For the past decade, ad agencies have spent considerable amount of resources beefing up their digital capabilities. These range from digital production teams, creative technologists, digital strategists, and the like. This primarily comes from a client shift toward digital, social, and mobile and a need for agencies to be able to deliver more integrated and holistic work that involves creating branded experiences over just advertising messages.
How has that worked out?
Looking at the recent scale of digital wins at advertising awards and the type of entries that win (Nike+ Fuelband won the 2012 Cannes Cyber Lions winner for great product innovation and the Johnson & Johnson Band Aid Magic Vision won the new mobile category), it looks like all these efforts are paying big dividends.
However, not all agencies get to do this level of work. Most agencies will typically have their digital team working on web banners, campaign microsites, and Facebook applications. Mostly done as part of a list of deliverables to support an integrated campaign message. Some might graduate into more enterprise-level work that shifts away from their core competency in creativity and communications and into the realm of software companies, developing e-commerce platforms and building content management systems.
One of the contributing factors is the existing ad agency structure and remuneration model. It works on client retainers based on man-hours and projects that need to be budgeted for and signed off by clients before work begins. Unlike most businesses, the ad industry does not heavily invest in R&D; rightly so because it is a talent and ideas business. This works well in the existing model where the outputs are strategy, ideas, and communication assets but not when you look at creative technology and design driven product innovation like the Nike+ Fuelband.
This has led to a certain level of frustration and the exodus of good digital talent from ad agencies as they find it difficult to embrace this model where the work is focused on outputs rather than outcomes that provide true value by solving a real-world problem through a product/service utility and experience. Some take their ideas out of the agency and into their own start-ups while others decide to set up their own digital shops.
Rei Inamoto, chief creative officer at AKQA raised an interesting discussion in early 2012 on how ad agencies need to act more like startups. He later spoke at SXSW on the same topic and shared his analysis and interviews with some notable advertising and start-up professionals. The jury is still out there but I believe there were some great points made including the need for agencies to be more nimble and have the capacity for experimentation and to make mistakes and learn which the current agency structure, compensation model, and processes do not allow for.
In addition, agencies needed to go beyond helping brands tell stories and toward helping brands enable stories through a culture of agile technology innovation focused on creative problem solving and making useful things.
Many agencies out of Asia have already started evolving by developing innovation labs with various models, some integrating experiments and projects with client requirements while others spinning off a new business model akin to a tech startup.
Some well-documented ones include Pilot.is, which started off developing Projeqt as a way to unify the individual websites across TBWA’s 250-office network. Projeqt has since morphed into a real-time dynamic web presentation platform with a sizable number of users from advertising and marketing professionals to educators.
Deutsch LA recently launched its product invention arm Inventionist while BBH Labs has existed since 2009 as a “marketing skunkworks” dedicated to global marketing innovation. BBH’s other brand development unit Zag has also built a commercially viable product development and IP partnership model. Even Droga5, one of the most respected creative agencies spun off De-De as a product development studio that developed Thunderclap, a crowd-powered platform that allows social messages to be amplified through crowdsourcing.
In the U.S, businesses like Nordstrom have also created an innovation lab that operates like a lean startup inside the fashion retailer to look at product innovation to help fuel marketing and the shopper experience. Just look at this amazing case study video of the Nordstrom labs team in action developing a sunglass iPad app (to help customers select sunglasses) in the world’s first “flash build” – a flash mob where the lab team shows up in the store and builds the app in real time through rapid experimentation and prototyping, all while getting constant feedback from actual customers in the store.
This shift toward creative innovation and product development will be a continuous evolution in the agency space and one in which I believe will form the foundation of the digital agency of the future. There is a real synergy between product innovation and what agencies are currently doing and this looks like the next evolution in extending what agencies can offer to their clients.
Digital products have the power to improve and drive marketing by creating real value, solve real problems, and create long-term connections with people. One of the speakers at Spikes Asia 2012 encapsulated this nicely with the thought of “Think 365 not 360.” Rather than trying to surround your consumers with 360-degree communications, give them a reason to engage with you and love your brand 365 days a year instead.