Why TBWA\Hakuhodo is betting on hardware as the new frontier for creative agency R&D
How to create better margins without harming culture or creativity is the million dollar question for agencies. In Japan, it’s the 116,451,242 yen question. Not least because the market in Japan, much like the rest of the world, is shrinking, spread between fewer businesses. New business is core but volatile, so creating a service that can more holistically and innovatively serve clients is paramount to long-term success.
Creating IP, and therefore not relying on client sign-off, is one way to go. UK-based creative shop Ralph just had an animation series commissioned and aired by Nickelodeon, for example.
For TBWA\Hakuhodo, its corporate accelerator programme Quantum Accelerator acts as an R&D arm for clients and itself. The latest step in this is a partnership with Hardware Club, a VC that specialises in hardware, with business such as Misfit Wearables, Thync, Edyn, Narrative Clip, Prynt and Reach Robotics, on its books.
Yuta Inoue, director at Quantum Accelerator, says the partnership is about doing something that isn’t its core business of advertising.
“Sometimes it’s not a pure agency or a client. In terms of business development, hardware is more like a combination of innovation and incubation. We leverage core skills such as creativity, marketing, branding and product development, which sit at the middle of the agency and is more usual business, but it’s not 100 per cent pure agency.
“On the other hand, as an agency we are now trying to more actively not only do marketing and branding. We are doing product development and R&D to help clients more holistically. We’ve become more of a partner for the entire business process. In that sense this type of partnership really benefit for us, not just for the [Quantum] start ups but also our business too,” he explains.
While it gives TBWA\Hakuhodo a chance to broaden the agency’s capabilities, it is the core skills of an agency that is appealing as a trade-off for the start ups.
Jerry Yang, general partner at Hardware Club, says, “We’ve moved into an age where many start ups are PR-focused from the get-go. It has implications for follow-up fundraising, visibility to consumers, especially for hardware start-ups as the first sales are actually happening on Kickstarter.
"They need to know community building, comms and PR. These days most start ups will have experience working with a PR firm before even series A funding. You get PR firms that work ways in which they don’t charge cash, they’ll get equity, for example.”
But why a Japan-based agency? The Hardware Club start ups have global supply chains, they also ship globally and, according to Yang, Japan is a core market in their global footprint.
“There’s a new landscape that’s happening now in Japan. It’s an important market. For start-ups to enter Japan, you don’t want them to go there and not try their best, if you fail once, there’s no chance to return again. It happened to Ebay and Walmart twice. If you can win confidence and trust, you’ll find loyal customers. If you do it half-hearted, the Japanese will lose trust or confidence,” added Yang.
Ultimately, the partnership aims to offer three areas of service, some of which aren’t the normal agency bread and butter; helping global start ups enter the Japanese market, likewise aiding start ups in Japan in entering the global market and building collaborations between large Japanese corporations and global start ups.
The Japanese marketing industry set-up and culture has potentially forced such an alliance ahead of time but partnerships with hardware at their core will become more prevalent as wearables and robotics become a more regular part of consumers’ lives.