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Why agencies that operate like startups will win out

Why an agency should always act like a startup

Nigel Vaz was right to say that "agencies should act like startups” in his recent inuagural speech as IPA president. Moreover, it’s time we learned from other industries too when it comes to adapting our business models.

Central to Vaz’s speech was his belief that the industry needs to "reimagine" the agency proposition amid a shifting advertising landscape. One of the ways agencies can stay relevant and appealing to clients, he said, is by adopting new business models. "We will launch the ‘Reimagine Challenge’ to encourage agencies to act like startups and explore and develop new business models” he continued.

“The IPA will work with private equity partners and intermediaries to validate new agency models and will extend this to a global initiative – working with our international partners to identify and share new agency success models, to develop a growth mindset, and to ensure we deliver maximum value to our clients.”

Industry challenges

Vaz, as I'm sure most would agree, is bang on the money. But to be fair, agencies have generally always behaved entrepreneurially.

Agencies, I firmly believe, should be constantly in startup or beta mode: flexible and agile, able to adapt to different client demands and environment, and always willing to learn from other industries.

The challenges have never been so acute. There is an urgent need to rebuild trust with clients, who not only are acting more cautiously with their ad spends, but also honing their own skill sets so they can work directly with the likes of Facebook and Google.

Meanwhile, automation and new technologies like AI continue to shape our industry. Those that stand still amid these challenges will struggle.

New model adoption

Today, marketers are confronted with a complex and fragmented agency ecosystem, consisting of agencies that vary in size, scope, and the services they provide. Partly down to clients demanding new services, partly due to agencies stretching skills to take on new business, today's creative, digital and media agencies are a smorgasbord.

In media, broadly speaking, there are three models: the standard model (agency serves client from its own office); implanting (serving client from client's office) and in-housing (a transitional model where agency helps solve a client's desire to in-house in the future).

Ideally, today's fit for purpose agencies should operate fluidly across all three models and, in some client cases, multiple models at one time. Such fluidity demands a tight, trusting relationship between client and agency, as they explore these new models.

Different commercial models

Commission may be the historic standard and potentially most accepted way of pricing media buying, but today clients are looking at a range of payment models which best suit their needs.

One option is to utilise a price stack, offering a variety of different pricing models to clients that are almost ‘menu-like’ in structure, and where clients can opt for more than one to reach their desired outcome.

In the current climate, many clients want to de-risk spend, meaning they are shying away from long-term commitment and shifting away from retainers to more project-based work, particularly with creative agencies. Such work can be difficult to resource, so agencies should set about improving their network of skilled contractors.

Learning from other industries

One significant change in recent times is that automation has taken away a chunk of agency administration tasks, meaning one less way of differentiating individual agencies from competitors. This means there is an even greater focus on other areas where agencies can gain an advantage over competitors.

As an industry, we are, I believe, guilty of underselling ourselves. We need to display more business acumen and learn from other professional service industries. For too long, agencies have given a lot away for free, particularly in terms of thinking and ideas, to clients.

We should take our lead from other professional services, like lawyers, who rightly have no scruples about charging clients for their time and expertise, even if nothing tangible emerges. Likewise, architects rightly expect to be paid for developing the right plan for their building work. So should agencies.

So, I applaud Nigel for his comments. Most agencies are agile and smart operators but we can always learn from other industries. Those agencies which operate in startup or beta form by embracing new business models as well as new ways of thinking will win out.

Neil Collins is managing director, Agenda21

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