Why agencies suck for startups.
Digital agencies and software development companies build digital products and services — and by all measures have the skills and talents to build good software. (I refer to them as “Agencies” from here on out.) They have PMs, devs, UX, design and every skill you need to build products. They should be very well positioned to build startups right?
Wrong. So very very wrong.*
I’ve seen it happen over and over. Either the agency tries to spin out a product; or an entrepreneur comes to them with an idea; or one of their clients wants to reach a new market and they launch a product to fill it. They’re well positioned to build products and campaigns for larger companies (it is what they do after all) but they really suck at building for startups. Here’s why:
- Startups are businesses not products
In startups, the tech is less important than most people think. What makes Uber so unique is not the app, it’s the business model that the app allows. Their business model is fundamentally different where they don’t own the drivers who pick their own times and trips are collected from a marketplace. The tech behind startups is often what makes these new business models work, but how it’s built is far less important than building for the right business model. There are plenty of products that might be useful — but a far smaller number that provide real value to customers and can actually make profitable businesses. - Startups are iterative
Being agile and using scrum is one thing. But agencies are designed to work off a very clear scope on what they need right up front. Startups don’t need all the bells and whistles. They need a team to be there when they need them, not wait 3 month for availability. - Focus on the problem not the solution
As I’ve mentioned before: startups need a problem, not a solution. Agencies are really good at building solutions. They’re really good at taking a brief for a client and building that. Not so much on pushing back around the fundamental viability or assumptions. Without looking at multiple ways of solving a customers core needs is the surest way that you’ll build something interesting, but not useful. (See point 1) - It’s all in the process
Part of what makes agencies good at what they do is how they approach solving their clients needs. It stands to reason that when they’re dealing with a fundamentally different client and problem, they’ll need a fundamentally different process to build it. The briefings, planning and scoping meetings are mostly checks and balances that try to make sure that the product is being built to spec. Startups don’t have a spec. In the early days they have a hypothesis and are constant iterations of tests to prove it. (and the rest of that whole lean startup thing…) The additional layers that remove risk for larger clients only add extra costs without adding real value or de-risking the startups business model. You want the builders of the solution to be as close to customers as possible — not stuck through many layers of PM’s and product owners… - Startups need a driver
Everyone thinks that their great idea is going to be the next big thing. Some actually do have that potential, but the bottom line is without a significant amount of hard work it’ll never amount to anything. Idea’s are not businesses. And a business requires a driver. Someone focussed totally on it’s success and constantly driving the business forward. There is a lot of hard work and sweat that goes into building a business — and someone’s gotta do it. (And it very rarely works if that someone is just an employee…)
It’s all about risk.
At the end of the day, it’s all about risk. Corporates use big agencies to mitigate risk and guarantee that they’ll put out a solid product. Whatever the cost. Startups need to embrace that risk, test it and learn from it — it’s how they grow.
At Playlogix and our friends over at Afrolabs, we’re trying to learn from this and build a startup studio type business that builds startups and solves these problems. For us, its about the philosophical approach to the way we work and to better help startups win. We’re not there yet, but it’s certainly proving an interesting journey.
*This is true for every agency that I’ve come across. There may be exceptions, but it would be fair to call it the rule. If you’re not sure if this is true for you, then it is. The ones who get it right stand out in a big way.
