My Executive Creative Director at Havas, Steve Coll, recently discussed why so many ad agencies are not changing the way their creative departments operate considering the industry is constantly urging our clients to innovate. He states that as an industry here in Australia any discussion over different methods of thinking, as well as who and what makes the modern creative department tick, is strangely quiet. He is totally correct. I concur that the set up of agency creative departments doesn’t seem to have changed much at all over the last 20 years. Where we differ is that I think it’s too late for innovation to save the creative department.
“Innovation effectively is the process of technological change… the thing to really understand is that innovation is a process not a thing. The thing, the outcome of innovation, is the invention. For example I can point to a smartphone and say, ‘That’s a nice invention,’ but the process of innovation is coming up with it, and then making it, selling it, getting someone to use it and so on. Innovation involves all of these things…innovation is deeply associated with business processes, business models and all the different aspects that combine towards getting a new product or service to market.”
(Article Excerpt: Innovation Inside — Insights on Innovation)
Knowing this, my viewpoint is that the entire agency model needs to be totally re-invented and that innovation cannot save the creative department — in fact the creative department is a dinosaur and should be relegated to the history books. And before you start commenting below; yes we need creative, intelligent and talented people to succeed as an industry. It’s just that the agency model that generated the “creative department” was an innovation of the 1870’s. (Yes 1870’s — that’s not a typo). Surely the creative department is no longer fit for purpose 140 years later. The more this legacy has been perpetuated the more it has infantilised our industry, reaching a height, almost 100 years later, during the Mad Men era of the 1960’s — an era now immortalised on TV, which was an era that delivered some of the most immensely sexist advertising in history (something I personally don’t think we should be so proud of as an industry).
In addition to this, over the last two decades, our industry has self-inflicted structural issues that remain un-addressed. These include the siloed nature of agency production departments across digital, print and broadcast which significantly retard an agencies effectiveness in what has become an increasingly complex media and marketing environment since the arrival of the Internet. This means we continue to deliver very linear outcomes for our clients in a totally non-linear world. Even conservative Harvard Business Review outlined in 2014 that marketing can no longer rely on a linear model; that prospects don’t just enter at the top of the buying funnel; instead, they come in at any stage. We have become an inwardly oriented industry, with success metrics including revenue, client wins, awards and press coverage for an agency’s work — we no longer measure our success (except in some cases) in relation to the effect and positive outcomes we deliver for our clients. In fact most agency CEOs are only held accountable for revenue growth, which sometimes includes giving away profit. This ongoing incentive based revenue focus for agency CEOs will lead to a startling amount of acquisitions and consolidation within the global industry, further reducing diversification within the industry. If you feel inclined to place your advertising and marketing into the hands of a senior management team that is knowingly commoditising their own industry good luck to you (I’m sure it bodes well for the management of your brand).
As an industry we have effectively created a client/agency model that makes innovation impossible:
We have very effectively created a business model that is uniquely geared to promote products and services that customers currently want and need. Agencies are mature businesses, trying to defend, extend and increase the profitability of their existing revenue streams through the execution of a known and existing business model. They are stuck in Horizon 1 of the innovation model.
“Three Horizons of Innovation” by Baghai, Coley and White.
Image source: steveblank.com
Agencies have further minimised risk by only leveraging existing capability and/or decoupling the means of production from the agency balance sheet to a various number of production companies and studios. The agency model has now become singularly focused on driving efficiencies, competing on rate card, generating a situation where input pricing has become the last major differentiator in a commoditised industry. Could you really say that GPY&R is highly differentiated and diversified in comparison to Leo Burnett, or what are the differences between JWT and Havas? or even between the Saatchi outfits: Saatchi & Saatchi and M&C Saatchi?
If you are a graduate or recent graduate you might start to think that it doesn’t sound like the most appealing industry to work in and you would be right. Start-ups and the technology industry are offering equal or better salaries than agencies with more perks and a chance to own equity. Not only do they provide better work cultures that continually entice young, creative, innovative thinkers, they clearly understand and communicate a clear value proposition:
- That their company has an articulated purpose and mission
- That they respect your time and life outside work
- That professional development and mentorship of staff is critical to start-up success
I was not surprised to read a recent quote from Nick Law, Global Chief Creative Officer, R/GA, “The disruption caused by startups is affecting our clients, and they are going after our talent.” R/GA is a unique entity and re-invent their business every 9 years. In contrast most agencies end up offering whatever trend that makes them seem relevant and/or is the hot button item of the week, whether that’s social media, big data, UX, human centered design, or as seen recently building innovation labs and appointing a head of innovation in an attempt to compete as an employer of choice.
Unfortunately agency leaders have positioned themselves and the industry into a situation where it is about to be disintermediated in 2 specific areas:
- Firstly by decoupling production out of the agency they have become an intermediary in the supply chain ripe for their own elimination with clients dealing directly with production companies such as a B-Reel or Finch. These nimble production companies are now perfectly placed to benefit and profit by dealing direct with client side marketing teams.
- Secondly, technology platforms have enabled unique solutions for the development of branding and advertising which now includes businesses such as Envato, 99Designs, eYaka, Crowdspring, Ideabounty, Designcrowd,Blurgroup, Ideasicle, GiantHydra, Canva, GeniusRocket and many more.
This industry is in trouble and I don’t see many leaders taking on risk and forging a new path — in fact the lack of action is a bit depressing and I predict we will see many agencies in this country close their doors as the globalization of creative continues apace due to efficiency driving initiatives at head office.
Actually perhaps that’s a good thing considering the state of the industry we have created together… now that I think about it… perhaps we shouldn’t even try to save the advertising agency model.
Here lies within…
Rest In Peace
“I think spending your life trying to dupe innocent people out of hard-won earnings to buy useless, low-quality, misrepresented items and services was an excellent use of your energy,” Jerry Seinfeld