Opinion: Why smaller agencies are winning big
There is one simple reason why smaller agencies are taking business away from large agencies right now: Culture. This is unlikely to be a short-term fad. Tough economic situations forced brands to analyze their marketing investments. Recent shifts will lead to long-term changes.
Great culture leads to great results. It’s been a core tenet of business since Peter Drucker coined the phrase, “Culture eats strategy for breakfast” more than two decades ago. But culture is often misconstrued. I misinterpreted what it meant in the early years of our agency. When the team asked for better culture, I bought more beer, made the stereo louder and bought a foosball table. But great culture isn't about window dressing. Great culture is about building a world-class team and putting them in position to do their best work.
This seems relatively straightforward. But if you speak to people who work at large agencies, you hear complaints about big egos, bureaucratic processes and siloed thinking. And if you speak to clients who work with large agencies, you'll hear disappointment in the service and deliverables they get.
Culture starts with investing in the team
The challenge for large agencies is that many of them are part of public holding companies. This means they are beholden to short term, bottom-line results. Virtually every decision is dictated by the need to generate immediate growth and margins for shareholders.
Smaller, independent agencies have much more flexibility. This is particularly important during this time of financial uncertainty. They can invest in hiring people who are more experienced and more expensive. They can invest in establishing relationships with clients by over-delivering. They can invest in extra headcount to facilitate stronger client onboarding. They can invest in more senior account people to help drive strategy.
These investments lead to fluctuations in margins that are anathema to holding companies. But they also lead to a stronger culture because they put every person on the team in position to do their best work. This ultimately leads to breakthrough results in the form of creativity and relationship building.
Culture thrives on collaboration
Culture isn’t only about investments. It’s also about DNA. Advertising is more complicated than ever and becomes more complicated every day. There are now dozens of touchpoints in the relationship between brands and audiences. Agencies must do more than manage each of these touchpoints individually. They need to tell a cohesive story across the entire consumer journey, which means they need to break down the silos that exist between creative, technology, strategy, account management, data, analytics, media and user experience. This requires an entirely different approach than what drove the industry for decades.
Great agencies are built on the relentless pursuit of collaboration. Culture is about creating synergies, not just talented individuals. Smaller agencies are frequently born digital and are not evolving from the traditional siloed advertising world. They understand the deliverables required for the modern consumer journey and the collaboration required to get there.
This collaboration enables individuals on a team to learn and grow. By removing silos, each team member gets broader exposure and more opportunities to enhance her career. This creates a virtuous cycle because these team members naturally attract new collaborative team members to join the team.
Culture requires unwavering commitment
Great culture isn’t exclusively produced at small agencies. It happens at any size organization that makes an unwavering commitment. For example, BBDO and Weiden+Kennedy are known to have strong culture and have put out incredible deliverables for decades. Likewise, not all small agencies are able to produce incredible culture. It wouldn't be fair to paint every agency with only one of two brush strokes.
Here’s a parallel that might make recent events more tangible: I've always equated the agency world to the restaurant world. Both businesses leverage human talent to develop something that is both creative and commercially sound. Very rarely do you hear of a CMO going out to celebrate a major event at a chain restaurant. They find smaller downtown restaurants with incredible food, energy and ambiance.
The global pandemic and its economic repercussions have forced brands to think differently about their agency relationships. They've had a moment to dine on something other than giant agencies. They like what they're experiencing and it's unlikely that they will ever go back.