How strategy can save ad agencies

campaignlive.co.uk, Thursday, 05 July 2012 08:00AM

Agencies need to apply rigorous strategic thinking not just to their clients but to their own businesses to remain relevant in the evolving communications landscape. Craig Mawdsley reveals how.

How strategy can save ad agencies

This is not another article about planning being in crisis. Not another introspective, hand-wringing, poor-me polemic about the need for clients to value planners and pay more for us. Or the need for those of us who do our planning in companies formerly known as ad agencies to be seen to be so much better than those who do our planning in media or digital agencies. Because all that is irrelevant.

Instead, this is an article about the state of the ad agency. How we allow current prosperity to crowd out future prosperity. How we allow clients to lead us into obsolescence. How we are rushing headlong towards a cliff.

But it's also about the skills we have in our agencies that can lead us out of this situation. If we recognise them, invest, restructure and think differently. It's an article about how strategy can save ad agencies.

This much we know ...

Sometime soon - maybe not today, maybe not tomorrow, but someday, and for the rest of our life - we're going to lose our audiences. TV won't work any more and we will be stuck, because we won't know enough about how to build brands and change behaviour without it.

This isn't like the invention of TV, when agencies adapted, because that was simply a new mass medium. The business model was identical - buy advertising around or near entertainment properties. It just moved from ears or eyes to eyes and ears at the same time. Not a fundamental shift. Losing the ability to buy mass audiences' attention is entirely different.

We are not currently set up to deal with this situation.

We're stuck in a success model

We make money. Quite a lot of money, in many cases, through retaining and winning clients by delivering short-term returns.

We work with what works. The best agencies nudge their clients to do more unconventional things. But most clients, quite reasonably, don't want us to learn and take risks on their dollar. So we deliver success models, based on what has worked in the recent past and what will work in the near future. We recruit people who know how to plan to pass Millward Brown and Ipsos and who can drive short-term ROI. It's lucrative. In the short term. In the long term, we plan for our own obsolescence.

We hire for client service

Increasingly, every department is a service department, helping clients put faces to fees. Those we reward the most are presentable and friendly, the kind of person who would be engaging company over dinner.

But things are changing and we need to change further. So, what should we do? If we were Pixar, Google or Apple, we would recruit some brilliant maverick social misfits and get them to invent stuff. But there's a problem with this in a client service business. Steve Jobs would not have been great in an agency. In his first meeting, he would have told the client he was an imbecile, and alienated all his colleagues. He would have refused to turn up for work most of the week and wouldn't go out for drinks after the meeting. The agency chief executive would have fired him before the agency got fired.

If we're recruiting more people skills and fewer innovation skills, our chances of reinventing the model are at best reduced, at worst eliminated.

We're not investing in R&D

Every other industry that has any kind of exposure to technology is putting money and time into R&D.

In the 90s, IBM was a computer company, making money from hardware. Now it's an IT consultancy, making money from people. Have we even imagined changing our businesses that much?

R&D is not seven different TV scripts in a focus group, or three animatics in a Link test. That's not R&D, it's client service. If it doesn't change your business model, it's not R&D.

We're not investing in authority

There was a time when agencies were the only ones investing in broader thinking about communications, brands and marketing. We commanded authority. But now the most authoritative articles about marketing and communications are written by McKinsey and IBM. We fail as an industry to invest in the future and so allow ourselves to drift further downstream, competing for the future on the basis of great execution rather than on expertise in building business through communication ideas using new technology to change consumer behaviour.

So how do we get out?

We need to think and act differently. Applying principles of innovation to the ad agency produces a simple plan. The big question is whether or not we have the courage and resolve to act on it. While you're considering that, here's the plan:

1. Create more meaningful variation

In The Origin Of Species, Charles Darwin established that without meaningful variation, little evolution can occur. While we create variation within given forms, the amount of variation of form itself remains limited within ad agencies. Unless we do this, we will fail to change anywhere near enough. Consider the dodo.

Isolated from other landmass on an island with abundant food and no predators, it grew fat and happy for many years, losing the ability to fly because it was simply unnecessary. When the predators arrived, no form of dodo existed that could resist them and extinction swiftly followed. Sound familiar at all?

We're hooked on intelligent design. We need to embrace evolution. We need greater variation so the marketplace can select from a wider set of choices and new forms can emerge. Focus your planners and creatives on understanding form more than content. How different executions interact, rather than the content of individual executions.

2. Test in the real world

Focus groups and quant pre-testing were fine in a simpler world, but they're simply not up to the job now. There are now too many variables for "black box" lab testing to predict the success of any new communication idea. Most pre-testing methodologies contain so many ceteris paribus assumptions, they make macroeconomics look like an exact science.

The world we operate in is better understood through the work of the 19th-century general and military historian Carl von Clausewitz - no campaign plan survives first contact with the enemy. We need to be testing ideas for real-world adaptability and flexibility. We need to be creating contingency plans and executions that can be easily amplified if they succeed. Otherwise, we're trying to manage the Western Front from a comfy French chateau miles away.

If we're not working in the real world, in real media, with thousands of consumer interactions, we're simply not learning.

3. Get off the production cost hamster wheel

Sometimes it's the right thing to collaborate with a great director and spend a million pounds making a single piece of content. It can transform brands and deliver remarkable ROI. But it's not helping us learn (even if it's on YouTube), and it shouldn't be the norm.

In a recent supplement on nuclear power, The Economist defined why nuclear energy never delivered its early potential. The central problem is the inability to innovate reactor design. Every reactor costs billions and is highly regulated, so everyone sticks to the tried and tested - a very narrow set of designs have been tried in the real world. Solar power, in contrast, has become more and more effective, because each unit costs very little to produce and test. A wide range of designs are tried and progress is quicker as a result.

If we are to progress, the content we produce needs to be more like solar panels than nuclear reactors. More varied content models, costing less to produce, tested to destruction in the market, not the research group. To enable clients to try new things with us, the failure of those things must be survivable. Start looking for ways to make much-lower-cost content.

4. Stop planning, start strategy

Don't worry about job titles, worry about what you do. Calling people strategist is irrelevant; thinking and acting like strategists is the point. People you meet in client companies with "strategy" in their job title are quite different from us:

- They are business people, not comms people.

- Their currency is data, not opinion.

- Their preoccupation is future revenue, not current success models.

If you're really doing strategy, you're in the business of R&D, in the business of placing bets and taking managed risk, but most of all, you are in the future business, generating multiple options to manage the inherent uncertainty of the road ahead.

5. Invest in authority

We have two significant industry awards schemes and both have the potential to deliver the legitimacy we need to take the final step.

The IPA Effectiveness Awards need to move beyond their dated fixation with proving that advertising can deliver a commercial return (the billions spent on advertising in the UK, growing year after year, rather suggests that this case is well-established). Instead, they should be primarily rewarding the discovery of new forms and new testing models, remembering that the organisation exists to serve the evolving interests of IPA member agencies, not the discipline of traditional advertising. As those member agencies attempt to use R&D discipline to move the industry forward, the IPA should support them with the data required.

The APG Awards need to continue to evolve beyond proving that great planning leads to great creative (an old-world structure, assuming that the creative department is the gatekeeper to ideas affecting the real world). Instead, they should be primarily rewarding the creation of strategic processes and ideas that lead to new discoveries - the bold experiments that shed light on the future. We must define once and for all that these "creative strategy awards" are to reward creative strategic thinking, not strategic thinking that leads to creativity elsewhere.

6. Work out how to pay the bill

The final step is about money (isn't it always?). We need to change the role of strategy in the organisation so it looks less like client service. We need to be more formally responsible for both delivering effective communications in the existing paradigm and discovering a new paradigm. Our agencies and clients need to begin seeing this as a great use of their scarce resources, as it has the potential to create significant competitive advantage in the future.

Put "R&D" on timesheets and encourage people to spend 10 per cent of their time investing, testing, writing and publishing.

Are you ready?

If we create more meaningful variation, on a scale that looks more like a solar panel than a nuclear power station, if we test in the real world, measure what's working and react nimbly to create new forms, then the future could be bright.

But we don't have to do any of this.

As individuals, we could just jump ship and join new kinds of organisations when obsolescence hits. We can choose to have a parasitical relationship with the ad agencies we work for and care little about their survival as organisations, feeding off them in the good times and leaping off as extinction approaches. Or we can love and cherish those organisations we lend our labours to and help them transform themselves.

Strategic thinking must lie at the heart of this. But we need to begin thinking of strategy as a discipline we apply to ourselves, not just the brands we have the privilege to influence. If we don't, we will service our clients into ever-diminishing returns. But if we start thinking and acting strategically, then we can save the future.

Craig Mawdsley is the joint planning director at Abbott Mead Vickers BBDO

HOW STRATEGY CAN SAVE THE FUTURE

1. Create more meaningful variation. Learn from evolution and create new forms, not just new content, so market competition can show us where the future lies.

2. Test in the real world. Learn from military history and remember that the world is far too complex to plan and predict from a research lab.

3. Get off the production cost hamster wheel. Create content on the scale of solar panels, not nuclear power, so failure is survivable and learning can be multiplied.

4. Stop planning, start strategy. Learn from clients and make strategy a business-focused discipline that invents multiple futures. Don't kid yourself that changing job titles is enough.

5. Invest in authority. Use the IPA Effectiveness and APG Awards to document and celebrate the creation of new forms that show us how to create the future beyond TV advertising.

6. Work out how to pay the bill. Put R&D on your timesheets and encourage people to spend 10 per cent of their time doing it. Incentivise publication of new thinking.

This article was first published on campaignlive.co.uk

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