Salty

Salty or Swag. the Agency dilemma

Salty^ (adj). Bitterness. Feeling bitter, and being bitter about feeling bitter. To be salty is to be bitter.

Swag^. (adj). Feeling on top. Complete. In control. “I’m swag, that’s swag. That’s swag dude, real swag”.

 

Right now the agency business is salty, really salty, and it shall remain so. CEO’s know it. CFO’s know it. The CD’s know it too. For all our intelligence, creativity, hard work and vision, we don’t make money anymore. We struggle to monetize our IP, and have relied on their production suite for too long. It’s a specific type of bitterness seeing the quality thinking go out the door for next to nix, only to find production rolled up and stuffed by a purchasing department that forces contractual down-cost. No money for your brains, no money for the body (of work). That’s salty.

 

How did it come to this?

 

How easily did it come to this is the real question. Giving away the farm for the cows. Selling the IP as ‘green fees’, trusting the cash from ad production and fee from the account management team. Dealing with the client negotiation on the fee structure (arguing over a 2.4, 2.1, or 1.8 multiple on account management staff cost) doesn’t build value on the balance sheet. Selling the kids, but not the creators… You know it, I know it, and it’s all our own fault.

 

Turning this debacle around is not easy. Some big businesses – communications groups – are now so strapped for cash they’re hobbled when trying to turn around sinking ship by either investing in IP and new services, or buying smarter businesses. Shareholders don’t create value, but they do create a demand for profit that limits the capability of a CEO or Board to build a better business in the mid to long term.

 

4 years ago, I experienced this first hand. My effort to turn around a sinking ship was not the real challenge – been there, done that; the real challenge was to position the business (future-proof it) for genuine growth. That required investment in people and services, and it proved a very hard sell up the line to regional management. They simply saw more cost in an already marginal, if improving, business. Despite making it profitable, this Agency was hamstrung by its balance sheet. Net result? I didn’t want to manage an average shop. Nor did my regional management team, and fair enough too.

 

Now the predators are circling. Media shops. Management consultants. Clients too! KPMG just bought Heat. adweek.com | 29 February 2016
https://lnkd.in/ewYJMbt

 

“We are the single place for our clients to go to connect business strategy with creative strategy and content,” said Andy Main, chief executive of Deloitte Digital. “We combine creative chops with the powerful Deloitte platform to help our clients find their own disruptive advantage.”

 

That is real salty, particularly for the Agency CEO who has no real track record dealing with the type of process management a management consultancy puts in place – their veneer of professional service is so very different to that of an agency. But it is just a veneer.

Agencies produce the best ‘window dressing’ (strategy+creative) known. Hard arsed engineers, sales guys, finance people and operations managers look at what we do and dismiss it, saying “its just advertising”. But it isn’t just advertising, it is the marketing magic that builds the only asset that counts, a brand. It should be one of the most important pieces of window dressing on a client CEO’s agenda. Because if they get it right, sales follow.

Building a brand; It’s easy to say, but as we know, harder to do. That is the real reason most of the big management consultants are so reluctant to enter the agency game, because they don’t understand how to sell intangible concepts like ideas. They don’t really get it. All their training and pedigree in business has been in dealing with tangible assets or liabilities– cash, P&L, sales and logistics. Intangibles like brand values and feelings, aren’t as easily identified let alone measured. The management consultants look at the creative process and it scares them.

 

I had a conversation with the Director of Digital at a massive management consultancy the other day. He said “we love digital production because we can measure it, manage it, and control it. Ideation is a different matter. We are not ready, yet”.

 

Management consultants have the right idea though. Buy the business that can make real conversations around ideation and creative, and combine it with their reputation, processes, and professionalism. Clients gain confidence in a process that is both elevated and illuminated by the veneer of professional consultancy analysis and cost control. That’s swag.

 

What is really swag underscores the key difference between the agency and the consultancy – the consultancy will charge for the IP. The performance of each person working on the client’s business is measured very simply – billable head hours. The management consultancies wmonetize the IP the agencies give away for zip.

 

Interestingly, the PR firms have been monetizing IP for years. But most are yet to enter the big brand game – controlling, growing or re-shaping a brand’s health on behalf of their clients.

 

 

There in is the very salty rub. Agency people have a pedigree for doing the hardest of the hard yards, providing clients with the confidence that the agency product / machine can produce creative that changes the health and wealth of the clients brand and business. But we don’t get paid for it, and now, can’t find a way for charging for it.

 

A senior heavy-weight creative mate of mine posed an interesting question, asking me what I would do. His is client didn’t want the agency to provide a strategic solution that would take weeks to write and deliver, and cost a poultice. The client just wanted 2 hours of his time, because he knew my mate would solve the problem. He said ‘JOC, how do I charge for that?’. I said my Barrister charges $10,000 an hour just to mitigate legal risk, let alone fight a case, and you’re being asked to do so much more, to create brand health and wealth…

 

Our leadership challenge is to up-weight the IP offer by incorporating data and BI into the client conversation, along with the traditional brand management and problems / solution creative ideation.

 

We just have to charge for that work, and not just mere head hours, but charge a fair reflection of the wealth the work creates. Before more jackals* eat our lunch.

 

Now wouldn’t that be swag.

 

John O’Connor

CEO, Elemental

+44 7541 253544

 

 

 

*Jackals? They can’t do what we do. They just feed of our carcass.

^ Definitions supplied by 9 year old skateboarder