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The Nimble Advertising Agency
The Nimble Advertising Agency
The Nimble Advertising Agency
The Nimble Advertising Agency
The Nimble Advertising Agency
The Nimble Advertising Agency
The Nimble Advertising Agency
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The Nimble Advertising Agency

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Have we let advertising agencies become dinosaurs? Marketers are looking for effective business solutions, speed and low cost. While many agencies are still enamored by growth in size, stature and …

Have we let advertising agencies become dinosaurs? Marketers are looking for effective business solutions, speed and low cost. While many agencies are still enamored by growth in size, stature and heft.

Here are some thoughts on how agencies can close this gap.

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  • 1. The Nimble Agency by Mike CarltonDescribing an AgencyIt wasn’t so long ago that when someone wanted to learn about an agency thefirst question asked would be, “What are their billings?” The underlying issuewas, “How big are they?”And the answer usually came back as the agency’s figure for annual capitalizedbillings.But capitalized billings, as distinguished from actual billings, was an artificialnumber. It was an arcane calculation based on a multiple of the agency’s grossincome. The intent was to rationalize differences between agencies that placeda lot of media and those that didn’t.Still it was a fake number. While the industry seldom acknowledged it, usingcapitalized billings seriously misrepresented the size of many agencies.As a result the use of capitalized billings slowly lost credibility. And faded frombeing a popular metric for an agency’s size. That measure was graduallyreplaced by headcount. “How many people does the agency have?”Headcount had its problems too. Headcount figures initially only counted full-time employees. Individuals who were totally dedicated to just that one agency.But what about freelancers, part-time people and independent outsourceproviders? To include them some agencies started using the number indicatingtheir FTEs (full-time equivalents).Yet this was also a number that could be something of a fiction.Bigger Was BetterAnd under both metrics conventional wisdom dictated that the bigger thecapitalized billing and the bigger the headcount the better. Marketers andagency leaders placed high value on size. It mattered. And an agency’s sizecertainly provided an important bragging point.Yet this continuing quest to rank an agency by size begged an importantquestion. Did a bigger agency do a better job for its clients? Or return morepsychic and financial rewards to its staff? Or its owners? 1
  • 2. Was size, regardless of how it was measured, the right metric to be looking at inthe first place?Was size just for the sake of size a false aspiration?An Interesting RealityPerhaps the most wonderful thing about the advertising agency business is that ithistorically has regenerated itself from within. There is an old saying that everytime a big agency lays off two people a tiny new agency is born.New agencies provide fertile ground. More often than not, agency innovation hassprung from the upstarts rather than the big established firms. It has alwaysbeen an industry in which the freshest work can come from small new agencies.Often located in areas outside traditional advertising centers.And just about anyone can start a new agency. It doesn’t take much capital orequipment or experience. All it takes to create breakthrough ideas are a fewbright, talented, passionate and energetic people.When you stop and think about it ideas are what are really important. Almosteverything else in the agency business is just window dressing.From the very beginnings of this industry a pattern of creative reinvention hasbeen repeating itself. And it is a pretty good bet that this pattern will continue intothe future.The Price of SizeIt is an almost immutable fact that the bigger an organization gets the lessflexible and responsive it becomes. Like it or not, bureaucracy creeps in. Andsome might even say that size and innovation are mutually exclusive.Some time ago the leader of a very hot and rapidly growing young agency wasasked by the trade press how big he wanted his agency to become. His replywas, “I want to see how big we can get before we get bad.”A few years later when he sold the then much larger and more mature agency toa holding company he told his friends, “I have now found the answer to myquestion.”A World of ChangeGut-wrenching change is upon advertising agencies. Greater than anything theindustry has seen in anyone’s memory. The means for reaching the consumer 2
  • 3. expand almost daily. And consumers are constantly shifting how they acceptcommercial information and how they interact with marketers. The customer isnow firmly in charge of that dialog.So in addition to dealing with this power shift, to be successful an agency has tohave at least minimum fluency in all the various communications tools availableand to know how and when to apply them.This is an incredibly complex job.And unfortunately, one that a lot of marketers feel is beyond the abilities of manyagencies. This is validated by the fact that marketers are increasingly goingdirectly to specialized marketing communications providers thus bypassing theirprimary agencies.Thus many agencies which used to be the custodians of their clients’ broad-based market communications needs are finding themselves relegated to onlythe more traditional media advertising tasks.Their share of the client’s total marketing spend is declining.The DilemmaThe reason for this is simple.The fact is that no agency, no matter how big, can afford to have full-time expertsfor every communications tool or specialty that clients might need. Even theholding companies have great difficulty economically, cohesively andharmoniously fielding all the diverse talent needed to effectively address complexclient requirements.Yet the quest for agency size and stature continues. Offices are plush. With lotsof smiling faces. And lots of conference rooms for those people to gather in. Allbacked up by complex processes and procedures. Within this environmentinternal silos have flourished. So have bureaucracies. And overhead costs.The need for a continuing stream of cash is unrelenting. Payrolls are fixed. Soare most other costs. To support these requires a steady flow of income.But many clients are moving away from the agency of record concept. And awayfrom long-term agency commitments. They have an increasingly short-termproject orientation. They want to accomplish measurable objectives quickly, andat the very lowest possible cost.Smart marketers are not looking for agency flash, show and stature. They areseeking effectiveness, speed and economy. 3
  • 4. Do we have the makings of a big disconnect here? Have we lost our way in thequest for bigness? Are we now in a new age that requires new thinking?Have we in fact let advertising agencies become dinosaurs?Enter the Nimble AgencyDictionary.com defines nimble as: 1. Quick and light in movement; moving with ease; agile; active; rapid 2. Quick to understand, thinkNimble. That doesn’t sound like a bad handle for a 21st Century agency. Thereis no question that the best clients and the best talent both place high value onnimbleness as it is defined above.So the important question is would they use the word nimble to describe youragency? And would you?So, What Does a Nimble Agency Look Like?A nimble agency looks and behaves a lot differently than a traditional agency.Yet some evolved from traditional agencies while others started from scratch.And many of them don’t even call themselves agencies. Nor do the clients thatuse them. But they usually have a number of characteristics in common.Here are some of those characteristics: 1. Solving Business Problems Nimble agencies focus in a laser-like way on one purpose; to solve client business problems. And they do that by changing the behaviors of people in the client’s marketplace. They think and act in a high-level strategic way while often leaving the implementation tactics to others. While they use communications tools to accomplish their goals they see them as the means to the end, not the end itself. The agency is driven by marketplace outcomes not just the creation and production of stuff. 2. Effectiveness is the Metric Nimble agencies measure themselves by effectiveness not size. Size and heft are immaterial. What is important are the behavioral changes they are making with the client’s publics. Tangible, measurable results matter. This is a lot different from the traditional agency metric of selling hours of staff time. The focus is on results, not on billable hours. 4
  • 5. 3. Tiered Staffing Strategy Nimble agencies usually have a three tier staffing strategy. Those tiers are Core, Support, and Contingent. The Core staff is a small cadre of agency principles. Often partners and/or owners. They are responsible for the agency’s vision and values as well as relationships with clients, staffers, suppliers and prospects as well as the agency’s work output and financial well being. They are strategic. The drivers. The permanent part of the agency. Their personal compensation is variable and closely linked to the agency’s profitability. The Support staff is also small and generally made up of bright, young, highly energetic full-time talent. These folks implement the client work under direction from Core leaders. While they have client contact they are primarily tactical. And not necessarily expected to stay with the agency for the long-term. Their personal compensation is also variable and closely linked to the market success of the projects they participate in. The Contingent staff are individuals or organizations with specialized skills who are not employees of the agency. They are independent contractors who are engaged as needed to advise and implement client activities within the scope of their expertise. They can be lone practitioners or specialized companies. They are generally brought in just for discrete projects with their compensation linked directly to the successful implementation of each project. The good news here is that there are an increasing number of highly talented specialists working as freelancers or as part of separate specialized businesses. These resources generally have greater experience and capabilities in their special skill set than anyone the agency could hire full-time. And, they only cost money when they are being used.4. Project Based Business Model Nimble agencies use a business model built around precisely defined client projects rather than agency of record status. Now this doesn’t mean that a particular client does not use the agency on a continuing basis. What it does mean is that each project and each engagement is viewed individually and is priced on its value, not necessarily just its cost. It is important to note that this business model delivers a less predictable income stream than what many traditional agencies would like. And sales costs are generally higher than are typical in agency of record status. 5
  • 6. On the flip side, however, the cost structure of a nimble agency tracks quite closely with the agency’s income. When income goes up, costs go up. When income goes down so do costs. 5. Profitability Trumps Billings Nimble agencies are designed for continuing profitability rather than continuing income. This is a hugely different way of thinking. They expect income to fluctuate quite widely as projects come and go. But costs also fluctuate right in line with project activity. A nimble agency essentially expands and contracts in sync with client demands. Thus, its key financial metric is profit not billings. It has inherently flexible talent costs coupled with low overhead. This gives it great financial flexibility. 6. A Fun Environment Doing innovative highly effective work is fun. And that is an almost natural focus of a nimble agency. The result is that they can be expected to be a fun organization to work with. As the definition states, they are quick and light in movement; moving with ease; agile; active; rapid. And quick to understand, think. The kind of place that the best talent, both internal and external, wants to be associated with. Same for the best clients, too.In short, a nimble agency may not be big but it is very good.The Hard PartStarting a nimble agency from scratch is not particularly difficult. Market forcesand limited capital almost dictate nimbleness. In fact, a startup agency’s verysurvival usually depends on nimbleness. It is intuitive.What is much more difficult is transitioning a traditional agency into a nimbleagency. Much of what a nimble agency is can be directly counter to what peopleexpect from a traditional agency. So there can be lots of ingrained resistance.With many of the biggest changes needing to come from agency leaders andexisting employees.In addition, developing and cultivating a pool of specialized external talent is noteasy. It takes lots of time and effort. But it is a necessary requirement. In fact, itis not uncommon for a nimble agency to view building and maintaining theirexternal talent pool as a top priority, even ahead of new business development. 6
  • 7. Yet with all the challenges, a nimble agency can be a lot more successful, a lotmore rewarding and a lot more fun than a traditional agency. And it fits with thechanging times.Bigger Isn’t BetterAnd wouldn’t it be nice to have someone say about your agency, “They aren’t bigbut are very, very good. And amazingly nimble!” Copyright 2011 – Carlton Associates Incorporated 7

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