Nigel Bogle tells a story about "twisty boot laces made of toffee" being the original thought behind the invention of the Curly Wurly back in the 70s.
He knows because he was there. Bogle began his career in an age when advertising agencies were involved in the development of brands. Those skills haven't disappeared, but they are rarely called upon today. This is the reason Bartle Bogle Hegarty set up BBH Zag, a ventures business focused on developing and co-owning brands, providing an outlet for BBH's creativity and as a response to the relentless pressure on the core agency model.
Five years on, our commitment to Zag is firmer than ever. Zag's journey has taken it to much of the UK high street, seen it float a company, set up an investment fund, launch a software business, partner with start-up entrepreneurs, sell our brands in more than 20 markets, take equity positions in companies in the US, Europe and Australia, and launch a second office in New York. It has been a thrilling and, at times, turbulent journey. We have thrived because BBH has made venturing a strategic priority, and put it at the very heart of the agency agenda.
So, should agencies be looking at setting up a ventures business? The ans-wer depends on what type of agency you are in the first place. Are you restless to lead and do new things? Are you prepared to fail and lose money when you don't get it right? Are you willing to play the long game?
If venturing is right for you, here are lessons we have learned that could improve your chances of success.
- You have to get used to the idea of spending your own money rather than that of the client. You are investing ahead, rather than after, income. While it is easy to write this on paper, it is not so easy to write it on large cheques. This is a big cultural shift. You just hope you are backing more winners than losers. Ila, our personal security business for women, went from idea to successful float on the stock market within two-and-a-half years, and today has a market cap of more than £12 million. Pick Me, our "veg with edge" food brand, ran into both a price war and Innocent's Veg Pots within eight weeks of launch, and has struggled to gain a strong foothold ever since.
- You need to make some brave hires from outside the industry. This includes hires that may not fit like a glove, hires that cost you money, hires that represent risk. For example, to head up Zag in New York, we hired Chris Vance from Procter & Gamble (via Goldman Sachs). I was global brand director on Axe/Lynx at Unilever. New skills, new contacts and new impetus blended with internal stars is a powerful combination. Give this talent a chance to flourish by making sure your ventures team is full-time.
- You need to be ready to accept failure. We hear this often, but, in the world of venturing, words are cheap and wounds are expensive. At Zag, we consider our wounds to be our R&D, as long as we absorb the lessons and don't repeat the mistakes. We failed early in a pet business. We hired the world's first dog supermodel (Elle MacPherson's dog), we created news, but we couldn't overcome the complexities of one of the world's most fragmented retail arenas. So we backed away, tail between our legs.
- Seek brave partnerships with companies outside of your comfort zone. While this is challenging, it can also be game-changing. What makes it work is alignment of interest to the same single result. Let's be honest, this is pretty rare between client and agency. At Zag, we set up a joint investment fund with Spark Ventures, a London venture capital house (backer of Lastminute.com and Moshi Monsters). This combination of an investment house aligning with a creatively led brand house is possible because we have a common goal - the more valuable the fund, the more we both win. We have fastened our seat belts for a lively ride and a healthy learning curve.
- You need to understand where the value is in your ideas. Venturing is not geared toward creative awards. It is about being equipped to talk commercial terms with uncompromising buyers at Boots, Tesco, John Lewis, Marks & Spencer, QVC, and private equity investors at places such as Apax Partners or The Carlyle Group. Don't be lightweight on the financial side - and don't turn up if you haven't developed these muscles. Being shown the door at these places is not a pleasant experience, but as a result you become a better deal-maker. You are also probably a better partner for your agency clients, by developing the ability to talk with chief executives about the pressures they face because of your own experiences.
- Venturing needs to be a key business priority. Ben Fennell (the BBH London CEO) and I sit together, Nigel Bogle chairs Zag. This shows the commitment at the top of our business and the determination to make Zag work. This is because the benefits are tall and wide - not only delivering commercial returns, but also improving BBH's ability to hire, raising the overall level of commercial nous, building profile and differentiation.
Using ideas to create alternative revenue streams is what the industry needs now. Increased efficiency and sharper integration are very important, but being entrepreneurial is what will help us stay fit and relevant. Venturing (or "zagging") is not for the fainthearted. If you go for it, you need to be armed, you need to be agile, you need to be patient, you need to be resilient - and you need a bit of luck too.
Neil Munn is the chief executive of BBH Zag
Founded in 2006 to create brands and intellectual property that BBH could own. The model includes brand creation, partnerships and equity or royalty deals with existing brands. It is run from BBH offices in London and New York, with 14 full-time staff led by the ex-Unilever global brand director, Neil Munn. Advisors include Brent Hoberman, Patrick McKenna and Peter Bazalgette.
Ila Security: The personal safety brand for women was launched in 2008 and is a global business, retailing in outlets including Marks & Spencer. Listed on AIM with a market cap of £12 million.
Bo Peep: The accessories brand launched in autumn 2010 and is sold in River Island, Accessorize and Next. UK retail sales have exceeded £2 million.
Playground: Innovative music learning software launched in beta in the US in May 2011.
Didit: Children's entertainment brand. Media partnership with Nickelodeon.
High St TV: Direct shopping channel. Investment made in 2009.
Black Sheep: Fund Venture capital fund with Spark Ventures launched in April 2011. Offers start-ups investment plus brand strategy and BBH expertise.
ONfood: Online food business launching 1 July in the US.
The only industry awards we enter are effectiveness awards. While we're proud of our creative reputation, it's only there to get results for clients. Taking an equity stake in clients' businesses is a natural extension of that.
In 2007, we created the name, positioning and branding for new hotel chain, CitizenM.
We agreed a licensing fee for every new hotel, meaning the better they do, the better for us. Next year, we will help them to open three hotels in London and two in New York.
This year, we produced a series of "unofficial" Royal Wedding memorabilia with messages such as "Thanks For The Free Day Off", sold in John Lewis and other retailers.
In 2002, we made a Football World Cup documentary, The Other Final. It started paying back as we sold the film to TV channels such as Channel 4 and National Geographic. We sold the concept to Universal, which renews its option to make a feature every time the World Cup takes place, giving it real financial benefit.
It's a risk, but if you are confident in your work, it's a calculated one that pays off.
Dave Bell is the creative director of KesselsKramer
Mother is a creative company. We didn't set up solely to charge out man-hours in client services. The intention was always to create great ideas, have fun doing so and derive a living from those ideas. It stands to reason that, on occasion, retaining ownership of those ideas has proved the best way of delivering on our intent.
It would have felt remiss had the skills we'd honed making successful advertising not been applied to the development of a broader range of ideas. At its best, advertising hits the sweet spot between culture and commerce. Why would we confine our ability to find that sweet spot to one format?
Early forays into IP ownership saw us repurpose advertising vehicles such as "Monkey". He's now turned out for three different brands, in each instance maximising returns on our investment for mutual benefit.
More recently, we've extended into communication products such as Four Feet From A Rat - a comic book used by Time Out - and the current T4 show New Look Style The Nation, with IP shared by New Look, Mother, Two Four Productions and Monterosa.
We've also invested in proprietary ventures such as Dogmatic Hot Dogs in New York, and The Ministry of Letters education range for children.
Sometimes we take positions in other people's ideas through time-for-equity deals, usually at seed capital stage. Our investment in the biodegradable packaging company Green Bottle, where we provide marcoms expertise in return for a shareholding, is a good example of this.
In each instance, all we're looking to do is improve returns on great ideas and the skills and efforts deployed in creating them, sometimes immediately, and sometimes later when there is technology or culture shift. Retaining IP allows you to play the game short or long.
Crucially for us, it has never been about gaining absolute control. Mother is deliberately fuzzy-edged about sharing rights. Our experience has been that we make better ideas, and a better living from them, in collaboration with the right partners.
Dylan Williams is a partner at Mother
Since we started My Agency in 2005, we've created many brands and businesses for other people. It was only natural that our entrepreneurial streak meant we'd try and retain ownership of the IP we were creating if the opportunity arose. Manchester235 and The Casino at The Empire, two "new model casinos", were early examples of our work in creating and launching service brands. O2 Litmus and BlueVia are recent digital brand creation projects for Telefonica.
The first brand creation work where we retained an equity stake was Koru. This was the result of a partnership with Rapid Dissolve Technologies, a B2B supplier of edible strip products. Koru is a cult brand - a kind of Red Bull on a strip, giving people an energy hit faster than a drink. With Koru we created everything apart from the strip itself. The name, identity, packaging, POS, branding and advertising.
This has also been the case with our latest venture, Blott, a retail stationery concept aimed at children. Blott has been developed with the entrepreneur Chris Manson and the retail interior design company Raylian. My Agency has created the entire brand and designed more than 1,000 products. The first store opened in Tunbridge Wells in March, the next opens in Guildford over the summer and Blottshop.com has just gone live.
Blott has been the perfect business for us to be involved with as it is so design-led. The Blott merchandising team is based in our office. Being totally at the heart of running a retail business makes us think differently about the advertising and design we do for our other clients.
Nick Wright is the owner of My Agency
WIEDEN & KENNEDY
We invented a range of three novelty gifts in collaboration with Worldwide Co and Suck UK. These are available in boutique gift shops and chain stores including Paperchase and Hamleys.
The products are Happy Sacks, novelty bin bags including the "Christmas pudding" refuse sacks, Pass The Salt, a salt cellar with a friction motor in it, and Dan Wieden's Musical Ruler, a musical instrument that requires no technical expertise that can also be used to draw straight lines.
We designed the products and worked with manufacturers to transform the concepts into viable commercial items. We then licensed the ideas to manufacturers and distributors in return for a percentage royalty. We've sold more than 50,000 units so far, with a sales value of over £170,000, from which we take a cut.
We also launched Plot, a brand that takes interesting data and transforms it into wearable art. The first Plot launch was a range of necklaces.
Last year, we created an energy-saving/behaviour change product called Off/On to explore how we could persuade people in our office to save energy. The saved energy is used to power community projects in the emerging world. The trial has generated a lot of interest and we are now in discussion with partners about a commercial roll-out.
We have our own R&D/prototyping division, WK Platform, that is exploring what is "next next" in technology and communications.
We're a long way from the point where we can dispense with client work, but we're committed to continuing with projects of this nature. These initiatives have taught us to think about the commercial and practical applications of creativity. That directly benefits the way they approach our clients' business.
Neil Christie is the managing director of Wieden & Kennedy
THE BROOKLYN BROTHERS, NEW YORK
We launched Fat Pig Chocolate initially as an incubator brand. We developed it to test our theories in viral, branding and small budget (or no-budget) marketing. That, and we really like chocolate - and almost all organic milk chocolate sucks (something to do with the milk, apparently).
We went through a fairly extensive tasting test (a tough job but someone had to do it), and we looked at about 40 suppliers before we found the one who could match the taste profile we wanted, based on a Swiss recipe.
What we learned about product development, packaging and distribution improved our understanding of what clients go through. There's no substitute for experience when it comes to marketing - you quickly learn that the stuff we agency people obsess over is a tiny part of the process of taking a brand to market. Just try getting USDA organic certification, and you'll see what I mean.
So far, I'd say we've had moderate success. We turn a profit on every bar, though we won't be troubling Cadbury just yet. However, if Kraft wants to make us an offer, we'll certainly listen.
A quick Google search will reveal we've got about 37,000 different mentions on the web - from foodie sites to design blogs - and we encouraged further mentions and reviews by rewarding bloggers with free samples.
We've marketed it among celebrities through supplying the swag bags at NYC-based talk shows - the Bacon brothers liked it, naturally. And it's currently on trial distribution in Singapore and Denmark.
We also have it stocked in a few stores in the US. Finding a partner distributor is our next step.
Guy Barnett is a creative partner at The Brooklyn Brothers.