Why the Best Agency Growth Strategy is to Decide What Not to Do

August 31, 2010 | Author: Tim Williams

Besides just worrying if you are better than the agency down the street, you should also be concerned with whether you are different.

Quick, which airline do you associate with the following? “We invite you to sit back, relax, and enjoy your flight with us today.  If there’s anything we can do to make your flight more enjoyable, please just let us know.”

Your answer is probably “every airline.”  That’s because pretty much every airline uses the same language on every flight.  Airlines routinely miss an opportunity not only to say something different, but to do something different. The result is that you don’t know whether you’re flying Delta, United, or American.  And chances are you don’t care.

The airlines are just doing what most other companies do: copying their competitors.  In a business context, imitation is not “the most sincere form of flattery”; it’s just lazy.  When you really think about it, copying someone else’s business model demonstrates an incredible lack creativity and imagination.  Yet most are just copies of someone else’s. 

Most managers invest their time and energy in trying to make their brands better, when in fact they should be working to make their brands different.  Better isn’t necessarily always better; different is better.  Behind the scenes, American Airlines may be working hard to recruit the best people, deliver the most efficient service, and build the best maintenance record.  But most of that means very little to customers unless their experience with American is actually different than with other airlines. 

The Urge to Copy Others’ Business Models

The urge to copy is exceptionally strong in the human species.  The underlying explanation is the “copying” mechanism that has allowed humans to survive and evolve for the past few millions years.  The work of social observers demonstrates the simple truth that humans are social creatures, not independent agents, and that as such they rely on copying to learn and survive in society.

So building a successful brand means going against your instincts.  Common sense would tell you to closely examine what competitors in the category are doing, make sure you are offering the same or better features, and adopt the “best practices” in the industry.  But while others are studying and following best practices, the innovators and category leaders are developing the “next practices.”  They are resisting the natural urge to copy.  And instead of just working to improve their brand, they are working to differentiate it.

Agency Positioning Is Not Common Sense

Especially in tough economic times, “common sense” would suggest that a business can improve its revenue streams by expanding products and services, broadening capabilities, and appealing to more customers.  It seems like common sense, but it’s exactly the wrong response. The best growth strategy—in good economies or bad—is to decide what not to do.  The best way to expand is by narrowing.

Imagine two advertising agencies: one that’s extremely focused with a clear value proposition, and one with an unfocused business strategy that attempts to do everything for everybody.  Which of these two firms would have the greatest earning power? The largest geographical market area?  The fewest competitors? The greatest degree of respect from clients?  The answer in every case is the focused firm.

The counterintuitive solution to success and profitability is to narrow your focus, not expand it. 

Excerpted from the new book Positioning for Professionals: How Professional Knowledge Firms Can Differentiate Their Way to Success by Tim Williams.

Why Agency Bigness Doesn’t Lead to Greatness

August 17, 2010 | Author: Tim Williams

One in a series of observations from the new book Positioning for Professionals: How Professional Knowledge Firms Can Differentiate Their Way to Success

Advertising Age recently observed, “The list of great brands that have been damaged, even ruined, as they’ve been milked for growth rather than managed for profit is a long one — and it grows every year.”

The unbridled quest for growth has played out in very visible ways in the marketing communications industry. Today, just five holding companies control 85 percent of the advertising expenditures in the world. In addition to creating leverage when negotiating media contracts, this roll up of marketing communications companies also was expected to produce significant economies of scale. It didn’t. What was the total “savings” resulting from consolidating the operations of thousands of agencies? According to one study it was less than .025 percent.

In professional services, size is not a competitive advantage

Not only is growth not a strategy, but the supposed advantages of size are diminishing, especially in professional services. Aside from the benefits of what could be considered reputational capital, “bigness” is no longer a competitive advantage for law, accounting, advertising, or consulting. In fact, the trend is clearly away from big diversified firms to smaller specialized operations. In the paper The Death of Big Law Larry Ribstein chronicles the megatrends behind the devolution of large law firms, including increased access to legal information and resources via technology, competition from lower cost economies, and the “commoditization” of some forms of legal work that are widely available on legal websites.

Business observer Jim Collins describes the stages through which successful companies pass on the way to their downfall. Second on the list: the undisciplined pursuit of more.

Growth through acquisition — pursuing more for the sake of more— is almost always an unsuccessful strategy. The majority of mergers and acquisitions fail, and sometimes spectacularly so. While some of these attempted partnerships build the CEO’s ego, they usually erode shareholder value.

The belief that less is more

Most business books feature examples of large publicly-owned companies, which largely have shaped the collective consciousness of the business community. As a result, many have come to accept business axioms (such as “grow or die”) that apply mostly to companies that are in a constant quest to satisfy shareholders. But privately held companies — which actually make up the majority of businesses — can and usually do operate under a different set of principles.

The most exceptional private companies have chosen not to focus on revenue growth but rather to be the best at what they do. They deliberately place limits on their growth, choosing instead to focus on doing great work, providing great service, and creating a great place to work. The agencies most of us admire know that size is not a strategy.

Excerpted from the new book Positioning for Professionals: How Professional Knowledge Firms Can Differentiate Their Way to Success by Tim Williams.