Rising From The Ashes: A New Agency Model
In 1975, music writer John Landau penned the famous line, “I saw rock and roll’s future and its name is Bruce Springsteen.” Springsteen’s album Born to Run hit soon after and immediately went to number one, putting him on the cover of Time and Newsweek magazines at the same time. (Trust me—those used to be things and that was a big deal.)
As someone who is perhaps a little too fond of a grand statement, I’m tempted to borrow from Landau and shout that I have seen the marketing agency model of the future and its name is Communo. Like Landau, however, I have a bias. (Landau went on to become Springsteen’s manager shortly after writing those words.) I’m an advisor to Communo and have a financial interest in their success.
With my bias stated, this piece isn’t about Communo—which is not a marketing agency at all but a platform for enabling flexible two-way scale for agencies of any size—it’s about the trends in the shifting marketing agency landscape upon which Communo is built. Regardless of whether the startup succeeds or fails, I am convinced the trends that brought it into existence speak to the agency model of the immediate future. This post is about those principles and how likely they are to shape the changing way you staff, run and grow your firm. It’s another macro trend in the marketing agency world that some people have seen and are capitalizing on and others are oblivious to, as I was until last year.
The Holding Company Model is Wobbling
There’s no need to add to all the ink that’s been spilled on the holding companies’ problems but I’m also not going to get carried away and predict the full demise of a model that still sees five corporations control $65 billion in client marketing spend. Aggregating eyeballs as a means of clawing negotiating power back from the media oligopolies isn’t relevant in an era where media is sold at auction, but not all media is digital yet and there are other advantages of scale. Rest assured, the holding companies will find those advantages and many of the world’s largest marketers will continue to value them.
That said, size isn’t what it used to be. Consolidation in any industry tends to drive prices and margins lower as the larger entities use their market power to squeeze out smaller competitors. As a consequence, the consolidators tend to become efficiencies-driven organizations. As I wrote in Pricing Creativity, the first casualty in the pursuit of efficiencies is innovation. That’s because innovation is inherently messy and wasteful, and efficiency is the elimination of waste. You cannot pursue efficiencies without giving up some ability to innovate. In the creative professions, too much focus on efficiency can make you irrelevant overnight, in part because an operating model of “doing more for less” is not conducive to hiring top creative talent. The biggest problem the holding companies have today, in my opinion, is their value proposition has devolved to “We can save you money.”
And, alas, it’s no surprise that any client that hires a firm because of the efficiencies they promise tends to always want even greater efficiencies. But as the savings accrue, innovation and value creation inevitably suffer. The same clients pressuring their agencies for greater price reductions complain about the lack of creativity and results. It’s a vicious circle of larger firms, lower margins and declining client satisfaction. The world’s largest marketers seem to be embroiled in a contest right now to announce ad spend cuts larger than their competitors. The numbers in the CPG world alone are staggering.
If you’re struggling to find the winner in this model, you’re not alone. It’s hard not to look out into the future and see the largest, most cost-obsessed companies hiring the largest, most efficient agency groups in a battle of mutual destruction, with the less cost-obsessed clients and the less size-obsessed agencies finding innovative new ways to work together.
This is, I think, where we are today: an old model that few are happy with, and a sense that things have to change, but no consensus yet of what that change will be.
Let me take a crack at it.
First, let’s look at some of the large macroeconomic trends that are shaping the way we work and live. When you add them all up, the characteristics of a new marketing agency model becomes obvious, and, unless all your chips are down on the old model, it’s exciting as hell.
The Macroeconomic Trends Changing The Way We Work and Live
Positive-Sum Mindset Instead of Zero-Sum
I’ll begin with the most profound change I see. It’s one that has really caught me off guard.
When I was a young advertising professional much of my attention and that of my colleagues was on stealing clients from our competitors and otherwise beating them in pitches and awards shows. And we competed as fiercely for staff as we did for clients. The advertising business was zero sum. For us to win, someone had to lose.
Part of that was cultural but much of it was simply market-driven economics. We all sold the same thing: advertising campaigns. Today’s fragmenting markets and specialized firms have changed all that. It’s no longer a given that a client’s marketing spend will all go to conventional advertising, or even that any of it will. The trade-offs are far more complicated than “spend on broadcast or digital” or “spend with X agency or Y.”
While the market has changed, most interesting to me is the cultural change. The zero-sum approach to business that dominated early in my career seems to be a relic of people over the age of about 40-45 or so, while those under that threshold tend to think about competition differently. And the younger cohort is onto something because in today’s specialized economy, the economics of sharing—driven by a positive-sum perspective on business and life—are greater than the economics of competition, in which there is only winners and losers.
When I played sports growing up, the prevailing mindset was also about destroying the competition. My kids played some of the same sports I did (like ice hockey) but also ones I did not (Like mountain biking and skiing. I grew up on the prairies, they grew up in the mountains.) When I began to attend the skiing and biking competitions my kids frequented I was struck by how genuinely supportive and collegial the competition was. Opponents rooted and cheered for each other while still competing directly with each other. It was alien to me. That attitude extended to the crowd, too. I remember being at Crankworx in Whistler, BC and thinking that in my day if you had thousands of people jammed together at a sporting event like this, many of them drinking beer, there would be no shortage of trouble, but here there wasn’t even a hint. I was struck by how lucky my kids were to grow up in a time like this.
Then I started to see the same trend in business. Many of the old guard in the agency business still have the zero-sum attitude toward business that dominated early in my career where every social interaction is a measuring up of threats and weaknesses, of successes and failures. If you’re in this cohort you know exactly what I mean. Younger entrepreneurs, on the other hand, tend to have a more collaborative, positive-sum approach to business where the first question is “How can you and I come together to do something that has never been done before?”
That last part—”to do something that has never been done before”—was not the way we thought in my early career. The language I inherited was “build a better mousetrap,” “they’re eating our lunch” and “increase share of…” Those sentiments stand in stark contrast to the rising tide of entrepreneurs today who trumpet Peter Thiel’s admonition that competition is for losers. The mentality today is together we can do something new and special. Yes, I’m generalizing but I see that most people below a certain age are focused on growing the pie or creating a new pie altogether, whereas my generation and older are still largely trapped in mindset of battling for a larger slice of a well-defined pie.
Again, this change is driven in part by economics—technology and expertise is more specialized these days, reducing the likelihood of direct competition and making the fruits of collaboration more meaningful—and in part by a change in culture. I’ll leave it to others to explain the basis for this cultural shift—I don’t fully understand why things have changed in this way, only that they have. And I’m struck by how lucky we are to be doing business in a time like this.
This shift to a positive-sum mindset, built on a culture of sharing and collaboration is the most profound trend for me, perhaps because it’s caught me so off guard. Let me rattle off a few others I’m sure you’re familiar with, then we’ll try to guess where all this is heading in the marketing agency space.
Access Instead of Ownership
People of “a certain age” are driven to own things. It’s not enough for them to just be able to access them—even when the economics favor renting. Anyone only one generation removed from economic hardship sees ownership as an imperative for financial freedom. For people more removed from economic hardship—below that certain age (again, anecdotally I think the threshold is somewhere between 40 and 45 years old)—access is enough. Uber, Zipcar, Airbnb and WeWork are all built, in part, on this changing idea about the necessity of ownership. Again, some of this is being driven by economics but the cultural shift is undeniable.
Mobility Instead of Roots
A few years ago I hired, on a project basis, a video editor who was living in New York. A few months later he moved back to Paris, his home. He continued to edit our training videos on an as needed basis. Then he went to Kyoto, Japan. Then China then Kuala Lumpur, usually going back to France in between. Then back to New York. At no time did his travel affect his ability to do a job when we needed him. I’ve since encountered and even hired many young professionals whose lifestyle is similarly built around mobility and not roots. I see it in my kids, too, who travel further a lot younger than I ever did. A house in the suburbs is not in these people’s futures. Freed from their need from ownership, they’re happier moving than putting down roots.
Entrepreneurship Instead of Employment
Roughly one-third of North American adults are self-employed in one way or another and that number is projected to grow to be the majority of the workforce in just a few years time. Some estimates put the number at more than 70% of the workforce in under ten years. Increasingly, the state of employment is self-employment. I don’t look to Karl Marx for ideas or models on anything, but I cannot shake the thought that his prediction that workers would ultimately own the means of production is coming true, if not via the path he envisioned. He might be horrified at a world where most people are capitalists in some form, although he would no doubt trumpet that in the United States of America, one of the most entrepreneurial countries in the world, the move to solopreneurship has been expedited in recent years by the Affordable Care Act (aka Obama Care) which allows for access to affordable healthcare insurance, previously a barrier to entrepreneurship for the middle class that few outside the US really understand.
Flat, Agile Workforces Instead of Multi-Layered Hierarchies
Another trend lead by technology companies that is having significant implications on staffing everywhere. How many people under 40 do you know who are willing to devote years or even decades to climbing a corporate ladder? The good news is organizations are getting flatter, quickly, in response.
Gigs Instead of Jobs
Just think of how the Hollywood studio system of old, where all assets and talent were “owned” by the studios, contrasts with the production company model today, where independent contractors of all types of skills come together on a project, work intensely for a period of time and then disband. Now repeat across the entire industry: people coming together for a gig, creating value and community, then breaking apart to go work on a different project with different people, or to sit on a beach for a while.
Adding It All Up
The nature of work, and of work/life balance has changed. The workforce today is increasingly collaborative, mobile, project-focused, intent on calling their own shots, interested in working with like-minded people of complementary skills and not likely to enter or stick around in an organization of hierarchies and cost cutting.
Is it any wonder that an agency model that is forcing innovation out of marketing is suffering a prolonged talent crisis that sees good people migrate client-side, to consulting companies or to technology businesses of all sizes?
The future of the marketing agency is not the Hollywood studio model of everyone under one roof. It is pods of creative and differently-skilled people coming together on projects, disbanding, coming together again in different shape and form to work on something completely new, then disbanding again. Breaking when they want to break, travelling when they want to travel. Working from home one day, from a co-working space the next, from their Airbnb loft on the other side of the world the next. The people change, the projects change but the community that binds them all together stays in place.
At the centre, what remains of the old agency model are client relationships, people- and project-management skills, possibly high-level creative direction, and culture. That’s it. Everything else it outsourced as needed. Access instead of ownership, gigs instead of jobs, mobility instead of roots, entrepreneurs coming together to make something great.
And at the heart of it all is something that older firms driven by anachronistic thinking lack: a true culture of collaboration and sharing. A positive-sum mindset that whatever we might do together is likely to be greater than what any of us might do on our own.
What Do The Clients Think?
This is the way of the modern workforce and this too is the way the most innovative clients want to work.
One of the largest seed investors in Communo—a platform that enables the sharing of people and projects—is a veteran client CEO who was fed up with being burdened by what he saw as bloated agency relationships that restricted his ability to be nimble and innovative in his marketing. “The industry at large is broken,” he said over dinner one night. “There needs to be a better way for me, as a client, to enjoy top talent that doesn’t all work for the same shop, or in the same city. I should be able to benefit from the best of the best, regardless of where they are.”
We’ve Been Here Before
In 1993, Hollywood talent agency Creative Artists Agency (CAA), led by super agent Michael Ovitz, hijacked the Coca-Cola advertising account from longtime agency McCann Erickson (now McCann). Those who lived through it remember it was the latest harbinger of doom for the large agencies. In 1993 media buying was just being unbundled from creative, exposing the later to new pricing pressures, and because CAA and other talent agencies represented the best talent, many felt the ad agencies would be squeezed out. Stripped of both media and creative talent, agencies were just a hollow shell. But, for various reasons, CAA couldn’t really deliver, doomsday never arrived and Madison Avenue picked up pretty much where it left off.
Even though it was the beginning of my career, I was a devoted student of advertising and I was certain at the time that we were seeing a shift to a new, smaller, flexible agency model that is rising up today. At the time, however, there were no larger cultural or macroeconomic changes to support it. The revolution died with a whimper. Then last year, at a conference dinner that blended the old firms and mindsets with the new, the difference was so apparent to me that I felt like I was waking from a dream. The old guard were lamenting the state of the business, while still jockeying for position in their shared social hierarchy, and the freaky firms that caused older brows to furrow were launching into these enthusiastic collaborative discussions dreaming up something new they could do together. You can guess which conversations were the fascinating ones.
Creative destruction will get me one day, too. I know it because karma is real and I love creative destruction way too much to not have this beautiful, horrible force turn on me one day. Until then, I cannot overstate how exciting it is to be in business today.
Workspace & Culture Implications
I remember walking into my first ad agency job thinking, “This is the coolest place I have ever seen.” A couple of years later, when I went to work for my first global agency, I walked into that office and once again was struck by the same thought. I’ve long since been immune to the impact of a creative firm’s space. They’re almost all impressive places to work (remember that but for the grace of God you could be working in a bank or a government cubicle), but the profound impact on me is long gone. Last year I walked into Communo’s pilot compound in Calgary, Canada and I had that feeling again. “This is the coolest place I have ever seen.”
Remember your first WeWork or other profound co-working experience? Imagine a WeWork where everyone in it is running a creative, marketing or tech business, every one of which is a possible source of projects, specialized talent for your own projects or collaboration. Instead of everyone being heads down all the time, doing their own thing, there’s more interaction, more shared excitement, more deal flow.
Now reimagine your office as something similar, a co-working space for creative entrepreneurs, all trading projects and talent but with none beholden to the others. Flexible two-way scale for everyone, in a culture of sharing and abundance. Some of you can envision it, and others can’t get past the cynicism of their own zero-sum past. “People actually sharing instead of stealing? I’ll believe it when I see it.” That’s what I thought too, until I saw it.
Not all Communo members office (to verb the noun) at the compound, but many visit it as it is the central repository of collision and culture that permeates throughout the geographically diverse membership. (They plan to quickly add compounds in all major geographic markets as soon as membership hits a certain density.) And culture, in this new flex-scale model where all the pieces are always moving, is key.
When I was a consultant, I would roll my eyes when my clients talked about culture. When I started adding staff and became a CEO I suddenly understand how critical culture was to lasting success. Communo has done what any agency needs to do to succeed with this new model and that’s put culture first. A culture of sharing and collaboration where everybody involved agrees to give to get and everyone is interested in growing the pie or baking a brand new one instead of fighting to make their slice bigger. As Communo CEO Ryan Gill put it, “Knowing that you’re in a real community—that although you give without any thought of return (besides the great talent you get for your project), knowing deep down that community would return the favor many times over if you were in need—that is a powerful motivator and bond.”
Where Do We Go From Here?
Avi Dan, the search consultant and industry observer, wrote a piece for Forbes in September of last year titled What I Would Do Differently If I Started an Agency Today. In it, he lists seven things he would do differently from the traditional model. Six of them are reflected in this new model I have laid out.
Starting a New Firm
If I were starting an agency today, I wouldn’t. I would focus on my strength and perhaps build a small business around it and then build collaborations with other creative entrepreneurs of similar, complementary skills, coming together when needed, breaking apart at the end of a project, always experimenting, always evolving and always ensuring that my business was there to support my life. I would resist the need to own everything under one roof, to pursue size for vanity. If my strengths were client leadership (consulting), selling or project management then perhaps I would start an agency, but let’s face it, it’s been a long time since marketing firms were “agents” of anyone, let alone the newspapers for which they originally sold and hence earned the term. That label hasn’t been relevant for decades and it will likely fade from use in the next two. My agency would probably be called a marketing consulting firm.
Future-Proofing an Existing Firm
Similarly, if I ran a large agency today that was struggling to find relevance, I would scale way down and focus on a few senior people to lead the client relationships, the creative vision and the technology directions. I would give proper project management skills the credit and compensation they deserve. I would build relationships with independent professionals who wanted to come work on interesting projects but who were not on the books full time. I would maintain the ability to swap out talent at any time, with every new project representing a chance to work with someone new (if desired) or old favorites (if desired.) I would focus on culture and relationships. I would let people work from wherever they wanted but encourage many of my collaborators to move in and contribute to a new shared culture. I would make sure a good chunk of the pay that went to my people and collaborators was performance based, therefore that’s how I would charge my clients. As CEO, I would seek out the coolest people—clients and collaborators—who wanted to do the coolest shit with other cool people like them. I would learn to get good at asking, “What can I do for you?” without ever knowing if something direct would come back to me. At the core of it all I would prioritize the ability to scale without overhead, to flex up and down, to choose our clients and projects, to pivot on a dime and to never be burdened by unnecessary overhead, cost-cutting clients or the shifting vagaries of the market.
The Future is Thrilling
I know I’ve plugged Communo a ton here, but I’ll point out again that they are not an agency, but a platform to enable the collaboration upon which the new agency model is being built. Whether it succeeds or fails, Communo has opened my eyes to this new breed of creative entrepreneur and a new way of working. It has caused me to rethink many of my entrenched ideas and behaviors about business and to see that a model that first reared its head way back in the early nineties finally has the social and economic underpinnings to thrive.
Let the old model fall. Let’s do something that’s never been done before.