Building a new model for agencies and consultancies (en & cn) kevin lee 2011


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If you’re finding yourself in the insight economy, and feel the pains of the industry, start your reinvention by first asking, What’s your specific community of connection? How do you immerse to capture the right, relevant insights and build to provide a unique, value-added professional service?

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Building a new model for agencies and consultancies (en & cn) kevin lee 2011

  1. 1. Building A New Model For Agencies And Consultancies In China And Beyond KEVIN LEE MARCH 2011Reinvention is a constant that all businesses and industries go through. Adagencies, media agencies, market research agencies and managementconsultancies are currently going through one such reinvention, and a dramaticone at that. These professional services help organizations interact and influencethe end individual. They exist and thrive in what I call the Insight Economy.The future for these kinds of companies is not very clear. Industry andorganizational experimentation is happening in all areas. The successful newprofessional service will be one that accurately understands the nature and needsof the new industry environment.The Pains of an Industry:The digital disruption has made interacting with the individual exponentially 1
  2. 2. more complex and nuanced. The plethora of new channels not only makesreaching a segmentation more difficult, but traditional segmentations areobsolete as individualized digital experiences are creating people withmulti-faceted, multi-layered and unique identity points.Digital has lowered barriers of entry to many industries and professionalcompetition is on the rise in all domains. Tech companies are becoming mediaagencies, management consultancies are becoming digital agencies, and digitalagencies are becoming traditional/creative agencies.Competition is not only rising in the professional practices, but where it actuallycounts too: the ability to influence. Digital has enabled each connectedindividual to potentially be the king of their own domain, or the multiple domainsin their sphere of influence. The open stream of consciousness that now existsmeans the work and influence offered by professional services is even more atrisk of being belittled and relegated to irrelevance.The ever-evolving nature of Digital means everyone, including those traditionallyseen as “experts,” has fallen perpetually behind.And so clients have lost confidence in the ability of these professional services toprovide a reliable and appropriate return on investment. If the professionalservice’s influence on the end individual is diminished, if they don’t even knowwhat would influence the end individual, and if they may not even have thecapacity to learn what could influence the individual, why should clients pay?What makes matters worse is that most professional services are still organized 2
  3. 3. in large, lumbering, un-adaptive institutions that derive their revenues fromover-charging on services that are fast becoming obsolete themselves.In other words,It’s chaos out thereWe’ve got our backs to the wallAnd we don’t know what to doSo what is the most promising and versatile business model for theagencies and consultancies in the Insight Economy?Formation & Scale:1) Be Lean & Tactical, Modular in GrowthLets take a page out of the geopolitics strategy playbook. Traditional militaryunits are ineffective in engaging trans-border terrorist groups, but we’ve nowcreated tactical military cells specially equipped to handle specific needs andobjectives in specific circumstances in specific locales. Professional services needto be reformed the same way. No longer can we operate with large, generalistdivisions. We need to live in small cells of tactical units; each designed to be theexpert on a specific purpose, in a specific environment, in a specific localization.Only then can we be flexible and focused enough to stay on top of the learningcurve, and adapt to evolving situations. It’s also cost-effective. Operating asmaller group means the unit can survive at a time when the work requiredbecomes more piecemeal while still requiring a high state of intensity.Lean and focused doesn’t mean alone. Like terrorist cells or elite military units, 3
  4. 4. professional services need to live in fluid integrated networks that work in tandem,coordinated to achieve one objective. Different units of the same expertise shouldbe built in different localizations to master the nuances of the diversegeographies. Professional services should drop in and out of different situations,working with different partners, and solve different problems.It’’s the only way to operate in this influentially-fractionalized environment.2) Be Upward+Downward ScalableFast Company recently published a fantastic article about advertising, and in itthey described a company called Co, a 5-person consultancy that can drawupon a network of 44 multi-disciplinary partner agencies in the event they takeon a project more than their 5-person team can handle. In this way they canscale up and down to precisely fit the project size. In addition, they can invite theright combination of talents together that fit the project scope.Upwards+downwards scalability may not be the most job secure, but its moresustainable than the status quo. Clients and the work require greatercustomization. If you cannot offer the exact solution, a competing team will. Theindustry can no longer afford or tolerate redundancies. Those that expected anadvertising or media job to mean a steady paycheck should wake up. The futureof this industry will look a lot more like the film-production industry, whereeveryone lives project by project.Such frequent scaling may pose problems for quality control, but this is thechallenge of the new professional service. Creating replicable guidelines, 4
  5. 5. procedures and methodologies to ensure highly integrated collaboration fromDay 1 will be the mark of a successful company.Scope:3) Be Highly Specialized, Non-Integrated, and Positioned to Framethe QuestionAdAge published an article by TB Song, Ogilvy’s Greater China Chairman thattalks about the changing trends in China. Song states:“Marketers often spend 10% of their budget to produce the average TV spot and90% to blast it across mass media. In the coming years, budgets will look morelike those of movie studios –80% for production and 20% on promotion. Thestronger the content, the less one needs to spend on publicity.”Indeed, today’s individual will only pay attention if there are nuanced,resonating, and timely personal meanings and relationships involved. But in thischaos its not only content production that will grow, the more important issue iswhat the content production should be, and who it is for?Song proposes that Ad Agency Planners will break away and form their ownniche practices. I agree with Song’s forecast. Successfully answering: “Whatcontent production should be and who it is for?” requires long-term, immersedspecializations in categories/practices to develop the proper insights and trust.As traditional segmentations give way to tribal rituals, secrets, and micro-socialinteractions, the important question becomes which tribe, ritual, secret, andinteraction should the organization/brand be involved with. Only a highly 5
  6. 6. specialized professional service has the chance to answer this question.Specialists need to detach themselves from their present integrated service unitsin order to focus on particular areas and find the greatest relevant value – that’swhat clients are really ready to pay for.Unfortunately not all specialists –and by extension agencies– are created equal.Planners are already positioned to capture high individual value because theyare helping make sense of the chaos, and helping to frame the question. By thesame logic specialized market researchers and management consultants mayhave a similar value-added.This leaves creatives in a particularly difficult position. In an age where one ‘BigIdea’ has a harder and harder time convincing its value and ability to resonate,creatives are at risk of becoming a commodity. The earlier mentioned FastCompany article suggests that the way to capture higher value is for creativestrategists to evolve from story-tellers to story-builders, meaning they curate,participate, and add to never-ending story-lines in co-creation with the endindividuals. This again would need to be highly specialized, as story-buildersneed to be adept at maintaining and innovating intricate interactions that arerelevant to the cultural nuances of the particular community.There are some services following de-integration that will be commoditized, andhave already begun so. Media buying, media metrics, and to a lesser extentcreative production are becoming more interchangeable and will becomegenerally support-services, because they don’t answer the main value question, 6
  7. 7. “What content production should be and who is it for?”.Those that will offer the highest value, and reap the greatest rewards, will bethose professional services that can de-integrate, and be highly specialized withthe ability to frame the question.Value:While the above formation, scale and scope sections deal with organizingoneself for tomorrow’s industry, this value section is about defining anddefending a sustainable positioning.4) Give Free Data-Points, Get Paid for InsightsA great blog article interviewing the founder of PSFK reveals the new nature ofinformation value-creation, and anyone in the business of information–professional services, publishers, media–should pay attention. The small team atPSFK navigates through an immense amount of information and data points at avoracious speed. Acting as a media platform, they freely share and broadcastthe information they come across with the public. PSFK instead gets work andmakes its money consulting on concept development and trends. Theirvalue-added is not from the selection of information they broadcast, but fromlinking disparate data points, synthesizing patterns into insights.Why freely publish what you’re looking at? Shouldn’t keeping it secret give youmore advantage?PSFK has embraced the new reality that information flows free, and the benefitsgained from free broadcast outweigh the loss of potential revenue from taxing 7
  8. 8. that information access. Consider why you use Twitter. What benefits come fromfreely tweeting and re-tweeting all those links? For one, you gain a following ofpeople who begin to associate you as a credible source for a specific kind ofinformation–sounds to me like the best kind of advertising you could hope for.Perhaps more importantly, you build conversations and relationships with agrowing network of like-minded and equally amazing people. A network thatwill elevate the quality of information you consume by in turn sharing with youwhat they’re looking at. In this new insight economy, professional services areonly as good as their information community. The traditional model of marketresearch that ignores community immersion and commitment is dead. Give freedata-points. Build your information community. Get paid for deeply nuancedinsights.5) Narrow-Casted Community ConnectorsYour community is your long-term defendable competitive advantage because itis one of the most difficult assets to build and copy. Ask any Web 2.0 platformand they’ll attest to this. Communities are not just important for social media, butas we’ve just discussed, for professional services as well. Once you haveimmersed yourself with credibility and trust in a distinguishable community,clients won’t just want to draw on your insights from that community, they’ll wantto connect to the community itself. And they’ll hire you to help them do it. This isthe professional service’s next value added beyond insight. This is the realinfluence industry. 8
  9. 9. As a community connector, a professional service will “narrowcast”: strategicallyidentifying and working with a small group of community leaders who influencethe influencers. Each company will narrowcast in the community they’reimmersed in. PSFK offers connection to high-level creative thinkers. Co,narrowcasts from their extensive network of media, branding, technology andother experts in North America. Victor & Spoils, another company mentioned inthe Fast Company article, crowd-sources creative production from their base ofoperations in Boulder, Colorado. China Youthology, the company I help lead,will explore connection opportunities between passionate organizations and theChina youth community.Being a connector can produce powerful win-win opportunities, but can only beachieved by first having credibility with the community. This credibility is rootedin deep immersion, commitment, passion and membership.Where could we see this new model of professional service entermainstream use?It would have to be a place that: a) Clients are willing to try new things and arethirsty for an edge. b) There is less dominance by conglomerate holdingcompanies. c) There is a sufficient supply of talented specialists. d) There is anentrepreneurial spirit by those in the industry. e) There are growing communitiesof interest.I’d say that China has some challenges when it comes to growing the supply ofquality talented specialists, but this problem is already on its way to solving itself 9
  10. 10. as more and more talent migrates to Asia in search for new opportunities. Theother hurdle for China are the clients. It is not that China’s domestic clients aren’twilling to try something new, but the unsophistication, immaturity and generallack of standards in the client-agency/consultancy relationship has in the pastmade progress difficult. A lot of education, hand-holding, and culture-buildingcontinues to be needed. But perhaps this is also China’s saving grace. With lesslegacy impeding the breaking of convention, maybe China will have an easiertime embracing a new agency and consultancy model.However, I can also see other regions being the first to champion this model. Allhave their weaknesses and strengths, but all are in desperate need for change,and a model–like this one–that can help solve their ills. I would also surmise thatthe adoption of this model may arise by industry instead of geography. Adagencies and market research agencies are likely to be the first.Some last thoughts:With all this reinvention going on in agencies and consultancies, the onus isreally on clients. In the new insight economy marketers will not be able to rely ona one-stop-shop to answer all their questions and do all their work. It won’t beonly a matter of assigning budgets and deliberating on pitches. While able tohelp clients frame the right questions and connect highly nuanced strategies, newagencies and consultancies will only be able to add value if the client issophisticated enough to know what kind of professional service they need, andwhat kinds of value creation really matter to the organization. 10
  11. 11. If you’re finding yourself in the insight economy, and feel the pains of the industry,start your reinvention by first asking, What’s your specific community ofconnection? How do you immerse to capture the right, relevant insights and buildto provide a unique, value-added professional service? ***** Kevin Lee Translated by Ogilvy & Mather Advertising Beijing 11
  12. 12. 12
  13. 13. 1 13
  14. 14. 2 Fast Company Co 5 5 44 14
  15. 15. 3 TB Song 10% 90% 80% 20% / / 15
  16. 16. (big idea) Fast Company 16
  17. 17. 4 PSFK PSFK PSFKPSFK Twitter 17
  18. 18. 5 Web 2.0 18
  19. 19. PSFK Co Fast CompanyVictor & Spoils a b c d e / 19
  20. 20. ***** 20
  21. 21. Kevin is COO for China Youthology, where he leads business strategy and contributes as a Sr. Insights specialist. Kevin is a contributing writer at, and in 2009 and 2010 Kevin (@kevinkclee) was named one of the top 25 Twitterers in China by AdAge China and China Law Blog. He also is a respected blogger, writing the well-regarded Kevin has an MBA in Strategic Management from Canada’s #1 business school, the Schulich School of Business, York University.E: kevin.lee@chinayouthology.comB: http://genYchina.comT: @kevinkcleeT (Weibo): @ kevinW: www.chinayouthology.comW: 21