On the surface, this shift sounds dire for agencies. With brands building their own in-house services, agencies should be fading from the landscape -- endangered species marching towards extinction. Right? Then why are new agencies, large and small, continuing to pop up and grow in every market? Why are massive consulting firms tripping over themselves to build -- or acquire -- robust agency skills? Clearly, there is still a need and an opportunity for out-of-house agencies.
At Traction, we make a significant part of our revenue working with clients who have in-house agencies and teams. In a few cases, we've had those relationships for a better part of a decade. Because of this history, we understand when and why internal agencies reach out to us to help complement their own abilities.
The curse of knowledge
Traditionally, brands have turned to agencies as an objective party that can help them find creative (or more recently, technical) solutions to business problems. That is where agencies often provide the most value.
In its recent survey of in-house agencies, The Boss Group reported that 92% of in-house creative teams identified brand knowledge as part of their value. This is a blessing and a curse (it's too easy to pick on Pepsi here, so I just won't). It leads to standards-based thinking, which leads to standards-based work. In short, living and breathing a brand can blind people to new perspectives; they are are unable to see the forest for the trees.
Agencies, by design, are always acting as strangers in strange lands. The crossroads where internal brand experts meet with external agency experts is when significant marketing magic can happen.
Jacks of all trades -- masters of none
Most clients will be quick to tell you they don't think any one agency can be great at everything. Those same clients are hopefully smart enough to realize that applies to their own in-house agency as well.
Just like Liam Neeson, good agencies have developed "a very particular set of skills." Skills acquired over long careers. Skills that have been honed by working with a variety of clients solving a variety of problems. This gives them a unique ability to complement in-house agencies. We collaborate with them. We become part of the team helping them to face their own challenges, and work together to find solutions in new and sometimes better ways.
Premium talent -- only when you need it
Perhaps the biggest challenge of running an agency, internal or otherwise, is managing utilization, staying profitable while servicing the ebbs and flows of client needs. It is easy for a brand organization to look at hourly rates, do some cocktail-napkin math, and determine they should just do this in-house. What that doesn't calculate is the cost of expertise, process, training, talent acquisition, equipment and operational excellence that go into running a strong agency team.
For most brands, attracting great talent can be a huge obstacle. Often, this is not about aptitude, it's about environment. Agency talent often seek a variety of challenges and solutions, something that may not be an option when working on a single brand. Even for those brands fortunate enough to attract and keep great talent -- there are quite a few -- getting out-of-the-box creativity from a team working in the same box day in and day out can be difficult.
New paradigm, same old problems
A brand marketer recently shared with me that she hates working with her in-house team because "they aren't as creative, and they cost her just as much" as an external partner. Another complained that he wished he could find a team to outsource a particular function, so he could "get rid of some headcount." These anecdotes don't mean in-house agencies can't be successful or valuable, but that they can fall into the same traps any agency can. Outside agencies that understand these pitfalls -- and can overcome them -- will continue to be asked to collaborate with brands who need them.
The pendulum will eventually swing back. In the meantime, in-house agencies are not going away. This may diminish the volume of services external agencies deliver, but not the value they can provide when used appropriately. The agencies that focus on delivering that value -- and who make being great partners to internal teams a cultural requirement -- will be the ones that not only survive, but thrive.