1.
HACKING AGENCY COMPENSATION
JASON DELAND | FOUNDING PARTNER, ANOMALY | MAY 2013
@jasondeland
© ANOMALY 2013

2.
DISRUPTIVE HONEST ENTREPRENEURIAL GUTSY DARING
CAPITALISTS
WELCOME
© ANOMALY 2013

3.
INNOVATION
From one dominant system that levels the playing
field, to more dynamic supply/demand system.
© ANOMALY 2013

4.
LIBERATION
From second guessing if the agency has the best
interest of the client in mind, to knowing fully that the
agency is motivated, incentivized and eager to deliver.
© ANOMALY 2013

5.
BRAVERY
From being uncomfortable talking about money to
being confident and empowered.
© ANOMALY 2013

6.
ENTREPRENEURIAL
From the safety of thin, capped margins to the
higher profit potential of risk & reward.
© ANOMALY 2013

7.
HONESTY
From hiding behind the comfort of legacy input
costs to the naked truth of market forces.
© ANOMALY 2013

8.
SWINGING OR DUCKING
From being nice and weak to being strong and principled.
© ANOMALY 2013

9.
Given all the issues facing mankind today, it can and should be argued that
IDEAS MATTER NOW MORE THAN EVER.
In government, in culture, in business – ideas are all we have left.
An idea is capable of transforming the existence of our species, our economy and certainly the businesses
we work to build.
But this talk is not about the idea, how to achieve ideas, or even how to execute ideas.
THIS TALK IS ABOUT HOW TO VALUE IDEAS IN NEW AND DIFFERENT WAYS.
Something we have never truly understood or done particularly well as an industry.
WE ARE IN A POSITION OF STRENGTH
© ANOMALY 2013

10.
I WANT TO HIRE YOU FOR YOUR EXPERTISE AND YOUR ABILITY TO
CREATE AND EXECUTE TRANSFORMATIONAL BUSINESS IDEAS FOR MY COMPANY.
Excellent, we are ideal for that challenge.
YES BUT BEFORE I HIRE YOU
I HAVE A FEW IMPORTANT QUESTIONS.
Okay, shoot.
What do you mean?
WHY $1 MILLION?
WHAT WILL YOU CHARGE ME?
$1 million dollars for our ability to work with your organization to create the idea, and then if we move it
forward another million because truly transformational business ideas are valuable and in limited supply.
I NEED TO KNOW WHY YOU CHARGED ME A MILLION.
Why?
WELL IF I DON'T KNOW HOW YOU ARRIVED AT YOUR PRICE, HOW DO I KNOW IT’S FAIR?
I don’t understand. What difference does it make how I arrived at the price?
© ANOMALY 2013

11.
WELL IF I UNDERSTAND HOW YOU ARRIVED AT IT,
THEN I CAN NEGOTIATE IT DOWN.
But I do not want you to negotiate it down. That is money out of my pocket.
YES, BUT IT IS A PRIVILEGE TO WORK ON MY BRAND
AND YOU WILL GET LOTS MORE BUSINESS FROM IT.
I will? Can you guarantee that?
The team I said will do the work... and it will take as long as it takes until we have an outcome that everyone is happy with.
OH, BUT I NEED MORE THAN THAT. I NEED TO KNOW WHO WILL DO
THE WORK... AND THE AMOUNT OF TIME IT TAKES FOR THEM TO DO IT.
NO. BUT I STILL NEED TO KNOW HOW YOU GOT TO YOUR PRICE.
Well OK...I looked at the size and scope of the opportunity and considered the value of us addressing it for
you and calculated a price that I am willing to do it for. A price that I believe to be competitive in the market
and a price that affords me the peace of mind that I can make a bit of money.
YES...BUT WHAT IF JUST ONE PERSON CRACKS IT IN ONE DAY...AND YOU THEN EXECUTE
IT WITH A SMALL TEAM IN 3 WEEKS – THAT IS NOT WORTH A MILLION DOLLARS.
You’re 100% correct. It’s worth more.... If that happens, we will double it!
© ANOMALY 2013

12.
TODAY, MORE THAN EVER,
MONEY IS HARD TO COME BY
© ANOMALY 2013

13.
A QUICK HISTORY OF AGENCY
‘COMMODITIZATION’ MODELS
© ANOMALY 2013

14.
15%
© ANOMALY 2013

15.
15% 1985
© ANOMALY 2013

16.
COSTS &
FTE’S15% 1985
© ANOMALY 2013

17.
INCREASING DISTRUST
INCREASING FEAR
DECREASING ‘WORTH’
DECREASING PROFIT
FOUR BIG AND BAD TRENDS
© ANOMALY 2013

18.
IF YOU NEEDED MORE PROOF
HOW MANY PEOPLE, BY SHOW OF HANDS, HAVE NEVER
LIED ON A TIME SHEET?
HOW MANY PEOPLE, BY SHOW OF HANDS, HAVE NEVER
FELT THE PRESSURE TO LIE ON A TIME SHEET?

19.
The vast majority of communications agencies – from
design companies to startups to the largest agencies
on the planet – do not actually understand value
because they price time.
The unintended consequence is you end up in a
conversation about what your time is worth as
opposed to what your solutions are worth.
WHAT YOU PRICE
IS WHAT YOU VALUE
TIME IS FINITE
VALUE CREATED FROM
OUTPUT CAN BE INFINITE
© ANOMALY 2013

20.
“A commodity has a value, because it is
a crystallization of labor. The greatness
of its value, depends upon the greater
or less amount of that social substance
contained in it; that is to say, on the
relative mass of labor necessary for its
production.
The relative value of commodities are,
therefore, determined by the respective
quantities and amounts of labor,
worked up, realized, fixed in them.”
- Karl Marx, 1877
© ANOMALY 2013

21.
MAN POWER
“A commodity has a value, because it is
a crystallization of labor. The greatness
of its value, depends upon the greater
or less amount of that social substance
contained in it; that is to say, on the
relative mass of labor necessary for its
production.
The relative value of commodities are,
therefore, determined by the respective
quantities and amounts of labor,
worked up, realized, fixed in them.”
- Karl Marx, 1877
© ANOMALY 2013

22.
MAN POWER
MAN HOURS
“A commodity has a value, because it is
a crystallization of labor. The greatness
of its value, depends upon the greater
or less amount of that social substance
contained in it; that is to say, on the
relative mass of labor necessary for its
production.
The relative value of commodities are,
therefore, determined by the respective
quantities and amounts of labor,
worked up, realized, fixed in them.”
- Karl Marx, 1877
© ANOMALY 2013

23.
MAN POWER
FTE’s
MAN HOURS
“A commodity has a value, because it is
a crystallization of labor. The greatness
of its value, depends upon the greater
or less amount of that social substance
contained in it; that is to say, on the
relative mass of labor necessary for its
production.
The relative value of commodities are,
therefore, determined by the respective
quantities and amounts of labor,
worked up, realized, fixed in them.”
- Karl Marx, 1877
© ANOMALY 2013

24.
INPUT-BASED
PRICING IS A
BLACK BOX
© ANOMALY 2013

25.
INPUT-BASED
PRICING IS A
BLACK BOX
BENCHMARKS
© ANOMALY 2013

26.
INPUT-BASED
PRICING IS A
BLACK BOX
BENCHMARKS
JUSTIFICATIONS
© ANOMALY 2013

27.
INPUT-BASED
PRICING IS A
BLACK BOX
BENCHMARKS
STANDARDIZATION
JUSTIFICATIONS
© ANOMALY 2013

28.
INPUT-BASED
PRICING IS A
BLACK BOX
BENCHMARKS
STANDARDIZATION
COMMODITIZATION
JUSTIFICATIONS
© ANOMALY 2013

29.
INPUT-BASED
PRICING IS A
BLACK BOX
BENCHMARKS
STANDARDIZATION
DISTRUST
COMMODITIZATION
JUSTIFICATIONS
© ANOMALY 2013

30.
INPUT-BASED
PRICING IS A
BLACK BOX
BENCHMARKS
STANDARDIZATION
DISTRUST
COMMODITIZATION
JUSTIFICATIONS
LIES
© ANOMALY 2013

31.
REFRAMING HOW WE THINK
ABOUT MONEY
© ANOMALY 2013

32.
NOT FOR EVERYONE
I CAN ONLY SPEAK
BASED ON WHAT
HAS WORKED FOR US
© ANOMALY 2013

33.
YOU WANT TO BE THE
BEST VALUE
THE CLIENT’S EVER HAD
© ANOMALY 2013
AND...CLIENTS WANT YOU TO BE THE BEST VALUE
THEY’VE EVER HAD

34.
5 PRINCIPLES
© ANOMALY 2013

35.
THEREFORE WE DO
NOT SELL TIME, EVER.
It encourages more people to take
longer – which is not in the client’s best interest
and is a commoditizing & demoralizing force.
ALL AGENCIES
ARE NOT EQUAL.
© ANOMALY 2013

36.
EMBRACE ANY
MECHANISM THAT REWARDS
THE DIFFERENTIATION BETWEEN
THE QUALITY OF IDEAS.
This aligns our interest with our
clients/business partners
© ANOMALY 2013

37.
OWN INTELLECTUAL PROPERTY.
This increases commercial instincts and liberates the concepts of value, risk
and reward for all client conversations.
© ANOMALY 2013

38.
LEVERAGE DATA
TO PROVE VALUE.
The technology exists to prove effectiveness and
therefore the value you create year-over-year.
© ANOMALY 2013

39.
COMMUNICATE VALUE IN
EVERYTHING FROM
CREDENTIALS PRESENTATIONS,
PROPOSALS, TO EVERY
MEETING, EVERY EMAIL,
EVERY CONVERSATION.
The vocabulary of value will also
infuse into the culture of the agency.
© ANOMALY 2013

40.
3 MODELS
© ANOMALY 2013

41.
OUTPUT-BASED COMPENSATION
This revolves around reaching agreement on what your potential services (and
ideas) are worth to the client and what the opportunity is worth to agency.
For each party that value will vary according to their situation, choices, the need,
their desire for change, the opportunity cost, the qualitative benefits, etc.
All the pressure is then on the agency to drive up the market value: better work,
better people, better results for your clients.
This is almost the purest form of client/agency market forces.
WILLING BUYER &
WILLING SELLER
© ANOMALY 2013

42.
OUTPUT-BASED COMPENSATION
This revolves around reaching agreement on what your potential services (and
ideas) are worth to the client and what the opportunity is worth to agency.
For each party that value will vary according to their situation, choices, the need,
their desire for change, the opportunity cost, the qualitative benefits, etc.
All the pressure is then on the agency to drive up the market value: better work,
better people, better results for your clients.
This is almost the purest form of client/agency market forces.
ENTREPRENEURIAL MODELS
Your return is based entirely on, and proportionate to, the performance of your
ideas in the market place.
These include:
‣ Sharing in the revenue generated by our ideas
‣ Licensing
‣ Equity participation
This is the purest form of market forces in the service industry.
RISK & REWARD
© ANOMALY 2013

43.
OUTPUT-BASED COMPENSATION
This revolves around reaching agreement on what your potential services (and
ideas) are worth to the client and what the opportunity is worth to agency.
For each party that value will vary according to their situation, choices, the need,
their desire for change, the opportunity cost, the qualitative benefits, etc.
All the pressure is then on the agency to drive up the market value: better work,
better people, better results for your clients.
This is almost the purest form of client/agency market forces.
ENTREPRENEURIAL MODELS
Your return is based entirely on, and proportionate to, the performance of your
ideas in the market place.
These include:
‣ Sharing in the revenue generated by our ideas
‣ Licensing
‣ Equity participation
This is the purest form of market forces in the service industry.
OWNERSHIP OF IP
Even more than money this outlet ensures an entrepreneurial culture where all
the focus is on the commercial success of an idea.
This is the purest form of market forces in any industry.
PURE
MARKET
FORCES
© ANOMALY 2013

44.
THIS APPROACH IS NOT FOR ALL, BUT IT DOES HAVE ITS BENEFITS
© ANOMALY 2013

45.
THIS APPROACH IS NOT FOR ALL, BUT IT DOES HAVE ITS BENEFITS
IT’S HONEST.
© ANOMALY 2013

46.
THIS APPROACH IS NOT FOR ALL, BUT IT DOES HAVE ITS BENEFITS
FOSTERS A REAL BUSINESS PARTNERSHIP.
© ANOMALY 2013

47.
PLACES A PREMIUM ON EFFICIENCY AND SPEED.
THIS APPROACH IS NOT FOR ALL, BUT IT DOES HAVE ITS BENEFITS
© ANOMALY 2013

48.
ALIGNS OUTPUT, NOT INPUT, WITH FEE.
THIS APPROACH IS NOT FOR ALL, BUT IT DOES HAVE ITS BENEFITS
© ANOMALY 2013

49.
SETS CLEAR METRICS OF WHAT SUCCESS IS
AND WHAT WINNING MEANS.
THIS APPROACH IS NOT FOR ALL, BUT IT DOES HAVE ITS BENEFITS
© ANOMALY 2013

50.
ALLOWS FOR A RANGE OF ENTREPRENEURIAL STRUCTURES.
THIS APPROACH IS NOT FOR ALL, BUT IT DOES HAVE ITS BENEFITS
© ANOMALY 2013

51.
DOESN’T COMMODITIZE THE AGENCY,
THEREFORE DOESN’T COMMODITIZE ITS CULTURE.
THIS APPROACH IS NOT FOR ALL, BUT IT DOES HAVE ITS BENEFITS
© ANOMALY 2013

52.
INCENTIVIZES THE AGENCY TO OVER-DELIVER.
THIS APPROACH IS NOT FOR ALL, BUT IT DOES HAVE ITS BENEFITS
© ANOMALY 2013

53.
INCENTIVIZES THE CLIENT TO SEE THE AGENCY AS AN INVESTMENT.
THIS APPROACH IS NOT FOR ALL, BUT IT DOES HAVE ITS BENEFITS
© ANOMALY 2013

54.
ENCOURAGES ORGANIC GROWTH.
THIS APPROACH IS NOT FOR ALL, BUT IT DOES HAVE ITS BENEFITS
© ANOMALY 2013

55.
FORCES YOU TO ACT LIKE A BUSINESS
THIS APPROACH IS NOT FOR ALL, BUT IT DOES HAVE ITS BENEFITS
© ANOMALY 2013

56.
AND BEST OF ALL…DELIVERS HIGHER MARGINS
THIS APPROACH IS NOT FOR ALL, BUT IT DOES HAVE ITS BENEFITS
© ANOMALY 2013

57.
ALAS, IT ALL COMES BACK TO VALUE AND CREATING MORE OF IT, EVERYWHERE
‣How you talk about value.
‣How to quantify it.
‣How you practice it.
‣How you increase it.
‣How you judge it.
‣How you incentivize it.
‣How you sell it.
‣How you price it.
© ANOMALY 2013

58.
AN EXERCISE
new client
new contract
new practice areas
new sources of revenue, especially ‘found revenue’
stop collecting timesheet data
dramatically increase exposure to bonuses
embrace royalties and profit-share
create IP
VS.
EVOLUTION OF
YOUR PRACTICES
REVOLUTION OF YOUR
BUSINESS MODEL
© ANOMALY 2013

59.
A PRINCIPLE IS NOT A PRINCIPLE UNTIL
IT COSTS YOU MONEY
© ANOMALY 2013
THANK YOU
JASON DELAND | FOUNDING PARTNER, ANOMALY | MAY 2013
@jasondeland