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Are Strategic Alliances Right for You?                                          by                                     Mik...
economies of scale. There is no, nor should there be, a standardized   formula.   Yet economic growth in most industries h...
ImplicationsWhat a dilemma! Agencies need a much larger and more diverse talent base.Yet clients are reluctant to support ...
The First StepMaximizing the potential of outside contingency talent first requires a basic shiftin an agency’s staffing s...
continued success it should take on the same importance as new businessdevelopment.That’s a big order. But deep commitment...
adding the discomfort of having a less that enjoyable personal   relationship. Strategic partners should be people who you...
outsiders get everything they need to be effective without compromising       the trust the client has placed with the age...
The good news is that being an orchestrator of a client program is a highercalling which should reduce ongoing fixed talen...
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Are Strategic Alliances Right for Your Advertising Agency?


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In today’s marketplace agencies need a broader range of skills than ever. Yet the cost of hiring specialized talent is prohibitive. Can strategic alliances cure this dilemma?

Here are some thoughts on strategic alliances that may be helpful.

Published in: Business
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Are Strategic Alliances Right for Your Advertising Agency?

  1. 1. Are Strategic Alliances Right for You? by Mike CarltonChangeLike most people, I have considerable ambivalence about change. I love theexcitement and sense of adventure it brings. Change can be energizing andinspiring. It makes the adrenaline pump. And can be a lot of fun too.But I also know how disruptive change can be. It takes me out of my comfortzone. And I’m pretty comfortable where I am right now. So if truth be told, I liketo look at change a bit vicariously while I cling to that which I’m used to.I suspect a lot of agency leaders feel the same way.But of course, like it or not, change is inevitable.And as we all know, the advertising agency industry is confronted with morechange today than it has seen in over 50 years.Some QuestionsNaturally the first question is why are we experiencing so much change rightnow?Next, what are the business implications for advertising agencies?And finally, what can we do to turn all this to our advantage?Four FactsIt appears that this unprecedented period of disruption is being driven by theconfluence of four key factors. They are: 1. The needs of each client are different Now there is nothing surprising here. This has been true since the beginning of time. Every ad and every campaign an agency creates is unique. Creativity, by definition, requires differentiation from what has been done in the past. Fundamentally, every solution an agency provides to its clients must be different. Thus the creative product of agencies does not align with 1
  2. 2. economies of scale. There is no, nor should there be, a standardized formula. Yet economic growth in most industries has come from standardization. The mass production business model has served society very well. Yet, that business model which works for most industries is not really available to advertising agencies. So agency leaders must find other ways to maintain and grow profitability.2. Ways to reach consumers are growing exponentially It used to be fairly easy for an agency to launch a campaign. Success could usually be achieved using only a few communications tools. Maybe print and TV with possibly some direct mail, PR and promotion thrown in. Choosing the tools to reach and influence the target audience was not very complicated. But new technologies have changed all that. Websites, mobile, social, search, marketing automation, etc., etc., have dramatically increased the variety of ways the public consumes commercial media. Not to mention the increase in dialogic communications that has given the consumer a much more powerful voice in the marketplace. And the number of new communications tools an agency can use increases each day. With no end in sight.3. No agency can be expert on every needed tool The variety and scope of the tools needed require a much broader range of talents than ever before. This poses a real challenge for all agencies. Because no agency, no matter how large, can be skillful with every technique that may be appropriate for each client. Highly specialized people are needed. Ones who are hard to find, expensive to hire, and often difficult to keep busy.4. Clients are increasingly moving to project engagements To compound all this clients seem to be moving away from agency of record status and are using their agencies for a series of discrete projects. Thus denying their agencies a steady stream of predictable income. The effect of this change is to create greater volatility, and increased uncertainty, in agency income flow. Thus forecasting staffing requirements more than a few months out can be very difficult. Making it exceptionally risky to hire full-time specialized talent that may be needed right now, but may have nothing to do a few months from now. 2
  3. 3. ImplicationsWhat a dilemma! Agencies need a much larger and more diverse talent base.Yet clients are reluctant to support the cost of that talent except when they needthem. Is there is a Catch-22 here?One might say that it’s a double-whammy that flies in the face of the traditionaladvertising agency business model. That is to build and retain a permanent full-time staff that can meet the full-service needs of every different client.That business model is in trouble. Try as we may, that way of doing businessjust won’t work the way it used to.The Good NewsUnder all this turmoil the reality is that the root needs of clients have not reallychanged. They continue to need their agencies to help them solve their businessproblems. And to do that through modifying the marketplace behavior of theircustomers and prospects. That has been the role of agencies for ever.The other piece of good news is that at a very basic level consumers have notchanged either. While they consume media differently and engage in moredialogic conversations with marketers, their wants, needs, hopes, fears, desiresand pleasures are pretty much the same as they have always been.The Road AheadSo, while change is closing one door it is opening another.The closing door. Agencies can no longer afford to have full-time on-staff talentexperts for every possible tool a client may need. Yet without that capabilityagencies are at a competitive disadvantage. And their ability to orchestrateholistic integrated solutions is diminished. As well as their ability to generate afair revenue stream and equitable profits.The opening door. At the same time, the availability of top-flight contingent talenthas never been greater. This talent can be engaged by agencies on an asneeded basis. And strategic alliances can be the key to opening this door.All an agency has to do is to adjust its business model away from a heavyconcentration on full-time staffers to one with greater reliance on outsidecontingent talent that become the agency’s strategic allies.And thus increase the agency’s capability of orchestrating comprehensiveintegrated solutions using a diverse mix of inside and outside talent. 3
  4. 4. The First StepMaximizing the potential of outside contingency talent first requires a basic shiftin an agency’s staffing strategy. We see this as embracing a three tier staffingconcept. Those three tiers are Core, Support and Contingent.The Core Staff is a small cadre of agency principles. Senior executives, partnersand/or owners. They are responsible for the agency’s vision and values as wellas its relationships with clients, staffers, media, suppliers and prospects as wellas guiding the agency’s work output and financial well being. They are thedrivers. The permanent part of the agency. Their personal compensation shouldbe variable and closely linked to the agency’s profitability.The Support Staff is also small and generally made up of bright, young, highlyenergetic full-time talent. These folks implement the client work under directionfrom Core leaders. While they have client contact they are primarily tactical. Andare not necessarily expected to stay with the agency for the long-term. Theirpersonal compensation should also be variable and closely linked to the marketsuccess of the projects they participate in.The Contingent Staff, your strategic alliance partners, are individuals ororganizations with specialized skills who are not employees of the agency. Theyare independent contractors who are engaged as needed to advise andimplement client activities within the scope of their expertise. They can be lonefreelancers or specialized companies. They are generally brought in just fordiscrete projects with their compensation linked directly to the successfulimplementation of each project.The good news here is that there are an increasing number of highly talentedspecialists working as freelancers or as part of separate specialized businessesopen to contingent engagements. These resources generally have greaterexperience and capabilities in their special skill set than anyone the agency couldhire full-time. And, they only cost money when they are being used.But embracing this model won’t happen by accident. Making a conscious shift inagency staffing strategy is required. Without this commitment there is a realdanger in sliding back into the all full-time employees mode as soon as a fewhigh-profit months come along. Only to be penalized when the next lean periodcomes along.Now the Hard PartHere is where it gets challenging. Building and maintaining a pool of contingenttalent takes time and effort. It needs to be an ongoing effort. In fact, to achieve 4
  5. 5. continued success it should take on the same importance as new businessdevelopment.That’s a big order. But deep commitment is needed. A staffing strategy thatonly gives lip service to contingent talent, or is just a sometime thing, will notdeliver on its potential. And possibly even create more harm than good.In building a successful strategic alliance program here are some things to thinkabout: 1. Chief Talent Officer Up until now, the ongoing attraction, development and retention of talent at most agencies has been kind of an afterthought. It only became critical when a specific skill was needed or when a key person chose to leave. Few agencies give talent development as much priority as new business development or creative. That should change. A function that may have been reactive should become proactive. Building and maintaining a diverse and comprehensive talent pool, including both insiders and outsiders, deserves high priority. A senior executive of the agency should assume the portfolio of Chief Talent Officer. Responsible for assuring that the agency has direct and immediate access to the best possible talent in every discipline. 2. Programmatic An ad hoc contingent talent strategy will likely not work. It should be built around a carefully planned consistent program. One that fits the unique needs of your agency. This is a responsibility of the Chief Talent Officer. It requires building a capabilities pool made up of the best talent available in each specific discipline. These can be individual freelance practitioners or independent specialized firms. And, with today’s communications technologies, they can be located anywhere. The Chief Talent Officer will want to proactively reach out in recruiting, engaging and embracing these folks. Ideally, this should happen long before you have a specific client need for them. Within this circle the agency will most likely establish and in-depth ongoing communication program so that a passion to work together will be there when needed. Avoid the out-or-touch, out-of-mind syndrome. 3. Chemistry First and foremost, life is too short to for any of us to work with people we don’t like or trust. Collaboration with outsiders is difficult enough without 5
  6. 6. adding the discomfort of having a less that enjoyable personal relationship. Strategic partners should be people who you will be comfortable with when it comes time to work together when things get tough and you are both down in the trenches. Trust your gut. If the vibes aren’t right find another resource.4. Client Understanding Essentially the agency is presenting to the client a highly-skilled task- driven team made up of agency employees and outside contractors. The client should be clear on why this team has been created and that the agency is responsible for its leadership and the holistic outcomes it should deliver. The client should never be confused about who’s who or forget that the agency is completely in charge of the team’s output.5. Co-opetition Here’s where it gets tricky. The best talent may reside within potential competitors. And if you want the best talent working with these folks may be in the best interests of your agency and your clients. Co-operating with competitors can require some new skills that haven’t generally been necessary before within agencies. Yet the practice of co- opetition is growing rapidly, particularly within high-technology fields. Now co-opetition opens up an almost Pandora’s Box of special issues. All are solvable but not without some careful thought. And careful attention.6. Legal and Tax The rules on the difference between an employee and an independent contractor are complex and can very between jurisdictions. You’ll want to make sure that your legal and tax advisors sign-off on the specifics of how you engage outside talent, how you pay them and the agreement documents you use.7. Work Ownership Another tricky legal area. You want to be sure that there is crystal clarity on who owns what and that appropriate legal agreements are in place in advance and easily enforceable. And separately, it is a good idea to keep your client fully informed on the steps you are taking to protect them and get their full buy-in.8. Confidentiality This is an area that also takes some careful thought up-front. Establishing uniform ground rules and non-disclosure agreements with outside contingent talent, as well as your own inside people, can make sure the 6
  7. 7. outsiders get everything they need to be effective without compromising the trust the client has placed with the agency. 9. Non-Compete Again, your legal counsel should guide you on setting up enforceable rules and the use of devices like non-compete agreements, etc. Protections must be balanced. Care must be taken here so that the agency’s legal requirements are not so onerous that the best outside talent chooses not to work with you. 10. Scope Definition The scope of the assignment to the outside talent must be precise and continually monitored to assure that scope creep, regardless of who initiates it, is quickly and effectively addressed. Nothing sours the relationship with outside contingent talent more than misunderstandings about scope and costs. 11. Internal Reactions Usually an agency’s inside people work very effectively with outside contingent talent. But sometimes an us vs. them mentality can creep into the working environment. Obviously the strong esprit of the task oriented project team is vital to achieving effective results. 12. Murphy’s Law. It is almost a certainty that along the way something will go wrong in even the best strategic alliance. Misunderstandings and errors happen. It is easy for finger-pointing and defensive posturing to begin. Often at the core is the question of who pays for the cost of the mistake. This is when agency leadership and the leadership of the strategic partner need to rise above the heat of the moment and resolve the issue based on what is in the long-term best interest the client, the agency and the strategic partner. Finding an equitable resolution may take some time and effort but it will be worth it.A Different WorldSuccessful agencies can no longer rely solely on their own full-time staff for allthe solutions today’s clients need. Collaboration with outside talent is required.This in itself is a big change. But perhaps more importantly there is underlyingshift in the agency’s overall role. Avoiding being just a doer of parts and piecesof a client’s program to becoming the orchestrator of a comprehensive outcome-focused program. The one responsible for bringing together and leading the bestpossible combination of talent for each different client. 7
  8. 8. The good news is that being an orchestrator of a client program is a highercalling which should reduce ongoing fixed talent costs and at the same timecommand improved compensation and improved profits.I think everyone would agree that would be a change for the better. Copyright 2012 – Carlton Associates Incorporated 8