Ad Agencies Should Disrupt Their Models in 2018

By The Chicago Egotist / / Just Daab, President of Magnani, a Chicago Experience design and Strategy agency writes about the need for agencies to evolve their models. We all know that disruption is the new normal. In fact, it is predicted that only half of companies listed on the S&P 500 today will remain there ten years from now*. But it’s not just the big guys in the S&P who should worry. Agencies need to take a look at their business models and begin to prepare for the wave of disruption starting to wash over our industry. About a year ago, we could feel our business model shifting beneath our feet. Where once we had long-term retainer-based business relationships, we then found one-off projects. Where once we saw the sales cycle from RFP to signed contract completed in 60 days, we now witnessed procurement-managed negotiations taking 6 months or longer. Clients began to view great creative as a commodity and agency relationships as short-term, and yet they still expected, and demanded, that we proactively spend time thinking about their business, beyond the project at hand. Basically, they were seeking all the benefits of a retainer-based relationships with none of the financial commitment. We started hearing the same story from friends at larger nationally known B2C agencies, as well. And reviewing transcripts from their analyst calls, some of the largest global agency holding companies were relaying the same experiences. So, where do we all go from here? Rethink the value proposition. Historically, most traditional ad agencies won business by selling intangibles, e.g.: subjectively great creative. Agencies need to be a part of the strategy and planning conversations (and more importantly paid to do so) far before the moment someone is asking for new creative. If you can, by the time it comes to execute creative against the strategy, you have a nearly unbeatable advantage over any other potential outside partner. Embrace your clients’ I.T. departments. In our history, we have often found ourselves hired by a client to fix or redesign a web or app project that an earlier agency partner created with little or no input from the I.T. department. It’s not surprising then that an I.T. department who had no input on a project would be loath to accept responsibility for its potential failures, opting not to launch or to hobbling features that were deemed “too difficult” to implement. Invest in machine learning and A.I. Today, you can have a relatively one dimensional—though convincingly polite—A.I. bot named Amy schedule your meetings. Provided by a company called X.ai out of New York, you cc Amy (or, should you choose, Amy’s “male” counterpart, Andrew) on any email message where you are attempting to schedule a meeting, and Amy takes over negotiating the date, time and channel/place. While useful and admittedly quite convincing, Amy is a single purpose A.I.—acting within a highly constrained set of rules. For agencies, preparing for competing in the inevitable A.I.-driven future means developing the skills to create data rich user experiences, like Amy/Andrew, that allow for predictive behavioral modeling, precise segmentation, and managing fully-abstracted API-level transactions that can easily manifest in voice, bot, or human driven experiences. But wait there’s more! This is scratching the surface. We have been telling our clients for years that some competitor will inevitably come along and disrupt their business, so the smartest strategy is to disrupt yourselves. Agencies should be looking at this rapidly evolving landscape with the understanding that everything we do and everything we think we know about the industry could and likely will change tomorrow. So, we should change it ourselves. About the Author Justin Daab is President of Magnani, an experience design and strategy firm based in Chicago. The firm works at the nexus of business strategy and experience design, crafting transformational digital experiences that delight users and deliver sustainable competitive market advantages. Daab is also a contributor to the Forbes Agency Council.  *https://www.innosight.com/insight/creative-destruction/