The SoDA Report (Volume 1, 2015)

1. From the SoDA Board Chair Tony Quin, Chairman of the Board, SoDA & CEO, IQ As SoDA enters its 9th year, the organization has gained unprecedented momentum. From a base of 13 founding companies in 2006, the organization has grown to almost 100 handpicked member companies, in thirty-four countries, with nearly 300 offices worldwide. SoDA has truly become a global network made up of the most respected digital agencies and creative companies in the world. Getting into SoDA is still not easy. Only 14% of the companies that applied over the past 12 months have been invited to become a member. It’s a rigorous process. First a member must support the application of each candidate company. Then, based on their HQ location, the appropriate regional membership committee will review their work, reputation and culture. Those that pass this test go on to be reviewed by the board, which finally presents its recommendations to the entire membership for a vote. As a result, this rigorous commitment to the highest standards of excellence has produced a peer group that is unique in the digital world. In the coming year, you will not only see more editions of The SoDA Report, but also SoDA’s expanded presence at major industry events around the globe, in addition to our own event series called SoDA Sessions. Later in 2015, we’ll debut The SoDA Academy, an invite-only conference that will take place in Brooklyn October 11-13. The event will bring together director-level leaders from digital agencies around the world, in 10 key disciplines, for a unique master class and collaborative peer-to-peer exchange. After the extraordinary success of the C-level SoDA meetings, the mission of The SoDA Academy is to bring that same remarkable experience to discipline leaders from across the industry. I hope you find this edition of The SoDA Report valuable and enjoyable. Take the time to explore our website at www.sodaspeaks.com, where you can also sign up for our mailing list and keep informed about what’s coming next from SoDA. Best wishes, Tony Quin Chairman of the Board, SoDA CEO, IQ Agency Thank you for viewing the first 2015 edition of The SoDA Report. We are delighted that The SoDA Report has become one of the most viewed digital trend publications in the world, with over 300,000 views per issue. In this latest issue, SoDA’s elite membership, partners and other industry leaders provide their insights into digital innovation for brands and the blurring borders of digital marketing, customer service and product design.

2. From the Managing Editor Chris Buettner, Managing Editor and Executive Director, SoDA Our readership has continued to flourish. Over the last 12 months, The SoDA Report has garnered almost 330,000 views and downloads between the SlideShare and responsive (sodareport.com) versions of the publication. The editorial theme for this year’s report is Spurring Positive Change. Effecting real change is not a formulaic process. As strategic design expert Anna Meroni underscores in her work, it involves interpreting situations where problems are open and ill-defined, tasks are unclear, processes are experimental and where knowledge is something that emerges step by step through continuous interactions with other players. I want to thank Barcelona-based SoDA member, Vasava, for translating our editorial theme of Spurring Positive Change (and leaving behind that which no longer serves you) into a striking visual metaphor for the cover of this edition. In this edition and throughout 2015, we’ll explore this topic through the lens of industry leaders who are creating the future of marketing and digital experiences. To become a subscriber of The SoDA Report, please email SoDA and we’ll make sure you have priority access to the release of upcoming editions. We hope you enjoy this issue and, as always, we welcome your feedback, ideas and contributions for future editions. Saludos, Chris Buettner Managing Editor and Executive Director, SoDA Welcome to the Volume 1, 2015 edition of The SoDA Report. We are extremely proud of the growth and development of our biannual trend publication. We’re also humbled by the positive industry feedback we’ve received regarding the quality of our editorial content and the value of our annual Digital Outlook Research Study - conducted in partnership with Econsultancy.

3. The SoDA Report Team & Partners Content Development Editorial Team Chris Buettner Managing Editor of The SoDA Report SoDA Executive Director After a career on the digital agency and publisher side that spanned 15+ years, Chris Buettner now serves as Managing Editor of The SoDA Report. He is also the Executive Director of SoDA where he is charged with developing and executing the organization’s overall strategic vision and growth plan. And with roots in journalism, the transition to lead SoDA has been a welcome opportunity to combine many of his talents and passions. After living in Brazil and Colombia for years, Chris is also fluent in Spanish and Portuguese and is an enthusiastic supporter of SoDA’s initiatives to increase its footprint in Latin America and around the world. Chris lives in Atlanta with his wife and two daughters. Sean MacPhedran, Industry Insider Group Planning Director, Fuel Sean is Group Planning Director at Fuel (based in Ottawa, Canada), where he currently works with clients including McDonald’s Europe, Nokia, Mattel and Lucasfilm. He specializes in youth marketing, entertainment & game development, and the incorporation of pirates into advertising campaigns for brands ranging from Jeep to Family Guy. Outside of Fuel, he is co-founder of the Ottawa International Game Conference, managed the category-free Tomorrow Awards and spent a good deal of time in the Mojave Desert launching people into space at the X PRIZE Foundation. They all came back alive.

4. Rob Thorsen, Modern Marketer Managing Director, Big Spaceship As Managing Director, Rob oversees the development of Big Spaceship’s client relationships and the disciplines of the agency that drive them. Equal parts relationship builder and creative contributor, Rob brings over 15 years of agency building expertise to the agency. His work includes launching Unilever’s AXE at BBH NY, joining Mother NY as it’s first strategist stateside, to leading several flagship accounts at BBDO NY. When not in the office, Rob is either chasing down his two children with his wife, Sarah, or chasing after cyclists he so desperately tries to keep pace with. Also, he is from the Great State of New Jersey. Zachary Jean Paradis, Tech Talk Director Innovation Strategy, SapientNitro Zachary Jean Paradis is an innovation strategist, professor and author obsessed with transforming lives through customer experience. He works at SapientNitro, teaches at the Institute of Design and lives in Chicago. Zachary works with companies to become successful innovators by utilizing “experience thinking” as a strategic asset manifested in better offerings, flexible process, and open culture. He works with start-ups and Fortune 1000 companies as diverse as Chrysler Auto Group to Target, Hyatt Hotels to John Deere, M&S to McLaren, and SAP to Yahoo! evolving service and product experiences across digital and physical channels. Emily Wengert, Talent Group Vice President UX, Huge Emily Wengert leads the UX team in the Brooklyn office. Her emphasis on UX strategy pairs her with clients looking for genuine innovation and impeccable execution. Since joining Huge 6 years ago, Emily has successfully collaborated with some of Huge’s largest clients, including Google, Gucci, Target, Loblaws and Reuters. With a particular focus on the intersection of physical and digital, Emily specializes in digital engagement in commerce, restaurants and other social spaces. For her work, she has received an OMMA Award and been honored at the Webby Awards. Emily received a BA in English from the College of William and Mary. Pauline Ploquin, Advocacy Chief Relationship Officer/Partner, Struck With a background in communications and nearly 20 years in the creative industry, Pauline has mastered the art of left brain/right brain integration. As CRO, she is focused on developing satisfying relationships for Struck including current accounts, strategic partnerships and attracting new clients. Previously Pauline held the title of COO and she led the efforts to develop operational and strategic alignment for Struck. For the past few years that has meant evolving Struck’s offerings to deliver client-satisfying solutions. She holds a Master’s Degree in Political Science from La Sorbonne, Paris and a degree in Communications from UCLA.

5. Kate Richling, SoDA Showcases VP of Marketing, Phenomblue As Phenomblue’s Vice President of Marketing, Kate Richling oversees the agency’s marketing and social media outreach, as well as its inbound marketing efforts. Previously, Richling worked in public relations, creating and executing strategies for institutes of higher education and Blue Cross Blue Shield, as well as providing social media counsel to various non-profit organizations. Jonathan Butler, Continuity Editor Engagement Coordinator, Deepend With a background in both advertising and photography, Jonathan thrives when he combines his love of all things visual with creative and strategic thinking. As the Engagement Coordinator at Deepend, his role primarily involves liaising, researching and coordinating all departments in preparation for new business proposals. He also works in the strategy department, contributing to initiatives such as Deepend INDEPTH and conducting market research. Jonathan’s written and photographic work has been featured in both international and local print and online publications. Jennifer Tucker, Continuity Editor Strategy Director, Deepend As Strategy Director for award-winning digital agency Deepend, Jen uses her 10+ years of experience in transforming high profile brands and organization from traditional communication to digital platforms and helping them bridge the gap between creating something which is innovative and engaging but delivers results. Along with her 10+ years experience on both client and agency side, Jen also holds a BA and Masters degree in Strategic Communications from the University of Sydney. The SoDA Report Production Team Lakai Newman, Head of Production Jessica Ongko, Designer The responsive version of The SoDA Report was developed with a variety of solutions from the Adobe Creative Cloud

6. Partners Lead Organizational Sponsors Cover Design Web Development Research Partner Data Graphics Provided By Content/Production Founding Organizational Sponsor The opinions and viewpoints expressed in the articles in this publication are those of the authors, and do not necessarily represent or reflect the opinions or viewpoints of SoDA.

7. tracks ACCOUNT MANAGEMENT ANALYTICS BUSINESS DEVELOPMENT DESIGN & DESIGN THINKING FINANCE INNOVATION & PRODUCT DEVELOPMENT OPERATIONS & TALENT STRATEGY TECHNOLOGY USER EXPERIENCE theSoDAAcademy.com OCTOBER 11-13, 2015 PRATT INSTITUTE BROOKLYN, NY For a select group of discipline leads focused on the future of marketing and digital experiences, The SoDA Academy (a two-day, invitation only event) will foster radical collaboration, peer-to-peer learning and a network of professional relationships unlike any other professional learning event. Visit the website to learn more and request and invite. Who we are: SoDA serves as a network and voice for entrepreneurs and innovators around the globe (in 30+ countries across 6 continents) who are creating the future of marketing and digital experiences. Find out more at sodaspeaks.com. SoDA

8. Digital Outlook Study 1.0 Introduction 1.1 Respondent Overview 1.2 Agency Ecosystems in 2015 1.3 The State of the Agency - Client Relationship 1.4 The Outlook for Agencies 1.5 Modern Marketers 1.6 Talent & Advocacy

9. Introduction to the 2015-16 Digital Outlook Study Conducted by SoDA in partnership with Econsultancy, the 2015-2016 Digital Outlook Study reveals some intriguing – and challenging - trends wielding an impact on the future of marketing and the creation of digital experiences. An increasingly complex ecosystem of brands, agencies and consultancies are issuing in a new era of disruption and change in the industry. The rise of consultancies in digital services and a more pronounced trend toward clients bringing digital work in house are just two of the salient findings from this year’s study. Even the use of the word “digital” to describe this research study, our industry and our organization – SoDA – continues to incite debate amongst SoDA’s leadership and member companies around the world. As you may know, our organization is called SoDA and its letters originally stood for the Society of Digital Agencies. For the past few years, many of our members have been saying that “digital” is no longer a relevant word. In short, they argue that given the ubiquity of digital it’s now a distinction without a difference. Our current name (SoDA - The Digital Society) was adopted in early 2014. It represents a move away from the use of the term “digital agency” to describe our membership and is a nod to the pervasiveness of technology in our personal and professional lives. It’s also a good compromise given that so many of our members no longer classify themselves as “agencies.” Yes, there are many amazing agencies in SoDA’s ranks, but also incredibly talented design studios, digital product development shops, experience design firms, elite production companies and the list goes on and on. While the debate over the term “digital” ensues, one thing is clear. Senior business leaders have never been more interested in this global study. In fact, this year a record 88% of respondents were key decision makers and influencers (C-Level, Senior Executives, VPs and Directors) with annual marketing budgets ranging from US$5M to over US$100M. In this year’s study, there was an uptick in the percentage of clients indicating they were decreasing their marketing spending on agency partners charged with managing and executing digital initiatives. That figure was up 7% in relative terms vis-à-vis 2014.

10. About one in seven client respondents indicated they were decreasing their marketing spends with digital agencies this year. The result is arguably due to three key trends: • The commoditization of some types of digital work • The increasing prominence of programmatic media buying • The ongoing trend of client insourcing The spending news, however, is not all doom and gloom by any stretch of the imagination. Two in three client-side respondents also revealed they were increasing their spending on non-marketing-related digital products (including platforms, applications and tools to better service their end customers and to facilitate the work of their employees). Clients in 2015 are also feeling tremendous pressure to understand and leverage emerging technology trends in order to innovate their operations as well as the products and services they offer to their customers. In fact, expertise in emerging trends is now the No. 1 skill clients most value in their agency partners, up from a distant 3rd position in 2014. Agencies and production companies – particularly those who invested early in innovation labs and product incubators – are reaping the benefit of clients’ acute need for emerging tech expertise. They’re also increasingly bringing their own IP directly to market. For the first time, the 2015 SoDA Study segments the benefits engendered by innovation labs based on the number of years the labs have been in operation. Some extremely salient differences begin at the 3+ year mark. In this year’s study, we’ve also segmented the results on a number of other key variables (by region, by size of agency and by ownership structure). Some fascinating findings emerged as we sliced the data in a more nuanced manner this year. For example, shops under 200 FTEs predominate for design and development initiatives, while larger agencies lead the pack in areas such as media and analytics. As a non-profit organization, SoDA offers this research study to deepen the community’s understanding of macro-level trends shaping our industry and to identify potential windows of opportunity for companies to thrive within this era of disruption. We hope you find value in the insights revealed and we welcome your feedback on future editions.

11. Organization Type KEY INSIGHT: • 2015 SoDA DMO survey respondents were more senior-level than ever before (9 out of 10 were key decision makers). • The share of respondents identifying themselves as consultancies nearly doubled this year. The share of respondents identifying themselves as consultancies nearly doubled this year, arguably due to the larger role firms like Deloitte and Accenture (as well as other Respondent Overview

12. innovation consulting practices) are playing in the industry. SoDA member companies (and other leading players in the digital services industry) have increasingly become M&A targets for the major consultancies who are seeking to build (or buy) end-to-end, integrated digital capabilities. The shift allows those consultancies to better service their clients and capture a larger percentage of growing budgets – particularly the rising budgets for platforms, applications and tools outside of the marketing realm. Brands are desperate to redefine how they serve connected consumers and operate connected businesses. As such, building an integrated ecosystem of companies that provide end-to-end consultation>ideation>execution>analytics services is an increasingly prevalent trend this year.

13. Consumer Marketers by Category KEY INSIGHT: The share of client-side respondents in the Service Sector rose significantly in 2015. The growth trend was particularly pronounced on a year-over-year basis, but not out of synch with global macroeconomic trends. In fact, Services are projected to account for almost 50% of global job growth from 2010 to 2020. The percentage of client-side respondents in the service sector rose substantially in our 2015 study, increasing 16 percentage points to 53% of the total client respondent base. Albeit a sharp increase, this is not an unexpected trend. The share of the service sector in economic value-added* measures has grown steadily over the past few decades. For example, the service sector in the U.K. was responsible for 67% of economic value-added in 1990. By 2014, that figure had mushroomed to nearly 80%. 1 Source: The World Bank * Value added is the net output of a sector after adding up all outputs and subtracting intermediate inputs.

14. Job Title KEY INSIGHT: C-Level executives are showing unprecedented levels of interest in digital marketing research and insights as evidenced by their dramatically expanded participation in SoDA’s 2015 DMO Study. A record 88% of respondents (up from 82% in 2014) were key decision makers and influencers (C-Level, Senior Executives, VPs and Directors) with annual marketing budgets ranging from US$5M to over US$100M. The trend was even more pronounced when we isolate C-Level respondents. The share of C-Level client respondents swelled to 68%, up from 30% of all client-side respondents in 2014. (continued on next page...)

15. C-Level Respondents

16. Geographic Region While North American executives are still the single largest contingent of DMO Survey respondents, participants from Europe, Asia and Latin America are growing in numbers and importance. We fully expect that participation from Asia, Latin America, the Middle East and Africa will continue to rise, based on global macroeconomic trends as well as the growth patterns we’re seeing within SoDA’s own membership base. Twenty percent of SoDA’s member company offices are now in Latin America, Africa and Asia*, up from 13% in 2014. * SoDA members in Australia and New Zealand are not included in this figure.

17. Global Economic Input By 2020, the economic output of emerging economies is expected to outpace advanced economies for the first time. Top players interested in international expansion should consider emerging markets for high-growth opportunities. However, not all emerging markets are created equal. The A.T. Kearny Global Business Policy Council analyzed the 25 largest emerging markets, going beyond a simple comparison of GDP and related economic forecasts. They looked at structural factors that position markets to withstand unforeseen economic shocks and foster longer- term economic growth and stability. The seven markets that rose to the top among emerging markets were China, Chile, Malaysia, Peru, Poland, the Philippines and Mexico. To see the ATKearny research study, click here.

18. MARKETING WORK CHAOS, SOLVED. workfront.com/marketing + 1·866·441·0001 + 44 (0)845 5083771 Workfront is a centralized, easy-to-adopt-and-use solution for collaborating on creative work — improving productivity, raising visibility, and increasing creativity and credibility with clients. ✔ Consolidates your end-to-end work process and tools into one solution ✔ Single ‘system of work’ provides visibility into work ✔ Work automation platform for enterprise work scenarios Get a custom demo today: workfront.com/try-workfront Conquer the chaos of overflowing inboxes, endless status meetings, and shifting deadlines with Workfront Marketing Work Management. Request Management Work Reporting & Analytics Project & Resource Management Task Management & Time Tracking Document Management & Proofing Social & Collaboration Work Flow & Approvals Agile + Waterfall Methodologies

19. KEY INSIGHT: The percentage of clients taking full responsibility for digital efforts at their companies grew significantly in this year’s study. Those clients who are working with digital agencies are reducing the size of their rosters. Only 12% of brands had four or more digital shops on their roster this year, down from 21% in 2014. Number of Digital Agencies (%) Agency Ecosystems in 2015

20. In SoDA’s 2015-2016 study, there was a significant spike in the number of clients indicating they were not working with outside agencies on their brand’s digital efforts (27% in 2015, up from 13% last year). In North America, the in-housing trend was essentially on par with the global average. 28% of client respondents in North America indicated they were handling all digital efforts in-house. While no doubt an alarming trend for agencies, other research studies conducted by SoDA in 2015 underscore that the overall state of the business for top digital shops is strong. For example, nearly 8 in 10 respondents to SoDA’s Q1 2015 KPI Survey indicated that their revenue grew or was stable during the last quarter of 2014 (vis-à-vis Q3 ’14). Over 73% reported that their profit margin rose or remained stable during the same quarter. And when asked to set their company aside and rank the health of the digital services industry in 2015 on a scale of 1-10, the average response was a robust 7.1. We continue to see a clear trend of clients maintaining digital initiatives in-house and working with a select group of outside partners on innovation efforts. Many digital agencies are also diversifying their revenue models and bringing their own products and IP directly to market as a growth engine for their companies and as a hedge against the commoditization and in-housing of some digital services. In fact, for agencies whose innovation labs are 3+ years old, one in four reported that their efforts had resulted in a company spin-off, VC investment or significant funding; four in five said their innovation lab efforts contributed directly to new business wins, and slightly less than one in three indicated increased revenue from their product incubation efforts. As brands continue to build their own digital capabilities in-house, it’s no longer as common to see crowded rosters of digital agencies servicing a single client. In the 2015-2016 study, only 12% of brands had four or more digital shops on their roster, down from 21% in 2014.

21. Role of Agencies & Consultancies in Client Innovation on the Rise KEY INSIGHT: The percentage of clients taking full responsibility for digital efforts at their companies grew significantly in this year’s study. In last year’s DMO study, when clients were asked what they valued most in their primary agency relationships, the second most prevalent response was “product/ service innovation.” While approximately 60% of clients handle innovation efforts internally, nearly two in five now work with agencies and consultancies to innovate their company’s product and service offerings.

22. What Types of Digital Shops are Clients Hiring? KEY INSIGHT: Two strategic approaches are emerging – one toward higher levels of specialization and another toward agency consolidation. The percentage of client organizations working with a small roster of highly specialized agencies remained high in this year’s study (27.8%), and consistent with our 2014 findings (29%). There was also a significant increase in the share of clients indicating they worked with one lead agency for digital and traditional assignments. That figure was 30.5% in SoDA’s 2015-2016 study. Clearly, two strategic approaches are emerging – one toward higher levels of specialization and another toward agency consolidation. In its 20 Digital Trends for 2015, Forbes seems to be squarely in the consolidation camp.

23. Marketing Mediums Merging. Content marketing, SEO, PR, social media are all blending into one skillset. No longer is there a need for numerous boutique agencies, as such disciplines are all inter-dependent upon each other with t oday’s techniques. Look for agency consolidation here. (Source: Forbes.com, 1/16/2015) On the other end of the spectrum, there are highly specialized businesses in our industry that many clients are clamoring to work with in areas such as user experience, data and the use of technology platforms for built environments, among others. We’ll continue to track this trend in subsequent studies, but we fully expect the two approaches to co-exist in the short-to-medium term. When we further segment the data, the 2015 survey shows a direct link between level of digital sophistication on the client side and the use of specialized / niche digital agency partners. - Those clients who characterized themselves as “Very or Somewhat Innovative” with respect to digital initiatives were five times more likely to be working with highly specialized digital agencies or a mix of full-service and highly specialized shops. - Only 1 in 8 clients who characterized themselves as “Not Very or Not At All Innovative” with respect to digital initiatives were working with highly specialized digital shops.

24. Independents in the Majority on Client Agency Rosters KEY INSIGHT: The percentage of clients taking full responsibility for digital efforts at their companies grew significantly in this year’s study. More than 60% of client-side survey respondents indicated that they work primarily with independent shops on their digital initiatives. An additional 27% said they work with a mix of independents and holding company agencies. While M&A activity was strong in 2014 (and thus far in 2015), it’s clear that independent digital shops still have a bright future and a commanding position on clients’ agency rosters.

25. Size Matters... Somewhat In this year’s survey, we also asked clients about the size of the agencies they work with and the types of assignments awarded. Here were the top three most common areas of engagement with clients by size of agency. Q. Based on discipline, what size(s) of companies do you currently work with on digital initiatives? For smaller agencies (0-50 FTEs and 51-200 FTEs), Design & Development are the most common areas of engagement with clients. The findings also suggest that clients are opting for small and mid-sized agencies to handle strategy engagements. Client engagements in the area of User Experience cut across multiple agency size 1) Product Mania - clients are eager to jumpstart the way they interact with their target. No matter the vision, creating this “product” doesn’t usually require a cast of thousands or a budget of millions. This trend is paving the way for many smaller agencies to “break into” larger brands to demonstrate their wares. In turn, it places pressure on larger agencies to justify their strategic and design pricing. 3) Innovation Speed - speed is a large part of how smaller resources are able to be more strategic and impactful with data insights. I often encounter talented individuals who seek to work in smaller, more nimble teams to create products so they can not only deliver faster, but innovate and respond quickly once products go live. This approach appeals to clients who know that part of their inertia is derived from their size. 4) Media & Social Media - Like all digital activities, digital media takes a little more handwork. The bar for delivering effective social programs is not as high as for detailed paid acquisition media. Here, the client’s budget and program complexity determine how much demand from smaller partners there is for this category of services. Agencies are consumers too. They’re naturally conceiving solutions that are aligned to the current digital media environment. Because a lot of this information is available in an increasingly automated fashion, there is less and less reason for an agency to “avoid” media as a daunting discipline. - Jessica Pezzulo, CMO, Huge

26. categories. As SoDA member Ari Weissman from EffectiveUI points out, the agency’s (and client’s) ability to collaborate is arguably the most important selection criterion for agency-client collaboration on the UX front. “Working with a UX design agency is transformative for many client organizations and requires collaboration not just with the agency but across the entire client organizational structure, involving stakeholders who oftentimes have not worked together before,” says Weissman. “Your customers don’t care if organizations are siloed. They expect a cohesive and integrated experience,” he added. Analytics and Media rounded out the Top 3 for client engagement with agencies in the 200+ FTE category. Larger companies – including consultancies such as IBM Interactive and Accenture Interactive – have developed extremely robust analytics offerings that are clearly resonating with clients who are under intense pressure to apply more science to the art of marketing. On the media front, a sophisticated ecosystem has coalesced around programmatic buying. While specialized providers have enjoyed a certain first-mover advantage in this space, some larger agencies are coming on strong, building complex programmatic platforms in house.

27. The Changing Nature of Client Engagements KEY INSIGHT: Half of all agency respondents report consulting with clients on new product and service offerings. In last year’s DMO study, clients ranked “product/service innovation” as the second most valued area of expertise for their primary agency relationships. In that same “We’re hearing a few consistent desires from clients: 1) Elasticity - clients are struggling inside their organizational silos and want agencies that don’t suffer from the same rigid structures and instead thrive on fluidity; 2) Chemistry - as the need for collaboration increases clients are increasingly looking at team chemistry as an explicit part of their selection criteria and small to mid-sized agencies are more likely to deliver on that; and 3) Velocity - many report having negative experiences in the past with large agencies not being able to move at the pace of the social consumer.” - Michael Lebowitz, CEO & Founder, Big Spaceship

28. study, agencies, however, ranked product/service innovation a distant fourth in their evaluation of what clients valued most. Fast forward to today (12 months later) and it is clear that agencies have begun to capitalize in a major way on their clients’ interest in partnering on innovation efforts. In fact, 50% of all agency respondents indicated they were consulting with clients this year on new product and service offerings. Given the increasingly blurred lines between the agency and consultancy space, we will continue to monitor this trend closely in the coming months and years.

29. Estimation is Still a Sore Spot for Digital Shops When asked to rank their organization from 0 to 10 on their ability to accurately estimate project costs, agencies left themselves quite a bit of room for improvement in 2015. The average for all agency and prodco respondents was just 6.32 (up slightly from 6.09 in 2014), indicating that most digital shops continue to struggle with estimation – a core business requirement that wields a tremendous impact on their overall financial and organizational success. This mediocre self-assessment underscores that some of the underlying causes of poor scoping and estimating still need to be addressed head on. Far too often (as SoDA partner AgencyAgile has highlighted in numerous SoDA roundtables on scoping), estimates are completed too late, with insufficient detail, by the wrong people, with too much acceptance of uncertainty and are poorly communicated to key stakeholders.

30. Campaign Spending on Digital Projected to Grow In last year’s DMO study, the growth trajectory for digital marketing budgets was slowing considerably. While only 9% of respondents said they actually planned to decrease digital marketing budgets last year, there was a double-digit increase in the number of client respondents who indicated they would be maintaining the status quo. A wait and see approach was the name of the game. While there is still a great deal of economic uncertainty in regions like Europe, the strength of the North American market is translating into larger marketing budgets overall – and for digital initiatives. Globally, in our 2015-2016 study, there was a surge in the number of respondents increasing their digital marketing budgets and increasing overall marketing spends. That figure grew 27% this year, with nearly one in four client-side respondents indicating they were increasing marketing budgets overall and allocating a higher percentage of that budget to digital. Areas such as programmatic media buying are seeing the largest budget increases. In fact, almost one in three client respondents (31.5%) indicated they were increasing budgets for programmatic media buys in 2015.

31. Globally, 46.9% of respondents indicated they were either a) reallocating more budget into digital from their existing marketing spend or b) increasing digital budgets while also increasing their overall marketing spend. In North America, the digital budget expansion trend was even more pronounced, with 55.9% of respondents falling into one of the two categories mentioned above. In Europe, however, the story was decidedly less rosy. Approximately one in four respondents (28.2% to be exact) indicated they were increasing digital spends either through the reallocation of existing budget or by augmenting their overall budget. Meanwhile, 13% of European respondents said they planned on decreasing digital budgets (vs. 9% globally). Increased Digital Spending Not Limited to Campaigns Increased spending on digital is not limited to campaign buys. In fact, budgets are growing most dramatically for digital products outside of the marketing realm (including platforms, applications, tools and services). Agencies and software development companies who have expertise in digital product creation (both bringing their own IP to market as well as developing digital products on behalf of clients) clearly stand to benefit from the growing budget priority among clients organizations.

32. The Value of Innovation Labs KEY INSIGHT: The financial value of innovation labs & product incubators increases geometrically after Year 3. Those agencies that have powered through the initial challenges and steep learning curve associated with product creation are reaping strong rewards. For the past three years, SoDA’s DMO research study has analyzed the proliferation of innovation labs and product incubators within full-service agencies and digital shops. We’ve focused specifically on the value generated by these efforts. While “Too Early to Tell” predominated in past studies, there were some clear benefits, namely… - Happier, more engaged staff - New business wins

33. This year, we took the analysis a step further, analyzing the benefits engendered by innovation labs based on the amount of time the labs have been in existence. As the pie chart above highlights, the average “age” of innovation labs within our agency and prodco respondent base was fairly evenly divided this year (34% < 1 year, 37% 1-2 years and 29% 3+ years). When the age of the innovation lab is not considered, talent retention and new business development tied as the two most salient benefits (both at 70%). When the age of the product incubator is factored in, some significant differences begin to emerge. Clearly, moving from a service-based model to product development involves a steep learning curve for agencies and production companies. After 2-3 years, that learning curve begins to flatten and more financial benefits such as significant funding, revenue growth and new business wins begin to take root. It could also be that after 2-3 years, agencies who do not see clear financial ROI on their innovation labs / product incubators choose to disband efforts and focus on their service-based offerings. When we compare the overall findings to 2014, talent retention and new business both showed strong gains, rising 19.0% and 9.8% respectively. Q. What benefits has your innovation lab/product incubator produced? (select all that apply) KEY INSIGHT: For companies whose innovation labs were 3+ years old, one in four reported that their efforts had resulted in a company spin-off, VC investment or significant funding.

34. KEY INSIGHT: While only 1 in 10 agencies cite revenue growth as a benefit of newly formed innovation labs (<1 year), that percentage nearly doubles for shops who have at least one year of product incubation experience under their belt. KEY INSIGHT: Happier, more engaged staff (seeking a respite from client work) remains one of the top benefits of innovation labs and product incubators, regardless of how long they’ve been in place.

35. KEY INSIGHT: After just 12 months, innovation labs and product incubators are having a significant positive impact on new business development wins. The effect accelerates after Year 3.

36. The State of the Agency - Client Relationship Agency and production company respondents in this year’s survey are decidedly bullish on their relationships with clients. A whopping 69.5% of agency and prodco leaders who chimed in with their opinion indicated that the dynamic of how brands and agencies are working together is improving overall. This is arguably due to the fact that an increasing number of agencies are “walking the walk” of real transparency in their client relationships. SoDA members – and other top companies in our industry – are creating highly innovative collaborative workflows with clients that are paying quantitative and qualitative dividends. We encourage the readers of The SoDA Report to explore some of those best practices that are highlighted within our Industry Insider section in this edition. (continued on next page...)

37. The Client / Agency Dynamic Agency respondents at independent shops were even more optimistic about the state of agency-client dynamics. • 72.3% of independent agency respondents who chimed in with their opinion on this question thought the brand-agency dynamic was improving • Meanwhile, only 62.5% of holding company agency respondents believed that to be the case.

38. What Clients Want In contrast to the 2014 DMO Study, this year’s research reveals significant congruity in client and agency perceptions of what’s important to clients. To gauge YOY trends, we once again asked both clients and agencies to rank the areas of expertise they believe to be most valuable for client organizations. Here’s what they said: Q. (Agencies) What do your clients value most in their relationship with your organization? Q. (Clients) Generally speaking, what do you value most in agency relationships? Our 2015 DMO study indicates that agencies are clearly more in tune with the needs of clients. While there was only one match between clients and agencies in 2014, the 2015 results revealed matches in five of seven areas as shown in the graphic above. “It’s not surprising that clients are looking to agencies for expertise in emerging trends and digital innovation – agencies have a front seat for observing the shift in user behavior towards consuming more digital experiences on an increasing number of device types. There’s a great opportunity here for agencies to act as change agents by helping their clients take full advantage of this shift, creating improved ROI and ultimately greater brand advocacy and loyalty.” - Mark Asher, Director of Corporate Strategy, Adobe

39. The 2015 results, however, do reveal a missed opportunity by agencies in the area of data and analytics. Clients are clearly looking for more expertise and support from their agency partners in the mission critical area of data science than agencies believe to be the case. Clients nearly ranked measurement/analytics capabilities in their top 3, while agencies ranked it a distant 6th . To view this infographic from last year’s Digital Outlook Study, click here (located in Section 1, “What Clients Want).

40. Why Clients Leave In last year’s study, we revealed significant discrepancies between clients and agencies in terms of their thoughts on why clients terminate agency partnerships. Like last year, the No. 1 reason cited by clients in our 2015 study was that their needs had outgrown the agency’s ability to deliver. Meanwhile, agencies continued to assert that changes in management were the number one reason they got the axe. In this year’s study, however, there was direct alignment between clients and agencies when it came to the 2nd most cited reason that clients terminate – Cost Overruns. In last year’s study, cost overruns ranked a distant 4th in the eyes of clients as the primary reason for terminating an agency partnership. This underscores just how critical it is for agencies and production companies to improve their scoping and estimation practices in order to boost client retention. Agency/prodco respondents in this year’s study are keenly aware of the need to step up their scoping game as evidenced by their self-assessment of their estimation skills. Q. (Client) Thinking about your most recent experience with terminating an agency, why did that relationship end? Q. (Agencies) Thinking about your most recent experience with being terminated by a client, why did that relationship end?

41. We also allowed respondents to add color commentary around the issue of why clients terminate. Consolidation and insourcing also emerged as major themes among the respondents. “Consolidation of brands under one agency.” “Agency personnel turnover too high.” “Cost structure too high” “Decided to create our own team [in-house].” “Desire to control services internally” “Shift to in-house” “Taking work in-house” “Thought they could accomplish cheaper/faster in-house” “Establishing in-house team.” Our personal favorite. “No accounting for crazy.”

42. Clients on Their Agency Partners: A Lukewarm Assessment KEY INSIGHT: SoDA’s 2015 study points to the acute need for agencies of all stripes to focus on client satisfaction in order to drive improvements in customer loyalty and to enable profitable growth. While almost 7 in 10 agency respondents reported that the dynamic of how brands and agencies are working together is improving, clients are not yet strong advocates for their agencies to the extent that they would recommend them to other client-side colleagues. In this year’s study, we asked clients how likely they were (on a scale of 0-10) to recommend their agency partners to a friend or colleague. We inquired about those agencies primarily responsible for digital marketing efforts as well as agencies responsible for other marketing efforts at their companies. Here’s what they had to say. Q. How likely are you to recommend the following agency partners to a friend or colleague? On the whole, clients surveyed in this study can be classified as agency “detractors” based on Net Promoter Score (NPS) methodology. Any NPS score under “6” indicates that these clients are generally unsatisfied and can damage your brand and impede your growth through negative word of mouth. Agencies (and other companies in the digital industry) must reinforce efforts on client satisfaction in order to retain relationships and fuel future growth. When we segment the results on a regional basis, agencies in North America fared slightly better (4.8), while agencies in the APAC region fared the worst (3.6).

43. When we segment the results based on the ownership structure of the agencies, independent agencies (5.4) performed better than the overall average. A company’s actual NPS score is a percentage, calculated by taking the percentage of your “promoters” (i.e., those who rank you 9 or 10) and subtracting the percentage of your “detractors” (i.e., those who rank you 0 to 6). Based on that definition, agencies in our 2015 study had a significant negative double-digit NPS score. In order to secure a positive, double digit NPS score, more companies in the digital service industry need to open up and have a candid dialogue with their clients. One way service is no longer acceptable, as customers want to be heard and involved in the discussion to find solutions. Emily Wengert of Huge and Jordan Eshpeter of Invoke both underscore this necessity in their articles within the Industry Insider and Modern Marketer section of this edition. Those agencies who have the leadership commitment and businesses processes in place to monitor customer satisfaction and to act on that client feedback are likely to win in the medium-to-long term.

44. Are Clients Organized for Innovation? Clients and Agencies Opine. For the first time in this year’s DMO Study, SoDA asked both clients and agencies their opinion on clients’ organizational structures and whether those structures facilitate or hinder their ability to innovate and spur positive change. Here’s what they said: Q. (Clients) “My company’s current organizational structure (facilitates, hinders, neither facilitates or hinders) our ability to innovate” Q. (Agencies) “Our clients’ current organizational structures generally (facilitates, hinders, neither facilitates nor hinders) our ability to innovate.”

45. The perceptions of clients and agencies on this question are diametrically opposed. More than two in five agencies see client organizational structures as a major impediment to innovation. More than 40% of clients, on the other hand, believed their company’s structure actually helped enable innovation. From the agency’s perspective, organizational complexity in large client organizations is clearly seen as a roadblock that can suffocate innovation. The intricacies of developing a new product or service on the client side can also lead to missed market windows. Many client organizations, however, are becoming much more agile and responsive to their customers’ needs – albeit perhaps not to the extent that agencies would like to see.

46. Clients and Agencies Assess Their Digital Savvy Q. How do you rate your organization on the following? 0-10 (Clients, Agencies and Prodcos were evaluating themselves on the three attributes listed below) Sophistication with User-Center Design Taking Advantage of Emerging Technology and Trends Driving Digital Innovation within our Competitive Set and Incubating New Products and Services that are Transforming Categories

47. The capabilities analyzed above (user-centric design, emerging tech & trends and product incubation) constitute our Top Three Picks for growth areas in agency- client collaboration in 2015. While one could argue that agencies and prodcos simply have an inflated sense of their capabilities in these three areas, it is undeniable that a large and growing number of agencies in the digital services industry have developed a wealth of expertise in UX, technology trends and product incubation – both in their work with clients as well as through their efforts to bring their own IP to market. In contract, the client-side talent gap in User Experience has been well documented in each of the last three SoDA Digital Outlook studies. This year’s study also revealed that expertise in emerging technology and trends is the area that clients value most in their agency partnerships – a finding that makes perfect sense based on their mediocre self-assessment in this area. The potential to spur positive change across a wide array of industries has never been stronger if resources and agency ecosystems are aligned to stimulate innovation. Agency-client partnerships forged via a sober analysis of strengths in these three areas are likely to yield strong benefits for agencies, brands and consumers.

48. The outlook for agencies, production companies and consultancies in the digital services space is… drum roll please… unquestionably mixed. The Good News - Forward-looking agencies and production companies who are diversifying their revenue streams through successful product and platform creation efforts – bringing IP to market themselves and working with clients on digital initiatives to transform their product/service offerings to customers – are doing well. - Firms that have developed a strong consultancy offering via a digital lens, or are providing training and education services to clients building in-house teams are seeing revenues grow. - Shops that are smart about taking advantage of the right types of emerging technology and trends –and working with their clients to do the same – are thriving. - Agencies that are sophisticated about user-centered design and the use of data to drive deeper levels of personalization are flourishing. - Those who are able to deliver strong marketing creativity and customer- centered marketing are prospering. - Companies that are pioneers in place-based digital experiences (things like architectural digital media, place-based mobile technologies, interactive installations and experiential technologies) are in high demand. - Agencies that are revolutionizing how they work as agency partners with clients through innovative, transparent and highly collaborative workflows are doing well. The Bad News - Digital shops that are failing to embrace change and those that are failing to diversify their offering beyond digital deliverables that have become highly commoditized are – well – failing. • In fact, 38.1% of agency respondent’s in this year’s survey indicated that the rapid commoditization of digital work product is proving to be a serious problem for their companies. • Meanwhile, 29.3% said near-shoring or off-shoring is wielding a significant impact on their business. The Outlook for Agencies

49. Agencies Say the Glass is More than Half Full When asked if the digital marketing industry is moving in a positive direction in 2015, nearly 4 in 5 agency respondents agreed that is was, while only 11% disagreed and another 9% remained undecided on the issue. Additionally, the percentage of agency respondents indicating that agencies with digital roots are more likely to lead was up 10 percentage points YOY (from 66% in 2014 to 75.9% in 2015).

50. Agencies Believe They Are Spurring Change Q. Please rank your organization from one to ten on the following areas, where one is lowest and 10 is highest. Effecting real change is not a formulaic process. It involves interpreting situations where problems are open and ill-defined, tasks are unclear, processes are experimental and where knowledge is something that emerges step by step through continuous interactions with other players. Despite that undeniable truth (and while also leaving themselves room for growth), agency respondents in the 2015 Digital Outlook Study do believe they’re making a positive impact both internally, with clients, and – ultimately - with consumers. (continued on next page...)

51. Product Creation: Still the Best Route to Growth? While 4 out of 5 respondents in the 2015 study affirmed that making digital products and platforms (both for brands as well as directly for consumers) was the best path to growth, the response was down slightly vis-à-vis 2013 and 2014. Product incubators and innovation labs are producing tangible results (as noted in the “Value of Innovation Labs” section), but some of those benefits are non-financial in nature, particularly for those agencies whose incubator efforts are less than two years old. Additionally, a number of companies in our industry have begun to realize that operating a service-based and product-based business under one roof can be too complex to navigate successfully. The focus on digital product creation as the path to growth is still an extremely salient trend. However, we do anticipate a number of agency players who are dabbling in the product creation space to refocus on their service-based offerings given the tremendous complexities of bringing a product to fruition and sustaining it over time.

52. 2015 Hiring Trends One in five agencies is anticipating major growth in full-time staff in 2015. Another 56% of respondents anticipate minor growth. In a completely separate study, SoDA asked its own member companies (a select group of top digital agencies and production companies around the world) about their anticipate staff growth for calendar year 2015. Most SoDA member companies fall into the major growth category. On average, the projected FTE growth by EOY 2015 for a SoDA member company was 21%. Only one in ten SoDA member companies anticipate single digit FTE growth (Study conducted Feb 2015). While the in-housing trend on the client side is undeniable, it’s equally clear that agencies and production companies with a strong value proposition and a differentiated (non-commoditized) position in the market are showing robust growth.

53. Agency Specialization and Client Insourcing Emerge as Parallel When asked specifically what types of companies (agencies, prodcos, etc) do clients work with on digital initiatives, two parallel trends become readily apparent in SoDA’s 2015 study: 1) Clients are working with more specialized digital partners – particularly in the realm of UX and Media. 2) Clients are taking more work in house, particularly in the areas of Strategy and Analytics. The insourcing trend is least prevalent when it comes to Media.

54. Agencies Still Give Themselves Mediocre Marks on Measurement / Analytics Just as in 2014, agency respondents were decidedly humble (or refreshingly honest) when asked to rank their organization from 0-10 on their ability to: 1) Identify actionable insights from increasing volumes of data (Avg. of 5.86, up slightly from 2014) 2) Use a variety of data inputs to drive deep levels of personalization (Avg of 5.69, down slightly from 2014) Analytics is one of the areas in which insourcing on the client side is becoming more and more prevalent. Just under 35% of our client respondents indicated they handled measurement and analytics internally. Despite that fact, data and analytics still constitute huge opportunities for agencies who invest the time, resources and talent to flatten the learning curve and provide a compelling offering to clients. And admittedly, driving deep personalization and gleaning insights from ever increasing volumes of data are still nascent skills for most marketers and digital shops.

55. Clients Leave Themselves Room for Growth on Innovation Front Clients-side respondents in this year’s study were slightly more sober in their analysis of how innovative their digital initiatives are in 2015. This is likely a symptom of the growing complexity marketers are facing on all fronts. It’s harder to be confident that you’re creating groundbreaking work when the marketing and technology landscape is relentlessly shifting beneath your feet. Modern Marketers

56. Additionally, many client respondents indicated their organizations are decidedly conservative, and will wait for technology trends to mature before adopting them. And finally, some respondents pointed to a failure of vision and sophistication on the part of management to drive digital innovation within their organizations. The verbatim comments from survey respondents underscore these realities. “We are always learning, but are not cutting edge yet.” “We try a lot of new things, but I wouldn’t say we’re bleeding edge.” “We are constantly working to improve processes and generate new ideas.” “We are agile in our approach, trying our best to stay on top of all the latest marketing trends and emerging technology.” “We follow the market – when a practice is established we adopt it.” “We adopt new technologies but only after they have been on the market a while and fully tested.” “Management are luddites.” “We could do more, but don’t have the full support from leadership.” “A lack of creative leadership at the VP level frustrates our efforts.”

57. Where Clients Say They Are on the Learning Curve Defining our terms: – Emergent Forms of Digital Interaction (ex. augmented reality, virtual reality, IoT) – Place-Based Digital Experiences (ex. architectural digital media, place-based mobile technologies, interactive installations, projection mapping, social media, and experiential technologies) – User Experience (research and testing) – ROI Analysis (measuring ROI on digital initiatives) – Innovative Engagement (engaging with agency partners in innovative and highly collaborative ways such as agile and co-development of new IP) – Data Use (use of data to drive digital marketing effectiveness) The two primary areas where client organizations report making great strides over the past year are user experience and the use of data to drive digital marketing effectiveness. These two categories were the only areas where a greater percentage of respondents indicated that they are either “state of the art” or “ahead of the curve” versus being “behind the times” or “hopeless.” Despite the trend toward insourcing on the client side, there are clearly gaps in expertise within client organizations across all of the above categories that provide excellent business opportunities for agencies, production companies and consultancies to step in and fill.

58. Three in Four Marketers Say Early Adopter Status Key to their Brand Position Nearly 75% (up from 69.5% in 2014) of clients believe that being seen as an early adopter is key or important to their brand position. Even for non-tech brands, being seen as having your finger “on the pulse” adds brand value. In fact, “Expertise in Emerging Trends & Opportunities” ranked as the top priority for clients when asked what agency skillsets were most valuable to them – up two spots from last year’s survey and even surpassing marketing creativity. And unlike last year’s study, agency perceptions of what’s most important to clients were in direct alignment. Agencies also ranked emerging trends as the top priority for clients in this year’s study. See the “What Clients Want” infographic here. Identifying and evaluating trends for use by clients has emerged as a significant revenue opportunity for companies in our industry. Agencies are starting to take notice. In 2015, just under one in three agency respondents (31.9%) say they are now providing direct training and mentoring to client staff on emerging technology as one of their paid service offerings.

59. KEY INSIGHT: While 2 in 5 clients affirmed that their company’s organizational structure facilitates innovation, many marketers still believe they have a ways to go before their processes are truly innovative and experimental.

60. Clients on Collaboration Marketers gave themselves high marks on their ability to collaborate, interacting continuously across teams and disciplines. In her piece “Show Your Underwear: A Case for Transparent Collaboration,” Emily Wengert of SoDA Member Company Huge makes a compelling argument for more open, transparent collaboration with clients in order to test assumptions and put requirements in context throughout the creation process. “The focus on collaboration is also transcending intra-company workflows and becoming increasingly common in the way forward- thinking brands and agencies are working together.”

61. Level of Complexity Anticipated in 2015 - 2020 KEY INSIGHT: Three out of every four marketers believe the growing complexity they will face over the next five years will be high or very high. 74% of all client-side respondents expect the level of complexity faced by marketing professionals will be “high” or “very high” over the next 5 years. Interestingly, the percentage of C-Level client respondents who thought the level of complexity would be “high” or “very high” was marginally lower (67%). While still a significant response, the finding does suggest that many executives in the C-Suite may be failing to grasp the growing level of complexity on the horizon. Additionally, as the graph below underscores, less than one in three marketers feel prepared to handle that growing complexity, providing yet another opportunity for forward-thinking agencies and consultancies. Those agency partners who are able to help brands craft a progressive and agile strategic approach that can adapt to a marketing and technology landscape which is relentlessly shifting beneath their feet are well positioned for success. Easier said than done, without a doubt.

62. Are You Prepared to Handle It? KEY INSIGHT: Less than one in three feel especially prepared to handle the growing complexity.*

63. Staff Training Executive Leadership and Staff Don’t See Eye-to-Eye on Education Initiatives Even among those who indicated they receive staff training on emerging technology, perceptions also vary by staff level as to the types of training being offered. Talent

64. POVs on Types of Training Made Available Types of current and/or emerging technology training offered to staff

65. Talent Gaps KEY INSIGHT: Agency respondents still point to User Experience as the No. 1 talent gap on the client side, but the gap is shrinking. The percentage of agency respondents indicating it was a major talent gap on the client side declined 17% on a YOY relative basis. As in 2014, agency respondents ranked User Experience as the most significant talent gap within client organizations, but the gap is shrinking. The percentage of agency respondents indicating that User Experience was a major talent gap on the client side declined 17% on a YOY relative basis. In last year’s DMO study, we predicted this major gap would begin to close as the User Experience profession matured, as clients gained education on what UX is (and is not), and as brands began to hire UX professionals from the agency and start-up communities. Based on the results of this year’s study, it is clear that agencies believe the UX learning curve on the client side is beginning to flatten. Agency respondents also believe that clients in the C-Suite and other Executive Management positions still face a steep learning curve when it comes to digital platforms and marketing initiatives. Technology rounded out the top 3 client-side talent gaps as identified by agency respondents this year, further reinforcing the need for client organizations to staff up and/or find agency partners to help them improve their operations focused on current and emerging technology trends.

66. Client Education Agencies Step Up Education Offerings to Clients in 2015 Key: Thought Leadership = We develop and deliver thought leadership, research and analysis as part of our planning or client service offering Playbooks = It is a standard practice to create “play books” and other guidelines that help our clients effectively operate the campaigns, content and platforms we create. Only When Asked = We offer educational or training services only when clients ask for briefings on a topic, or help building a capability in-house In 2015, almost two-thirds of agency respondents are offering thought leadership, research and analysis to clients as part of their formal service offering, building on the client education trend that has been gaining momentum over the past three years. Agencies are also being much more proactive in this realm. The percentage of agencies who provided education only when asked plummeted 24% in relative terms vis-à-vis 2014, declining ten percentage points in absolute terms. Client education and training still constitute a tremendous opportunity for leading agencies and consultancies as brands increasingly seek to build in-house digital expertise.

67. Talent Recruitment and Retention Q. How do you rate your organization on the following? Choose a rating between one and ten, with one being the lowest score. Education and Advocacy We also asked all survey respondents what they saw as a primary issue that requires education or advocacy. Here are a few highlights: Education • “Client education. An educated customer is a good customer.” • “Education around the process and expectations for digital products.” • “Brand and client education on the importance of new technology and what qualifies as smart marketing. Why safe marketing is death. Risk is the only way to break through.” • “Emerging technology best practices.” • “Lack of knowledge about new technologies and the importance of user- centered design in improving brand strategies.”

68. Customer Experience • “Good old-fashioned customer service.” • “Focus on customer experience, not messaging.” • “User experience and the research and insights around it.” • “Addressing the omnichannel consumer -- agencies and brands are still focused on individual channel silos as opposed to the experience of the consumer across channels.” New Business & Procurement • “Legal issues in a digital landscape. Contracts and insurance. Standard terms.” • “Running pitches on fair terms.” • “Compensation models.” • “Spec work..still a major problem. Don’t do it!” • “Pitching practices.” • “Structure and staffing for optimal relationship between brands and agencies.” • “Understanding and adopting new compensation models. Ability to share IP and pursue mutually beneficial risk / reward relationships. Client (procurement especially) tend to be set up to value T&M / rate card appointments, the popularity of which is declining in the agency landscape.” Collaboration • “Effective client/agency collaboration.” • “More transparency and collaboration.” Data Science • “Data-driven marketing.” • “Digital strategy as well as metrics analysis and campaign refinement.” • “Establishing relevant KPIs and expectations for ROI.” Privacy • “Privacy issues.” • “Implications of new privacy legislation.” • “Customer privacy needs to be handled more responsibly. There is too much data being collected that do not materially affect the ability to target. I would strongly endorse an awareness effort reminding of this.”

69. Industry Insider 2.0 Introduction 2.1 Mission Possible: Process, Flexibility and Next Big Things 2.2 Brief Strategy vs. Business Strategy: Where Good Creative Originates 2.3 Show Your Underwear: A Case for Transparent Collaboration 2.4 Agency ‘Game of Thrones’

70. Introduction to Industry Insider Sean MacPhedran Industry Insider Section Editor Group Planning Director, Fuel The Future is Finally Here, Now What? This edition of The SoDA Report is being released at a time when many “technologies of the future” are finally seeing the light of day. We’re talking about the kind of stuff predicted by 1950s futurists. The Apple Watch has launched, getting us (almost) to the point of the famous Dick Tracy watch phone. A wide array of Virtual Reality offerings are on the verge of coming to market, ranging from the augmentation flavors of Magic Leap and Microsoft’s HoloLens to the full immersion of Oculus to the simplicity and accessibility of Google Cardboard. The private space flight industry continues to grow by leaps and bounds. SpaceX is testing reusable rockets with vertical landing legs. Virgin Galactic is building a new craft. Vulcan Aerospace is assembling the world’s largest plane (with six 747 engines and a wingspan wider than a football field) in order to launch rockets into space from an altitude of 30,000 feet. 3D printers continue to get cheaper and smaller. Facebook is bringing free Internet to emerging markets. Google is bringing it to the most remote places on Earth with balloons. And I just bought an HP tablet for $80 that runs a full version of Windows. Eighty bucks! Unfortunately for our lot, this doesn’t mean we have the luxury of taking a break to sort out the meaning of these changes. More change will come. The next generation is growing up learning to code. As online education, cheap technology and Internet access become ubiquitous, we’ll see a new, global generation of entrepreneurs create a new wave of even greater change. And that’s fun, and why we’re all in this business. In this round of Industry Insider, four great minds from SoDA’s membership help navigate these futuristic waters, with their scary robot sharks and hidden coves of opportunity. The articles touch on everything from our industry’s similarity to Game of Thrones to the importance of letting yourself be a little naked, metaphorically, with your clients. Without further ado, please enjoy these articles from Nathan Moody of Stimulant, Jim McArthur of Mirum, Emily Wengert of Huge and Jonathan Tvrdik of Phenomblue.

71. Mission Possible: Process, Flexibility and Next Big Things Nathan Moody, Stimulant (from left to right) • Josh Goldblum, Founding Principal & CEO, Bluecadet • Joel Pryde, Lead Developer, Stimulant • Don Richards, Executive Creative Director, Foghorn Communications We all want clients with vision, who can imagine (and accept the risks and costs associated with) the “Next Big Thing,” the experience no one has seen before, and which no studio or agency has ever attempted. But once you land such projects, you may quickly find yourself with a whole new set of challenges. You can almost be guaranteed the client has seen those cutting-edge experiments and hacks that your own team draws inspiration from. The bar is set higher than is comfortable. Outcomes are uncertain. And yet your team needs to still design, develop and deploy a solution that’s on brand, business-right and user-centric. We’ve built a strong business on projects of this nature for over six years, and have found great success with a highly plastic process, by stealing workflows from other disciplines, maintaining an org chart without creative directors, and holding mandatory cocktail classes. But just as one ‘Next Big Thing’ is launched, there are

72. a handful of others already queued up. We wanted to check in with others leading the charge in our industry – colleagues, clients and peers – about process and organizational lessons in the world of emergent interaction and place-based digital experiences. Josh Goldblum and his team over at Bluecadet have launched some pretty incredible projects. We’ve had the pleasure of working with Don Richards of Foghorn Communications and have long been impressed with his approach to emerging technology and creative collaboration. And we checked in with our very own Joel Pryde for his perspective. Q1: From grappling with new technology to managing client expectations, what has been your greatest challenge when tackling projects heavy in emerging tech? DON RICHARDS: Feature-itis. These projects are by definition R&D. To focus our research and ensure a successful outcome, we try to develop clear use cases up front with tangible, measurable objectives. As the work progresses, it’s common for excited clients to want to see the projects do more. Can’t you just add this thing or make it do that, or wouldn’t this be cool? There is the obligation to say “we’ll look at that,” but it’s foolhardy to let it take your eye off the prize. JOSH GOLDBLUM: We’ve found that the hype and promise of an emerging technology can often outpace the technology itself. What might seem to be even a basic implementation of a new technology can often be buggy, unreliable or simply not possible. More often, the technology might require a very controlled set of circumstances to function properly. Sometimes there is a way around the obstacles to using a technology, but whether that solution actually matches the production schedule or the budgeted hours can be an entirely different challenge. This is especially the case when the client is convinced that the technology should be as simple as plug-and-play. JOEL PRYDE: It can be difficult to balance the desire to use the newest and shiniest technology with the need to rely on tools that are reliable, proven and that will work within the schedule allotted. In general, our strategy has been to spend time outside of normal projects working on lab experiments. This allows us to play around with new tech and test out viability so that we can make educated decisions on hardware before we deploy that technology on a client-facing project where the time constraints are more rigid. Q2: We’ve all been there when a project doesn’t go according to plan. Can you share a “failure” or a sticky moment where a project or idea didn’t go so smoothly and how you managed it? DON RICHARDS: We developed a traveling installation that demonstrated how large touchscreens could be used as ‘endless aisles’ in a retail environment. As the project progressed, so did retail sales technology, and the client wanted new technologies integrated that the project was not designed for and, more importantly, did not need. The result was a demo that was highly successful from a business standpoint

73. (traveling to over 300 locations) but which lacked the crispness and ‘wow’ factor we would typically expect. JOSH GOLDBLUM: When we first started working with the Kinect Sensor, we pitched an implementation that – while seemingly simple based on the available documentation – was actually incredibly complex. Based on our initial assumptions, the client completely bought into the idea and we proceeded to develop a project scope that was completely wrong. The implementation ended up being a nesting doll of complexity. Ultimately, we made it work and the client was thrilled, but we burned a ton of un-billable hours. JOEL PRYDE: I feel fortunate to be able to say that we haven’t had any outright failures. We have, however, gotten into a few projects where our initial assessment of the development schedule and the complexity of the technology implementation were woefully underestimated. Probably the most extreme example of that was the Reunion Tower installations in Dallas. We knew that we were building three different pieces, but we didn’t realize how hard it would be – and how much time it would take – to meet with so many external agencies focused on deployment and infrastructure issues over the course of the project. Fortunately, having a great pool of contractors to rely on and a scheduled staging of the project helped us stay on track and allowed us to uncover and resolve a lot of the issues that could have proved disastrous at deployment. Q3: It seems like the constant hurdle is managing client expectations. In such a rapidly changing landscape, how do you align client expectations and strike a balance between your aspirations and the associated risks? DON RICHARDS: We set realistic goals and we work with very, very good people. Each group evaluates its own risk and bears responsibility for it. And in actuality, each group ultimately bears responsibility for the entire project since every element is needed for success. There is no contract that can substitute for knowledge, integrity, attitude and relationships. JOSH GOLDBLUM: Whenever we take on a new technology, we set aside some time very early in the schedule to test and prototype. This allows us to determine the actual capabilities of the technology without committing ourselves to an idea that will take forever to implement or that won’t deliver on the promised experience. Outside of our client work, we also schedule time to play with a range of technologies. . This way, if we find something we think would be great for a client project, we can pitch it to that client knowing we’ll be able to deliver without exposing ourselves to the risk of failing or missing a deadline. JOEL PRYDE: Managing client expectations has proved to be an incredible challenge as we move into working with real-time 3D graphics. I come from a games background, so I have a fairly good idea of the limitations of current real-time 3D hardware and how that hardware stacks up to products like Maya and Cinema4D that do not provide real-time rendering capabilities. Ultimately, we do need to comp something for the client, so we do end up using such tools. However, we try to

74. communicate that what they are looking at is a rendering (much like an architectural rendering) and not the final product. Fortunately, our skills with writing shaders and current GPU technology are progressing quickly so the gap does get smaller day by day. Q4: In the past few years, there have been so many first-of-their-kind projects launched in our industry and technologies developed that are considered “successes.” When everything goes according to plan, how do you ultimately measure the success of an experience that’s never been seen before? DON RICHARDS: By whether people voraciously engage with it. If they play with it for a minute, smile and say they like it, we’ve failed. If there’s a beaming line of people who can’t wait to get their hands on it, we’ve succeeded. The Connect to Life creature creator we did with Stimulant at CES was such a project. Over the four days of the show, attendees created a new, unique creature on average every three seconds! JOSH GOLDBLUM: How we measure success depends on the industry and the implementation. For example, when we work with museums, we work closely with their in-house evaluators. These teams will provide us with a wealth of qualitative and quantitative data on how visitors engage with the experience. This includes dwell time, but also other metrics like how many people smiled, who invited friends to join, etc. Ultimately, we like to observe real people interacting with our experiences. We’ll test the experience with users well before we launch and will iterate until we feel the product is ready for the public. JOEL PRYDE: The ultimate test is to watch people come into the space you have worked on and interact with what you have built. We have been lucky enough to work on a lot of playful projects and, in particular, it is a joy to watch children interact with a project we have worked on and experience it with open eyes. At the end of the day, success is defined by the story that your technology is able to deliver to the widest array of people and what they take away from that experience. Q5: Creativity and innovation really need to be part of the culture and DNA of any company operating in this space. How do you maintain such a culture within your company? Are there any particular sources of inspiration? DON RICHARDS: We build unique teams for each project where people of highly varied expertise and interests come together. Virtually no project team is ever fully replicated. It’s very much a film industry model. When you bring together the right “producer, director and actors,” you get a unique “film.” It’s the same for bespoke digital experiences. And every member of the “cast and crew” walks away energized. JOSH GOLDBLUM: As a studio, we’ve found that it’s important to constantly keep a good frame of reference for who is doing the best work in a variety of fields. This includes expected disciplines such as design, gaming, typography, photography, video and motion graphics, but also less expected fields such as theater, art, film and architecture to name a few. At the same time, we try to approach each project on its own terms and to solve the problem directly. It’s important to resist the temptation to “Success is defined by the story that your technology is able to deliver to the widest array of people and what they take away from that experience.” – Joel Pryde, Stimulant

75. replicate someone else’s solution to a similar challenge. Sometimes a tested solution is a good one, but we have to be sure to think it through methodically before deciding that is the best course of action. Also, while we are very process oriented, we also keep an open mind as to when to adapt our process to meet the challenges of each project. JOEL PRYDE: We keep the normal internal mailing lists of cool things we see. However, I’d say the key thing that helps us maintain a culture of innovation and creativity is ensuring that we have employees with an incredibly wide range of outside interests and influences. Also, during brainstorming sessions, we’ve found that it’s crucial to keep an incredibly open mind to ideas. One thing I saw in the game industry was that when you have a lot of people who are into the same thing, you end up generating very similar ideas. At Stimulant, we have people who make noise music, make techno, play board games, play musical instruments, kayak, ski, photograph, build arduino projects…etc., etc., etc. I firmly believe that every one of those interests slightly colors the ideas we bring to the table and are as essential to what we do as designing interfaces and writing code. Q6: Do you have any advice for others just starting in this space? DON RICHARDS: Go to bat for both sides. Stand up for your client’s needs and desires, but also stand up for your own artists, designers and technical people as well. When they are doing amazing work, it’s my job not to let politics or poor communication compromise it. Good clients respect you for intelligently pushing back. The trust developed through that process is more than worth the risk. And the respect shown to your own people for their time and talent amplifies their enthusiasm and dedication. JOSH GOLDBLUM: I am a big fan of basic chops and grit. For example, when we look for a designer, we want them to know the basics of color, grid, motion and type. I believe these fundamentals are an important basis for creating anything new. Further, I like to see a bit of determination. A designer should be willing to keep pushing an idea and a design. I love seeing a portfolio in which a bunch of good concepts are tossed out for something great. My advice is to get good at your craft and never be too impressed with yourself to stop pushing for something new and better. JOEL PRYDE: Build projects. Lots of them. Don’t be afraid to make absolute crap as long as you are learning something new and can do better the next time (well, don’t build crap for your clients…). We build a lot of stuff that never sees the light of day and we design even more. Every one of these ideas or projects either evolves or at least influences something that does come to fruition. Q7: What’s on the horizon that’s exciting you and your team? JOSH GOLDBLUM: We are working on a number of large museum projects. This includes designing and developing mobile, touchscreens and projections, but also creating a series of interactive environments. I am especially excited to be using sensors, projection, lighting and spatial design in order to create experiences that are more theatrical, serendipitous and multi-sensory. We also have been playing with “Get good at your craft and never be too impressed with yourself to stop pushing for something new and better.” – Josh Goldblum, Bluecadet “Stand up for your client’s needs and desires, but stand up for your own artists, designers and technical people as well.” – Don Richards, Foghorn Communications

76. Oculus Rift, beacons and a bunch of different sensors and cameras. JOEL PRYDE: We have lots of fun projects currently underway and a bunch more in the pipeline. In general, we are working hard on building our internal tools and methodologies so that we can have tighter integration between development and creative in order to iterate faster. A lot of what we do is very fine refinements and adjustments to get the look, motion and overall experience as magical as possible. Any roadblock cuts down on the number of ideas we can bring to the table and how refined those ideas will eventually become. About the author: Nathan has designed award-winning interfaces, interactions, illustrations, motion and sound for two decades, in almost every digital delivery medium and communication channel, for some of the world’s best-known companies. His broad range of experience informs his cross-pollinated, holistic approach to the design, art and craft of experience design. Nathan is a published author, awards judge and frequent public speaker, and lives to explore what he doesn’t yet know.

77. Brief Strategy vs. Business Strategy: Where Good Creative Originates Jonathan Tvrdik, Phenomblue “Put your toys away and get ready for bed.” “Why?” “Because it’s time for bed.” “Why?” “Because you have school tomorrow.” “Why?” “Because you have to get a good education.” “Why?” “So you can get a good job.” “Why?” At some point in our lives, the unrelenting curiosity of our youth eventually subsides and we become happy with status quo answers. As functioning and polite members of society, the importance of placating others in conversation is so ingrained in us that we fear our inquisitiveness is nothing short of rude – or worse – irritating.

78. “If the digital age was about building communication lines, the connected age is about linking and focusing them.” However, agency folks, always keen to distinguish themselves from “normals” are quite aware of this developmental regression and thus nearly all employ the following mantra as their signature song: “We’re different. When clients tell us they need [advertising tactic]… we ask why? Our creative comes from strategy. We are a team of strategists… blah blah blah.” You get the idea. You’ve read it in the agency footer – next to the office location and the “made with love” tag. Regardless of our declarations, I’d argue that as an industry we do not dig far enough into that echo chamber of analysis. “We need a campaign.” “Why?” “Because we’re launching this new suite of products.” “Okay, good enough.” Typically, the conversation ends there as creative tactics have historically come from a narrow view of strategy devised exclusively within the framework of a brief issued to the agency by the client. Therefore our strategic insight and recommendations have all the influence of the variables within that brief… but nothing beyond it. When told, “We need a campaign because we’re launching this new suite of products” our response needs to pry further: “Why are you bundling your products in this new suite?” “Because we need the market to understand the breadth of our offerings.” “Why? What is your desired market position?” “To be the leading technology-focused solution provider in our industry.” “Why technology-focused? What business areas are you planning on growing in the next two years? Is a focus on technology something the CEO or board of directors want to develop? If so, why?” What right do agencies have to ask such questions traditionally reserved for C-Level executives? Good question. The decade-long gold rush that was “the digital age” gave rise to a 360-degree, digitally-united system of data points operating on push/pull strategies. That transformation is now complete. Now, in the connected age, the means to marketing are so democratized and coupled that our clients’ marketing efforts are an ecosystem of interconnected and interdependent tactical hits and misses. Internal marketing departments are firing on all cylinders, making sure activity exists for activity’s sake because no one is quite sure exactly what is working. If the digital age was about building communication lines, the connected age is about linking and focusing them. Agencies can no longer relegate the impact of our creative strictly to marketing and advertising tactics. In the words of Tony Soprano, “Every decision you make affects every facet of every other f-----g thing. It’s too much to deal with almost.” When asked to respond to a brief, it’s critical that our efforts to develop a clear

79. strategy extend out of the brief, out of the marketing department and up the ladder to what ultimately matters: why the business is doing what it is doing in the first place. Beginning a strategy assignment at the true beginning allows you to accurately and responsibly choose the creative tactics that will generate the maximum positive impact on the business. What industry areas do you as an organization want to be focused on in two years? What position do you want in the market? What do you want the external and internal acuities of your business to be? With the answers to those critical questions in mind, next you need to put measurements in place that gauge whether or not you’ve been successful. Then, and only then, can you decide what creative tactics are needed to move the needle on those measurements. Despite the growing importance of data science, there is still a tremendous amount of dissonance, noise and uncertainty as to what is actually working in the connected age. Admittedly, the current complexity has been created in no small part by the digital age and all those communication lines we struggled so hard to construct. When asked to propagate that activity, it is our duty as communication experts to ask why. And then why. And then why. And then why… About the author: Phenomblue VP and Executive Creative Director Jonathan Tvrdik is responsible for the overall creative direction of the firm, leading Phenomblue’s Creative team. With a portfolio of work for national clients, including Diet Coke, Samsung and Microsoft, Jonathan navigates Phenomblue’s top clients through strategic and tactical planning as part of its PTSApproach™. Illustration provided by Russia-based SoDA member, Red Keds.

80. Learning Inspiration Radical Collaboration BROOKLYN, NY theSoDAAcademy.comVisit the website to learn more and request and invite. COMING OCTOBER 2015

81. Show Your Underwear: A Case for Transparent Collaboration Emily Wengert, Huge It’s a Tuesday and I’m about to do something I’ve never done before: send our clients a photo of a hastily scribbled whiteboard to explain how we’ve been approaching their million-dollar ask. After a day of debate, we’ve hit a snag. We get on a quick call with three clients, hoping they know something we don’t. Turns out, they do. Ten minutes later the call wraps and everyone feels good about the decision. In the agency world, there’s a lot of pressure to be right. In the not so distant past, we only felt comfortable bringing clients the final answer that showed off our brilliant thinking. But the problems we face in digital today are exponentially more complex than those we were solving even half a decade ago, and there’s really no chance of getting it right the first time. The clients – as the voice of the business as well as digital experts in their own right –

82. “Clients – as the voice of the business as well as digital experts in their own right – need a better seat at the table, not just as arbiters but also as creators.” “Embracing transparency requires reinventing client engagement.” need a better seat at the table, not just as arbiters but also as creators. We believe the secret to making that possible is transparency – a “show our underwear” mindset that supports collaboration and produces the best products. Let’s shed the agency aversion to sharing mistakes and take the opposite approach: expose the wrong ideas, bad assumptions and delays in schedule, right alongside the good ideas, smart assumptions and efficiencies. Shifting How We Work Together There’s an old adage in the design community: don’t share with clients anything you don’t like in case they fall in love with it and pick the wrong option. This kind of thinking has to disappear. Embracing transparency requires reinventing client engagement. That same client who got to see a picture of our whiteboard also attended our (normally internal) product scrums for several days every other week. We’d show all our work, including what we didn’t like, and talked openly about why something was broken, sometimes before we even had a better solution in place. We critiqued our work then critiqued each other’s feedback on the work, including (gasp!) the client’s. We also used this kind of team model to redesign TED’s website, ted.com. We had frequent, direct access to key decision makers at TED. They worked face-to-face with Huge’s design team multiple times a week, which means they saw successes and failures in real time and collaborated with every team member, from the most junior to the most senior. There were no formal presentations in these meetings. We printed some work, dragged JPGs into browsers or showed materials directly from our phones. We didn’t even book our “client-friendly” conference rooms. The TED team hung out in the war room, side-by-side with our entire crew. None of this is an excuse to get sloppy. In fact, this much transparency will quickly expose if there’s a weak link on the team. It makes it impossible to put together a B team – something agencies should never do to begin with. This kind of approach, which we now use for more than one-third of our clients, allows us to test assumptions and put requirements in context. We see problems sooner and know what the internal pressures our clients might be facing when they sell an idea. It allows them to feel confident in the process, the rationale and the micro decisions that make up the whole. In essence, it lets us create faster and create better. Transparency is an acquired taste When transparency works, it works really well – especially for the most innovative projects, when the decisions are many and the implications big. Of course, total transparency isn’t feasible with every client. A host of factors can hold us back: 1. A client must be interested in seeing incomplete thoughts. Some aren’t.

83. They have pressures to succeed and a manager, president, or CEO to please, and that can make for less tolerance for nascent ideas. So we adjust how we communicate and take time to add more polish. The more these clients can picture share something with their boss’ boss, the more positive the relationship will be. 2. Sometimes a client isn’t empowered to make the day-to-day decisions needed for this model to work. For them, the constant invitation to participate becomes stressful instead of exciting. We work closely with these clients to avoid a big reveal, but the partnership still won’t be as intimate. 3. One of the most unexpected insights from this model is that sometimes having a client next to you every day is not the most efficient way to work – even in the best relationships. Genius is lumpy. Product teams have good days when something takes a big leap forward and bad days when 12 tries doesn’t lead to anything better. Like any good relationship, a little space is a good thing. In many cases, the benefits of transparency outweigh these qualifications. We need to rethink how we expose the progression of our work to clients. Not a single digital project in the history of the world has ever gone according to plan. Not one. And yet historically, agencies have felt obligated to pretend they can predict the future and then scramble to compensate when perfectly normal surprises come up. This is where transparency becomes our friend. By openly acknowledging where things stand, we’re building trust. As long as we approach their problem with passion, smart planning, and an open mind to having that plan change, we can all make better things. About the author: Emily Wengert is Group VP of User Experience at Huge in Brooklyn. She believes transparency is bad when it’s a shower curtain. Illustration provided by US-based designer, John Starr. “For a transparent approach to work, a client must be interested in seeing incomplete thoughts. Some aren’t.”

84. Agency ‘Game of Thrones’ Jim McArthur, Mirum The ultimate battle for supremacy has begun. The great houses of Advertising, Digital and Business Consulting are at war, a battle both epic and intricate. But before we can make sense of what is happening today, we must look to our past. The year is 1950. Digital means you have a thing for fingers and toes. The Big Four are more like the mid-sized 30; they all wear green visors and have hipster brass lamps. The era of Mad Men: Four packs a day and an unwavering grip on both the vodka bottle and the global economy was the name of the game for (metaphorical) Don Draper and his cohorts. Through the force of their creative genius, they (and Hollywood) became the tip of America’s Capitalist spear. This unique position put yesterday’s (m)ad-men at the center of many of the West’s most successful corporations — not only handling above-the-line acquisition, but

The SoDA Report (Volume 1, 2015)

You are reading a preview.

Check these out next

The SoDA Report (Volume 1, 2015)

More Related Content

Slideshows for you (20)

Similar to The SoDA Report (Volume 1, 2015) (20)

More from Society of Digital Agencies (11)

Recently uploaded (20)