We live in a world with extreme transparency, where work can be done anywhere, and at any point in time. Productivity tools like Slack, Asana, G-Suite and a wealth of other SaaS tools make it easy to work in distributed teams. Almost every agency around the globe has embraced this reality, and those still pending is a dying breed.
The old school way
There are still a lot of agencies that are stuck in the old way of thinking about their value add. As an agency, you operate in an industry where your assets walk in and out of the door every day. Unsurprisingly, the value you bring your clients comes down to what this talent does between entering and exiting that door. Not one agency can house all the talent required to deliver the best solution for every business out there.
The agency model as it currently stands follows traditional corporate structures and linear processes. It worked fine for the industrial age. A little consolidation tinkering and restructuring have allowed it to stagger on as the information age took hold. However, client requirements are already calling for teams consisting of an infinitely diverse list of specialties. Still no single agency can provide that. However, a network can.
The future agency
A kid in a dorm room created the largest social network in the world. Imagine what a coordinated network of rock-stars can do. The next big successful agency is going to be the agency that manages to build a network of experts working efficiently and distributed together. There are a few key steps you need to take as an agency in order to start building your own network. If you are a buyer, make sure the next agency you choose is on the path to these three simple steps. They can all be summed up in:
“Do what you do best, and link to the rest!”
1. Focus on your core competencies to become world-class
If you try to be everything for everybody, you end up being nothing for nobody. Most agencies start out with the mission to become world-class at something, only to forget this shortly after missing this quarter’s revenue target. Don’t settle on multiple disciplines to hit your target, it’s a short term fix to a long term problem. The future belongs to those that go narrow and focus to become specialists in their field of expertise.
For a service providing digital agency, all you really need is a laptop with an internet connection. Small is beautiful. In today’s day and age, you don’t need scale to take on bigger, more interesting projects. Instead, you need to connect with like-minded specialists to go up against the incumbents and win the good stuff. That way, you still get to do what you love, without perishing into a massive organisation containing levels of hierarchy, slowly but surely making you hate your life. So if you are a freelancer, or a small agency, partner up with people you love working with. Get out there because there is no reason why the big agency sharks should win the contract that you would have done infinitely better.
The Hollywood Model
Hollywood provides some reference here. Think of Ocean’s Eleven and the approach George Clooney takes when planning the ultimate casino heist. His sneaky little plan calls for a crack team of specialists including con men, a bomb expert, a hacker, a pickpocket, and even an acrobat. Rather than planning the next big casino heist, agencies can take inspiration from the Hollywood Model.
Film studios have been using this model for years. They keep a core staff moving between the studio and HQ, and then they engage partners and crew with the specific skills required to best execute the film. The different teams may or may not have worked together before, but they all know their specialty. With the right coordination, everyone knows how to work with each other and get the job done.
The two key drivers
It’s time to get busy. You have now started focusing on what you excel at and partnered up with others that complement your skills. There are two key drivers that will help determine the success of an agency:
- Value for money – There are two variables here, price you charge the client and return on investment (ROI) for the client. The lower the price and the higher the ROI, the more you will sell. Keep in mind selling more doesn’t necessarily reflect in more profit.
- Recurring revenue – Hired guns often find it difficult to build a recurring business. In this way, they end up doing one-off projects and with a very blurry future. If you are serious about building an agency that lasts, then working with recurring clients billing on a monthly basis is the key. This is in the interest of both the agency and the client, who has no interest in high employee turnover either.
2. Partner up with like-minded people
Make sure the people you partner up with has the same interest as you. Meaning create more value for money and establish recurring revenue. The tricky thing is that different companies often have different interests.
When you outsource, the reality is that some of the budget is allocated outside of your control. Sooner or later, this eats away margins and growth. Especially, if you do not maximize the generated value for money as well as generating recurring revenue. On the contrary, if an agency didn’t specialize and kept the work and hence budget in-house, then it should either accept the talent they already have, or bring talent on to the payroll who may not be needed in the long run. The problem becomes critical today as requirements change at a faster pace due to an accelerating market.
This is why it is so important when you go narrow to build a strong network. Next step is to prove to your current and future customers that you are as much in bed with a partner agency, as you are with your talent. There is no better way of doing so than having crystal clear alignment on how exactly you maximize value for money to your customers, and why that requires recurring revenue. Once you obtain that alignment, the final step is to either consolidate or coalesce.
3. Consolidate in holding companies, or coalesce
Historically, consolidation of agencies has been happening in holding companies. For example, companies build a network by accumulating shares in one large conglomerate with a wealth of partners holding minority stakes. You see this when most of the agency functions and talent are absorbed into global consultancy oligopolies like Deloitte, Accenture, PwC et al. The same thing has happened for advertising agencies with WPP, Publicis and Omnicom. Furthermore, you are starting to see similar patterns for digital agencies with Dentsu Aegis.
Instead of building a network dictated by ownership, networks will form purely based on skills. These networks would coalesce into flexible project teams to cooperate on specific projects. Combining skills and resources, they would then disband once the project is complete, no strings attached. Teams could even convene to pitch for retainer style accounts, so the client knows they are receiving a purpose-built team and solution for their business problem.
Whether consolidation is going to continue to be the way forward for agencies is a greatly debated topic. However, with technology allowing for distributed teams working efficiently, an alternative is on the rise.
For some it will make sense to consolidate, but it’s not the one true answer to all agencies. Stronger and stronger arguments can be made for agencies to coalesce instead of consolidating. Wiredelta® is currently building a coalition of strong agencies we work with. This will allow us to actively bid on large contracts otherwise reserved for the big consolidated conglomerates. If you are interested in hearing more about partnering with Wiredelta, go to our Partners page.