

──Mr. Yagi, with his long tenure at Dentsu Group, and Mr. Sugimoto, who has excelled at a major consulting firm. Could you share your perspectives on the roles of advertising agencies versus consulting firms?

Yagi: Advertising agencies have two main roles. One is to cultivate "brand anticipation" in the market. The other is to execute marketing activities based on that anticipation, encouraging consumers to purchase and use products or services. These are the areas advertising agencies excel at and the functions companies demand.

Sugimoto: Consulting firms structure the given conditions based on external environmental data and internal management data to identify the issue (the problem to be solved). They then organize and evaluate the strategic options necessary to solve that issue, propose the most cost-effective business plan, and support the client's decision-making.

──What changes have occurred in the situations of these two types of companies in recent years?

Sugimoto: First, more consulting firms are now offering concrete execution support beyond the "decision-making" stage mentioned earlier—such as system development and operational improvements. In other words, they are expanding their scope into the execution domain of marketing strategies traditionally provided by advertising agencies.

One factor driving this is the shift from a centralized, hub-based society to a decentralized network society. In other words, as society has shifted from one characterized by information asymmetry to one where individuals have more power, market segmentation and diversification of people's values have progressed. As a result, the traditional "waterfall" approach, which moves in a single direction from upstream to downstream, has become unable to respond to today's rapidly changing market environment and consumer needs.

Consulting firms now need to adopt the "lean startup" and "agile" approaches and processes that advertising agencies have always excelled at, which involve constantly tuning strategies while engaging in dialogue with the market.

So, in order to keep up with changes in the social environment, consulting firms are becoming more like advertising agencies in some ways. What are some of the challenges facing consulting firms?

Yagi: Consulting firms often apply methodologies established in Europe, the US, or China directly to Japanese companies. However, this approach can lead to mismatches with Japan's unique culture and economic conditions. It also risks making it difficult to create truly original businesses or services, as they tend to follow overseas trends.

Sugimoto: The "homogenization" of consulting is also a major industry challenge. As each consulting firm logically pursues "plausible solutions" from given conditions, the answers they arrive at become indistinguishable, creating an environment where innovation is hard to achieve.

Furthermore, consulting firms are highly valued by clients as convenient, "high-end outsourcers" that comprehensively compensate for their own functional gaps. However, a side effect of this is that it hinders the development of the client's own innovation capabilities. In other words, there are cases where consulting firms actually diminish the client's ability to formulate and execute strategy.

──So there are drawbacks to this structure where clients essentially "outsource" their strategy to consulting firms. Next, could you tell us what kinds of management challenges consulting firms are tackling most frequently for clients right now?

Yagi: Currently, many clients face challenges related to "transformation" – be it management transformation, business transformation, or digital transformation. First, introducing digital solutions often leads to immediate efficiency gains and tangible "results." However, this is merely operational efficiency, and the effects are not sustainable. I believe this represents only a part of the transformation challenges executives face.

"Why are we pursuing transformation?"

"What kind of company do we want to become for society through this transformation?"

The time comes when you face these questions.

For consulting firms to answer these questions and address the transformation challenges faced by executives, "the ability to logically structure things" alone is insufficient. It also requires "creative power" – the ability to discover unseen opportunities and challenges in markets, companies, and customers; to work closely with executives to create unique solutions; and to inspire customers and employees with ideas.

──Creativity is an area traditionally handled by advertising agencies, isn't it?

Yagi: Yes. Consequently, what we're seeing now is an active trend among consulting firms to recruit creative talent. Simultaneously, advertising agencies are strengthening not only their creativity but also the capabilities consulting firms have traditionally excelled at—namely, logically supporting clients' decision-making.

Amid these efforts, I believe the current state of the consulting industry is one where the areas covered by both are increasingly overlapping.

Transforming the Homogenized Consulting Industry! What is a "Balanced Organization" Combining Right-Brain and Left-Brain Approaches?

――We've discussed the challenges facing the consulting industry and client challenges. Based on that, please tell us what you two at Dentsu Consulting Inc. aim to achieve.

Sugimoto: Our current focus is increasing the number of people capable of adapting to the new era. As Yagi mentioned earlier, the consulting industry is now intensely focused on acquiring right-brain talent rich in lean startup thinking and creativity. However, it's extremely difficult for right-brain talent to integrate into organizations that have been 99% left-brain oriented. Due to significant differences in culture and thought processes, even when right-brain talent is hired, integration within the organization often fails, leading to frequent resignations.

But I believe the reverse can work. That's what we aim for at Dentsu Consulting Inc. Specifically, I think we can integrate left-brain thinking into Dentsu Inc., an organization known for its creative, right-brain talent.

──Why is it difficult for right-brain talent to stay in a left-brain organization, yet the reverse can work?

Sugimoto: Right-brain abilities involve innate traits and aspects cultivated over time within an organizational culture. Left-brain abilities, however, can be acquired to a certain extent through training.

I believe the fastest path is for Dentsu Inc., which has a concentration of right-brain talent, and growth-oriented consulting talent to jointly drive projects, enabling both sides to hybridize. By cultivating talent possessing both right-brain and left-brain capabilities, we aim to spark innovation in the commoditized and homogenized consulting industry.

──In addition to the "left-brain" capabilities traditional consulting firms possessed—logically devising optimal strategies—the "right-brain" capabilities that truly shine in the realm of communication are essential for consulting going forward.

Yagi: Yes, that's correct. From another perspective, Dentsu Consulting Inc. values the premise that "a company is not an anonymous collection of people, but is made up of individuals, each with their own distinct personalities."

When supporting clients' decision-making, proposals inevitably tend to center on facts like numbers. However, in the real world, to move individuals with distinct personalities and, consequently, drive change in companies and society, it's impossible to achieve this through logic alone.

It requires engaging both the right and left brain: moving hearts to evoke "empathy," engaging minds to foster "understanding," and motivating actions to achieve "conviction." This is another area where the expertise cultivated by advertising agencies can be leveraged.

Sugimoto: Another strength of the Dentsu Group I'd like to highlight is our network. It includes not only our current talent but also Dentsu Group alumni and external "non-traditional thinkers" involved in various business scenarios. In the coming era, "non-traditional teams" – blending right-brain talent like these individuals with left-brain thinking – will be indispensable. I believe they will become our weapon in the consulting business.

Setting KPIs out of fear of risk won't lead to "discontinuous growth"!

――You mentioned growing corporate businesses. Dentsu Consulting Inc. positions itself as a "growth-focused integrated consulting firm." Could you share your perspectives on solving challenges in corporate growth areas?

Yagi: Today, it's critically important for companies to combine "continuous" growth—driven by improving existing business models—with "discontinuous" growth—driven by transformation.

What I particularly emphasize in growth strategy is the optimal allocation of "discontinuous" and "continuous" growth through strategic KPI setting. Consulting firms often tend to set "KPI that can be reliably achieved" by eliminating risk. However, formulating growth strategies that expect "discontinuous" growth and driving those initiatives requires taking risks, and naturally, things don't always go smoothly. Therefore, rather than focusing solely on avoiding risk, we should operate on the premise that "things might not always go well."

What matters is having the courage and resolve to support the client's "discontinuous" growth, embracing both successes and failures. Then, we can incorporate "continuous" growth by scaling what works and improving what doesn't. Thinking this way allows us to set aggressive KPIs that drive innovation. Eliminating risk from the start makes achieving discontinuous growth impossible.

──If traditional consulting is defined by an inability to take risks, then it cannot contribute to the discontinuous growth modern companies demand.

Yagi: I agree. For example, we prioritize "non-financial metric"-type KPIs. We advance the business by capturing what the client's business truly values through these KPIs.

Consider a health tech company that set "amount of sweat produced by customers" as a non-financial KPI. That represents the value the client wants to prioritize. To put it in left-brain terms, it's about IoT sensor data and managing how much equipment is used. But by framing it as "getting customers to sweat more," and declaring that as the core purpose of their business, it fundamentally changes how employees engage with customers.

From the market's perspective, this company communicates that it exists not solely for profit, but to make society healthier by increasing the number of people who exercise. Of course, it must ultimately connect to financial KPIs, but I believe building this kind of framework creates a strong organization connected to society and its customers.

We aim to support decision-making that balances right-brain and left-brain thinking, creating a "win-win-win-win" connection between society, customers, employees, and corporate management.

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Sugimoto: Furthermore, achieving growth requires not just "bottom-line improvement" through cost reduction to generate profits, but "top-line growth" by increasing sales. This means marketing strategies and new business development strategies are essential.

However, boosting the top line requires taking risks and challenging new things, making it difficult to control within the scope of traditional consulting services. Furthermore, top line growth depends on the "strength of the client's resolve and their strategic execution capabilities." How determined are the president and management to see it through? Whether they can make bold decisions while controlling risk significantly impacts the outcome. That's why supporting the growth domain is incredibly challenging.

Traditional consulting firms primarily operated under "advisory contracts." Essentially, they hedged their risk by only providing clients with "strategy." Their stance was: "We'll develop the logically optimal plan, but whether you execute it is up to you."

Dentsu Inc., however, being fundamentally a marketing communications company, has instead centered its support around executing the strategies provided by clients. We have always faced the challenge of committing to "results."

Yagi: Even if "results" weren't achieved initially, we could continuously improve what didn't work. Visualizing insights—why purchases didn't happen and how to drive them—is precisely where advertising agencies excel. Then we scale what delivers results. Even if immediate success eludes us, by communicating with clients and iterating through second and third attempts, we consistently improve and achieve outcomes. That's why Dentsu Inc. has thrived in marketing for so long.

Sugimoto: Building that kind of relationship with clients is another strength of Dentsu Inc. To summarize, I believe Dentsu Consulting Inc.'s major advantage is its ability to provide "creative capabilities that leverage right-brain thinking, something traditional consultancies lacked, along with execution capabilities."

We want to visualize "creativity" at a level useful for management decision-making.

――So Dentsu Consulting Inc.'s uniqueness lies in an advertising agency, skilled in the "execution" phase, extending that capability upstream into areas like "strategy." What should advertising agencies focus on most to become essential consulting partners for clients?

Sugimoto: To succeed in growth-focused consulting, I believe three approaches are crucial. First, there's the problem of homogenized outputs from consulting firms addressing client-provided issues. That's already a red ocean, so we avoid competing there. Instead, we adopt an approach where we collaborate from the very beginning to define the issues that need solving. This means committing from the stage of identifying and setting the challenges – essentially a blue ocean strategy.

Second is what Yagi mentioned earlier: the resilience to continuously adjust course while engaging with the market and customers. It's not about submitting a perfect plan and calling it done. It involves exploring plans that take risks, scaling successful elements, improving underperforming ones, and pivoting the service itself if necessary. This is also a challenging approach for traditional consulting firms.

The third is the ability to provide "end-to-end" support, from upstream challenge exploration and purpose setting all the way to downstream digital marketing operations. While more consulting firms are now venturing downstream, few actually handle the operational execution. We formulate the client's strategy, engage with the execution, and stay by their side to deliver results. Providing this end-to-end support is, I believe, the raison d'être of the Dentsu Group, including Dentsu Consulting Inc.

Yagi: Personally, I think traditional consulting firms might view it this way: "We provide reliable solutions to the issues the client presents, so any subsequent business results are simply a direct outcome of the client's management decisions."

I disagree. I want to create unique solutions by walking alongside client companies—sometimes energizing them, sometimes generating ideas, sometimes giving them a push, sometimes suffering alongside them. And I want to support them with the goal that, as each client company creates the unique value they wish to deliver to society, society as a whole grows. I know people might say, "That's easier said than done..." but I firmly believe there is absolute value in pursuing this.

──I think creativity is a strength of advertising agencies that clients can easily understand. How will Dentsu Consulting Inc. deliver this creativity to clients?

Yagi: Business leaders have mechanisms to manage risk when making investment decisions. For example, investment firms come in to increase the probability of investment success or support portfolio optimization. But investing in creativity is said to be highly uncertain and difficult to manage.

If companies avoid trying new concepts just because they're difficult, it won't lead to growth. That's why I believe we need to structure creativity and establish clear criteria for judgment.

In other words, as professionals handling creativity, we envision acting as a kind of "investment firm for creativity," capable of "visualizing" the scope and variability of creativity's impact.

We don't just want to provide creativity in a purely right-brain manner. We also want to engage with the uncertainty inherent in creativity and offer a left-brain approach to unravel it, elevating it to a level that can support management decision-making.

Of course, this is extremely challenging, but I believe it's precisely why Dentsu Inc. should pursue consulting. We aim to achieve this.

Sugimoto: In consulting, supporting management decisions through "visualization" is fundamental. Our advertising agency-like approach—selecting strategies with relatively high success probabilities without avoiding failure risks, then adjusting course to move closer to success—differs from traditional consulting firms' approach of "presenting logically plausible strategic plans for given issues, leaving execution to the client."

──I imagine some clients partner with different specialized companies for each phase, from upstream to downstream.

Sugimoto: It's true that many clients currently develop their businesses by combining multiple partner companies, like "strategy in the upstream phase with a consulting firm, and downstream communication with an advertising agency." However, this approach is inefficient. I believe clients are seeking partners who can maintain consistency from strategy to execution. To seamlessly connect the functions that make up the value chain and maximize the value delivered, the transformation of advertising agencies themselves is also essential.

──Finally, could you share your outlook on the future of consulting firms?

Yagi: Mr. Norihiro Kureya, President and CEO of Dentsu Inc., stated, "We no longer consider ourselves an advertising agency." IGP (Integrated Growth Partner) represents the current vision for the Dentsu Group. Dentsu Consulting Inc. will also pursue a consulting model suited to today's era, accompanying clients' growth from upstream to downstream.

About IGP
https://www.dentsu.co.jp/capabilities/

The boundary between the advertising and consulting industries will become increasingly blurred going forward. As Dentsu Consulting Inc., we aim to refine our unique value proposition for driving client growth by employing consulting that fuses right-brain creativity with left-brain logic.

Sugimoto: As I mentioned earlier, society is undergoing significant transformation. Including external factors like viral outbreaks and intensifying conflicts, uncertainty in the global economy and business is expected to rise further. Precisely because of this, I believe all companies must move beyond clinging to conventional wisdom. They must confront the "now" of markets and customers, using business power to improve society and people's lives.

Amidst this, I believe increasing the number of "right-brain × left-brain × exceptional talent" individuals—who combine the right-brain capabilities cultivated in the advertising industry with the left-brain strengths developed in consulting—is a crucial key to creating a more fulfilling society.

*Dentsu Consulting Inc. website here