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A few weeks ago I was chatting with a senior exec from one of the big, legacy agency networks. He told me the agency has 180 offices around the world, and 60% of those are franchise deals.
Then I asked him what his biggest threat is at the moment. He said it's the new generation of agencies that are built for a digital world.
Which raises these questions: Can legacy agency networks introduce new ways of working faster than their aging, lucrative model and structure declines? What if everything that has made ad agencies iconic and essential in the past is exactly what makes them vulnerable now? What if the next generation of client doesn't want to foot the bill of dismantling and transforming a behemoth built to work in a pre-digital world?
Global agency networks were built on confidence through scale and uniformity. Lots of boots on the ground gave clients the confidence that they were allocating their budgets to the right place. And in turn, agencies modeled their fees to play to this, designing roles and structures that slowed the process to filter more money from clients' pockets into the agency's (holding company). It's pretty simple -- if you're a commercial entity rewarded for taking your time and putting more resources than necessary around a project, that's exactly what you're going to do.
However, as brands look to make their storytelling and growth more efficient to suit the world that surrounds us today, a global infrastructure designed around an outdated model is becoming more of a hindrance than an asset. A new generation of client-side marketers know that you don't need 180 offices around the world and a 50-person account team to feel confident anymore.
The next-generation client, which grew up hacking the system, collaborating with people around the world to solve challenges, Googling "how-to" for everything, and generally finding solutions more efficiently and effectively than its predecessors, will have a different set of challenges to make decisions around when choosing a creative partner.
The client of the future will face challenges around speed and agility, not scale and uniformity, and will demand an agency to be custom-built for today's world -- a leaner, more agile strategic and creative consultancy with a collective of multi-skilled experts to support it in solving brand and business challenges.
Confidence in the future will come through responsive teams and models, designed to adapt and sprint for a variety of challenges, utilizing the incredible wealth of knowledge and technology at its fingertips to produce solutions beyond just marketing. Furthermore, it will come through agencies that are rewarded for moving quickly, being efficient and doing good work.
What's happening to the advertising industry now is similar to what happened in the music industry over the past decade, and what's currently happening to the financial sector via Blockchain and the disruptive fintech startups that are challenging the establishment.
Just over ten years ago, the Fortune 1000 list looked very different than it does today, with 70% of the companies that were on the list having now vanished. Might those companies still be here if they and the professional service firms they hired were able to move quickly enough to adapt to the world around them? Perhaps some of the big legacy agency networks should look to the likes of IBM
With the ability to adapt and change now being a business imperative, appointing a traditional agency to your brand today is somewhat like moving into a new home and saying you want to install the next-generation TV experience, then signing up for a 36-month cable TV contract. You might be comfortable with this solution because it's what you know, but the reality is that it's an expensive resource that was modeled for a pre-digital world.
Scale, uniformity and an iconic name (even if it's an icon designed to operate in the 60s or earlier) still has a place and clients still buy it. It's still the safe place for marketing directors to put their budgets -- they feel confident that they won't lose their jobs if they do it the way it's always been done. But increasingly, doing things the way you've always done them could be the highest-risk strategy of all. Maybe the low-risk strategy for today is to ditch the cable TV and have the confidence to try something new.