A clear division for the future

The relaunch of Bates Dorland shows that agencies are taking a leaf out of retail and manufacturing’s book and beginning to define their `core competencies’. It remains to be seen whether they will be able to do this fast enough.

SBHD: The relaunch of Bates Dorland shows that agencies are taking a leaf out of retail and manufacturing’s book and beginning to define their `core competencies’. It remains to be seen whether they will be able to do this fast enough.

Bates Dorland chief executive Paul Twivy is disappointed with the marketing press at the moment.

It has all but ignored his relaunch of the agency as an “ideas factory” even though it could, he claims “herald a new era in UK advertising”. For something that’s the result of an “examination of the role of the advertising agency” the press silence does seem a bit unfair: the only titbit reported so far is a proposal to charge potential clients a modest fee for pitches.

Bates Dorland claims it has “redefined the advertising process drawing on best practice from the retailing and manufacturing sectors”. An Advertising Agency

Register showreel presents Twivy pillorying the industry for being “more conservative even than banking” and ridiculing his rivals for “scrabbling around” for role models such as the professional firm, the marketing or management consultant, or the new era integrated marketing outfit.

“The modern retailing and manufacturing sectors provide a blueprint for our new agency structure,” he declares. Just as the ultra-modern factories pioneered by the Japanese have “transformed manufacturing industry” so a new approach to creating ads involving much harder, clearer briefs, more research into the product, and much more sharply honed, testing will, Twivy hopes, mean that this agency gets it right first time more often.

So why has the media ignored it? Partly because the earth shattering announcement was overshadowed by Maurice’s little management contretemps at Dorland’s sibling agency. Unfortunately, the press chases the exciting in preference to the merely important.

Agency hype inflation means the best of initiatives are now instantly devalued, and engenders a sceptism about whether agencies are, in fact, changing. Take Twivy’s nod in the direction of manufacturing and retailing. How many ad agencies have treated themselves to industry’s dramatic and continuing cost cutting? It’s not a few per cent every few years, but perhaps 20 per cent this year, another 20 per cent next year, and so on. And they also have to deliver huge quality improvements.

“Ad agencies have no idea of what people in industry have been living with in the last few years, or how dramatic their response has been,” says Mike Farmer of Farmer & Co, a business process reengineering consultancy which has recently turned its attention to advertising. Compared to the experiences of companies like BAe, Ford and Lucas, what adland has produced in the way of business transformation is “pretty minor”.

True, there has been plenty of downsizing, organisational restructuring and office reorganising (Dorland is making a big thing of that too). But, according to David Wethey of Agency Assessments, there have been no serious attempts at business process re-engineering which actually changes the way ads are made. He adds that despite the easing of recession manufacturers are still taking out costs at a fantastic rate, but many agencies’ response to rising ad budgets is to put their costs back up again.

Ad industry leaders now need to do three terribly difficult things. As clients begin to expect their suppliers – even privileged suppliers such as ad agencies – to respond to the pain they’re going through, they really will have to start delivering more, better, faster. Staff/billings ratios are an extremely crude measure of productivity, but it’s nevertheless thought-provoking that among the top 20 of last year’s Campaign Top 300 agencies, the billings per head of the “most productive” agency (EURO RSCG) were three times higher than the “least productive” (Grey London).

According to Farmer the few savvy agencies taking on what he calls agency resource management are finding that dramatic improvements are possible. One, he claims, has doubled its margins by revisiting the process of ad production. “The gap between agencies like this and the average agency will grow,” he warns. Agencies which truly rethink their processes and structures really do have an advantage, agrees Wethey. Just look at the strong performance of EURO RSCG’s US outpost Messner Vetere Berger McNamee Schmetterer.

But doing it better, faster and cheaper is not enough. Agencies also need to clarify exactly what “it” is. That sounds silly, but confusion on this subject is growing amid the controversies about multimedia and integration. Agencies have been slow to take a leaf out of their manufacturing paymasters’ books and ruthlessly define their “core competencies”, before going all out to “leverage” them.

What exactly is each agency really good at? Is it, for example, developing new marketing strategies which “identify wholly, radically different corporate stances and strategies” as Jeremy Bullmore put it in a recent IPA speech? Is it sparky new marketing initiatives within existing markets? Is it great advertising ideas? Great TV advertising ideas? Or the brilliant execution of great TV advertising ideas?

There’s room for a lot more differentiation here. When that differentiation happens much of the fog surrounding how agencies should be paid and what for may clear, along with internal confusion about agency management priorities.

Third, in addition to setting out clearer corporate stalls, the ad industry desperately needs a vision for its future. At present, we have an army of hot-air balloon prickers who can tell us very cogently why multimedia, interactive, integrated, whatever, are not where the future lies. But they are far less voluble about where we should be heading.

As Gary Hamel and CK Prahalad argue in Competing for the Future, “successfully managing the task of organisational transformation can make a firm lean and fleet-footed; it cannot turn a firm into an industry pioneer…To be a leader, a company must take charge of the process of industry transformation.”

Love them or hate them, people like Bill Gates, Akio Morita and Rupert Murdoch seized such roles in their industries and made themselves king of the castle in the process. Arguably the Saatchis did the same back in the Seventies.

Initiatives like Dorland’s are to be welcomed because they show agencies are trying out new ideas. But whether they’re going far or fast enough is not at all clear.

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