Agencies, like most businesses in today’s economy, are going to great lengths to avoid risk. It’s easy to assume that the least risky path is to pull in your horns and keep plowing forward with your current business model. This is essentially the strategy of “just try harder.” But marketing communications firms are at the nexus of the Great Recession and the Great Upheaval of Mass Marketing. Continuing on the traditional agency path is by far the greatest risk you could possibly take.
Don’t risk everything, but be willing to risk something
Especially now, it’s important for marketing executives to understand the nature of risk. Risk is inherent in absolutely everything you do, starting with your drive to work every morning. If you own a business, just turning on the lights and incurring payroll expenses every day is a risk. Then there’s the risk that your largest client could get acquired, your most talented creatives could leave, a group of employees could decide to start their own agency, and everything else that may keep you up at night.
Choose your risk instead of letting it be chosen for you
There’s risk in every decision you make about your firm, but there’s actually greater risk in not making decisions. You can choose to be either proactive or reactive when it comes to risk. You can make active decisions about the kinds of risks you believe your agency should take, or you can sit back and let your firm be passively subject to the risks that are inherent in running a marketing communications firm in an era of constant and disruptive change.
In Ignition’s view, here are 15 of the greatest risks to agency profitability now and in the future:
- A skill set built mostly around “interruption” instead of “engagement.” Attempting to solve marketing problems through paid mass media.
- A digital department in place of a digital competency. Viewing digital as a separate discipline rather than mandating that every agency professional learn and practice it.
- Core competencies focused on “one-to-many” instead of “one-to-one.” Irrational fear of databases and CRM, which are the future of marketing. Mass messaging instead of mass customization. Broadcasting instead of narrowcasting.
- Continuing to focus on “brand-to-consumer” communications at the expense of “consumer-to-consumer” communications. Viewing consumers mostly as an audience instead of as a medium. Continuing to practice controlled communications instead of open conversations.
- Lack of analytics and tools to measure and demonstrate effectiveness.
- Production people skilled in traditional media output instead “producers” in the Hollywood sense. Linear instead of organic approach to production. Moving on to the next campaign vs. analyzing and optimizing the current campaign.
- Developing media plans instead of channel, communications, conversation, or engagement plans. Media placement instead of media creation.
- Creating brand transactions instead of brand relationships. Producing one-time sales instead of helping clients nurture and cultivate customer relationships.
- Continuing to rely on the mass media-centric “big idea” instead of “big multichannel ideas.” Advertising production instead of multichannel production.
- Expecting “account executives” to be both strategic leaders and project managers (these are two very different skill sets, especially in the digital age).
- Working exclusively in the realm of brand perception instead of brand experience. Helping clients only in the “pre-purchase” phase instead of purchase and post-purchase.
- Standing for everything instead of standing for something. Supporting the increasingly unrealistic cost structure that comes with attempting to house every possible service under one roof. A business strategy that must support both high-value product offerings (strategy and ideation) and increasingly “commoditized” product offerings (basic production and execution).
- Continuing to manage knowledge workers in a framework left over from the industrial age. Knowledge workers — especially those in the professional services — need a different set of tools, resources, and work policies to be effective. Staff management instead of talent management.
- Continuing to allocate client budgets to media instead of creative. In a world where many of the most powerful media have a cost of $0, ideas are the real currency of marketing, not money.
- An accounting and compensation system built on time, costs, and efficiency rather than outcomes, value, and effectiveness. Selling hours worked instead of value created.
This adds up to a lot of change. Which is why agencies need to move from an attitude of “tried and true” to “test and learn.” Because they’re used to functioning as third-party “agents” on behalf of their clients, agencies aren’t used to investing their own capital and taking risks on behalf of their own brands. But now agency leaders must move beyond disrupting their clients’ brands and instead disrupt their own brand.