Business meeting

By Robin Bonn, founder of Co:definery

The current pandemic has heightened the need for agencies to fundamentally change. That’s all very well in theory, but what should CEOs do in practice?

As if agencies didn’t have enough to worry about before COVID-19. From management consultants and in-housing, to margin-squeezing, time-pressed clients, not to mention an oversupplied and undifferentiated market, there were already plenty of reasons to change.

These issues were reflected in Publicis Sapient CEO Nigel Vaz’s agenda as President of the Institute of Practitioners in Advertising. He described ‘reimagined’ agencies as genuine partners for growth; focused on outcomes and offering their clients real leadership.

That vision is spot-on. But it’s a tough sell to agencies because it’s not new.

Agency heads in the sand

With their boundless optimism, many agencies hear familiar rhetoric and presume they’re already ahead of the curve.

Their can-do attitude outweighs self-awareness. Sure, nothing is impossible. But now more than ever, fake-it-til-you-make-it is wearing thin.

Not that winging-it is inherently wrong - it’s akin to a just-in-time production line. After all, why do more if you only need to be the second least informed person in the room?

But when you’re conditioned to maintain that you’re progressive, it’s hard to admit when you’re not. Worse still, you might not realise that you’re lagging behind.

‘We’re already partners to our clients’

You can see this blinkered positivity everywhere, not least in agency clichés that don’t stand up to scrutiny.

They love to say ‘we challenge our clients’. But let's be honest, most agencies take the brief as read and dive into solution-mode too soon. In new business, that’s desperation. And with existing clients, it’s an order-taking mentality.

Another classic claim is being ‘all about results’, despite trading on ‘The Work’ and vague concepts like ‘creativity’ - a wondrous thing, but not an outcome.

So the IPA’s job is a tough one. For agencies giddy on Kool-Aid, the need for reinvention is a difficult truth to hear.

No more of the same

Fortunately, even the most relentlessly chipper agency can no longer deny that their world’s got more complicated. Even pre-COVID-19, as Accenture’s research shows, the clients they are a-changin’.

And whatever your view on management consultants, they offer rigour for uncertain times. Similarly, in-house agencies promise speed, control and accountability. And under-pressure clients are searching for reassurance in new ways.

So agencies are at a fork in the road to rude health. Will they choose the sticking plaster or life-changing surgery?

Many choose the easy option - do more of the same. Double-down on intermediary relationships, pitch for anything that moves and prop-up margin by deploying ever more junior people.

If that’s your plan, good luck - you’ve just joined the race to the bottom. But if you’re ready to grasp the nettle, then you do have options.

Where reinvention starts

In line with Nigel’s agenda, the IPA’s Business Growth Conference offered a wake-up call and some practical ideas for change.

Even if much of the rhetoric fell on Pollyanna-ish ears, there were some compelling options offered for wrestling your agency into shape.

Having both left their big agency roles, Group of Humans’ Chris Clarke and Amelia Torode of The Fawnbrake Collective each spoke of their relief at having adopted different business models.

And for those not ready to tear things up and start again, the biggest question of the day was how to transform.

The IPA suggested that pricing is a good place to start. Their white paper, The Price of Success, offers sound advice for evolving beyond traditional cost-plus billing to a value-based model.

Unfortunately, many agencies fundamentally misunderstand value-based pricing. They wrongly equate it with payment-by-results (aka performance-related pay), so dismiss it as impractical.

That’s a massive strategic fail. Progressive pricing represents a huge opportunity for tangible change.

But - and it’s a big but - adoption of value-based pricing requires a nuanced, holistic view. It’s certainly not just a job for Finance.

For one, you must be differentiated to earn the right to price in different ways. And then you need to change how you sell. These aren’t difficult changes to make, but the sequence and interdependencies really matter.

Most importantly, this kind of business-wide thinking represents agencies’ best shot at reinvention.

Making change achievable

Ultimately, transformation requires serious focus. As a case in point, pricing on value needs a bespoke definition of value, an audience that seeks it and a model to deliver it.

Complete focus on your outcome and audience enables you to tailor your agency’s entire Customer Experience to prove your worth to those buyers.

Far from being limiting, super-serving fewer people is liberating and fundamentally transformative.

Scarce expertise makes differentiation achievable. You don’t even need unique skills; you just need an ownable focus for how you use them.

Compare the Mail and the Guardian. They’re ostensibly the same product - same channels, frequency and subject matter. But they’re both so committed that they inspire devotion in their own readers and antipathy in one another’s.

This extreme differentiation shows the power of a clear focus that’s relentlessly applied.

Time to transform

Clearly the current crisis is forcing agencies into an intense period of reforcasting and replanning. But once you’re ready to refocus and evolve, you have two routes to choose from: top-down or inside-out.

Top-down grabs the bull by the horns - refine your proposition, find a new route to market and win better clients. New-business serves as the advance party for the rest of the agency.

In contrast, inside-out starts with your current clients; finding a solution to their unmet needs and using that as a proof-of-concept for transformation.

Deciding between these options depends on your scale, complexity and politics - not least where your remit as a leader begins and ends.

But either way, once you’re through the survival phase, change is no longer just something to ponder - it’s time to crack on.

And if you’re not getting upstream with clients and having conversations at a more senior level, then someone else is.