Position Your Firm for the Future by Adopting These 4 Values
Ray Grainger, Founder and CEO, Mavenlink outlines that the services business models that used to work just fine are inadequate today. To reach your full potential in this large and growing market, you need to completely reimagine your business. Adapt — or risk getting left behind
It is a great time to be a marketing agency.
In fact, it is probably the most exciting time in history. There is a wealth of opportunity, and agencies are reporting record revenues and hiring and acquiring at record pace. The recent Ad Age Agency Report 2016 indicates that in 2015, U.S. agency revenue grew 6.5% to a record $46.8 billion — more than double the 2015 GDP growth. That’s a lot of business at stake.
And, taking advantage of this market opportunity is proving challenging. Today’s agencies face immense pressure on their business, which we can attribute to these three factors:
1. Clients are demanding an ever-increasing diversity of services
Technology has completely upturned advertising. Digital ad spend is expected to overtake TV by 2017. To reach a target market today, agencies must offer many new services they didn’t have before. The same Ad Age report noted a Publicis Group statistic stating 51.9% of 2015 worldwide revenue came from digital services — a 10% year-over-year increase from 2014. This extraordinary growth in digital is forcing agencies to innovate and expand their core offerings.
2. Agencies now compete with new market entrants who are giants in the services industry
The competitive landscape has shifted for agencies. As they expand their offerings into new practice areas, others are rapidly assailing the agency’s core market. Michael Roth, chairman and CEO of IPG, recently stated, “There’s no question that we’re competing against companies that we never competed against before: Deloitte Consulting, Accenture, IBM. It’s a very difficult competitive market out there, and we just have to be on our game.”
3. Competition and margin pressure requires fundamental changes to services delivery
Clients demand delivery at an unprecedented speed. The average contract length is shortening and is often measured in weeks versus years now. In the recent US Agency-Marketer Business Report, 43% of marketing firms stated most of their work is project-based. Shorter-term engagements are harder to staff and make profitable.
I speak with agency leaders every day, and there is a common belief that what used to work just fine has become inadequate. Firms feel they need to adapt, or risk getting left behind.
This is a significant moment for the industry and indicates that we are potentially on the cusp of disruption. “Disruption” may be a broad word, and often overused, but it fits here. We have seen this pattern before: New entrants with innovative or agile business models arrive, the new players get closer to buyers and expectations soar, and the incumbents that focus on optimizing what has worked in the past ultimately fail.
The agency industry is embarking on this same period of transition. Forward thinking leaders are already designing new operating models and finding ways to better understand client demand. They know exactly the supply and talent required to deliver and have become extremely agile to execute profitably.
This is the Service Level Economy.
And what has emerged are a new set of core values that you can adopt to position your firm for the future. These values include:
- Transparency. Always be completely accountable and clear with your clients. This is the foundation of a partnership. You don’t need to have an answer for everything. Clients can also see and feel how fast the world is changing.
- Performance. Be relentless in your pursuit of data and insights surrounding your business to find opportunities to improve efficiency and financials. No more flying by the seat of your pants. Your agency needs to be sophisticated and run like a well oiled machine.
- Scalability. Keep your bench light and develop an on-demand network of contractors — we call them Multi-Affiliated Professionals (MAPs). This allows you to scale your resources based on client demands. Enable granular management of these MAPs by skill and expertise so you can get the right people on the right project, at a moment’s notice.
- Swift Trust. Traditionally trust is built over a long period of time. In the Service Level Economy, you need this same level of trust almost immediately. You can accomplish this by automating the vetting of resources to find the best fit for every client project, and communicating clear goals for every team member.
My advice is to get out in front of this now. It’s going to come at you like a tsunami. Competitors can and will take your customers. If you want to win, you the need the ability to price, staff and execute your work with absolute precision. And thanks to technology, that is more possible today than ever before.
Technology: The Great Enabler
The MarTech industry today is a cluttered, $10 billion point solution market. As thousands of new ways to reach people emerge, thousands of new management tools pop up. Social, mobile, automation, programmatic… the list goes on.
Unfortunately, there has been little to no advances in business management tools to help agencies become higher performers. And think about this in the context of the new competitive landscape — the technology that agencies have access to is completely inadequate and does not allow them to compete with the likes of Accenture, IBM, and Deloitte. These organizations know how to run service businesses. Every client, every project, and every person, is its own P&L.
The good news is that technology today can give you a competitive advantage. You already have the expertise and client relationships. The right platform will properly enable you to leverage the networks you’ve already built to access the right people, at the right time, for the right project, to generate the right margins. With greater visibility and control of your business, you will stand out and be recognized for your commitment to best practices and to meeting your clients’ needs.
This is the future of services. It’s exciting, and a little bit wild. And I believe it will transform work as we know it.
The article above has taken excerpts from the recent book by Ray Grainger, Thriving in the Service Level Economy. If you deliver services and client-based work, Thriving in the Service Level Economy is a must-read.