SoDA :: 2019 Year in Review

SoDA :: 2019 Year in Review
a global network of digital agency founders, creative innovators and technology disruptors.:
We hope this note finds you closing out a strong year and sailing into a restful holiday. We know that every day in this business can be full of ups, downs, ins, outs and all arounds. If you’re not laughing, you’re crying... and sometimes both at the same time. Here at SoDA, we’re super grateful to work with a group of leaders that embody the best of our industry: restless creative vision, scrappy entrepreneurialism, progressive company cultures, commitment to craft and a generosity of spirit. The SoDA community spans 95 agencies, covers more than 20 countries and represents an incredible network of digital agencies, product design studios, experiential agencies, production companies, digital consultancies and everything in between. And while we continue to diversify the membership, we are all (at the heart of what we do), digital experience makers with a serious commitment to excellence and a belief that everyone in the community stands to gain when we collaborate and share with one another. Just good has never been good enough for the SoDA community and 2019 continues to prove the point. Consider the following: • At the 23rd Annual Webby Awards (e.g. “The Oscars of the Internet”), SoDA member submissions were honored nearly 120 times with a total of 26 wins in the community. Even if you don’t focus on industry awards, this is such an impressive showing and speaks to the innovation and caliber of creative work coming out of this group. • Rob Ford, Founder of the FWA, just released a ground-breaking book charting the history of innovation and creative excellence in the digital world. Web Design – The Evolution of the Digital World from 1990 – Today features no less than 20 SoDA member agencies (current and previous), many of which appear with multiple projects and in-depth quotations. There no doubt this is a group of pioneers, creative visionaries and limit-pushers. • Forrester Research is beginning to amp up their coverage of the digital agency landscape and the SoDA community sits at the epicenter. In a new report released in November (Supercharge Your Marketing With Creatively Focused Digital Agencies – Ten Digital Agencies We’re Watching) 8 of the 10 agencies featured are SoDA members. I like the odds! 2019 was a busy year for us and it’s been such an honor to work with you and your teams. As we look back on the year, we wanted to capture just a sliver of the incredible perspectives, contributions, highlights and good times. We hope you enjoy this year-in-review and, more importantly, wish you and your teams and wonderful holiday and New Year – one that’s full of friends, family, laughter, pets, passion projects and plenty of time to unplug and recharge for 2020. There’s no doubt you’re in great company with the SoDA community and each of you is part of that greatness. Peace. Tom, Kendyll, Lakai and Jess Hello SoDA Community!Hello SoDA Community!
24. Building a Foundation for AI Personalization 28. How the Digital Era Has Redefined Brand Experience 32. How Brands Accelerate Digital Transformation 34. Trends Shaping Tomorrow Global Digital Outlook Key Findings 39. Can SoDA Save the World? 6. Design for Change A Letter from the 2019 SoDA Report Guest Editor 8. Digital Disrupts Digital: Adapt or Die? 10. Do Good Now 5 Non-Negotiables for Taking Your Brand Into the Future 13. Project Profitability (aka Unit Economics) 20. Room 250 22. Effective Capacity Planning is Rooted in Tools, Communication, & Team Alignment 40. A Case for Agency Design Systems 42. Building the Best Personalized Experience for Your Consumers 44. The State of Augmented Reality 47. Excerpts from The Tao of Digital Agency Profitability 52. The Agency as Innovator 2. 2019 SoDA Members 4. 2019 Highlights 54. SoDA Members Making History 56. Board of Directors 1630 CO NT EN TS 31
It was a busy year for the SoDA community and our efforts focused on collaboration, knowledge-sharing, research, thought leadership and best-practices discussions. This is just a snapshot of some of the programs and resources released in 2019. SoDA resources can be accessed on our primary website at www.sodaspeaks.com and through our member portal at www.sodaspeaks.com/member-portal. 2019 Program Highlights 4
5 Benchmarking Studies - Salary & Compensation - KPI Financial Performance - Global Trends in Personalization - Operational Performance Measurement - Future Agency Model - Global Digital Outlook SoDA Sessions - Trends in AR, VR and Mixed Reality (B-Reel in Venice) - Musings on the Industry (Big Spaceship in DUMBO) - SoDA Meet-up at SxSW in Austin SoDA Report On Series - Agency Operating Practices - Global Trends in Personalization - Trends in AR, VR & Mixed Reality - Metrics that Drive Business Excellence Webinar Series - Equality, Diversity & Inclusion - Conversational AI in Retail - CMO Guide to Personalization - A Sound Approach to Designing for Voice And many more... Global Member Meeting The End of the Beginning (Nashville, TN) Virtual Creative Jam for Good A partnership with SoDA, Adobe XD and the Made of Millions Foundation Executive Forum Discussion Threads A vibrant and always-on knowledge exchange with 300+ leaders across 20+ countries on nearly any aspect of running your business – operations, finance, legal, talent, sales/marketing, strategic development and more.
D esign for change. It’s both a call to internal action and a promise to market for the agencies that make up SoDA. Most of us carved out our niche as digital agencies and production shops before digging our way up, out-and-in to roles as the AOR, innovation partner, product company and so much more. And all of us are driven by an existential question that can either trigger dread or make you dream: are we still relevant to our clients? And can we help them stay relevant to theirs? And if so, for how much longer? We used to be able to roadmap our tech stack and talent needs to the beat of a three-year digital drum. Today? We’re happy if our position and proposition can survive the calendar year. As our industry con- solidates, we end up racing to the middle, with the distinct lines of separation between networks, digital indies, consultancies and the variety of innovation, product and production offerings not just blurred, but forever broken. Design for change means finding higher ground, that’s the only way to stay relevant and stay a step ahead in the eternal race to the bottom. And that’s not just our challenge. Brands and businesses across industries know one thing for sure, change is either here or it’s coming soon, and the next wave of technology, user behavior and digital service will either wash you away or lift you up. Again, that can trigger dread, or it can make you dream of new models; new ways of working and creating value. Wake up any SoDA member in the middle of the night1 and we can recite the industry expectations: deliver it faster, for less, and show that it drives results. Manage that? Great! Welcome to the middle, a circle pit of (c)agencies2 and “partners” jos- tling for position with creds, decks and pitches that are interchangeable to most clients. The irony has always been that for an industry selling the value of distinction, so few of us are distinct3 . Higher ground means being able to help clients inno- vate, shepherding their ever rising digital spend to and through the right platforms and channels, and providing transparency so they can launch and learn. It’s about supporting in-house teams—and maybe even helping staff them—taking short term cuts to client revenue to maintain long term relationships. It’s about finding comfort in clients that might no longer be retained by contract, but become retained by the nature of your ability to plug and play into whatever happens now, what’s near, and what comes next. Design for Change: A Letter from the 2019 SoDA Report Guest Editor written by wesley ter haar
For many SoDA agencies this is where we can make a true difference. We are, above all else, a network of entrepreneurs. Our services and products are a base- line, the middle if you will. It’s high time we focus not just on our own revenue and growth, but start selfishly extending that to our clients’ challenges and P&L’s. If we don’t, many of them won’t be here five years from now. Let’s scale up the idea of the agile product owner to the breadth of our clients’ business and own our entrepreneurial distinction. It will allow us to be consultative and creative in ways that others can’t, and flexible in ways impossible to implement for many. On a personal note, I believe the best version of our company is a perpetual motion machine. Never settling or finding its final form. Our ability to change, both in small ways and big, is in direct correlation to the growth of MediaMonks. Growth is driven by two key components: the ability to handle stressors and friction—both in ample supply in an ever-changing landscape—and finding space. Finding space gives the ability to see, and then move into areas of growth. Our recent merger with S4Capital is an example of that, a broad and brawny call to change the status quo. To strip away silos, integrate production and performance, and take a stand that creative, quality, and craft combined will forever be a distinction worth paying for. Finally, this leaves me with my hope that you enjoy this year’s SoDA Report, delivered in close collaboration with our friends at Forrester and the input from the biggest collection of dreaders and dreamers in our industry. Welcome to the front-line of change, and as you read this, keep in mind that our members are already thinking about what comes next. • 1 They’re probably still awake thinking about this, it’s what we do 2 I hear consulgency lost out by one vote 3 Google “700 ad agency philosophies and taglines” for a depressing scroll session Wesley co-founded MediaMonks in 2001 to wage war on mediocre digital production, working tirelessly to grow it into a creative production powerhouse with global reach and recognition since. Acting as MediaMonks’ COO, Wesley’s a self-described ‘lifeline for deadlines’ and ‘Project Manager of Project Managers’. Next to MediaMonks, Wesley sits on the board of S4Capital, alongside Sir Martin Sorrell. “It’s about finding comfort in clients that might no longer be retained by contract, but become retained by the nature of your ability to plug and play into whatever happens now, what’s near, and what comes next.” 7
I n the past 20 years we have seen digital technologies disrupt every facet of the economy. We have watched Napster and Spotify revolutionize music consumption, Netflix challenge film and TV production, and dominant companies like Kodak and Nokia disappear in under a decade. As leaders of digital agencies we have always been the beneficiaries of this disruption—from designing and building websites to developing products and applications, we have helped our clients navigate a new digital economy. However, in 2015 as I set about to prepare my annual ‘Noise Vision’ presentation, I was struggling to find a core theme that I could communicate to my team—what were the new technologies or platforms that we would need to master? In past years, I pronounced the ‘year of mobile’, ‘the year of social’, or the ‘year of data’ and so on. Staring at my screen for hours only increased my anxiety over what I knew was coming… Digital is disrupting digital. After 20 years of consulting with our clients I knew that there was one immutable truth, digital is the great invisible hand of disintermediation. If our clients were in retail, manufacturing or CPG, we advocated the value of transforming around a direct to consumer model—a digital experience predicated upon a personalized data driven strategy. “Know your data, know your customer,” we preached. Now it was our turn, I could see the signs and I knew we would need to design a new business model to succeed in a world of production commoditization, shrinking margins and intense competition. We all know the agency model is changing. Big or small, we are all reacting to fractured customer behavior, the death of brand advertising as we have known it, massive disruption in retail and a persistent deflationary economic environment. I knew that adding new services or hiring a few data scientists would not be enough to stave off being disrupted. Noise needed to transform the way in which we created value, not only for our clients but to ensure our business survived. 8 Digital Disrupts Digital: Adapt or Die? written by Trevor Carr “We are all reacting to fractured customer behavior, the death of brand advertising as we have known it, massive disruption in retail and a persistent deflationary economic environment.”
We have seen economic value shifting from pure mon- etary denomination (profits) towards ‘owning’ the relationship with consumers through data. A Sybase study by the University of Texas “Measuring the Business Impacts of Effective Data” found that a 10% increase in actionable data for a typical Fortune 1000 company resulted in a $2 Billion increase in revenue. Amazon and other platform companies have built their entire businesses on this premise. For an agency like Noise, we needed a new value proposition that leveraged our customers first party data and delivered personalized experiences at scale. Faced with these current realities, I decided to pull off the proverbial band-aid and re-build Noise with a new agency vision—Agency as Platform (AAP). This vision was based on Noise’s experience utilizing algorithmic data platforms like DSPs and DMPs that allowed our media and analytics teams to leverage data for buying media. Using data as our connective tissue we separated the platform from the consulting business, allowing us to shift from a linear ‘pipeline’ to an exponential organizational framework—we needed to achieve scale without the traditional overhead increase. Noise was re-positioned as a marketing consulting company that leverages technology to help our clients achieve digital transformation using their own data. In parallel, we launched our new company: Fastloop, a marketing platform that helps translate data acquisition into customer acquisition. Fastloop integrates paid media and owned data with sophisticated attri- bution and analytics models to surface performance and marketing insights allowing our customers to make impactful business decisions. The launch of Fastloop is perfectly timed in a marketplace where CMOs are increasing spending on in-house capabilities like programmatic media buying as well as increasing investment in measurement and analytics capabilities. So, how is this a platform and what do I mean by an exponential framework? I’ll borrow a quote from Bill Gates to explain what I mean: “A platform is when the economic value of everybody that uses it, exceeds the value of the company that creates it.” This is the philosophy Fastloop was born from, as we add more data to the Fastloop platform our customers derive exponentially more value from the platform without incurring incremental cost—the more data we generate the less cost we spend on leveraging it. Our revenue model has also shifted to include both a managed service offering as well as a self-service one that will allow for clients to transition key data and media buying functions to in-house teams. The collection, processing and use of first party data will become the critical competitive advantage for modern enterprises. From my perspective, data has replaced brand as the key metric for success for all marketing endeavors. As the cost of data processing and technology continues to decrease, the cost of entry will only become easier for small start-ups who can design, deploy and sell a product in a matter of months. This paradigm shift will continue to become a significant challenge for large CPG companies who are handcuffed by complex product development and retail logistics. Noise was able to transform our traditional digital agency model by developing a new ‘agency as a platform’ model that is feature-built for a new ‘exponential era’. An era where data becomes the true measure of economic value and influence. This era is forcing us all to adapt or die. What will you do? • Trevor began his career in 1996 by taking a Senior ‘New Media’ Director role at a boutique agency in Los Angeles at a time when animated Gifs were at the pinnacle of innovation. After two years in LA, Trevor started to refer to himself in the third person and knew he needed to come back to Canada where he set up his own digital agency in beautiful Vancouver, B.C. Presently, Trevor runs the strategy and media departments at Noise; in addition to his executive role as President and CEO. 9
F L C B T he millennial demographic tsunami coupled with a rising tide of technology washed away traditional marketing practices driven primarily by “selling” and created a new landscape for companies. And what’s one big demand Mil- lennials bring to the checkout counter? Increased social responsibility. Every brand must take heed or miss out on the projected $1.4 trillion Millennials will dump in the retail market by 2020, according to Statista projections. To earn that business, companies – and the agencies helping them – must do good now. We’ve com- piled five key principles for doing good the right way. Even if you or your clients already do good, refining according to these principles is essential for future success. Create something good that lasts. Everyone loses when lowest price is the focus. Creating beautiful, useful things that last for a long time has become a clear differentiator. This holds especially true for younger shoppers. Plus, it’s hard to compete on price alone. You can’t beat Walmart, Target, Amazon or other big box retailers at their own game. When you emphasize lasting value instead, the rest falls into place. Conscious consumers are reject- ing the pervasive, one-time-use culture and seeking products they can rely on – goods with a story, dise, the people you hire and even how to speak up when political controversy erupts. Look to the long term. It makes things “stick.” Change doesn’t happen overnight. Especially when you’re meticu- lous about crafting a systemic approach designed for the long haul. Consider the “stickiness” adidas created through their recent collaboration with Parley for the Oceans. In 2015, adidas made waves when it partnered with aquatic advocates Parley for the Oceans to give plastic beach waste a second life as performance footwear. The adidas x Parley Ul- traBOOST collection launched using Econyl thread, a technical fiber made from this plastic trash that functions like nylon. Each shoe removes 11 plastic bottles from oceans and beaches. Designing for the long-term means committing to something that’s bigger than your brand alone – and that’s a story people want to hear and join. Fill the room with people who know more than you. If you’re the smartest person in the room, you’re in the wrong room. Gather in people who know more and have different strengths to fill gaps or weaknesses. It’s important to talk to the right people, or rather, listen to them. These conversations should be ongoing and constantly evolving, things that get better with age. Your customers want to feel good about what they wear, use and consume. Brands who don’t embrace this shift are bound to find themselves designing for the landfill. Be mission driven. It attracts the RIGHT customers. We live in a polarized world, which makes it increasingly difficult for brands to avoid taking a stand. So how do successful brands navigate this landscape pockmarked with sensitive pitfalls? Know who you are. Understand your mission. And align everything you do around that. A few years ago, “authenticity” was the big buzzword. Brands needed to be “true to themselves” and own the good and the bad of their business. But being mission-driven goes deeper. When your brand is driven by both values and purpose, you don’t just know who you are, you know who you WANT to be, and you work to get there. A mission-driven company understands they’re not perfect, but they have a roadmap in hand for making the world a better place. Reframe the idea of your brand, your ethos, your place in the world. Know what sacrifices you’re willing to make in order to do the right thing. Think past the obvious environmental impacts to the people crafting your merchan- 11
H just like our world and the marketing landscape. Keep an eye on what your colleagues and competitors are creating and doing. When we collaborate and inspire each other, creativity increases and innovation makes the world a better place. Have hope. It’s worth it. The next chapter for the fashion industry (among others) will unfold only through innovation, prac- tical action and a commitment to working toward the solutions. A perfect example: The Amster- dam-based organization Fashion for Good. They promote collaboration around circular fashion, or the idea that conscientious consumers shop for VALUE and buy things that last. All in all, there’s a lot to be optimistic about. The founder of Taylor Stitch said something that’s really stuck with us: “I believe business is the best source of change. I think profits mean you have money to do something good.” Wow, right? Maybe that’s not how the average CEO sees it. But if you want to be mission-driven, this is a good place to start. • Heather McWilliams Mierzejewski joined VOLTAGE in 2015 after escaping journalism’s tentacles. She crafts accu- rate, relevant and creative copy and thrives in detail-oriented, deadline-driven situations. She relishes telling clients’ stories and is dedicated to teamwork, quality and connection. She’s passionate about innovation, creativity, and people. “I believe business is the best source of change. I think profits mean you have money to do something good.” 12
Project Profitability (or “Unit Economics”) is a profit and loss measure of a firm’s smallest economic unit—a project. It is a fundamental KPI for agencies where project teams operate with a high degree of autonomy. A well-conceived and executed process for managing unit economics allows agencies to quickly and confi- dently assess economic performance (at any level of granularity and cross-section) so that management attention can be optimally focused (on economic issues or otherwise). The resulting operational maturity is essential for managing operations at scale or during rapid growth. Unfortunately, many agencies struggle with the process of managing unit performance. As identified within the accompanying research, only 20% of agency respondents report using partially automated systems for tracking profitability. Most agencies rely on a collection of point solutions rather than a Pro- fessional Services Automation system (a “PSA” where time, resourcing and commercial terms are integrated within the same system. It isn’t surprising that 84% of agencies report regular budget overages on projects. If you are looking to upgrade your process for managing project profitability, consider the following: It Is A Process, Not Just A Measurement • Cadence – Bad news doesn’t age well. The goal is to be able to react quickly to mitigate issues. For most agencies, a weekly meeting will allow account/project managers to take action before it is too late to: make design and scoping decisions, manage client expectations, team changes, initiate change requests, etc. • Set red, yellow, green targets for Gross Margin and RPH and share them widely. I believe that 50% gross margin is a reasonable starting place for most agencies. Rate per hour is highly variable based on your location and associated labor costs. • Pricing – Start measuring profitability in the sales process when determining the price—this will provide valuable insights for pricing future deals, managing risk and help reduce finger pointing after kick-off. • Focus on forecasting future performance. The past is only useful as an indicator of what will happen tomorrow. Conversely, one definition of insanity is doing the same thing over and over and expecting different results. A PSA will point you where and how you need to take action to change outcomes. • Track changes from week to week. By watching the changes over the prior 4-5 weeks, you will be able to see underperformance trends as they emerge—don’t wait until you cross thresholds to take action. • Your process should include your partners/execs, heads of account and project management and possibly other departmental leaders. Automation • The system that is used to assess profitability needs to be 100% automated1 . Time cards, scheduling (and contract changes) are the inputs and revenue, costs and gross margin are the outputs. • Full automation almost definitely means you need PROJECT PROFITABILITY (aka unit economics) Written by Tamir Scheinok 13
to purchase a PSA system. The core functionality of a PSA has time entry and resourcing at its core. Once a project is set up with bill rate, cost rates, and commercial terms, time (past) and resourcing (future) you can report on revenue, costs, and profitability in an automated manner. It is imperative that time, expense, resourcing, and commercial terms are in the same system—integrating different point solutions won’t work nearly as well. 1 I am not exaggerating about this point. Aside from time, schedule and contract inputs, profitability reports need to fully automated. If not, the manual step (and persons who take it) will be a bottleneck or worse. Teams should be able to assess profitability from the PSA directly and independently. Consistency Is More Important Than Accura- cy – This is NOT an accounting exercise • Consistent Measures. It is essential that the assumptions used to measure profitability (e.g.,cost rates) are consistently applied across, people, projects and periods – this will enable high-integrity comparison between project types, periods (proposal vs. completion), and different teams as economic performance is impacted solely by how much revenue is generated and the hours (and cost rate) consumed in the process. • About once a year you can assess if changes to cost rates are needed. It is better to add a few percentage points now to account for inflation and go 2-3 years without requiring modifications. • Simplicity will help you achieve consistency. For instance, use average salary not actual salary to calculate cost rates. Organize your staff into groupings (or band – 8 is more than enough, even for large organizations) and use average salaries for each group. With this approach, for example, the cost of two different Sr. Engineers will be the same, even though salaries can vary across a group by 20-30%. Each line on your Bill Rate card should have exactly one cost rate associated with it. • Don’t take overtime or exempt salaries into account. The 41st hour should be treated the same as the 1st. • Keep utilization assumptions simple (which are part of labor costs – see below)—use one number of the whole agency and be conservative (e.g., 1550 billable hours). • Be careful to avoid creating incentives to use freelance labor. If you need to artificially increase cost rates for freelance labor, do so by applying a load factor. • Be conservative. It is better for your measurement process to indicate slightly worse performance than reality. • Pay attention to differences between your average project gross margin and the gross margin on your income statement. Large differences suggest issues with your cost rates. Measurements Percent Complete = Actual Labor / (Actual Labor + Remaining Labor) Labor can be measured as Costs (best) or Hours Revenue to Date = Percent Complete * Total Con- tract Value Works for T+M and Fixed Fee Current Period Revenue = Revenue to Date - Sum of Prior Period Revenue The math looks simple here, but you really need a PSA to track revenue. Direct Costs = Costs Associated with Fulfilling Contractual Obligations (Loaded Labor and Expenses) Do not include sales costs 14
Loaded Labor Costs = (Annual Salary * Payroll Tax and Benefit Load) / Billable Hours Per Year For Example, $100k per year employee has a $78 Cost Rate Per Hour ($100,000 * 125%) / 1,600 (be realistic and conservative) Gross Profit = Revenue - Direct Costs Gross Margin = Gross Profit / Revenue Rate Per Hour (RPH) = Revenue / Hours Pulling It All Together • Get a PSA. • Validate/Audit your Bill and Cost Rates. • Set Targets for Gross Margin and RPH. • Integrate these principals into your pricing process. • Meet with core team frequently (weekly, one-hour, regular time). Finance scrubs numbers for data validation (did hours get added before the change request was added?). • Review the projects below thresholds or with biggest movement from the prior week. It should be obvious to everyone where attention is needed. • Test your assumptions periodically (hopefully not more than every few years) With success, this will free up more time to focus on the work. Good luck! • Tamir Scheinok is a co-founder of Fluid and was COO and CFO from 1999 until Fluid was sold to Astound Commerce in 2018. Astound is a digital commerce agency with operations in North America, UK, Germany, Colombia, and Eastern Europe. 15
One of my favorites! The city, venue, people and smooth operations made it one to remember. Johnathan Tann, SoDA Board One of, if not the best GMM I’ve been part of in my 10 plus years attending! Andrew Howlett, Struck This year’s GMM was really amazing, I felt the content was above the standard we had previously set and the flow of the event was really great. The venue was fantastic, creative, great energy and the audio system was perfect. A Great GMM! russ Whitman, globant
Great exchange and inspiration. Frankly speaking, the conference exceeded my expectations, I’ve rarely been on a conference where I could get so much for my business and me personally out of it. Christopher Roskowetz, Jung von Matt/TECH group hug X hot coals in my undies (nurture and challenge in equal measure) jonathan hawke, Resn Felt this was the best year, yet, that I’ve attended. The scheduling of keynote and member speakers was really great. Kemp Attwood, Area 17 I’ve been told for years now how incredible, how cathartic, how interesting, how humbling GMM is. And I was like yeah, yeah, yeah but it turns out it’s even more amazing than what it was explained to be. I learned so much, met so many amazing people and had so many valuable conversations. Katherine Cochran, metajive
F irst, a quick intro. My name is Halli. I am the founder of an agency called Ueno. And I am in a wheelchair. These facts will be important later, I promise. And now, the story. Last August, we at Ueno had our third annual retreat. During the retreat all our offices come together to work and play for a week. This year we all went together to upstate New York. We stayed at a hotel that was supposed to be accessible for wheelchairs. In theory it was. But as is often the case, it really wasn’t. There were accessibility issues here and there that ranged from mildly annoying to semi enrag- ing. But the biggest one, and the one that broke my heart, was a surprise to even me. We had a couple of last-minute cancellations and because of that we had an empty room that we didn’t use for our employees—Room 250. Some of our people decided that this would be a great place to gather one night. People came to Room 250 that night to have fun, they laughed and drank and played and sang. By all accounts it was a great night. But as I was making my way to the room, I quickly found out that there was no elevator up to the second floor. There were only stairs. And wheelchairs famously don’t go up stairs. I didn’t tell anyone at the time because I didn’t want to make a big deal out of it. I didn’t want to show my pain or break their fun. To fully understand why this was a big thing for me you need to know my history. room 250 by Haraldur Thorleifsson
You need to know about the time my friends went backpacking through Asia and I wanted to go so bad that it physically hurt. But I couldn’t because the hostels and trains were not accessible. You need to know that I once went to Disney- land and after looking for a while I finally found a ride that I could take. Only to find out, after waiting for 30 minutes in line, that it actually wasn’t accessible. I had dared to think I could participate, and I was so devastated when I found out that I couldn’t that I broke down crying in front of my daughter. I was 37 years old. And, you need to know that even though I try to push myself, sometimes I self-select out of situations if I think there is a possibility that the location isn’t accessible because it’s so hard to handle the disappointment and the anger. And this might sound weird, the humiliation. But even if you know all of that, you still don’t know me. You don’t know about all the thousands of things that have happened to me. And you don’t know how all those things came flood- ing back when I couldn’t get to Room 250. In isolation not getting to one room, one night, is not a big deal. But nothing happens in isolation. At SoDA, we all work at places that have different people with different backgrounds and different stories. Some of their stories will be about how their gender or their identity was used against them. Some of them will be about how the color of their skin has been systematically used to push them down all their lives. Their stories will most likely include a mix of a few deep cuts and hundreds or thousands of papercuts. Big and small interactions every day that constantly remind them of the limitations the world has created for them. As leaders it’s our duty to understand that when someone speaks up about something that to us might in isolation not seem that big, they are coming from a place we might not fully understand. They are often coming from a place where that incident is just one in a long line of injustices. When they do speak up, our first job is to listen. Our second job is to applaud them for speaking up, so we can create a culture where people know they will be heard and supported. Where all voices are included and welcomed. We all have our Room 250. We all have pain in our lives that nobody else will ever fully understand. Talking about it won’t necessarily solve everything, but from experience I can tell you that finding people that are willing to listen without judging or pitying is extremely validating. • Haraldur “Halli” Thorleifsson is the founder and CEO of Ueno, a full-service digital agency with offices in San Francis- co, New York, Los Angeles and Iceland. There he oversees all aspects of the creative process, including branding, visual and interactive design, motion and code. 21
O n paper, capacity planning should be very simple, right? Multiply this, divide by that, calculate billable utilization, average bill rate, and bam...a revenue forecast to help drive your sales pipeline. Ok, if only it really were that easy. Balancing your sales pipeline and your capacity to produce great work is always going to be a challenge, especially when we see shifting needs within our industry. Clients want projects faster to market, which means work needs to move faster to production immi- nently once it is signed on the dotted line. And so, the race begins! Most digital agencies don’t have the luxury of an on-demand team ready to dedicate 100% of their time to a project with little or no notice. The common challenges of the industry leadership are balancing profit margins with overworked employees, compromised client service due to insufficient resources, or equally challenging is reduced quality of work from the same overextended pool. More than 100 key-stakeholders at digital agencies view “New Business Pipeline vs. Ca- pacity” as an “important” to “very-important” KPI in managing their agencies. The first step in managing sales vs. capacity is having the right tools and automated systems to manage your sales pipeline and resource allocation. The good news is that while these automated tools are ever evolving, and continue to deliver great value, there is no quick EFFECTIVE CAPACITY PLANNING IS ROOTED IN TOOLS, COMMUNICATION, & TEAM ALIGNMENT written by Jenn DePauw 22
switch to plan your capacity. Once you have done your research—and found the tool that is right for your team—there is still going to be a level of human interaction needed to guide your capacity planning. A capable team that is able to manage the necessary data points is key. Project Managers and Business Development team alignment is imperative in order to plan for resources. PMs typically have the clearest visibility into current capacity and assignments, but also have a view into things like team stress level and morale. Meeting the expectations for the expediency demanded by the client can often lead to higher levels of stress and lower levels of employee satisfaction – two things that often have a direct effect on efficiency and quality of work. A common vernacular across your team will ensure that everyone is level set to the same expectations. At The1stMovement, we have a Sales Stage Definition list that defines the criteria to calculate a percent to close so when a 75% prediction is identified, it holds some weight because criteria has been set to define that percentage. This allows us to layer onto the definitions the engagement level needed for resource planning. For example, when a lead is at 25%, biz dev is in the discovery stage – finding out what is the need, how long it takes to make a decision, who the decision makers are, etc. At this point the PM can begin to provide insight and information on past/similar projects. This level of engagement increases as the lead moves through the pipeline and towards the finish line, along the way the PM and Biz Dev have a finger on the pulse of capacity. From a project management perspective, key-stakeholders at digital agencies see “lack of view into over-servicing clients” as the issue that has the most impact on agency profits. Yes, over-servicing of clients has a direct impact on profitability because you are essentially giving your services away. It also has an impact on your capacity planning by slowly eating away at available resources. This allows it to creep into your culture, which ultimately can lead to lower employee satisfaction and lower productivity. Let’s face it, it’s hard to see real value in something you are giving away for free. Spend time to go over what is included in the SOW, understand the objectives and the role your team plays, and then empower your team to make decisions, or take action, when they see a project going off the rails. Pipeline vs. Capacity comes down to good data, good communication, and realistic expectations. Sell realistic lead times whenever possible to allow time to plan resources effectively. Communicate expectations internally. When everyone understands the nuances of the project and the level of service needed, it’s easier to identify areas of over-servicing. And lastly, appreciate the value that you provide to your clients. When everyone is aligned on the value of the service you are selling, managing capacity can be done much more effectively. • Jenn DePauw is the Managing Director of The1stMovement, a digital agency with offices in Los Angeles, Denver and Hong Kong. 23
M ost companies know that personalization is an effective way to increase relevance and build long-term customer relationships. In fact, 93% of marketers agree that personalization helps to advance customer relationships (Evergage). However, many companies still struggle to deliver personalized experiences. The problem isn’t the ability to deliver targeted information to an individual user, but rather to deliver personalization at scale. It’s easy to think about five or 10 variations of an experience, but what about millions? This why many organizations are looking towards artificial intelligence as a way to automate personalization. The potential for AI is unbound. With machine learning, we can use data to observe, understand and anticipate the needs of customers. However, AI isn’t a silver bullet that’s going to do all of the work for you. You first have to develop a strategy around personalization and then use technology to enable it.
Understand the Journey from the Customer’s Point of View Creating an effective personalization strategy starts with understanding the customer journey. The goal is to be able to customize every touchpoint to match the individual’s needs, preferences, and intent. To achieve this, you have to develop a 360-degree view of the customer and then identify opportunities to improve their experience with relevant content, offers, and calls to action. You also have to consider that your customers’ jour- neys will likely involve third parties and interactions you don’t own. Let’s say you’re a utilities provider and your customer purchases a Nest thermostat from Home Depot. That product will impact your customer’s energy experience, but you won’t know they’ve installed it unless they tell you, right? You want to learn what products they own so you can continue to build their profile and support their journey, but first you have to show them how providing that information can improve their experience. We helped a utilities client in this situation by implementing feature we call “Milestones.” With Milestones, a customer can add information to their account profile (e.g. “On this day, I installed my new Nest thermostat”) and then track the impact that product had on their energy usage and monthly bills. So even though the company was not directly involved in the purchase of the thermostat, they are able to create an improved experience by connecting to it. Showing your customer that you can make their lives easier and help them achieve their goals will earn lasting loyalty and encourage them to engage with you even more. Develop a Content Strategy that Keeps Up Many organizations struggle with content strategy, but it’s crucial to making personalization work effectively. Where there used to be one version of content for everybody, there now may be five or six content versions based on different audiences that need to be managed and expanded as personalization efforts grow. AI can help carry the load by determining the right content for an individual and then automating delivery from the pool of content you’ve created. It can even gain insights from factors like customer behavior and use those to further personalize without requiring new written content. For example, Uber can say to Above: Perficient Digital’s Personalization Spectrum
a user, “Hey, you took 40 trips this year, traveled 350 miles, and met 25 different drivers.” Nobody had to generate that content. Uber would just need to define rules and train the AI to pull the data and plug it into the customer-facing story. Know Your Systems and Capabilities, and Grow Them Personalization isn’t possible without the right technology - and knowing how to use it. We see a lot of clients that have great tools in place, but don’t really know how to use them to drive personalization. It’s like owning a Ferrari, but only using to go to the grocery store. So how do you go from the grocery store to the Autobahn? From crawling down side streets to flying down the highway? Well, you have to start small and then build a foundation for propelling more advanced experiences. Perficient Digital has a model that we use to illustrate the different personalization types, rang- ing from simple to complex, and the progression from rules-based personalization to cognitive. Over time, your solution should evolve from simple rules-based targeting against broad segments to cognitive solutions that understand and respond to individual customers’ intent. The more effectively you can use strategy and technology to understand customers’ intent and personalize experiences to meet their needs, the more they will trust and rely upon you to make their lives easier. • As a digital experience strategist, Brian is responsible for driving digital strategy for enterprise clients and oversight in delivering best practices. In this role, Brian keeps Perficient Digital and its clients on the cutting edge of new design strategies for next-generation technologies to consistently exceed client and peer expectations. 27
It’s been nearly two decades since mobile phones began making imprints in our pockets and on our lifestyles, becoming household items while shifting the paradigm of communication. But within the last ten years, easy access to broadband connectivity, evolution of camera technology and the social media takeover have given rise to the equally transformative ‘Instagrammable’ era—one that is continually redefining how we live, design, and experience everything from food to brands. The impact on experience and the growing experience design industry has been especially powerful. The spaces of art and commerce were always shifting, but the specific consequence of social media’s rise is that physical experiences are no longer intrinsically valuable. Rather, their value is now intimately related to the social media imagery that’s produced and shared with the masses. It’s not so much about the experience itself, but the validation that an experience actually happened, and furthermore, happened to me. Essentially, it didn’t happen if no one took a photo of it. And that may pose a real problem, to experience designers, brands and to the audiences they engage. Beware the Rectangle Brands go where their audiences are—and their audiences are, of course, now on Instagram and other social photo platforms, which allow them to document their own experiences. Shareability has become central to the success of every brand experience. But what are the consequences of brands’ re- action to this sharing culture, its new digital tools and how those tools affect the way people interact with the world? Brands want audiences to share and so, unconsciously or not, they maximize visual impact by deftly “helping” the pic-snapping public control their points of view, directing where to point their cameras, what to crop out and where to stand. In this way, they control the narrative and the audience’s story becomes the brand’s story as well. But there are diminishing returns. Ironically, in an age where we can point and shoot at anything, capture the world in full resolution, in slow-motion, in time-lapse, in any shape of rectangle, and even in full 360 panorama, the results of our collective photographic social memories are reduced to the same handful of rectangles the world over. From the Sephora x Coachella – Makeup Stationsto Refinery29’s 29 Roomsto Kusama’s Infinity Mirror space, the visual narrative becomes startlingly similar: a grid of identical photos with similarly structured backdrops - the only difference being the people in them. It’s a result that is at odds with the usually personal and spontaneous natures of art, design, and experience—which can work together to create lasting memories and a genuine emotional brand connection. By reducing the audience’s frame and ability to capture a unique experience, brands are making an how the digital era has redefined Brand Experience written by David Schwarz 28
exponential impact with these visual messages by forcing us to be very specific and repetitive in how we share experiences. While it’s a marketer’s dream, we as agencies need to question how complicit we are in the potential devaluing of the experiences we create, and instead push for deeper, more engaging solutions. Maintaining Integrity in Experience At a time where short attention span theater reigns and “shareability” is often mistaken for a core princi- ple of user engagement, it’s important for brands and their partners to protect theirauthenticity of mission and vision to propel experiences towards success. While it might be tempting to follow the lead of social media culture, the experience design industry needs to realize that brands can’t build real relationships with their consumers if they aren’t maintaining the integrity of the real-life experience. This means creating experiences where the core value isthe experience itself, not just the social photographic recordof it. Social media is a truly powerful tool and I understand why its promise of data analytics and curation are very attractive. More importantly, social media is a large part of people’s lives, and integral to how they experience the world. But, we have to remember that the real goal is to design unique experiences from an authentic, ownable point of view. This can be achieved by using aspects of the company, its people, products, services—or even data—that simply cannot be replicated by another institution. Instagram is not the only consideration. As the industry focuses more and more on the impor- tance of experience, brands can inspire and motivate their audiences by prioritizing a captivating experience over the allure of grid-riddled, social immediacy. Now picture that. • David Schwarz is an award-winning Co-Founder of HUSH, an experience design firm. He has spent over a decade working with brands to design compelling experiences utilizing content, interactivity, architecture and technology. “While it might be tempting to follow the lead of social media culture, the experience design industry needs to realize that brands can’t build real relationships with their consumers if they aren’t maintaining the integrityof the real-life experience.” 29
los angeles 6/27/19 SoDA session
brooklyn 10/15/19 SoDA session
Such changes can be disorienting and challenging for some. So how can brands initiate and accelerate these changes for the digital future? Transformation is not easy. Brands—big and small face difficulties with their digital transformation endeavors. Initiatives to transform the organization and deep-dive into new digital technologies are often marred with endless roadblocks and lackluster returns. Peering into transformation attempts, one of the main problems becomes obvious. Brands who feel that they are transforming are often only engaged in optimization of their current status quo. This limits the scale and impact of their change as well as their quest to be more competitive in the market. There is quite a gap between optimization and transformation. Many brands are just supple- menting existing processes with new digital tools to heighten efficiency. And transformation is definitely more than just offering faster processes or real-time responses. Transforming entails shaping and enabling new experiences that delivers new value. There is a difference between enhancing operational functionsand implementing a holistic change to heighten efficiency. And transformation is definitely more than just offering faster processes or real-time responses. Transforming entails shaping and enabling new experiences that delivers new value. There is a difference between enhancing operational functionsand implementing a holistic change to serve customers better. The latter is the one that can pivot brands into greater success and a long-term future. To get transformation on the right track, it has to start with the right vision. by Pim van Helten New digital tools, platforms and systems are being intro- duced almost every single day, bringing with them infinite possibilities. With that, customers’ expectations of digital experiences are also growing. Brands have to be prepared to challenge their status quo and transform themselves to leverage these new technologies and offer up-to-date experiences. Only then can they continue to appeal to the growing appetites of their customers and stay on top of the game. 32
Find the Customer Experience (CX) sweet-spot Brands will first have to shift their gaze towards the customers and away from the mentality of matching new technology to optimize current product vision. A unique customer experience beats product, price, and place advantages and has quickly become the way to truly differentiate from competitors. The attention should be on interaction channels, brand identity and content vision as they form the basis of CX. Mapping these three components can therefore be the first step towards crafting the new CX and hence a valuable transformation pathway. Interaction Channels. Go beyond thinking solely about the customer interaction with their product. Instead, reimagine a customer’s total experience before, during and after the interaction. Away with single touchpoint thinking! Start developing a thor- ough, multi-channels perspective that connects all the dots. Such a holistic consideration of customers’ touchpoints will help to point towards opportunities for extended engagement through new technologies. Brand Identity. A unique brand identity that is tailored for the dynamic and diverse digital platforms needs to be crafted. It should embody bold promises of a refreshed experience and be adapted across the different channels. Most importantly, it should reso- nate with customer expectation of a brand deeply in- grained with the digital space and its unique offerings. Content. The mediums and methods to engage and communicate with their customers meaningfully and immersively also need to be explored. Addressing the multitude of new content possibilities and narratives can draw out new ways brands can build deeper emotional connections with customers. This creates personable experience that bridges customers more closely with the brands. This nexus of the potential channels, brand identity and content forms the CX sweet-spot, which the transformation should gravitate towards to give brands an edge. Develop and Organize for Change Transforming an organization to be new every day asks a lot of changes that cuts across regular bound- aries and processes. Since such a change is a high risk and high reward business, brands should focus on insight management and invest in data strategy to measure, track and justify the transformation efforts. Constant review will safeguard the process and mini- mize the risk elements. That is especially so in the next step. The implementation of a new CX as well as the creation of a unique and consistent brand message are challenging activ- ities. They require many different levels of expertise and coordination across the organization to craft and execute plans across multiple touchpoints. Brands should therefore analyze valuable data that can be extracted from its early transformation steps to validate or pivot its transformation planning. They can connect customer insights to business objectives. They can connect results of attempted changes to service objectives. This will allow for timely interven- tion or further development in the course of transformation. Evidently, a transformation plan is never finalized and will need to be revisited iteratively as brands continue to collect and measure new data, technologies and interactions. • Pim van Helten is CEO and co-founder of digital agency DPDK. With offices in the U.S. and Europe, his agency is focused on demon- strating a constant high level of quality and keeping modern brands on the offense. 33
TRENDS SHAPING TOMORROWby Tom Beck, Executive Director of SoDA
T he Global Digital Outlook Study is an annual collaboration between SoDA and Forrester Re- search. Our study assesses global digital spending trends, adoption of emerging technology and shifting views on the digital landscape. It’s also one of the few studies to gather, analyze and compare this particular outlook data from the perspectives of both client-side marketing, technology and product design leaders as well as agency leaders at digital agencies, integrated agencies, consultancies, product design studios, production companies and every niche in between. This year’s study had 401 executives from across the globe – 166 responses from client-side marketing, technology and product design leaders and 238 responses from agency leaders. A BIGGER PIE... AND MORE HUNGRY MOUTHS AT THE TABLE The 2019 Digital Outlook finds a majority of agency leaders optimistic about the future even as they remain clear-eyed about the challenges facing their businesses. Despite all the doom and gloom regarding broken agency models (vivid images of fire, brimstone and post-apocalyptic demogorgans come to mind), agency leaders are reporting healthy performance in 2018 and a solid outlook for 2019. More than half of agency leaders reported growth in revenue and total profit in 2018 (56% and 55% respectively) and 79% say they are confident that the next 12 months will be even stronger in terms of profitable growth. Confidence levels are bolstered (and, perhaps, jus- tified) by a strong spending outlook from client-side marketing leaders: 54% plan to increase their digital spend in 2019 and 36% plan to increase overall marketing spend. More importantly, 43% plan to increase their spending with external agency partners making this one of the strongest spending outlooks we’ve seen since we began tracking in 2013. But if the outlook is strong, agency leaders readily admit that competition, pricing pressure and esca- lating costs for talent are growing concerns for their business. In 2018, only 39% of agency leaders said they were able to increase their billable rates and 57% agree that pricing pressure is becoming an even bigger factor in winning new assignments. Further- more, 66% saw competition for their services intensify and 64% said that the rising cost of talent was having a direct impact on their bottom line. Stiff competition and continued pressure on operating costs will un- doubtedly winnow out more and more agencies with indistinguishable capabilities and inefficient operating model. BATTLE ROYALE OR TOKYO DRIFT TO THE MIDDLE? The marketing world has been obsessed with the incursion of management and IT consultancies into the sacred creative territory of agencies. Too much of the industry commentary, however, adopts a binary view on the matter suggesting that only one model will prevail in this battle royale between consultancies and holding companies. This is a simplistic assessment for a complicated and interconnected ecosystem of digital providers of all shapes, sizes and flavors. While our data this year uncovered a 24-point decline in marketers’ openness to using consultancies for digital agency assignments (53% said they were “Very Open” or “Open” this year vs. 77% last year), we continue to see an array of partner types tackling digital initiatives. In fact, there has been little change, year-over- year, in the number of partners marketers’ tap for digital assignments. Nearly one-third of marketers use 3 or more agencies/partners. Furthermore, there is no dominant partner type for digital projects and usage of integrated agencies, full-service digital agencies, consultancies and specialized digital agencies is evenly distributed. The bottom line: agency “type” is increasingly irrelevant when defining the competitive landscape for digital services. AGENCIES PRACTICE MIXED MODEL ARTS Our findings this year point to an active evolution of the agency business model with some moving towards specialization while others seek to expand their responsibilities with new capabilities. An as- tounding 61% of agency leaders this year said they were actively re-evaluating their core business models. 35
Experimentation with different pricing models (26%), going to market with 3rd party partners to round out service offerings (25%), and deeper collaboration/ integration with their clients’ other partners (30%) are just a few of the avenues agency leaders are exploring. On the capabilities front, agency leaders point to areas such as strategy, data, platforms and technology as key areas for revenue growth in 2019. Interesting- ly, these capabilities are traditional strongholds for consultancies. It’s clear that many native digital agencies, traditional integrated agencies and, consultancies are racing towards a melee at the center of the marketing/customer experience ecosystem. It’s also clear that new areas of specialization have emerged. For instance, more than 30% of all agency respondents said they do not currently offer any services related to voice-based applications, AI-driven digital experiences or experiential installations that blend the physical and digital environments. We also see agency leaders tackling a unique mix of capabilities across the digital marketing and experience value chain. S4 Capital’s planned combination of production, content, data and media is one such example of the mixed models beginning to emerge. SPEED, VALUE, AGILITY AND TRANSPARENCY What do client-side business leaders want? Brilliant strategies? Mind-blowing creative? Category-busting innovation? Technological wizardry? Lower billable rates? The rock sensation Queen said it best.... they want it all and they want it now! And even though (half-jokingly), this is most certainly true, a more pragmatic look at the market shows marketing leaders with a growing desire for partners that can operate collaboratively, nimbly, quickly and effectively. Several findings for our study suggest that marketers want: Speed. 56% of agency leaders said that speed of delivery is becoming a bigger factor in whether or not they win new projects and 63% of client-side marketing leaders said that producing and publishing personalized digital content, more quickly, is a major priority for their business. Agility. Flexibility and agility are cornerstones of a collaborative working model. Client-side marketing leaders point to “more flexible/nimble working models” as one of the top areas of improvement they’d like to see from their agency partners. On the other side, agency leaders say that “working directly with clients’ other partners in a more collaborative, integrated way” is one of the top ways in which their typical engagement models are changing. Addition- ally, more than 60% of all respondents agree that the in-sourcing of digital capabilities is having major impact on the way clients and agencies now partner. Value. Client-side marketing leaders ranked “different pricing models” as the number two change they’d like to see from their agency partners and pointed to “pricing/value” as the top reason they typically termi- nate a partner relationship. Agency leaders seem to be begrudgingly conceding to the point ranking “pricing/value” the second highest reason for why they are typically terminated by their clients. Additionally, a whopping 70% of client-side marketers admit that properly quantifying and valuing the impact of creative ideas represents a major challenge for how they compensate their agency partners. Transparency. 66% of client-side marketing leaders are demanding greater detail and transparency from their agency partners in how they report on budget spending. While not quite as high, 50% of agency leaders agreed and said that their clients are increasingly demanding greater detail and transparency in reporting how their clients’ budgets are used. What does this all mean? It isn’t to say that bedrock elements of the agency business (creative and innovation) aren’t top of mind for clients. They are. In fact, “Better Design/Creative” is the number one improvement they’d like to see from their agencies. But there are many paths to success and given the growing realities of operating in an multi-partner ecosystem (often with in-house teams in the mix), greater scrutiny for CMO’s entrusted with more responsibility and bigger budgets, and market pressure to move quickly, we see marketing leaders placing a bigger premium on the working models of the partners they select and with a keen eye towards if/how/where they can be 36
a collaborative, nimble and efficient element in the overall ecosystem. CREATIVE LEADERS GAIN CURRENCY IN THE C-SUITE In business, the creative discipline has historically been confined to the marketing function and deployed as an adjunct to business or product strategies cooked up elsewhere in the organization. The phrase, “make it pretty,” best captures this ethos. But times are changing, and design leaders increasingly find themselves at the helm of successful start-ups, in an advi- sory capacity at VC firms, or in newly minted C-level roles at traditional brands. John Maeda first reported on this trend in his annual “Design in Tech” report and our Global Digital Outlook Study adds further proof. This year, 67% of client-side business leaders agreed that creative and design leaders were having a bigger impact on the overall strategic direction of their business. Furthermore, they pointed to “brand differentiation through innovation” and “adopting emerging technology before our competitors do” as the single most important strategic factors driving success for their business over the next two years. This is welcome news for creative agencies hungry for allies in the executive suite and desirous of more clients focused on the intersection of design, technology and innovation. But more allies in the C-suite won’t necessarily translate into easier wins. For starters, client-side leaders continue to elevate their expectations for agency partners. In fact, “Better Design/Creative” is the top attribute clients would like to see more of in their agency partners.... even ahead of criteria such “different pricing models,” “more flexible working models,” “stronger data capabilities,” “stronger technology capabilities” and more. Translation: No free rides on the creative front. Even more troubling, 70% of client-side leaders said that quantifying and valuing the business impact of creative/design ideas presents an increasing challenge for how they compensate their agency partners. The bottom line: creative and design leaders are on the rise in corporate structures and there’s no doubt that this can help bolster the influence of creative agencies in the board room. But increased visibility leads to increased scrutiny... for the caliber of the creative work product and, more importantly, the direct business value it creates. Agency leaders have their work cut out for them. DIGITAL PRODUCT STUDIOS POISED FOR GROWTH Of all the data we track relative to spending, perspectives on the digital landscape, talent, operating models and emerging technology, one trend that continues to stick out is the growing focus – for both client-side marketers AND agency leaders – on the creation of new digital products and services distinctive from traditional creative work on marketing-related content, campaigns and experiences. In our study this year, 45% of agency leaders projected that revenue related to helping their clients create, launch and improve digital products and services would increase in 2019. This was the top-ranked category for agency revenue growth (tied with Cus- tomer Insights & Analytics) even though just 9% of agency respondents overall identified themselves as “Digital Product Design Studios.” 42% of agency leaders also pointed to “more consulting with clients on new product and service offerings” as the one of the major ways in which their engagement models have been changing. Again, the top-ranked attribute in this category. In fact, the digital product and service trend is most striking among “Digital Agencies.” 65% of Digital Agencies anticipate increased revenue for digital product work in 2019 and 60% report that this is one of the major ways in which their engagement models are changing. Digital Products & Services are also highly sought after among client-side marketers. 37% of marketers are planning for increased spending for digital products and services in 2019. In fact, more marketers plan to increase budgets for digital products and services than for marketing-domain stalwarts such as stand-alone content creation, campaign development and media planning/buying. As agency models continue to shift and marketers are tasked with broader agenda for growth and customer experience, it’s clear that a mature capability and 37
competency in digital product/service design is one area of specialization poised for growth. EMERGING TECHNOLOGY IS, WELL, STILL EMERGING New technologies come to market at a rapid pace and each one of them challenges business leaders and agencies with the choice of where to experi- ment, where to invest and where to wait and see. AI technology and initiatives related to AI-driven digital experiences where top of mind for both marketers and agencies this year. Collectively, 56% of business leaders and agency leaders agreed that “AI technology will significantly impact the way we plan for and design customer interactions.” More importantly, 36% of client-side marketing leaders plan to increase spending for “AI-Driven Digital Experiences” in 2019 and 36% describe their investment levels in this area as “significant.” That said, it’s still early days for AI. Just 16% of respondents said they are actively working on AI-related projects and 27% have no plans to tackle AI in the next 12 months. The remaining 57% are just beginning to explore the technology or planning to begin their first initiatives in 2019. Outside of AI, we saw steady adoption for technologies related to AR/VR/Mixed Reality, voice-based experiences and even blockchain technology. More than one-third of marketers said they were planning for significant investments in these areas in 2019. Practically speaking, the broader topic of “Marketing Automation” topped the list of emerging technologies in terms of anticipated spending and impact. Market- ing leaders and agency leaders identified Marketing Automation as the top area for investment (46% of client-side marketers plan to make “significant investments” in 2019), and potential impact (37% of agency leaders anticipate that marketing automation will have a “significant impact” on their client’s marketing approaches in the next 12 months). While Market- ing Automation, as a category, encompasses other emerging technologies (particularly AI), it’s clear that marketing leaders are prioritizing investments into solutions to alleviate key pressure points such as speed, scale, efficiency and effectiveness. • Tom Beck is the Executive Director of SoDA. Tom works closely with the Board of Directors, operations team, membership and partners to ensure the health and success of SoDA as an indispens- able community for digital business leaders, creative visionaries and technology disruptors. 38
O n October 8th, the world’s leading climate scientists (IPCC) published an important report. It con- cluded that we have 12 years to prevent a climate crisis. 12 years! While SoDA and fellow industry peers may not be able to save the world, we have influential “arms” that reach far into the machinery of thousands of the biggest and most innovative organizations in the world. What they do and say affects hundreds of millions of people around the world. This means that we have a unique chance to leave our mark on this world for the better. At Hello Monday, we built our own agency around specific F-values: Fun, Fortune, Fame, Forward. In retrospect, those were self-centered values, and the truth is that we felt a deeper sense of purpose when we added the last F: Footprint. An important lesson we learned is that Fortune and Footprint are co-existing values. You don’t have to be a non-profit to do good. Bill and Melinda Gates are good examples of this. On the contrary, the more successful you are as an agency, the more you’re able to help. An additional benefit is that it’s a mean- ingful business driver. Sometimes it’s the lawyer who can have a bigger impact than the activist literally chained to a tree, so long as he or she uses their skills for good. Likewise, fellow agencies have unique, creative and powerful skills, primed to make a huge impact. When big companies ask for ideas and concepts, let’s make sure these ideas can make a positive change for as many people as possible. When we are profitable, let’s reinvest some of it into projects that need but cannot afford our help. When a client’s strategy has a negative impact in the world, let’s try to lead them back on a positive track. When we look at our own portfolios, let’s do it through the lens of the UN Global Goals and see if our work is contributing to at least 1 of the 17 goals. When sustainable clients approach us now, let’s remember that they will be “normal” clients—and therefore our bread and butter—in the future. When we know that our employees are not excited about a potential project, let’s consider if it’s still worth taking on because it can finance a do-good project. When we undertake creative experiments, let’s em- bark on some that make sense for the world too. And then, when our kids ask us what we’re doing, we can say that we’re working towards making the world a better place. Maybe it’s time to create a manifest for the digital industry? • Andreas is one of the partners at Hello Monday. He’s inter- ested in the impact of creativity and its ability to create a better world. He was born in small-town Denmark, went to a hippie school, and learned to dance the alphabet. 39
As agencies, we think of design systems as something our clients should have. That the benefits of them – consistency and efficiency across products, sites, and teams – can transform their organizations. But what if we applied that thinking to our own work? What if we created our own design systems to leverage these same benefits for ourselves, and ultimately our clients? This is a particularly challenging proposition for agencies. Prod- uct companies (ex. Shopify) can be very specific in their approach, while platform companies (ex. Google) can be extremely broad. For us, we need to find the sweet spot in between; something opinionated and specific enough that we gain consistency and efficiency, but not so specific that we limit our ability to apply the system across a variety of clients and projects. Here’s an approach for developing a design system from an agency perspective: 1. Getting started. If you haven’t already, choose an existing design system and get your team using it consistently. For us, that’s been Material Design over the past few years, but there are plenty of other options to consider. We don’t use Material on every project, but it’s been a great fit for many of our application design projects; particularly mobile ones. Because we’ve used this system consistently across multiple projects and teams, we can share a common language and general design perspective on new projects. 2. Leveling Up. After using a system for a while, you’ll notice that some of your results are better than others. Figure out what’s working for you and what isn’t. Modify the system to fit you better. Lean into what’s working. Change the underlying system if there are things you don’t like. For example, Material Design has very specific measurements for their grid. We found these measurements didn’t work for some of our designs. We created alternate gutter/margin measurements and documented it so other designer and developers don’t have to repeat the same discovery process. 3. The End Game. Eventually, you’ll reach a point where you’re no longer just generating work that feels derivative of someone else’s system. You’ve created something that’s flexible for all your client work but has a core design philosophy that feels unique to your agency. At this point, working within the system feels more natural and expressive than working outside of it. A CASE D E S I G N A G E C Y N by Kevin Vigneault 40
FOR S Y S T E M S Too often, agencies push pixels and invent components, only to put their efforts in deep storage, never to be used again. We convince ourselves that each client must have a completely new system, unique solely to them. How often is it the case though, that a client needs a completely new design? This perpetuates inefficiency and slowly makes the company less competitive. In a market where we compete with businesses like Squarespace, creating an agency design system allows us to hone in on our competitive advantage. The goal of having an organization design system is to focus on what our clients hire us for—creativity, innovation, and efficiency in the most impactful way. Having a design system to start from would free us up to do just that. However, this would require an investment from leadership— This isn’t just a parts kit, strung together over time. It’s an in- tentional, deliberate design system that can shrink and expand depending on your client. As such, it has to be maintained outside of client work. But the benefits of this effort would be rewarded. Too often agencies work on projects that feel similar to previous work. By creating an organizational design system, the repeat energy is no longer wasted. Instead, designers and developers are free to invest in the most impactful part of our work like research, design, and brand messaging. • Kevin Vigneault has more than ten years’ experience working with custom websites and mobile applications and brings a well-rounded background to his position as Product Design Director. He believes in making websites and products that are simple in their structure, yet unique and compelling in their details. 41
Building the Best Personalized Experience for Your Consumers written by Matt Griffin
T here’s no denying the rise in demand for personalized experiences. However, along with this increased demand come many challenges facing marketers in their efforts to keep up with ever-evolving trends and remain truly impactful. Through a combination of the use of innovative AI-driven technologies and a continued focus on developing and implementing exceptional CX strategies, marketers can successfully pave the path to building the perfectly personalized consumer experience. There are numerous exciting developments at the forefront of personalization. Technologies incorporat- ing dynamic optimization make the process of iden- tifying winning variations far more efficient. We’re seeing personalization engines that are able to compile vast sets of data to deliver highly tailored experiences to website visitors, providing us with unparalleled possibilities for engagement and conversions. The continued trend focusing on mobile users presents us with opportunities to leverage location-based services on a wider scale to pinpoint consumers and their various stages in the process in a more pre- cise and effective manner. Delivering multi-channel personalized experiences in real time is becoming increasingly essential to our success. However, there are still several challenges agencies are facing today when it comes to building an outstanding consumer experience. For one, many of the underlying technologies being developed to further propel advancements in personalization are still in their infancy. Many of us also still find ourselves struggling to deliver real-time personalization at scale. We have more access to data now than ever before; however, being able to effectively organize and extrapolate this information into actionable insights, especially when multiple devices come into play, remains a challenge for most. Furthermore, the industry faces several challenges posed by data harvesting for the purposes of providing personalized experiences and ensuring adequate security measures are taken to protect an individual’s valuable information. But enough about technology. While advancements in fields such as AI serve to provide us with a world of opportunity in the arena of personalization, the implementation of this technology alone in the absence of the right CX strategy is insufficient. So, what exactly defines a good CX strategy, and how can we as marketers better prepare ourselves to meet the demands of our modern consumers? By focusing on solid customer research using qualitative methods to get to the emotive center of the problems that face us so that we can find the right solutions to the right problems through personalization. Qual- itative data should, of course, always be supported with a certain level of quantitative data. However, too much of this can muddle the process, resulting in the loss of valuable insights. A good CX strategy involves a company-wide commitment and needs ideation through co-design work- shops and rigorous processes around the problem to ensure that the creative processes drive true innovation. Then and only then can we begin to focus on persona development in order to connect with the desires of our real customers. Segmentation that merely looks at demographic data does not give us the level of insight that we need to be truly impactful. A focus on choosing the right platform technology to solve the dilemmas we face is also crucial. Choosing a platform for the sake of choosing a platform won’t cut it. We need to find solutions that can streamline operations and create seamless individualized experiences across multiple channels, enabling us to radically transform how we interact with our customers and prospects. Embracing appropriate CMS options and identity resolution is essential in our efforts to stay current and effective. Effectively mapping these personas into our platforms of choice and relentlessly optimizing and refining our processes for maximum effectiveness over time is also vital to success. 43
Furthermore, we need to improve our measures for ensuring the security of the personal data that we harvest for personalization. Growing concerns over the exploitation of valuable consumer information have prompted the implementation of new policies such as the GDPR to grant individuals greater protections. If we want to provide our audiences with the best experiences possible, we must start by taking steps to ensure their well-being and reduce the risks of data being compromised. Conclusion Delivering exceptional consumer experiences through personalization continues to lie at the forefront of our minds. While there are still several challenges that face marketers in this arena, the prospects that the rapidly evolving technological climate presents us with are exciting. As developments continue to progress, we as marketers must do our best to focus on preparing ourselves by developing and implementing effective CX strategies to best meet the needs of our customers. Once we’ve done this, we’ll be able to create positive change by designing the perfectly personalized consumer experience. • With over 20 years’ experience in the design and interactive media industries, Matt was an active participant in the formative years of the digital communications industry, gaining valuable experience with Deepend in London, before setting up Deepend in Australia in 2000. Under his management, the Group has grown to include the brands Deepend, Nomad, History Will Be Kind and How To Impact and Kobalt Systems. A dvancements in augmented reality have been steadily turning heads over the past few years. What started as a niche and futuristic technology has hit the mainstream to wide appeal, and creative approaches in deploying it have led to many magical implementations of AR in recent times. Now, it’s a rapidly swelling market – and while the rate of growth in the segment is certainly notewor- thy, what’s even more exciting is that we’re just at the beginning of the journey. There is so much exciting innovation on the horizon. To appreciate how far augmented reality has come, let’s take a look at its history. The earliest origins of AR date back to 1862, when scientist and inven- tor John Henry Pepper presented an awe-inspiring illusion during a performance of Charles Dickens’ The Haunted Man. The effect, which became known as ‘Pepper’s Ghost’, used a combination of lighting and refraction to project an apparition on to the stage, seemingly out of thin air. Though Pepper’s Ghost pre- ceded digital technology by over a century, the same basic technique is still used today for creating AR experiences such as Tupac’s appearance at Coachella festival in 2012. The first example of AR as we know it today – aug- menting a physical environment with digital objects or overlays – appeared in 1992 when Louis B. Rosen- berg, a researcher at the US Air Force Armstrong the state of Augmented Reality written by Peter Altamirano
Labs, built an experimental headset which provided virtual visual assistance for a physical task. Rosen- berg’s research proved proof of the conceptual viabil- ity of AR technology, and acted as a predecessor to commercial AR headsets that are on the market today, such as the Microsoft HoloLens or the Magic Leap One. Headsets such as these are one of two distinct ways that we can experience augmented reality. There are many different headsets on the market currently, and as usual the big players want in: Facebook has con- firmed that they’re building AR glasses, and Apple is also rumored to have something in the works. But while it’s true that we’ll begin to see ever more com- pact and ergonomic AR headsets for commercial use, major advancements are likely still five or more years away. On the bright side, nothing stimulates innovation like a competitive market, which could lead to incredible developments such as liquid crystal-based AR contact lenses. The other way that we can experience augmented reality is through screen devices like smartphones and tablets. This branch of AR is generally more accessible due to the ubiquity of screen devices, and because many people are already familiar with how it works due to the commercial successes of things like Pokémon Go or face filters on social media platforms. There’s a core distinction to be made between AR as experienced through a screen as opposed to a headset. When using a mobile device or screen, which mediate AR through a camera feed, their entire experience of the intersection between digital and real-world elements occurs within the enclosed frame of the screen. On the other hand, when wearing a headset, a user’s field of view is unchanged from their usual POV, allowing the addition of virtual content to provide a far more immersive and authentic AR experience. As with the output, the process of creating AR experiences is also a little different between headset and mobile. Building for headset usually means making an app using a game engine such as Unity or Unreal combined with a supported plugin released by manu- facturers, or using the headsets native SDK. For mobile application, both Google and Apple have released their AR SDKs: ARCore for Android and ARKit for iOS. Both include support for game engines and the utility to make a fully functional AR experience, but if desired more specialized features can be added using Vuforia, 6D.ai or other AR cloud start-ups. While these methods are standard for native AR – experiences that require an app download to support them – things aren’t quite the same for website applications. Web AR experiences are generally coded using JavaScript alongside WebXR API and AR librar- ies such as AR.js, 8thWall TensorflowJS. The benefit of building a website AR experience over a native one is that it makes it more accessible to consumers by bypassing the requirement of downloading an app to try it. The trade-off is that browser-based AR doesn’t offer the same level of performance nor the number of features that can be applied to native AR. Despite the minor drawbacks, web AR has taken a huge leap forward in recent times, and now both formats are viable in their specific and distinct uses. Longer storytelling experiences such as East of the Rockies suit native AR better because of its depth and functionality, whereas simpler, low-poly experiences that only require plane- or image-tracking like Portal Hunt or this Spiderman game are perfect for web AR. “The next few years will be full of incredible milestones as we witness AR redefine the user shopping experience, change our conceptions of en- tertainment and transport, and introduce ground-breaking applications to the education and medicine sectors.” On top of there being different ways to build and interact with AR, there are also different types of experience that can be created. One of these is known as world tracking. This category uses a ‘marker’ or logo present in 3D space to act as a kind of ground- ing point for the experience, where digital content is 45
then placed in relation to it. While this is standard for many AR creations, advancements technological advancements have begun to allow for a marker-less approach, or what is known as SLAM (Simultaneous Localization And Mapping). A SLAM build doesn’t require a marker since it detects nearby surfaces in a physical environment and uses them as reference points for the digital augmentation. Another common format for AR experiences is human body tracking. The most widely used example of this is face tracking because it provides remarkable accuracy and has a huge variety of applications. Face swapping, makeup application, and expression detec- tion are just some of the near endless opportunities for face tracking AR – but while face tracking is pretty advanced, other human body parts (besides some breakthroughs in hand tracking) remain much harder to track. “Some of the best creative and technical minds on the planet are working to bring into reality experiences that past generations could never have even dreamed of, experiences that improve and enhance human capability down to the very way we interact with the reality around us.” Even though the technology has yet to catch up with our imaginations, there are big things in store for AR as innovation increases at an ever-accelerating rate. Exciting leaps forward, such as AR cloud, now stand to radically change how we interact with AR. From multiplayer, to perfect localization and occlusion capabilities, AR Cloud brings us a step closer to true mixed reality and the ability to create much more immersive AR experiences. No less impressive are the hardware upgrades also in development. Oculus’ Chief Scientist, Michael Abrash’s predictions for AR and VR are well worth watching. Fascinating progress is also being made using audio instead of image for AR experiences, in particular with the latest AR audio sunglasses from Bose. The next few years will be full of incredible milestones as we witness AR redefine the user shopping experience, change our conceptions of entertain- ment and transport, and introduce ground-breaking applications to the education and medicine sectors. So, while it’s clear that AR has come a long way since Pepper’s Ghost, the story is really only just beginning. Some of the best creative and technical minds on the planet are working to bring into reality experiences that past generations could never have even dreamed of, experiences that improve and enhance human capability down to the very way we interact with the reality around us. As Arthur C. Clarke once said: “any sufficiently advanced technology is indistinguishable from magic” – if that’s true, it looks like we’re well on the way to becoming professional magicians. • Peter Altamirano is Technical Director at Jam3. He guides tech projects and teams, from frontend and backend to AR and installations. He loves exploring new technologies, bringing new ideas, prototyping, improving production processes and development. He is a creative technologist discovering new possibilities and making things happen. 46
It’s 2019, and despite years of people espousing the death of the “digital agency” the industry is thriving and confident. Amazing work continues to be produced by top digital agencies around the world, and clients continue to hire agencies to complement their internal teams, in particular when creative or technical innovation is required. Our objective for this article is to distill and understand the main drivers of agency profitability, and provide tips, tactics and techniques that agency leaders can put into practice in their own businesses. To do this, we asked the leaders of ten digital agencies from the SoDA membership for their secrets of success in the pursuit of healthy profit margins; what has worked for them, what hasn’t, and for any surprising insights and ideas they can share. The agency leaders we interviewed have run or are still running some of the best digital agencies on the planet. Half of those interviewed have had their digital agency be acquired, whilst the other half continue to work in and grow as independent agencies. Some run global agencies with offices around the world, others are based in one location. A common thread with the agencies we interviewed is not just the financial discipline, but the quality of the work - with awards including Emmy’s, Cannes Lions, Webby Awards, One Show and pretty much anything else you can imagine. Financial performance and quality work are not mutually exclusive! After we received the interview responses, we com- pared these against the SoDA 2018 KPI Benchmark Study, a detailed annual survey that saw 61 digital agencies provide data against hundreds of key metrics. We isolated the data for global averages and top-performers and used this to provide benchmark figures. The global average for EBITDA performance was around 10% while top-performers delivered margins of 20% or more. The result of the interviews and qualitative research are eight Key Drivers that we believe drive superior agency profitability: 1. Nurture repeat customers 2. Reduce project cost overruns 3. Maximize billable utilization 4. Have keen financial discipline 5. Build a strong sales pipeline 6. Develop a capability for low cost delivery 7. Manage your ratio of billable vs non-billable staff 8. Value your people and culture Let’s get started! Nurture repeat customers If you want to improve profitability in your agency and have time to do only one thing, do this. Almost all of the agencies who collaborated on this article rec- ommend increasing the amount of repeat business you get vs pitching for work with new clients. Long-term client relationships result in higher profit for the agency than individual projects, in part due to the trust that builds with the client (allowing your agency to charge appropriately for your services), and also for the reduced new business costs of pitching. Win rates when bidding for work with an existing excerpts from the of digital agency profitability By Tim O’Neill
client are typically twice as high as with new potential clients, and so the cost of pitching and losing is drastical- ly reduced. As Bill Fritsch, former Chairman and CEO of Digital Kitchen says “Serious profitability comes when clients value your work and feel valued by your team. When they prefer working with your organization versus other firms, clients are more willing to work in partnership and to pay more for your service.” A good benchmark is to have over 70% of your annual revenue from existing clients (i.e. clients that were already a client last year) and the remainder from new clients you have won throughout the year. Reduce project cost overruns Reducing (or removing) cost overruns on projects is easy to say, but hard to do. But with concerted focus and effort you can make improvements continually over time, and it has the potential to revolutionize your bottom line. Top performing digital agencies are able to keep average cost overruns below 10%, and the best are below 5%. Cost-overruns on projects can be measured by the quoted rate (the hourly rate you quoted) vs the effective/actual rate (total project revenue/total hours spent). As Wesley (Wes) ter Haar (Co-founder and COO of MediaMonks, merged with Sir Martin Sorrell’s S4 Capital in 2018) puts it “The actual rate per project/client is probably the key indication [of agency profitability], if you’re over delivering against paid scope or struggling with operational efficiencies, it will show up in the actual rates you’re getting for the work.” Most agencies have a mix of project-based work and client retainers. Both project work and retainers are priced either at a Fixed Cost (with fixed scope), or on some variation of Time and Materials (T&M), e.g. in an agile delivery it might be Sprint-based pricing with “fixed cost” but variable scope). The benefit of working on a T&M basis is that your team should be getting paid for every hour they work, the result is the reduction or elimination of overruns. Based on data from the 2018 SoDA KPI Benchmark Study, digital agencies that predominantly work on a T&M basis overrun on projects at a rate of 5% less than agencies that work on a majority fixed-fee basis. This alone would equate to a roughly 2% - 3% higher EBIDTA margin! There is discipline required for the leadership team to track projects as they’re in the studio, Kath Black- ham from Versa (one of Australia’s top voice and digital experience agencies) says “We report on billable rates and write-offs on a weekly basis and interrogate the why constantly. This allows us to address any issues that are brewing before they become too much of a problem to the bottom line.” Maximize billable utilization Unsurprisingly, one of the strongest leading indicators for profitability is how busy your agency is, which is most commonly measured as Billable Staff Utiliza- tion. Assuming you have a healthy ratio of billable vs non-billable people in your agency, a good benchmark to provide high profitability is to have utilization over 75% and ideally higher than 80%. Something many agencies have difficulty with is charging for the time spent by the senior team, and this can be a major drain on profitability. As Russ Whitman from Globant puts it, “stop letting your senior talent give their time away for free!!!” He goes on to say, “These are arguably the most valued resources in the agency, they know more and can move faster than nearly everyone else - and they donate their time.” On a more operational level, to maximize utilization in the studio, Enlighten would closely manage their contractor base, so they could scale back when needed. Both Enlighten and Red Badger said they are very considerate when hiring staff, doing so only after a sustained need. A great suggestion from Tamir Scheinok at Fluid was to price projects and reserve resources in blocks of time that make the leftovers usable by other projects. “For example, use defined weekly utilization levels of 40, 20, 16, 8, 4. Do not allow 36.5 hours reserved which is effectively 40 because no one is going to make productive use of the 3.5 hours remaining.”

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