Building the Digital Agency of the Future

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In my previous article The Digital Agency Of The Future, I wrote about the shift in digital within ad agencies and digital shops from creating communication toward creating product innovation.

So how do agencies transition into an innovation-led product development model, especially when it is highly disruptive to the current ad agency model?

Here are five thoughts I have that might help those within the agency who are looking for such change to manage this paradigm shift:

1. Complement, not challenge the status quo

The core business of an ad agency will always be focused on communications not innovation. What needs to start is a shift in how digital is perceived and being used within an agency and this needs to be done through a progressive change in culture, structure, and processes. It starts with a group of people (usually within the digital team) coming together who share a common vision and passion for creating stuff. And it might have to fly under the radar in the beginning to avoid rocking the bigger boat.

Structurally this could be in the form of an innovation lab or marketing skunkworks project that looks at creating product ideas and developing them through fun experimentation, rapid prototyping, and learning. This is a shift from the agency culture of working on an idea till it is fully "cooked" and perfected before presenting it to a client. Rather, it works on a "lean startup" model  where the focus is on agile development to get prototypes out as quickly as possible into the real world to test and refine.

The objective at this stage is to build a culture where agile iterations are favored over rigid plans and the focus is on the actual "making" of things that going beyond software and into the Internet of Things to help create integrated physical/digital experiences. One of my favorite examples to describe this is Chaotic Moon Lab's Board of Imagination.

2. Focus on the right outcomes

The focus is not to create stories (i.e., advertising) but to enable them through a product or service. To do that, we need to look to solve a consumer problem and develop ideas and products that will help enable the solution. Furthermore, the labs team can leverage on the marketing expertise within the bigger agency to identify relevant consumer insights that may lead to product or service solutions.

Some of my favorite examples of this include Westpac Impulse Saver,  Red Tomato Pizza VIP Fridge Magnet and Evernote Smart Notebook by Moleskin.

http://youtu.be/pNvEyUjrwJA

3. Develop a long-term objective and business model

To ensure sustainability, the natural progression for any innovation lab is to move from fun experiments into a sustainable monetization model.

There are a couple of ways that this could be done. Akin to a startup, agencies could monetize the product or software by offering it to consumers (e.g., a mobile utility) at a price or via a subscription model (e.g., a social listening tool for brands). This provides a whole new revenue stream for the agency.

Another way is to match product ideas developed to appropriate business problems of existing clients or even use these ideas to pitch for new businesses. Rather than trying to get clients to fund the entire project, an IP-based revenue or equity-sharing model might provide agencies with a more lucrative payback along with a longer term relationship with these clients due to the nature of product partnerships.

The last model is to provide product innovation as part of a service to selected clients, as what Inventionist (the product innovation arm of ad agency Deutsch LA) has done.

4. Don't do all the heavy lifting

Even the most talented group of digital people will find it hard to go solo by themselves trying to juggle experimentation and learning along with their day-to-day agency work. It is always best to find partners who can contribute expertise, skillsets, and connections. For example, W+K partnered with innovation studio Deep Local to get the necessary hardware and software expertise to build Nike Livestrong Chalkbot.

http://www.youtube.com/watch?v=UR1xt5lM40I

Agencies can also look at partnering with academic institutions that have innovation incubators such as NUS-CUTE Centre.

5. Put it all out there

Sometimes, the fastest way to challenge yourself, learn, and move forward is to put things out there for the world to see and critique. When Inventionist decided to revamp the Deutsch agency website, they decided to put their money where their mouth was and apply the same agile development model that they would use on clients.

What better way to prove to your clients that building digital products in more agile manner is ultimately the best approach than a public challenge to the agency to rebuild their website in 30 days. Out came #30Days2Beta, where the entire development process was live-streamed for the world to see in a transparent and participatory manner.

Deutsch LA - 30 Days to Beta #30Days2Beta from Inventioni.st on Vimeo.