Agency growing pains
Sir Martin Sorrell and Chris Ingram, both multi-millionaire marketing services entrepreneurs, may not always see eye to eye, but on one thing they are in perfect accord. Both are emphatic in their belief that the agency model must change: it’s a matter of survival.
Sorrell trained a merciless spotlight on the problem the other week by trotting out some market capitalisation statistics. For all that WPP and Omnicom are global companies, indisputable market leaders in their sectors and employers of about 100,000 people apiece, they are fishing smacks compared with new media’s Dreadnought, Google. WPP is currently valued at about $15bn compared with Google’s $165bn. That’s one eleventh of the market value of something that produces only twice as much revenue.
Broadening the point, he said that if you added the capitalisation of the top four marketing services groups together, (WPP, Omnicom, IPG and Publicis Groupe), you get a figure of about $45bn: one quarter the size of Google, but they produce 50% more revenue.
Clearly, market capitalisation is only one of a number of ways of sizing up companies and industry sectors – but it’s a pretty important one all the same. It’s an index of comparative value. Just as tellingly, it’s predictive: a punt on where a trend is going, with a view to making money out of it.
Marketing services professionals, of course, often complain that the investment community doesn’t understand their industry (and, in particular, their companies when it comes to individual valuations).
And it’s true, the money men may well be too bullish about the prospects of a new media technology company increasingly aping the ways of a marketing services group; while simultaneously being too bearish about the likely resilience of traditional marketing services faced with digital assault.
A model beset by fears
But they are unlikely to be completely wrong in their assessment. Whether Google, and other internet-focused technology companies, really have the wherewithal to take on the marketing services world remains to be seen. There are, for example, huge cultural and attitudinal hurdles in the area of client service which technology companies seem ill-equipped to surmount. Nevertheless, that’s scarcely an excuse for complacency where the traditional ‘agency model’ is concerned.
It’s a model beset by fears. One whose essentially servile or – if you prefer – dependent nature has made it ill-suited to change when the case for change has become overwhelming.
That passivity has allowed the procurement industry to steadily extract the financial marrow from its bones. And also accounts for the agency business’ inability to take ownership of the creative ideas which are its life-blood. Instead it continues mainly to rely upon the pitch system for its remuneration, a system so statistically absurd, seen in the round, that it could only have appeal for a seasoned gambler.
It is creativity which is the agency business’ saving grace. Call it right brain versus left, divergent versus convergent, ideas versus logic, the industry continues to attract a certain kind of talent that is not interested in, or would founder within, the better paid professions of management consultancy or investment banking.
As Sorrell put it recently: “People in our business are more qualitative, more intuitive, probably more fun.” He’s having a poke at management consultants, which tend to have much stronger senior relations within companies than agencies, but couldn’t devise a creative digital ad, or an inspired media plan, if they tried. They are, however, systematic; and know their worth and how to extract it.
In Sorrell’s opinion, the increasing pressures on the agency business have forced a fairly major change over the past five years. All the global network groups are being obliged to adopt what he calls the Team approach to client service. Operating companies, instead of feuding over the biggest chunk of the client’s budget, must now regroup themselves in customised, virtual agencies. He cites Bank of America at Omnicom, Samsung at Publicis Groupe and Dell at WPP.
Innovation rather than creativity
For Ingram, the accent of change is slightly different. While admitting the primacy of agency creativity as a selling point, he criticises agencies for misconstruing what it is that clients actually value. “The industry needs to be selling ‘innovation’ not ‘creativity’,” he says. “ Everyone wants innovation.” He goes on to point out that 60% of the top 500 global companies incorporate the concept of innovation in their mission statement or cite innovation as part of their strategy in annual reports.
So what is the difference between this ‘innovation’ that companies are crying out for and the ‘creativity’ currently on offer from agencies? “Innovation,” says Ingram, “isn’t just brainstorming 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.”
In other words, agencies must become a lot more knowledgeable about their clients business than they are at present. Creativity has to become part of a process; and, to achieve that goal, the management culture of agencies will need to grow up, so that the operating parts can collaborate more effectively. Or as Ingram puts it, slightly acidly: “The appalling way in which ‘integration’ is widely claimed but rarely embraced is not a good omen.”
Deconstructed, Ingram’s message has spooky similarities to Sorrell’s. Perhaps, after all, they agree on more than they realise.
