Is Overhead the Enemy of Innovation?

Tom MartinInnovation is sexy. It puts you ahead of the competition because you can offer a new tool for the marketer's toolbox. It gets you meetings with prospects and new streams of funding from current clients. It excites your employees and gets you press. In a nutshell, innovation builds agencies in today's hyper-competitive environment. And while you may disagree with how important it is -- you likely won't disagree that it is very, very important and a highly desirable trait for any agency to possess. So why don't we see more of it? Why is it that more agencies aren't out there on the edge, investing their time, energy and money to create that which does not exist today? Why aren't we reading in Ad Age about agency after agency that has created a new way of marketing, a new technology or has partnered with a brand to test the stormy waters of a new channel. Overhead. Profit. Billable Hours. Utilization. Realization. These are the enemies of innovation. They stand in the way like Roman soldiers guarding the gates to Caesar's Palace. They, along with the continued use of a broken compensation system (the billable hour) require agency management to focus it's time on maximizing billing per employee. Of these items, I have always believed that overhead is the biggest innovation killer. But we live in a high overhead kind of industry. Those pretty offices with fancy addresses. The need to "look" cool leads to expensive build outs. The costs of the award-show entries to bolster our rep. And my personal overhead growing favorite -- the uncompensated new-business pitch. It all adds up and makes it very difficult for an agency to move billable hours to non-billable hours any more than it absolutely has to because each hour is carrying that innovation-crushing overhead factor. Add to this today's ROI-focused world and you can understand why we can no longer experiment on our client's dime. Today's client isn't afraid to walk the road less taken, but it surely will ask you for some kind of Proof of Concept or a case study that shows your experimental idea working at some smaller level. And even more likely, that case study and the associated marketing effort will be funded by the agency. It will be your time, money and non-billable efforts. So how do we change this? I'm sure you have a few thoughts by now. Here are mine. First, lower your overhead. Get your CFO involved and find a way to relieve your innovation efforts from the crushing pressure of the traditional agency high overhead. Either set the innovation group up as a separate low overhead model LLC or just remove the overhead factor from their P&L. After all, unless you've hired new people or taken on additional office space for this effort, your true overhead didn't change. Right? Second, find low-cost options to create the proof of concept. Use off-the-shelf tools, even if it lowers the quality of the final product a tad. I once ran an entire social media campaign with nothing but an iPhone that I already owned. Third, use rapid prototyping. Don't make it perfect. Build something, launch it, test it and repeat. In this manner, you'll get more real-world data faster and you'll innovate in shorter cycles. Fourth, keep your eye on the ball. Innovation for innovation's sake is something they do in academia; everything we do should be focused on new billings, new clients and press. So put in place rigor and time lines. If a new project hasn't shown fruit within a particular time line, shelve it and move on. Maybe one day you'll bring it back or maybe it will just die. Either way, it is important that you don't fall in love with your baby. Stay focused on the underlying goal of the innovation project -- growth. So now I've shared my opinion with you -- care to return the favor? How are you going to make sure your agency is more innovative? ABOUT THE AUTHOR Tom Martin created Converse Digital to help companies and agencies monitor, create and engage in digital conversations. Want to talk? Just email ConverseDigital@gmail or follow @TomMartin on Twitter.

Is Overhead the Enemy of Innovation?

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