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Agency Future… Bleak or Bright?

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?

Emerging Trends

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?

FinTechs vs. Banks and Insurers

From the start, mediaman has had a focus in the insurance and financial space. A lot has happened there in the last few years. Agile Startups such as Simple, Moven, or Payfriends are stepping up to evolutionize banking. Insurers, too, have to move, as companies like SquareTrade are trying out new business models.

Today I am talking with mediaman Germany’s new Head of Finance & Insurance Dominik Groenen about the European FinTech scene, and about why and how traditional banks and insurers should care.

How do you define the term FinTech?

FinTechs are startups which use technology to make finance, banking, and insurance better. Doing so, they focus on one particular part in the value chain. PayPal, for example, is not a bank, it only simplifies online payments.

Does that apply to B2B and B2C startups? 

Absolutely. In my experience, the major difference between the two is that as a B2C startup, you need full coffers from the get-go. Customer acquisition costs are extremely high, as well as the need to explain your product, if it is something completely new. As a B2B startup, you may have developed a new solution, a new technology for which you are looking at banks or insurers as cooperation partners. That is not necessarily easy, or less work, but definitely less costly.

Where is the danger for traditional banks and insurance companies? 

Many B2C FinTechs are taking the customer interface away from them. Yes, banks still have your money in a checking account, but how profitable is that for them? When banks lose direct contact with you, because you now get all your statements through Mint, they don’t have the opportunity to sell you other products, either. Others will profit from your auto loan, your mortgage, your IRA. When you insure your iPhone through SquareTrade, the contract will still be maintained by a traditional insurer, but the idea to protect your laptop just as easily, will come from SquareTrade, or any other new player on the insurance market.

So banks and insurers will become pure “processors”?

You won’t really be aware of them anymore. They are somewhere down the chain and do what has to be done: claims settlement, risk management, etc. Everything else in the front end will be done by other players. I still like the often used comparison with the music industry. Spotify, iTunes, Pandora interface directly with music listeners. Nobody is aware of record labels anymore.

I think that bank branches, for example, will only survive in large cities. And they will look more like an Apple Store, like the AIB Lab in Ireland. Banks are experimenting with that right now, some of it is working, a lot of it isn’t. Even getting customers into the branch is a challenge, at a time where all banking can be done online and cash is being replaced by mobile payments. And maybe the expectation, that branches need to be profitable, is wrong. Maybe they need to be financed out of the marketing budget.

Do banks and insurers just have to accept this fate? 

I don’t think that change and innovation can come from the inside alone. As Magnus already postulated in his blog post, it’s not in an insurance company’s DNA to act technologically agile. I know from my experience that there are still managers in the upper ranks who are just waiting for the internet to “pass”. And even younger managers don’t clap their hands in excitement when they hear about technology driven change. The mentality that I see sounds more like: “We need a responsive website, an online transaction, an app, because that is what the others do and we don’t want to be left behind”. There is only very slow and careful movement out of the comfort zone, very little risk tolerance in trying something new. Traditional sales channels have made companies fat, over decades. And sluggish. Insurance agents still hold most contracts and still bring in most business. That is just the way it is. But it won’t remain that way, I believe.

In order to bust these crusts, traditional companies need to come together with startups and FinTechs. As partners, investors, or, most importantly, by buying FinTechs. Their products, but mostly their entrepreneurial spirit and their explorative mood can be incorporated and facilitate a jolt. If the will is there.

How do you feel about internal innovation labs? Capital One just had a big presence with theirs at SXSW in Austin. 

Yes, that can work as well, if there is a will and a strategy, and if it is not just a marketing event to display an innovative spirit. ERGO, for example, one of Germany’s main insurance companies, has been running an innovation lab in a co-working space in Berlin since 2013.  I think it’s important for such a lab to be stationed externally, in a separate space. So that employees don’t get pulled back into day-to-day business. At the same time, there needs to be a direct line to the company headquarters. ERGO sent their entire upper management through the Berlin lab, so that they could experience what happens there and how important that is. I would consider that a change in company culture.

When banks and insurers shop for startups, or start their own innovation labs, what role remains for digital agencies? 

I believe that in addition to traditional project work, consulting and product development will play an important role in the relationship between agencies and companies. To do that, it is crucial that we always remain at the industry’s pulse. So that we know what the pains are that could be lessened through technology. Sure I have 17 years of experience in insurance, but we still need to build and maintain connections to companies, to keep listening, so that we don’t develop anything blindly.

That’s why we are planning events in Germany and the US right now, where we will invite companies and experts to exchange their experiences and visions. I am hopeful that mediaman is well positioned to continue servicing clients in the banking- and insurance industries. As it has for almost 20 years.

Portrait-Dominik-GroenenDominik Groenen is 33 and already has 17 years of experience in the insurance industry. It is in his genes. His father is a banker and his mother, as well as his two brothers, work in insurance. After starting out in a bank, Dominik worked in insurance sales for 7 years, then went to Lloyds in London for another 7, which is where he got hooked on the FinTech scene. Which then led him to Berlin as a startup founder. Dominik strengthens mediaman’s Finance & Insurance Unit since February 2015. 

Think Digital First: Open the Door to Innovation

Digital First

At mediaman, there are legends about clients who think radically about digital.

Our Director of UX once told me that she worked with a (much revered) client in Germany who “felt that digital was the most complicated, so he always started with that.”

Our conversation took place after a project kick-off meeting for a client about to refresh its international corporate websites. The briefing included the new print style guide and a comment from the client on the irony—“you’d think that digital would come first in this day and age.”

This is not a post about design thinking and digital. It is a post about why digital should come first in your communication strategy. It’s about how digital makes you a better thinker and a smarter company.

#DigitalFirst

The beauty of digital is that it is an intimate communication with the audience. While traditional marketing tactics are usually one-to-many, digital is one-to-one. Because of this, digital is often considered the functional aspect of communications; it is the place where the traditional marketing call-to-action, more often than, not sends people.

In my opinion, this is an example of when last is not least. If your campaign has been strong enough to drive people to a digital touchpoint, then this is actually the most important meeting. Another way to think of it: if traditional communication is giving your Crush your phone number, then digital is the First Date.

A communication strategy that begins with thinking about how digital will execute the Big Idea sets the bar for an innovative and intimate campaign. Digital’s one-to-one conversation with the consumer ensures that you are focused on the audience and their experience. Using the lens of what is useful for the audience regarding their preferred digital touchpoints, or even new tools or platforms, opens the door to creativity in the execution.

Too often digital communication strategies, especially social media, look at digital and the customer with a one-directional, or traditional, communication mindset. The audience is not thought of as people with tasks that they are doing online, but rather prospects or fans meant to be distracted, sold to, extract information from, or manipulated (often through puppies, kittens, babies or Star Wars) into promoters (or, if it backfires, haters) of the brand.

Moving digital upstream in the communication process helps your organization get close to your audience. It also helps to craft a message with an inherently authentic Big Idea, since it must have a relevance that speaks deeply to your brand and the broad spectrum of audience members using the digital touchpoints.

For instance, one of our clients, a specialty pharmaceutical company, has a target audience that includes a diverse audience of researchers, primary care physicians, media, career-seekers, and patients. Creating a new, more robust and emotional template for the client’s website resulted in crafting a new home page campaign with rich, unexpected images paired with stories that emphasize the employees’ passion as a source of strength for overcoming obstacles. From the website, this campaign will roll out to other mediums, and is already inspiring other ideas and new touchpoints.

The Takeaway

Where does digital fall in your communication process? If it is a place where information goes to be posted, stored, or referenced, then your website is still acting as a brochure. If there is a call-to-action which the audience is following through on, ask yourself how the brand is putting its best foot forward at each point during that experience.

Another thing to consider is where you and your digital agency begin a project. Our goal at mediaman is to build useful and engaging digital experiences, so we always emphasize beginning with a Discovery Phase. This helps to eradicate or validate assumptions and clearly identify opportunities for the website to work harder or fill gaps. It is a first dialogue with the audience which will enable a larger dialogue to ring true, be effective, and woo your audience.

What are some of the ways that you are—or can be—inspired by your audience to enhance your digital communication strategy? Do you believe that digital should come first? Tell us what you think!