The debate on the shape of new model marketing is hotting up. Just a couple of weeks after Cindy Gallup, founder of BBH in the US announced to a London conference that, Its time we blew up the existing agency model, what Harvard Business Review acclaims as the “most extensive marketing industry review ever” undertaken by a cohort of very heavy hitters reveals just how bad things really are. If you are still living with the the cosy belief that change is just around the corner brace yourself. It seems you’ve already missed the boat.

Those of you who read my stuff know that I’ve had a number of constant themes running for the past few years. “You are only as good as your next big idea” has been my angle on the need to drive innovation in business and the fact that products are less important that the process that creates them and that’s certainty proving true now. Big business has become entrenched in the routine and beaurocracy that drives the perpetuation of their original offer, but that’s turning out to be the single greatest inhibitor to innovation and innovation is the future.

I’ve also proclaimed long and loud that brands are communities of like-minded individuals and created my Brand Discovery programme to help businesses define and bring their brands to life. This research tells us with absolutely certainty that any kind of purchase BtoB or BtoC is an emotional experience driven by the relationships (I coined the phrase “Brandships”) that we have with brands.

It’s always been my belief that all businesses are marketing businesses and that to succeed requires that marketing is placed at the centre of any organisation. I’ve been working for a number of years with my Full Effect Marketing approach to help my clients make that shift. Now this and other research has revealed that the businesses that have done so are performing far better than those stuck in the old model.

Way back in 1991 I created a digital business blue-print for one of the world’s biggest financial services groups and have launched numerous digital enterprises since, but sadly, especially in Europe business has been slow to embrace the digital age. I know that working with new media and sales channels requires a different approach and different skills, but that’s why we need a different model for both agencies and their clients. Unfortunately, too many businesses have clung to the security blanket of traditional structures and practices for far too long. Now they are, according to analysts, facing oblivion. If you don’t believe me take it from the authors of the new report who tell us that while smart CMO’s have been pushing for years for fundamental changes in the way their businesses operate the fact that marketing has not been understood for what it is and marketing departments have been siloed rather than centralised has resulted in 80% of businesses still trying to function on an out of date model. What’s really interesting though is that the businesses that are adapting are performing so much better than those that aren’t and the decline the the performance of the latter is steepening.

The same goes for the use of data. Businesses that have re-aligned their operation to collect and analyse data are way ahead of the game, but again, even this fact is less interesting than the rate of decline of those who haven’t. However, the really big winners are the organisations that have expanded their knowledge by combining analysis of why people buy the things they do to analysis of the relationships we have with our purchases and how the purchase is emotionally fulfilling. The fact is, its not always practicalities that drive a sale, emotions play a big part in every buying decision. But then, we knew that didn’t we? Back to the branding thing again.

While the Middle East, where I have been based for almost three years, went into its customary hibernation for Ramadan, I’ve been travelling Europe, talking to the movers and shakers who are driving the agenda here at the moment and they are not the big firms you might expect them to be.

As I mentioned earlier. Big business is suffering the legacy of its past success. Some years ago Tony Mooney, now of SKY IQ, but then part of the Experian Clarity Blue success story came up with an interesting illustration of how unweildly big businesses had become. I worked with Tony then to create a kind of “parallell universe” that took new strategy and the structures and practices it demanded, out of big businesses by creating a second semi-independent business unit that operated alongside the mainstream operations of an organisation to develop innovation to a point where it was self-sustaining, then plugging it back into the main business to act as a basis around which the business as a whole could be remodelled. Tony was ahead of his time it seems as in the past few weeks I’ve come across a number of businesses that are following this basic premise successfully. In fact, I had dinner this week with the CEO and founder of one of Europe’s most successful new model agencies who revealed that they have two financial products that they have created for an international financial services group and are taking them to market right now. The client doesn’t want these products associate with them, partly because if consumers associated the new products with a traditional financial services business they would almost certainly be less successful. This, in itself says a lot about how inappropriate big businesses and their brands are in today’s market.

We English are familiar with the stories of how our small, nimble sailing ships of the sixteenth century ran rings around the previously invincible Spanish armada with its big heavily-armed galleons. Small is fast, small is adaptable. Big is slow and unwieldy. What the world needs now is the former not the latter. It looks like history is repeating itself. When these discrete business units are running smoothly and the products established, the plan is to fold the new brands into the original business (in some way yet to be defined) It may even be that the new brands will become the senior entity and rescue the original business in more ways than one. Such is the demand from the more clued-up big businesses for agencies that can offer this kind of support and the failure of existing agencies to remodel themselves, that in addition to the work they are doing in numerous other sectors my host at dinner is working for as many as four international banks. It seems when something is so “right” the concept of client conflict goes out of the window (Another lesson I’ve been delivering to my agency clients over the years)?

A few weeks ago Martin Sorrell was quoted in an interview with The Drum as saying that clients no longer get excited about TV campaigns and press advertising and traditional agencies need to start questioning their own relevance. There are undoubtedly far more crap agencies around than good ones and clients get what they deserve (and usually what they pay for). Maybe we are about to witness another clear-out of the dross in both client and agency sectors? Not before time I think.

I’ve been telling the agencies who are my clients for years that their offer to their clients has to lead with strategy. Its been the case for a long time that unless you are in the top 1% of creative agencies your work is going to fall into the “commodities” category, which means pressure on your fees and profit. To succeed beyond a few years an agency has to be able to strategise. Those who have managed this shift now have a better chance of success in the coming months and years, but what does the new model agency look like. The truth is there is no set pattern. Because every business problem demands a different and unique solution an agency needs a very wide range of skills and loads of experience on tap and the ability to combine them as and when necessary in an infinite number of permutations.  This has implications for hiring strategy too.  The kind of young account directors that appear to have become the norm for agencies in recent years don’t carry the gravitas or credibility to advise businesses on business strategy and clients think its insulting to suggest it. Why even refer to senior agency managers as “Account Directors” anyway. Why not, as one agency I talked to this week have CEOs of the business units?

There are very broadly three main opportunities for an agency looking to be in business in the next few years:

  • Big businesses that recognise they can’t innovate and are looking to import solutions. They do this in two ways – go direct to an agency and get them to source or invent something, or hire an intrapreneur and develop their own incubator. The problem with the latter seems to be that the intrapreneurs I have spoken to all seem to face the same problem with internal politics and that kills a lot of great ideas. This is why the agency route is being favoured and even the intrapreneurs are turning to agencies now.
  • Investors looking to invest in short-term and medium-term seeding projects. As I said, there seems to be plenty of these individuals or funds around, but the connection between the money and the concept is weak. This seems to be mainly because the innovators rarely have the skills to produce the documentation and make the pitch that will secure them the funds they need. These investors aren’t charities, they are looking for a return, usually a quick one, so you need a robust argument and to offer some kind of reassurance that you have sound business skills.
  • People with great ideas, but without the business nous that will turn them into commercial enterprises. This is the other side of the previous point. The unanimous feedback I received this week is that innovators lack business and especially marketing skills. This is a big opportunity for agencies who can find a way to finance their involvement. There are a few models out there, but this represents possibly the biggest departure from the traditional agency skill-set and its where the weaker agencies will founder. The agencies that are having success are effectively taking over the management of the start-ups and I think this is the way to go. If you have control and the credentials to impress investors you should be looking to tie into an existing fund or start your own.

Surprisingly perhaps there is no shortage of money. Everyone I have met in the past month tells me this. Potential investors are everywhere although some of the traditional sources are probably the least useful right now (banks and their old-fashioned attitudes again!). It also seems there is no shortage of ideas. I have spoken to incubators who have assessed up to 800 innovations over the past twelve months, only to whittle them down to a handful that they have taken on. This is the result of a combination of factors. Firstly most innovators wear rose-coloured spectacles and few ideas measure up to rigorous commercial measurement. (I learned of a truly great product from a consumer’s viewpoint this week that may never see the light of day because however the agency concerned models it, they can’t get it to generate an appropriate level of profit) but mostly innovators just don’t know how to run a business or present a convincing business case.

I think the bottom line here is that there are plenty of opportunities, no shortage of funding and loads of innovations to keep enterprising agencies busy. It’s just that far too many agencies shouldn’t be in business anyway. They have bobbed along for decades without really contributing anything. Now is judgement day. I hope to see loads of so-called marketing consultancies, branding agencies and advertising agencies fold in the next couple of years and a new more vibrant, enterprising and useful consultancy model come to the fore. The clients who want an agency that just delivers a shopping list of wants are those that will fail and any agency relying on them for revenue will find business unsustainable, meanwhile the successful agencies will be those that are deeply involved with their clients and provide the support that evidence suggests they are desperate for right now.  What kind of agency are you?

Phil Darby
July 23, 2014

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