Agency Models Digital Technology

Huge bets on productization model as it launches Australian operations


By Danielle Long, Acting APAC Editor

February 20, 2023 | 9 min read

Is productization and the value-based compensation model the future of the industry? IPG-owned digital and design agency Huge is putting its weight behind the business model.

 Mat Baxter Ben Skelsey HUGE

Huge launches new business model and Australian operations

Mat Baxter, the global chief executive officer of Huge, says the days of discounted rates, free pitching and undervaluing agencies are over. At least they are for the IPG-owned digital and design agency Huge.

Baxter, once described as the enfant terrible of Australian advertising, is passionate that productization is not only the answer for Huge but also the solution to the industry’s woes. Baxter spoke to The Drum alongside Huge Australia managing director Ben Skelsey as the duo announced the launch of the “creative growth agency” in the Australian market.

“Let’s face it, the current model the industry has is broken,” says Baxter. “There hasn't been a new model that's been proffered for our business or our industry ever. We've been operating in the same mode of operation for decades and decades and decades.”

“The productization model is a radically different model. It's a more stable model, it's a more margin accretive model, it's more generally stable for client relationship model than we've had in the past. And so, we've fully embraced it and taken it on board.”

Huge effectively offers clients a set menu, with the products grouped under three categories, or “gateways to growth”: experience transformation, technology realization, and growth creation. Under each of these categories are lists of product packages, which have been designed and curated to solve “common recurring client problems”. The products have set prices and, once purchased pre-agreed outcomes and timelines.

While 80% of products are foundational and have been built with core ingredients, 20% can be customised for the client's specific needs, bespoke categories, etc.

Transparent, pragmatic and straight-forward

“It's a very transparent model,” says Skelsey, “All the ingredients are on display, in terms of process, rigor, validation, where and when data is used, where and when the bespoke components of strategy and creativity happen, that are customized to them. So, clients can see very clearly, what we're going to do, when we're going to do it, what's required of them.”

Huge launched the new business model last November and has had “multiple clients” buying product packages. Part of the appeal for clients, says Baxter, is that it does away with the need for many of the traditional agency-client structures such as pitching and retained client arrangements.

“We're not pitching, we're not giving away anything for free,” says Baxter. “We're providing product packages with product prices with a pre-agreed set of outcomes. You either buy them at the price that we ask, or you don't. If you don't we respect that that's your prerogative as a client. But that's the model. This notion of just pitching as kind of a random agency giving away a whole bunch of stuff for free. That's over, and that's the beauty of the new model.”

“You buy the product or a series of products. It's got a set timeline, it's got a set price, it's got a set value journey, it's got a set number of outcomes, and you know what you're getting right. It's a much more stable way than a retainer.”

The pragmatic approach will obviously ruffle feathers - does creating a menu of services devalue the work the agency does?

“No, it is the complete opposite,” says Baxter. “The industry has devalued itself for years, selling people at discounted rates, discounted hours, with free pitching, free RFPs and RFQ s, allowing itself to be whittled down to its lowest common denominator under procurement. With this model, products are set at a pre-agreed price for a pre-agreed outcome with a value that is absolutely set in stone and protected. It's value-based compensation. And value-based compensation is the way to protect the industry moving forward.

“Productization is a way of protecting what we do, protecting the outcomes that we create, protecting the pricing that we that we set, and not allowing ourselves to be commoditized to the place that we've been historically.”

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Huge’s system not only cuts out pitching costs it’s also removed office rents, with the entire company working remotely. The Brooklyn-based agency operates an 'experience centre' in the New York City borough, however, the rest of the company is remote. Skelsey, who is based in Melbourne, says the majority of staff are concentrated in the US and UK/Europe with “a few people scattered around APAC”.

“We get the benefit of this entire backbone of Huge’s network, being able to service and answer the client problem, which gives us extra time because we can get eight or nine days in five because of time zones. Equally, it allows us to piece together the very best team for that particular problem. So not just skills and capabilities, but experience in category or across categories, as need be as well,” says Skelsey.

Baxter adds, “I think a lot of clients in Australia are looking to work with international talent, right. Part of our model is about connecting Australian clients to truly global international talent and capabilities. So, yes, you might be an Australian client, but you get to work with an international team that's located all around the world.”

To ensure the business maximises the skills and expertise of its global team, Huge has a database which includes every skill of every person working at Huge. The database is used by a dedicated team design team, whose job it is to find and match the skill requirements for a job to ensure they have the right composition of people, skills, talent and experience to complete the project.

Following the revenue downunder

The launch of the Australian agency comes months after Huge shuttered its Singapore and Japan offices as it transitioned towards its new business model. Skelsey, an Aussie who was previously general manager of the Singapore agency, has returned home to drive the business locally. The launch adds another agency to the Australian market, which is one of the most over-serviced in the world.

“Yes, clients are spoiled for choice,” admits Skelsey. “When they want a new TV ad, they've got 15 agencies, probably within spitting distance, that they can turn to that are all very good award-winning businesses. We're here for very purposeful, predictable growth. We see us being able to deliver the growth of a consultancy, but the creative craft of the classic agency, we're not here communications, we're here to solve problems.”

Baxter says the agency is seeing “really good positive early signs” in Australia. “We've already got an Australian client who's bought one of the new products that we've designed under the new transformation, and early signs are already good. We feel very confident that Australia will embrace what we're selling.”

“We lent too aggressively into Asia,” Baxter continues. “Asia is a market that you've got to be cautious with, China has a lot of challenges associated with operating in it, and so do Japan and Singapore.

"We want to be very purposeful and surgical with how we operate in Asia, we will go where the revenue takes us. We have good opportunities right now in Australia and that's where we're focusing our attention. We think Australia is a strategically developed and creatively developed market, we think there's good opportunity to sell the new product strategy that we've got at Huge in Australia.

"If those opportunities surface in Singapore, China, Japan and other places, we'll certainly look at them. But right now, Australia is definitely our focus in Asia,” says Baxter.

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