If the fun is lost, just what does the future hold?

	Anyone playing today’s game with yesterday’s rules is doomed to disappointment.

Now’s the Time

For many in the advertising agency business, the first half of this decade has been terrible!

The business cycle has taken a significant economic and human toll. Tens of thousands of talented people have been driven from the industry. Agency red ink gushed. Venerable agency brands disappeared. And to make matters even worse, agencies received a smaller slice of the client spending pie.

But now things are looking up. The business cycle has turned. The good news is that clients are loosening the purse strings. Agencies are getting busier.

All is well again…or is it?

While the downturn may be past, few people are saying that the fun has returned. And this industry is, or should be, driven as much by fun as by money. The passion for, and the excitement of, the big idea is what made the advertising agency business great in the first place. And the principal source of fun.

If that fun is lost, just what does the future hold?

What’s Happening, and Why?

It is clear that what has happened is not just a temporary economic downturn. Some fundamental shifts in the role of the advertising agency are underway.

There are no easy answers. All we know for sure is that the “tried and true” business models of the past just don’t work the way they used to. But generally accepted new models have not yet emerged to replace them. So we find ourselves today in a kind of no-mans land. The way of the past is over. And the way of the future has not yet arrived.

Not a fun place to be.

The purpose here is not to lament the situation. Rather, the objective is to explore the opportunities this change is presenting. There is the urgent need to persistently question conventional wisdom. To recognize that we are now plowing new ground. To apply serious creative thinking to the role of the agency, and the business models by which it serves the needs of marketers.

Only by this process can each agency find the right future for itself. And the fun its people deserve.

A Brief Look Back

Some say what we’re experiencing is a hangover from the excesses of the late 1990s. Others blame it on the impact of 9/11, terrorism and Iraq. Or the recent globalization of business. Maybe so. Yet it appears that many basic changes that are now so evident had their origins some time ago. They just became abundantly clear recently.

Let’s take a look at some of the paradigm shifts and relationship changes that are upon us. And some difficult questions they raise.

Some Paradigm Shifts

1. Audience Fragmentation
Media advertising was built around the idea of mass communications. Agencies provided the commercial content for that mass communications. Agency structure, allocation of talent and compensation has historically focused on large audiences with common interests. This has changed. Individual consumers (and those in the B to B audience) now demand personal relevance in the commercial messages they receive.

Audience fragmentation, which is really a social phenomenon celebrating the uniqueness of each individual, is with us for good. Yet, many agencies continue to do their best work, and receive their highest compensation in direct relationship to the size of the audience.

In the age of TiVo and one-to-one marketing, can the traditional mass audience based business model long endure?

2. Fast Response
The world is shrinking. And, speeding up at the same time. Cause and effect can now be measured in a millisecond. Marketers live on instant responsiveness from the marketplace. It has become part of the business culture. And to make matters even more challenging, the financial community unrelentingly demands it.

So, no matter how intellectually sound the idea of long-term brand building is, the need for fast response is increasingly irresistible.

Yet, brand building is essential, too.

Thus, are fast response and brand building mutually exclusive? Hopefully not. But how to accomplish both simultaneously?

3. Non-Traditional Media
Advertising isn’t just about TV spots and print ads any more. The consumer has moved way beyond their limitations. She now receives commercial information from an ever changing array of sources.

There is no surprise here. The magnitude of the change is crystal clear. So are the successes of agencies and advertisers that have moved beyond a focus principally on TV spots and print ads.

Yet the economic backbone of many agencies continues to be creating, producing and placing TV spots and print ads. So, how to transition to a business model that will successfully reward the agency for both traditional and non-traditional media? And, what will the future look like for agencies that are unable or unwilling to adapt to this sea change?

4. Non-Craft Clients
More and more client decisions are made by people who have little training or experience in the use of traditional as well as non-traditional advertising and market communications tools. Their background and focus frequently is on product management and sales. And, they are under intense pressure for immediate sales numbers. If they are not quickly successful, someone else will surely take their place.

In this environment, their thinking can be more tactical than strategic. Often, they (and their procurement departments) see what agencies provide as commodities. Cost can become more important than value. And, frequently they do not grasp the power of creative leverage. Nor value the long-term benefit of a strong brand position.

With this mindset, is it any wonder they can have difficulty understanding that the agency can be a lot more than a vendor?

Relationship Changes

Successful relationships require mutual understanding. And, the understandings that have been the historic foundation for agency/client relationships are changing.

1. Agency Status
The word “agency” denotes the status of agent. With all its legal and operational implications. However, many client-side people don’t understand the agent relationship. Thus, clients increasingly view their agencies as vendors. This has profound human, financial and legal implications.

The question therefore is, does the name agency truly reflect the character of the relationship with many clients? Is “agency” still an accurate descriptor? And, should it be?

2. Partnership
Agency people have long considered themselves partners with their clients. Some of the best agency work is done when the client views the relationship this way.

But, today many clients just want agencies to solve problems or provide stuff. They don’t see them as partners. Are agencies kidding themselves when they describe themselves as such?

3. Stuff Factories
To survive the past few years, many agencies were forced to shift their focus from the creation of big ideas to the production of stuff. Keeping people billable churning out stuff that clients needed, and were willing to pay for, kept a lot of agencies with much higher aspirations afloat.

Many clients, as well as agency people, now see the primary role of the agency as a stuff factory. In this environment, will it be difficult to return to the big idea high ground agencies so long enjoyed?

4. Brand Architects
Yet through it all, client needs have been growing. They have major market issues that need to be solved.

So, what may be replacing partnership, agency status and the stuff factory mentality is the recognized need for building brand architecture and pragmatic problem solving. Clearly, good agencies have always solved client brand and communications problems. But, there are no generally accepted business categories of brand architect or problem solver.

Have agencies entered new business categories? And, does that demand new names? And, if so, what should it (or they) be? And, how will that be communicated to marketers?

Some Things to Think About

If clients are viewing their agencies differently, how do some of the traditional characteristics agencies value measure up? For example:

1. Full Service
Many agencies like to be considered full service. But there is a lot of confusion over just what that means. What value does the client place on full service? Is it better to be just OK at a lot of things or outstanding at only one or two?

Does full service embrace all kinds of ways of connecting with the customer? Or does it just mean all kinds of advertising?

2. Agency of Record
This is another popular industry term that we suspect has more meaning to agencies and media than it does to clients. In fact, it has been estimated that the majority of agency staffers and client marketing people cannot accurately define it.

With clients increasingly moving away from exclusive agency relationships, are agencies unrealistic in expecting much client loyalty? And if so, how can an agency successfully function with a client using multiple agencies for the same brand?

3. Bill Paying Accommodation
As agents, advertising agencies have historically bought media and materials for their clients. This is a great convenience for the client. And, it makes a lot of sense if the client values the agent role. But, it also carries with it administrative costs and financial risks for the agency.

If the client views the agency as a vendor, brand architect, or a problem solver, what is the risk/reward equation for the agency in handling client buying and bill paying? What does it really cost in time, focus, hassle and plain old money to provide this accommodation? Could those resources be put to better use for the client?

Is there a better way to handle client bills? And if so, what is it?

Some Strategies Worth Considering

Against this changing environment, innovative agencies are trying a bunch of new strategies. Here are a few:

1. Consumer Centricity
Most agencies describe themselves as consumer centric in their thinking. Yet for many, their economic success is still directly linked to the creation, production and placement of TV spots and print ads. This is an impossible dichotomy. An agency cannot be media agnostic in its work until the economic benefits for the agency are also media agnostic.

For an agency to be truly consumer centric, it must wean itself away from primary economic reliance on traditional ways of communicating with consumers. This can be a gut-wrenching change. For it requires a business model that adequately rewards the agency for the creation and implementation of ideas that can employ a broad range of both traditional and non-traditional media.

2. Niche Positioning
Rather than trying to serve diverse clients with diverse services, some thoughtful agencies have narrowed their focus to very precise niches. This may be a specific market segment, or it may be performing specific services that the client’s other agencies cannot perform.

The secret here is identifying what your agency can do better than any competitor, and then focusing on it with intensity and gusto. What is important is demonstrable superiority in the chosen niche. This concept can be very powerful.

The real test of niche positioning is being able to say no to other tempting, but spurious, opportunities.

3. Flexibility
It is easy for agencies that have clients which are large organizations to begin mirroring the structure of those clients. This can make small agencies look ponderous and bureaucratic. And it makes work slow, expensive and frustrating. This is a disease. And, it can be fatal.

The cure is to breakdown internal organizational barriers. This is not just moving people around, but an ongoing commitment to finding better ways of working together.

It also requires an agency staff with high self-confidence and self-esteem. For only confident people thrive in a bureaucracy free environment.

4. Focus
There is an old saying that what you’re not defines you more than what you are. Some agencies are finding that it is better to be an inch wide and a mile deep than to be a mile wide and an inch deep.

This means using a rifle rather than a shotgun. It is doing a few things very well, rather than doing many things without distinction.

5. Talent Driven
Personal relationships are important in obtaining and retaining clients. Always have been. But, in today’s environment, if you’re not performing, you’re in trouble. This means finding, developing and keeping the best possible talent.

This also means smaller, but more highly talented and motivated agency staffs.

And, demographic and economic patterns indicate that we will be facing a severe agency talent shortage sooner than we may think.

6. Low Cost Provider
Price competition is a fact of life. To be competitive, an agency must be able to provide more value at lower cost than the client’s alternatives. It is as simple as that. This doesn’t mean being cheap. What is required is a relentless ongoing commitment to providing more for less.

This will take an enormous amount of business creativity.

7. Exit Unnecessary Services
No agency can be all things to all people. Yet, many agencies are excellent in a few things, but only adequate in others. There must be an ongoing evaluation of services offered to clients.

Often agencies continue to provide services that have outlived their need. If it isn’t competitive, it should be retired. This is seldom easy, but relentless pruning is vital to an agency’s long-term health.

8. Quality
Simply stated, quality is providing something of value that meets or exceeds the client’s expectations all the time. Anything less is trouble. Errors are frequently the root cause of client defections. Most agencies are filled with horror stories about embarrassing and costly errors.

Manufacturers and large service industries have pioneered sophisticated process quality management programs. Many of these can be applied to agencies. It makes sense to use these techniques.

9. Ad Hoc Structure
There are great organizational opportunities in moving away from the classic hierarchal military style structure. While it is not always easy to do, it can enhance productivity and responsiveness.

Plus, flexibility in the organization’s structure can be a big help in attracting and keeping top-flight talent.

10. The Entrepreneurial Spirit
People participating more fully in the risks and rewards can do better work. Entrepreneurs, by definition, want to excel. They cherish freedom. They also want to be different. They are stimulated by the opportunity for rewards commensurate with their positive contribution. They prefer to have their success measured by the marketplace, rather than just what their boss thinks.

Harnessing this power requires innovative leadership, management and compensation programs.

11. Strategic Relationships
This is an exciting alternative to trying to provide everything the client needs in-house, or through traditional suppliers. Many agencies are setting up long-term strategic relationships with independent service providers. This can be a very effective way to meet client needs with a minimum of cost and hassle.

But, enduring strategic relationships don’t happen overnight. They take significant effort in planning, recruiting, and sustaining.

12. Collegial Management
Nothing empowers good agency staffers like the proper combination of freedom and responsibility. They can do more, and do it better. Creating a collegial environment in which to work can have a dramatic impact on productivity.

However, the benefits don’t always come easily. To be fully effective requires real skill and dedication on the part of senior managers.

There are a lot more creative strategies than these. This is just a good starting list. No agency uses all. And many are not right for each agency.

The Value of Discovery

Discovery has never been needed more than today. Agencies must become more innovative in how they conduct their business. There must be a growing commitment to the kind of ongoing experimentation that is absolutely essential to remaining competitive in today’s changing marketplace.

This is kind of like a R&D function – essential to the enterprise’s future.

The agency that can be as creative in how it views its own business, as it is in the work it does for its clients, is the agency that can move securely into the future.

The Importance of Fun

In recent years, we’ve heard many agency people say, “This business just isn’t fun anymore.” What a tragedy!

Work should be fun. If it isn’t, why do it? Life is too short to spend our working hours in dullness, tedium, frustration and fear.

But as a wise man once said, “You can’t have fun if you don’t know the rules of the game.” How true! Whether it is a game or a business, when you do not understand the rules, you cannot possibly perform well.

And, if you can’t perform well, you can’t win. Nor, can it be much fun.

Maybe the reason so many agency people are not having as much fun today as they used to, is that the game has changed, and so have the rules. Yet, it looks like many are still trying to play by the old rules.

Anyone playing today’s game with yesterday’s rules is doomed to disappointment.

The new game of the advertising agency business is with us. It is not necessarily better. It is also, not necessarily worse. But, it surely is different. And it will never again be the way it used to be. There is no going back.

We believe that today’s new game of the advertising agency business is every bit as challenging, as exciting and as rewarding as the old game. Maybe even more so.

The real secret is to understand how the rules have changed, adapt our strategies to them, and then play with all the creativity, skill, daring and vigor we can muster.

That will be fun!