Times are hard for agencies, it’s fair to say.
With acquisitions of smaller agencies by the larger networks on the rise, and increasing prospects of mergers between these same networks fueling most of what counts as “growth” within the industry, it’s hard to escape the conclusion that we are seeing the twilight of a certain type of business model.
Separate to the (waning?) relevance of marketing more generally, the agency as a business model and unit of organization is showing strains. All of the warning signs are there: we can’t keep people in the industry long enough, and the pace of technological change is so great that our clients can scarcely adequately prepare a brief to scope a project whose outcome will almost be irrelevant by the time it is completed.
Agencies – and indeed every type of business – are not accidents. There are a set of conditions for their emergence and abundance. The prevalence of the agency as a model was, and remains tied, to two key factors: technology and growth, both of which need to be underpinned by consistency and stability. Change either factor too quickly, and either agencies have trouble adapting to the services required of them, or clients lose the ability to properly frame their needs and understand or measure the outcomes they are buying.
The Convergence of Marketing and Design
As a discipline, marketing’s emergence and rise to dominance was built upon the economic abundance made possible by the European industrial revolution. With economies of scale made possible through rapid advances in technology, the economic imperative became to distribute these goods in the most efficient way possible. The stability of operating at the “center of the bell-curve” meant that growing profitability was made possible by externalizing as many costs as possible. Relieved of the need to innovate on what a product does or how it works (on an individual basis), companies sought to externalize all aspects associated with selling what they produced.
Enter the agency, an all-purpose organizational structure that could effectively take on this task, structuring itself in the most efficient way possible to fill this need in an economically competitive manner. Put simply, it became more economically viable to make people want things, rather than make things people want.
Replacing the Agency
1. Being Digital
A relatively well-trodden path, many agencies have either integrated a strong digital capability into their business, or have established themselves as dedicated digital houses. Rather than challenge the underlying dynamic of the agency, the idea is that by adapting operationally and technologically, that utility will still be provided.
Problem: The renaissance that digital promised for agencies has largely failed to materialize. “Being digital” hasn’t really conferred any particular benefits on those that have made the transition. Instead, it’s presented a different set of problems to manage, ranging from talent shortages through to being perceived purely as “executional” and losing the ability to impact a strategy.
2. Greater Focus on Customer Discovery
Best advocated by Tom De Bruyne, the general concept here is that the principles of customer discovery as articulated by Steve Blank would constitute the core function and responsibility of an agency. It’s a unique and fairly dramatic departure from the agency model, challenging the structure of a traditional agency, the operational specialties required to excel, and a unique engagement model that places much more responsibility, power, and control for outcomes in the hands of the agency responsible.
Problem: The biggest challenge of this approach lies in the way client organizations are structured. Being responsible for customer development requires a high amount of control and contact with many individual touch points in a business. It is naive to think that organizations can effectively relinquish control of these. It might be what’s necessary, but clients may be far from ready or capable to embrace this approach – even though it would benefit them.
3. Management Consultants 2.0
In the traditional gulf between strategy and execution, management consultants have lived squarely on the strategy side of the equation. But the amount of technology-driven change affecting most industries makes strategically based consulting increasingly useless, with most large organizations needing more help than simply advice. Rather, consultants are being continually challenged to defend their value by embodying their recommendations and thinking in practical, demonstrable outcomes.
Problem: The operational challenges of this approach are real and considerable. Most management consultancies have trouble practically and culturally making the leap effectively to execution, while most executionally capable businesses face the same challenge of being taken seriously at the boardroom table.
The trend has longer to run. Traditional engines of growth remain strong, and while the wind is blowing clearly in the direction of change, most business dynamics in Asia will not change substantially in the short term, in this author’s view.
What do you think? Is the agency dead already? Terminally ill? Or is this just another stage of evolution for a model that will remain long to come?
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