Can agencies make viable products?

Last week, VCCP turned its attention to creating products with the launch of Studio Ex Nihilo. The venture aims to help companies find new revenue streams from digital technology and create products using rapid prototyping. VCCP’s chief executive, Michael Sugden, said it was founded to make money from the "business-changing" ideas that it was already providing clients.

VCCP is not the first to set up such an offering – Bartle Bogle Hegarty’s Zag was created in 2006, while Abbott Mead Vickers BBDO has Lab – and it won’t be the last. But do these invention studios work?

There are examples of success stories. Zag created a rape alarm and floated Ila Security on the London Stock Exchange’s AIM in 2010 with a market value of more than £4.5 million. Lab created the audio iPhone game The Nightjar, which is sold in the App Store. But most are not rivalling major retailers.

There is also debate over whether agencies should be creating more silos with separate invention departments rather than harnessing the ideas of all staff. Are these invention labs a viable new revenue stream or just vanity projects?


Agency head

Ian Pearman, chief executive, Abbott Mead Vickers BBDO

"With the right idea, skills and funding model, anyone can make a product. So, agencies – brilliant at ideas, with access to diverse skills and packed with great commercial people – should find it easier than most. The key question is: why? Are they developing their own products to sell direct to consumers or for clients to sell to consumers? I’m not convinced by the former, because agency finances aren’t built for significant R&D and capital investment. But helping clients by designing products that extend their brand promise while retaining a share in future revenues? That is sticking to our core purpose while evolving our business models. Why wouldn’t we?"


Creative head

James Temple, managing director, vice-president and executive creative director, R/GA London

"There is an argument that traditional agencies moving into this space could just be using it as a vanity project, based on either one individual’s vision or a need to be seen to do it. We don’t view having an innovation lab as an ‘add-on’. It should be entirely complementary to your business and at the heart of how you work day-to-day. A prototyping lab has been part of our fabric for years in London, so agencies going down this road need to make sure it’s about embracing new ways of working and for the right reasons for it to be a long-term success for them and their clients."


Agency head

Adam Arnold, managing partner, Zaga

"If you qualify products as digital businesses, then, emphatically, ‘yes’. High-street retail has consolidated around fewer larger retailers with fewer larger suppliers. Agencies inventing and selling physical products will find the terms punitive and the margins tight. We now pursue pure-play digital opportunities. Either ideas we invent – such as Playgroundsessions.com – or entrepreneurs’ ideas that we believe in and help to develop as shareholders, such as Squawka.com, which now reaches more than 200 million football fans monthly. Turning the best tech products into enduring brands is our focus and our industry’s challenge."


Agency head

Matt Edwards, chief executive, WCRS

"Ad agencies can certainly make products, but it’s easier to conceive them than to bring them to market and nurture them to maturity. We’re small companies in a competitive world and are unlikely to develop a tastier drink than Heineken or a smarter phone than Apple any time soon. However, we’re hard to beat at applying creativity to an understanding of people and how they live their lives, and we can now exploit this – at low cost – using technology. For this reason, the product invention model we’re pursuing at WCRS sits firmly in the digital and tech innovation space."

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