Saturday, September 25, 2010

MEDIAPOST: Simple Ways To Rethink Your Agency Business

“Maybe we’re coming at it from all the wrong ways.”

Have you ever uttered that sentence, or one like it? Have you ever had the nerve to completely deconstruct what you’re doing and admit that you might be doing it wrong? It takes nerve and it takes courage. It’s hard for someone to debunk their own internal mythology, the set of “tried and true” guidelines which have driven lives and careers to date, in order to start over but that’s just what’s being done now in the agency business.

The state of the business is forcing many people to deconstruct and rebuild their businesses. It’s not as dire as it sounds; ad spending is still strong and getting stronger, but the economy is questionable and no one knows what’s going to happen next. Some of the most successful businesses have been created in the most unsettling of economic times, and many people recognize the uncertainty as opportunity in disguise. If you can create a business and sustain revenues when business is down or if you can create new revenue streams where there previously was none, then your well positioned to be successful when business recovers.

As a result, many agencies are rethinking the ways they generate revenues. The old models are being rethought, and I thought I’d share some of what I’m hearing from the business.

First off, agencies need to be paid for thinking, not doing. Whether you call it strategy or planning, your intellectual capital is your most valued asset, but most of your revenue comes from execution. More and more agencies are rethinking this paradigm and rediscovering the value in the brains of the people they employ.

Secondly, performance is not a primary model for compensation, but it is a value for growth. Most agencies will not create work on spec anymore, and they require payment for their work, but they will sacrifice parts of their payments in performance kickers. These kickers are typically where the profit is found and if your agency is any good, they should be willing to put their money where their mouth is. Besides, if you succeed, they succeed. That’s where the strength of the relationship lies.

The third trend is that more agencies are getting into the brand business themselves. Agencies have long been the launching pad for many ideas, but those ideas were typically owned by their clients. Recently you see more agencies creating and owning their own IP. Agencies are creating brands. They’re creating soft drinks and websites and movies and music. They’re getting into their clients’ business in a way they never have before which leads me to the question of when will an agency pitch a brand client on a line extension that they could co-own or have a larger ownership stake in? What’s to stop Pepsi from launching Jalapeno Pepsi with their agency as an owner (other than an awful taste, of course)? Is that day so far away?

The pundits say the agency model is broken, but it’s only because they need something to write about. What’s most interesting to me is how you can find new ideas in these companies, that just require some thought and attention.

So don’t be afraid to question your own business and look for new ways to operate. It takes courage to start over, but rarely are the results less than you expected them to be.

No comments: