Where the industry is headed…

A few weeks ago McDonald’s awarded Omnicom nearly $1 billion of advertising work, breaking McDonald’s 35-year relationship with its partner Leo Burnett. After the decision, rumors circulated around how Omnicom would build the “agency of the future.” What would a customized agency for one of the most recognized global brands look like? What capabilities across Omnicom agencies would be handpicked to help turnaround McDonald’s flat performance?

Before I explore what the “agency of the future” may look like, it’s important to note that recently several corporations have consolidated their number of agency partners to reduce marketing costs and streamline communications. P&G and Kraft Heinz are two good examples.

As clients demand fewer partners, how will creative agencies respond, though? Examining the composition of the “agency of the future” is a good place to start. Here are some ideas what an agency will look like in the future:

Creation through distribution

Holding companies such as Omnicom, Publicis and WPP own a number of different agencies with a range of capabilities. In the past the number of agencies under a single holding company served primarily to diversify the company’s portfolio. However, as clients demand agency partners to create, develop and distribute global advertising campaigns at reduced costs, holding companies will increasingly combine diverse talent and capabilities to win new business. No longer will the world’s largest brands rely on an army of different agencies (e.g. branding, advertising, PR, etc.) working in silos under one roof. Instead clients will want customized agencies based on their unique business and marketing needs, giving the world’s largest holding companies a competitive advantage to address shifting client demands.

Business model innovation

In addition to consolidating the number of agency partners, clients will demand greater investment on behalf of their agencies to demonstrate tangible business outcomes. How agencies charge for their services will come under greater scrutiny as clients will seek alternatives beyond a fixed fee or time and materials payment model.

“The agency of the future” will feature business model innovation because clients no longer want to pay for creative work that is not going to drive revenues. Some agencies have adopted a performance-based compensation model, while others have established a strategic fee plus equity model. There are a range of business models smaller agencies have successfully deployed but larger agencies have ignored. However, as clients demand greater transparency into agency fees, these business models will become more frequent, even among some of the larger holding companies.

Attract and retain great talent

Some of the world’s largest brands have recognized the importance of design and creativity to fuel innovation. As a result, they have invested in building greater creative capabilities in-house. Those investments include attracting great creative talent. As more corporations adopt the lessons learned from tech companies, agencies will be facing greater competition to not only attract, but retrain great talent. Therefore, the “agency of the future” will have to pay closer attention to its talent practices if it wants to remain competitive. In some cases, agencies will have to attract experienced human resources professionals interested in building out systems and processes to recruit and retain the next generation of marketing leaders. This will be no easy task, but one agencies must embrace if they truly want to remain attractive to professionals will an unprecedented number of career opportunities.

To most people McDonald’s decision to build a customized agency to handle its advertising needs seemed like an anomaly. However, it is a symbol of what’s to come. The “agency of the future” will be the evolution of creative agencies as we know them today. And although the largest holding companies have an opportunity to innovate, one must wonder whether these companies will undertake the investment and organizational change required to address the expanding demands of their corporate clients? I hope so. If not, then creative agencies ironically run the risk becoming irrelevant.

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