How Agencies Can Move From A Vicious Cycle To A Virtuous Cycle

By Tim Williams

By Tim Williams

If your experience of going to work in the morning feels like the movie Groundhog Day, you and your agency are probably suffering the effects of being caught in a vicious cycle.

Vicious cycles are most often caused by employing a “harvesting” strategy to your business, where the agency seeks to wring all the revenues it can from current clients by delivering the normally-expected services instead of investing the time and effort in developing a business model that will help the agency earn revenues in the future.  Rather than investing in training, new capabilities, and innovative approaches to serving clients, management decides to instead focus primarily on delivering already-existing services as efficiently as possible.

This becomes a vicious cycle because the lack of foresight eventually leads to worse clients served by worse employees, which translates to lower revenues, lower profits, loss of business, and eventually loss of a company.

Becoming virtuous

A virtuous cycle is exactly the opposite, where one forward-thinking action builds upon the other and your firm becomes steadily better and more future-proof.  A virtuous cycle is created when agency management decides to invest in new products and services and train and empower its people, which increase competence, which produces superior service delivery, which leads to high client satisfaction, which produces higher revenues and profit margins.

Another way to think about this is to plot where your agency is on the chart below, inspired by the work of Clayton Christensen in The innovator’s Dilemma.  The vast majority of agencies are focused on delivering “overdeveloped services” – services that are widely available, offered by many providers.  By definition, if you’re offering the same type of services that thousands of other agencies do, all across the world, you’ll be living in the world of low margins and intense price competition.

On the other hand, if you focus on “underdeveloped services” – services that address underserved markets and unsatisfied client needs – you’ll be positioning your firm for success in years to come.  You’ll also have fewer competitors and higher margins, because you’ll be offering scare services.  And what is scarce is valuable.

Staying to the left of this spectrum will keep your agency trapped in a vicious cycle.  The only way out is to consciously move your firm to the right of the spectrum.

Being disruptive

The natural tendency is to count on “sustaining innovation” to get you there, but it’s more likely you’ll succeed with “disruptive innovation.”  Sustaining innovation is about getting better and better at what you already do.  That’s important.  Our industry is notorious for underinvesting in training and professional development.

But its disruptive innovation that will help make your firm relevant into the future.  Disruptive innovation (again the work of the very talented Clayton Christensen) isn’t necessary about inventing entirely new technologies; it’s mostly about innovative iterations of existing technologies that improve a product or service in ways that the market does not expect.

Uber, the wildly popular mobile app for business travelers, is an outstanding example of distruptive innovation.  Uber took things that already existed and repacked them in a way that creates exceptional new value for travelers.  Instead of calling and waiting for a taxi, you can instead open the Uber app on your mobile phone and request a limo for very close to the same price.

Uber has contracted with thousands of independent limo drivers who, at many times during the day, find themselves looking for their next fare. Using existing GPS technology, Uber finds an available limo closest to where you are and tells you that a black car will be there to pick you up in, say, 8 minutes.  It shows you the name and picture of your driver, and allows you to see exactly where your driver is on the map.  Because Uber users register in advance with the service, the driver also sees your name and picture so he knows exactly who to look for at the pick-up location.  No money ever changes hands, because the fare is charged automatically to your credit card.  Brilliant.

Agencies, what could be your version of Uber?  That’s the kind of thinking that will put and keep your firm in a highly invigorating and highly profitable virtuous cycle.