Red Paper
November 15, 2012 | By Tim Williams

 “In the last decade, the best 10 percent of companies captured more than 85 percent of the market value created in the world.”  So say authors and business consultants Chris Zook and James Allen, who have studied the question of business success extensively over the years. 

In the agency world, Jon Bond and Richard Kirshenbaum once remarked “There are perhaps as few as 40 or 50 agencies in the United States that can actually manufacture a good campaign, and possibly 10 that do it consistently.”  That’s a pretty tough standard.  This paper plumbs the depths of the question “What makes great agencies great.”  For starters, let’s don’t confuse greatness with bigness.

Many of us in the business world have come to accept the idea “grow or die.” But it turns out that the companies that are most admired in a category are rarely the largest. The truth is that the most exceptional companies have chosen not to focus on revenue growth but rather to be the best at what they do.  Many in fact place significant limits on their growth, choosing instead to focus on doing great work, providing great service, and creating a great place to work.

Author and pricing expert Ron Baker says “Growth for the sake of growth is the ideology of a cancer cell, not a strategy for a professional services firm.”  Especially in a creative services business, size does not equal greatness.  The pursuit of growth is a different mentality and mindset than the pursuit of excellence.  That’s not to say you can’t be big and excellent at the same time; it’s just that bigness and greatness are two very different things.

Someone who knows a lot about business success, Herb Kelliher, the iconic founder of Southwest Airlines, always preached that market share has nothing to do with profitability.  These are two completely different concepts.  And let’s keep in mind that at least financially speaking, the goal isn’t to be big, but rather to be profitable. 

In the realm of advertising agencies, stop for a moment and think of an agency you admire.  What comes to mind?  Most likely you’re thinking of their reputation for innovative work.  That’s usually the part we can easily observe – the part of the iceberg that’s exposed for all to see.  But what’s below the surface that enables great agencies to produce great work? What’s the cause that produces the effect we admire?

Here’s another way of thinking about it.  Things like awards and industry recognition are what could be considered “lagging” indicators of success.  A more interesting question is what are the “leading” indicators of success?  What are the things that caused the outward success that the rest of the world sees?

This is important, because far too often the focus of agency leaders and managers is almost exclusively on lagging success indicators.  Measures such as gross income, salaries as a percent of gross income, income per employee, etc., etc.  These types of lagging indicator are things you see in the rear view mirror; things that have already happened.

Now let’s consider what might be some examples of leading indicators of agency success?  What are the things that predict financial success; things that if we do them well, we’ll be successful in the marketplace?  These could include things like:

  • Number of assignments accompanied by good briefs
  • Clearly defined clients expectations and scope of work
  • Effective training and orientation for new associates
  • Progressive use of technology to improve collaboration

Which brings us to the first of 7 points that characterize what separates the best from the rest.

1. The best agencies are purpose maximizers, not just profit maximizers

Instead of being driven by the market, the competition, the numbers, or even the client (which are all outside influences), what is it that drives us from inside?  The answer to that question is your firm’s purpose; the reason you do what you do that goes beyond collecting a paycheck.

According to studies by former P&G CMO Jim Stengel, there is a definite cause and effect relationship between strong ideals and strong financial performance. It’s no coincidence that the 50 fastest growing brands in America have one important thing in common: they have committed themselves to an ideal that transcends making money.  What’s true for marketers is true for agencies.  Those with the strongest ideals – or principles – also produce the strongest work, have the strongest cultures, and enjoy the strongest reputations.

GSD&M co-founder Roy Spence believes so strongly in the power of purpose that he’s written an insightful book about it, highlighting how the power of purpose infuses the work the agency does for clients like Southwest Airlines and AARP.

As an evolution beyond the “big idea,” Ogilvy calls the power of purpose “The Big Ideal,” the premise being that powerful brands were built not just on ideas, but also on ideals – a higher purpose that rallies support for the brand both inside and outside the company.

Saatchi CEO Kevin Roberts, the chief architect and advocate behind the agency’s very successful “Lovemarks” philosophy, says “Our purpose is to create and perpetuate Lovemarks in order to connect, transform, and empower the people in the 82 countries we operate in.  We will demonstrate that to be sustainable in the new century, enterprises need to take on an emotional dimension.”

Writing in Leading the Revolution, author and business school professor Gary Hamel asserts that “Every person should feel that he or she is contributing to something that will actually make a genuine and positive difference in the lives of customers and colleagues.”

The iconic British adman, Paul Arden, recently deceased, wrote a great little book in which he asked the question, “So how good do you want to be?” and offers the options “Pretty good?  Good? Very good?  The best in your region?  The best in the world?”   It’s a pretty good question!

The fact is that professionals – especially creative professionals – are motivated by more important things than money.  As the very wise and insightful Peter Drucker once said, “Profit isn’t the purpose of a business, but rather a test of its validity.”

2.  The best agencies draw lines in the sand

The agency EuroRSCG (now known as Havas Worldwide) once did a study among their own employees and among other things asked their people to indicate the degree to they agree with the following statement: “A big problem with working at ad agencies is that management is too often unwilling to stand up for their own people if it means taking on the client.”  74% agreed, which is symptomatic of the subservient attitude agencies have when it comes to client relationships.

A piece in Advertising Age a few years ago titled “Is there anything agencies won’t do” lamented the fact that agencies have become so fearful of clients and so desperate in their chase for new business that they have very few boundaries when it comes to spending time and money pitching and wooing clients. 

Agencies that are willing to stand by their beliefs and principles are actually much more likely to be successful in the long run.  In effect, these firms have articulated the things they will always do and the things they will never do.  The have established what could be considered rules of engagement governing how they act in various business situations. 

There are interesting examples at many of the firms with admirable reputations.  Richards Group founder Stan Richards articulates many of that agency’s principles in his book The Peaceable Kingdom.  Among them is the agency’s policy not to defend a current piece of business.  Another principle is that if the agency earns more than 20% profit on a given client, Stan writes a refund check back to the client at the end of the year.  Other agency principals might disagree with these principles, but that’s what makes them effective, because they are so meaningful and differentiating.

IDEO has a strong set of principles around the creative process, including the idea that “The best ideas emerge when the whole organizational ecosystem has room to experiment” and that “Ideas should not be favored based on  who creates them.”

MDC-owned Bruce Mau Design lives by what they call “An Incomplete Manifesto for Growth” which includes several fairly controversial principles, including:

  • Make mistakes faster.  
  • Don’t enter award competitions.
  • Avoid software.
  • Don’t clean your desk.

Mutejczyk Hoffer publishes its beliefs right up front on the agency’s website, including the very memorable “Make the world .000001% more beautiful with everything you do.”

Besides being differentiating, the powerful thing about principles is that they create a culture of self-governance.  Instead of agency management having to engage in the old command and control model, agency associates automatically know what to do in a given situation.  Principles guide behavior and keep a tribe together – a powerful sort of cultural glue. This means better decision making on the front lines of the business, because everybody understands the principles by which the firm operates.   If you don’t have clear principles, you need a lot of management.

But of course the ultimate test of a good principle was articulated by Bill Bernbach, who said “A principle isn’t a principle until it costs you money.”

3. The best agencies stand for something instead of trying to stand for everything

The next characteristic of great agencies is that they have a good answer to the question, “Can you describe your agency in 30 seconds?”  In other words, they stand for something instead of trying to stand for everything.

It’s a surprising fact that most agencies think they’re more differentiated than they actually are.  In fact, there’s actually a name for this phenomenon; it’s called the “confirmation bias.”  The reality is that while 80% of executives feel their offering is highly differentiated, only 8% of their customers actually agree with them.

Brand awareness is not the same thing as a positioning.  A lot of agencies have reputation capital in the sense that they’ve been around a while and many in the business community have heard of them.  But’s that’s not what it means to be a brand – the kind of differentiated brand you create for your clients. 

Because most agencies have yet to do the hard work of defining their brand boundaries, they are what could be considered “recognized trade names.”

Search consultant Bob Lundin once said “The common failing among agencies seeking new business is their inability or unwillingness to name what they stand for.”  Which do you think it is – inability or unwillingness?  Most agency professionals would say it’s a little bit of both.  Many agencies are unable to articulate a clear positioning strategy because they don’t really have one; and once you do you must be willing to publicly put a stake in the ground. 

Have you noticed how the agencies that are willing to put a stake in the ground usually generate an unusual amount of press and attention?  Like Colorado-based Made Movement, which describes itself as a marketing agency dedicated to supporting a resurgence in American manufacturing.  That’s pretty newsworthy.

Naked Communications has built a tremendously effective and well-regarded business by standing for inventive communications planning.  They plan, but don’t buy, communications channels.  And they don’t execute creative work.  This focused strategy has helped them build a successful network and an impressive client list. 

Successful agencies like Big Fuel actively resist the “full-service” model as well, choosing instead to do what they do best, describing their positioning as “a pureplay social media agency designed for the needs of large brands.”

So many agencies continue slogging along as what I call a “local generalist,” when in fact they could enjoy much more success as a “national specialist.”

If you haven’t looked at Advertising Age’s list of the 20 largest agency brands recently, you’re probably in for a surprise.  That’s because many of the largest agencies in America are not the generalist firms you used to find on Madison Avenue, but specialist firms you find in places like Irving, Texas and Little Rock, Arkansas.  We’ve entered the agency of specialization, and the smart agencies have realized we’re never turning back.

Shortly before leaving Advertising Age to take a job in the agency world, former editor Johah Bloom penned an insightful piece in which he observed “Commodization may be the biggest threat facing agencies today.”  High on his list of suggested remedies?  Say no, and specialize.

Here’s another phenomenon that helps prove the point.  Over the years, Ignition has made a study of the top 10 things agencies say about themselves.  If you’ve been in this business for a while, you already know what’s on this list.  Always, always heading the list is the promise of “full service,” followed closely by “integrated” and “wide range of experience.”  Its no wonder prospective clients can’t tell one agency from another.

Top 10 things agencies say about themselves

  1. Full service
  2. Integrated
  3. Wide range of experience
  4. Strategic
  5. Team approach
  6. Creative thinking
  7. Senior people
  8. Marketing partner
  9. Awards
  10. Results

From a slightly different perspective, let’s look at the most common topics in agency self-promotion materials – topics that you’re almost sure to find in most agencies’ capabilities presentations.  These should look pretty familiar, because they include such things as:

  • Staff size
  • Billings
  • Years in business
  • Number of offices
  • Departments and disciplines
  • Agency growth history

The interesting thing is that when you dig deep into the things clients say they are least interested in when it comes to selecting an agency, it’s exactly this same list of topics.

The best agencies step back and make a careful, honest analysis of what they know best.  Stop for a minute right know and think about “In what areas are you just a commodity and in which areas could you be a brand.”  The goal is to minimize the one and maximize the other.

One more characteristic of the most successful agencies; they don’t really do a “capabilities” presentation at all.  Instead, they talk about their beliefs and points of view.  Not only is this much more differentiating – it’s also much more interesting and engaging.  Just ask any client which they’d prefer to hear; a dry recitation of agency facts and statistics, or to hear the agency paint a picture of the brand’s success?

4. The best agencies optimize their work at the front end to get better work at the back end

One of the key hallmarks of successful firms is that they pay much more attention to the front end of the process, which results in much better work at the back end.  When asked to account for his firm’s incredible success, the creative director of one of America’s creative powerhouses said  “It’s because we have the best account executives in the industry.”  In other words, great work isn’t just a result of creative talent, but also the planning, blocking and tackling provided by other agency disciplines.

Most agencies feel they are now living in a world where “rush” is the rule instead of the exception.  It’s curious, as one anonymous copywriter once remarked, “There’s never enough time to do it right the first time, but there’s always enough time to do it over.”

A constant stream of “rush” has a tremendous corrosive effect in agencies.  For starters, a rush jobis done so fast the client perceives it as less valuable.  It often leads to needing freelancers (money the agency doesn’t earn).  Rush work doesn’t allow time for the agency to propose better ideas, leads to agency error, andcauses rework because of lack of complete information.

Here’s an instructive way to think about this, which actually comes from the world of software development.  The chart below illustrates the phenomenon that happens all the time in agencies; the belief that somehow we’ll get more work done, faster, if we just get started instead of worrying about providing a bunch of information and insights.  Of course what really happens is that as the project progresses, it becomes obvious that the creatives are missing the direction they need and the entire team will have to come back and do what it should have done in the first place – provide good information and insights.

 The point is that the best agencies do the best job on the front-end process.  They pay above-average attention to:

  • Clarifying client expectations
  • Clearly defining scope of work
  • Collecting more complete information
  • Writing more complete briefs
  • Giving better briefings
  • Breaking out work in phases
  • Previewing the direction with the client
  • Avoiding false starts

5. The best agencies have redefined the meaning of “work”

In the age of the knowledge worker, “work” no longer means people sitting at desks at a particular physical location. 

The nature of knowledge work is being redefined by people like Cali Ressler and Jody Thompson – authors of Why Work Sucks and How to Fix It – who believe the optimal work environment is characterized by the understanding that:

  • Everybody has a job and every job has a body.
  • Each position has a contract that describes desired outcomes.
  • Compensation and advancement are determined by outcomes met, not hours worked.

Progressive firms today are characterized by the attitude “Big brains, small machine,” focusing on building a small group of smart people who can work with a variety of outside resources to get things done. 

This is the Hollywood model, and most of the successful agency startups of the past few years – from co: to Victors & Spoils – have been built on this approach.  Richard Kirshenbaum’s new venture, NSG SWAT, sells itself as a “Small group of hybrid creatives; we work with a network of creative people from different backgrounds with diverse insights.  Our network allows us to stay on the frontline of consumer, pop and digital culture.  Productive relationships are our edge.”

6. The best agencies just keep coming back with better work

Great agencies don’t allow themselves to get engaged in endless rounds of revisions in an attempt to defend the work they started with.  Instead, they just keep coming back with better work. 

The official Goodby Silverstein & Partners handbook preaches the principle of “Start Over,” which is the belief that “The greatest enemy of brilliant work is the loss of perspective.  As work undergoes changes and revisions, it can be transformed beyond recognition. Be honest with yourself.  Is this still great work?  If not, make your best appeal and then throw it away.”  TBWA/Chiat/Day’s Lee Clow simply says, “Just keep coming back with better work.” 

One of the stated beliefs of CP+B is “If the client wants to kill it, then kill it. We’ll come up with other good stuff.”  New associates are taught:

“We don’t believe the process of creating advertising has to be painful.  We have absolutely no desire to come to work and spend the day arguing with our clients.  What we do have is an ability to work very hard until everybody is satisfied.  This is our belief. This is the way we work.”

The essential philosophy is “win-win or no deal.”  Both parties have to be satisfied with the work.

7. The best agencies cast people in roles that make the most of their strengths.

While casting people in the right roles sounds like a normal business practice, it is in fact practiced in only the most enlightened firms.  The default approach in most agencies is to put someone we think is qualified in a role and then expect them to be perfect in every aspect of their job. 

One particularly common mismanagement tactic is expecting people to have mutually opposing qualities: to be both spontaneous and logical.  To be a big picture thinker and a skilled tactician.  Qualities like these seldom come packaged in the same individual, and the best agencies understand this. 

This is essentially what David Ogilvy was looking for in this classic recruitment ad from the 1970s, in which Ogilvy was looking for a Trumpeter Swan – a “rare bird” that combines both brilliant creative skills with brilliant management skills.  That’s a rare bird indeed.

The truth is that people with outstanding strengths usually also have outstanding weaknesses.  Where there are peaks, there are valleys.  An even cursory review of the most outstanding leaders in business (Steve Jobs, Richard Branson) shows this pretty quickly.

So the most progressive agencies in this area don’t ever expect a given associate to possess all of the mutually-exclusive qualities that are often listed on employee performance review forms.  Instead, they understand that they’ll get much more value from their people by casting them in roles that make the most of their strengths. 

One final point.  It’s really easy to talk a good game.  Most agency websites would lead you to believe that the agency is a talent magnet that produces stellar work for stellar clients.  But of course, only about 10% really do.  What ultimately distinguishes this 10% is not the rhetoric, but the reality of walking their talk.

The best agencies realize that without execution, there is no strategy.  Execution isn’t just important, it’s everything.

Why do most agencies fail to spend sufficient time on their own brands?  Most executives would cite lack of time or resources.  But really it just boils down to belief.  The insightful Peter Drucker said that most professionals are too busy working on yesterday’s problems instead of optimizing tomorrow’s opportunities.  He famously taught the idea that we should “Starve the problems and feed the opportunities.”  Having the will to focus not just on problems, but opportunities is ultimately the biggest differentiator between the good and the great in this business.