Chris Ingram: Adland needs innovation not creativity

The agency groups are in a strange position today. They are huge employers for people businesses in the knowledge economy (the big two, Omnicom and WPP employ approaching 100,000 each). Yet, with market capitalisation of less than £10bn, they are not highly valued, bearing in mind the hundreds of companies they have bought over the years or when comparing them with their major clients or the new media businesses that have emerged in recent times.

“The agency model is broken” is now a cliché, but that’s because it’s so widely accepted. And this seems to be borne out by the extraordinary influence of the procurement department on major account moves and the continuous acquisition of digital businesses on the basis, apparently, that “if you can’t beat them, buy them”.

But does it need to be like that? Do there have to be so many gloomy senior execs in adland, despite their extraordinarily high salaries?
Now that the marketing sector is only one of my interests and not a 24/7 obsession, it is clear to me that there is a big opportunity being missed. Despite the failings of adland, what it has running through its veins is creativity. Yes, there may be more fear and more plc-driven profit pressure than there ever has been, but advertising and marketing services is still one of the most creative sectors you’ll find.

If agencies are creative, management consultancies emphatically are not. Yet management consultancies have stronger and more senior relationships than agencies; and they are able to charge considerably more. Despairingly, the agency response to this is that “clients value process more than ­creativity” or “clients won’t pay properly for ideas”.

Well, that is a cop out. The ad industry needs to be selling “innovation” not “creativity”. Everyone wants innovation. The Government wants more of it: Gordon Brown bangs on about it; the DTI published an investigation last year on Innovation in Services; NESTA (National Endowment for Science, Technology and the Arts) only exists to encourage innovation.

But, more relevantly, the degree of company interest: marketing guru Sergio Zyman says that over 60% of the top 500 global companies incorporate the concept of innovation into their mission statement or cite innovation as part of their strategy in annual reports. Certainly, the most common thing I hear from the leaders of big companies is “How do I make my company more innovative and entrepreneurial?” Reflecting this, London Business School is re-badging its successful Entrepreneurship Faculty to Entrepreneurship and Innovation.

According to the management consultant expert Peter Drucker: “The business enterprise has only two basic functions: marketing and innovation.”
However, innovation isn’t just brain-storming or group discussions. It has to be part of a disciplined process capable of scaling and reflecting the competencies of the company as well as the DNA of the brand.

The senior executives of agencies have to embrace the challenge of turning creativity into a process. I don’t underestimate this challenge: one of the key reasons why The Ingram Partnership failed in London but succeeded in New York (as Consumer Dynamics) was because it successfully turned innovation into a process for clients.

To do this, ad agency teams have to know much more about their clients’ business and products than they do currently. And they must encourage real collaboration among not only departments, but companies within their group that offer complementary skills and know-how. The appalling way in which ‘integration’ is widely claimed but rarely embraced is not a good omen.

However, it still won’t work unless the bosses change their way of working too.

They must create teams of varied talents and disciplines at the centre of their groups and publicly give them a minimum of three years to succeed. This has to be regardless of short-term profit requirements. Reward systems also need to be changed. Currently these encourage a silo system where there is no incentive to help sister companies. Indeed for newly acquired companies joining those groups, there is often an incentive system that encourages the opposite.

It is true that pockets of innovation have arrived in the agency groups from time to time, usually as a result of acquisition, but grafting such talent on is not going to succeed unless there is a real determination to change the culture from within.

The end game is to reposition the agency from being a resource for cheap creativity to one for highly valued product and brand innovation.
Is this too much to ask? Possibly, but something needs to change: from the outside, current group strategies seem to be “more of the same – but bolt on a bit of digital”. Not only does this not get the pulse racing, I don’t expect it will do much for the long-term share price either.

It would be sad if this were seen as an idle dream: the benefit would be to move succeeding agency groups to a position of international thought-leaders with much higher price points and share prices to reflect that.