EDITORIAL: Changing industry forces adaptation

The decision of Banks Hoggins O'Shea/FCB to undergo a complete rethink of its working methods highlights the growing difficulties of established agencies trying to match the appeal of younger and sexier rivals. Recent years have seen such a fundamental change in the style and approach of the newcomers that more mature shops such as BHO must either react or face the consequences.

Time was when start-ups simply milked their publicity and their curiosity value among business prospects for as long as they could in the hope of getting enough decent creative work under their belts to ensure their long-term survival. That's no longer the case. The arrival of shops such as Mother and Clemmow Hornby Inge represent an altogether new phenomenon.

Their success has been less to do with their novelty, more with their ability to combine the experience of their founders with entrepreneurial and high-energy cultures. The result is that such shops can now compete on equal terms for the kind of accounts that were once the exclusive preserve of the advertising establishment.

Older agencies now find themselves with a serious predicament. In the days when 15 per cent commission and full service was the norm, it was possible for them to offer their thinking as part of the package to clients and still be confident of making a decent profit. Now they're stuck between a rock and a hard place, having lost their fiscal responsibilities to the media independents but still under pressure from their holding companies to deliver the necessary margins.

BHO's problems are typical of those confronting established shops - the agency's recent new-business record has been dismal, while its new Interpublic parent is a demanding taskmaster when it comes to delivering the numbers. What isn't typical is the way John Banks, the BHO chairman, has chosen to tackle the situation, sweeping away the entire tier of succession management while making the agency far more flexible, bringing other disciplines such as media and PR closer to the heart of the agency and motivating key staff by allowing them to work part-time if they wish.

It's a brave move that other agency powerhouses will watch closely, mainly as Banks isn't a natural iconoclast. On the contrary, he's always been seen as one of the most traditional of agency bosses, a good businessman who inspires the confidence of senior clients. If traditionalists such as he can see the way the wind is blowing - and put his agency through the catharsis he believes necessary - the situation facing the industry must be serious indeed.