Business is a battle. Companies fight to be different. We analyze trends and compare benchmarks in order to stay ahead of the competition or shift directions to catch up. We make changes in our strategies, business models and organizational structure to stay relevant in a chaotic world.
Agencies are no different. We are in an industry that is affected by technology acceleration and digital disruption as well. At mediaman, we see our agency as more of a compass as opposed to just another digital agency with a pretty face. We thrive on helping our clients navigate through the clutter of digital disruption to understand the path forward in an overwhelming environment of options and marketing automation. We work hard to help our clients take calculated risks, but are we too at risk?
I wanted to explore what catalysts might be affecting our industry, specifically focusing on internal Innovation Labs and tech start-ups to see how they factor into the disruption. They are generating new ideas, doing rapid prototyping, executing quickly and attracting top talent in creativity and tech—some of the services that agencies traditionally provide.
If companies are creating internal departments to think faster and hire all the good kids, where does that leave the agency? Should we as agency advocates change the way we operate, the way we ideate, think, and collaborate? Are we destined to fight for scraps or will we need to shift directions in order to flourish? Is the future bleak or bright?
With some research, discovery, and some Google-ing, the following trends emerge that might have implications for how agency models could shift in the future:
Silicon Valley has All the Answers
These are the brands that create their own venture capital groups to seek out and fund new products and new ideas. These products may or may not have relevance to the core business of the brand, but it’s a way for the brand to own the great ideas and be in the game. Some examples are American Family Ventures, Hewlett Packard Ventures and Intel Capital. This isn’t a new idea by any means. Some of these companies have been investing in start-ups since as early as 1991.
WWGD? (‘What Would Google Do’)
These companies are following the model similar to what Google and Facebook are doing. They are buying start-ups to own outright and integrate the idea or technology into their own business and culture. In some cases, brands are even buying whole companies to create innovation labs, like what Home Depot did with Black Locus. Walmart Labs was created by acquiring thirteen different companies.
Brick by Brick
This is where brands are building their own innovation centers and in most cases, at off-site locations that are away from the corporate giant. Keeping teams lean and adopting agile methods allow them to prototype ideas quickly and shift directions if necessary; which can be difficult to do in a corporate culture. Some examples are CVS Health, Capital One Labs, Lowe’s Innovation Lab, AXA Lab and the newly announced Samsung Innovation Center.
None of these strategies are breakthrough or even new. GE, IBM, Starbucks, Staples and countless others have been driving innovation for years but how are these new strategic shifts affecting the business models for agencies, if it is affecting it at all? To get some answers, I asked a few agency veterans and brand executives what they thought.
The Brand Executive’s View
According to B. Bonin Bough, Chief Media & eCommerce Officer at Modelēz International, he thinks it’s an exciting time for agency/client partnerships. “I don’t think agencies should be concerned about it. I actually think they should be happy because at the end of the day what you want across the table from you is someone just as knowledgeable as you in the space because that means they are going to be willing to do things. You don’t have to spend your whole time explaining why. And you get down to the actual doing of things. And so these incubators allow clients to bring their knowledge base up to the level that their agency partners are and also identify technologies, start-ups and approaches that they want to use as part of their marketing. I think it’s an evolution that is happening on the client side that should be welcomed by and encouraged by agencies.”
He goes on to say that agencies need to think differently. They need to be ready for collaboration and not expect to solely hold all the knowledge. Bough told me we need to ask, “How do we all become smarter? How do we all unlock greater value together?” He went on. “I think you have to be very collaborative. So I think you have to be able to work with totally different partners than you have ever worked with before. I think for most agencies that’s the biggest threat.”
The Agency Veteran’s View
James Sposto, Co-Founder and CEO of Sposto Interactive, thinks that the internal incubators may have a hard time. “The one thing that’s hard to create in these in-house teams is the vertical depth of knowledge that goes with something like a specialization like user interface or user experience design. We have over twenty years of experience and we have our own institutional knowledge of what works to tap into and we can easily go in with a team who can extract the information and give them that part. I look at it as a 5% thing. There’s a lot of folks who can bring it up to that 95% and it’s that last 5% that makes the difference. That makes it stand out. That makes it real and timeless. Even when you have an in-house team in charge of your web presence or your interactive marketing, you can bring it to a certain point in-house but it’s very hard to have the people who can execute that last 5%. That’s what we’re selling. Bring us in and we bring you that last 5% and make you stand-out.”
So what about tech start-ups that are creating solutions such as self-service tools that may replace some of the services that a digital agency provides? Sposto thinks that it will mainly weed out the middle shops. “It’s [tech start-ups] basically erasing the middle [agencies]. There are certain things like personal touch and expertise that you can’t get from a machine. What you’re buying is judgement and the last 5%. I can go to… Squarespace and create an esthetically pleasing site but it’s going to look like everyone else’s and that last 5% is hard to come by. It’s not self serviceable.”
New Business Models
There are amazing agencies that are forging ahead offering new types of services and changing the model. HitLab is an agency that is an innovation lab focusing on healthcare; Happen is helping companies expose innovation and Frog Design is identifying opportunities and products that solve problems. There’s even agencies devoted to the internet of things development like Makeable.
Basically, agencies are here to stay. However, the agency of the future will look much different. As more of our advertising and marketing messages go deeper into a world of connectivity and technology, there won’t be “traditional” or “social” or “digital” agencies anymore because everything will, and is, digital. There will just be “agencies.” The question is not, how do we remain standing? Rather it will continue to be, how do we stand-out?