Like most businesses, the agency business is undergoing a period of structural change.
As traditional sources of revenue are attacked, holding companies are in consolidation mode.
For most people, that means one thing: job cuts.
Yet what does consolidation really mean for clients, agencies and talent? We break it down.
For clients, it's about:
• Managing cost: Clients are challenging fees, in-housing and calling for pitches to drive down the cost of marketing. Yet the expansion of touchpoints, the price of media, content, data and technologies is driving it up.
• Efficiency and effectiveness: Agencies that specialise in channel-specific disciplines are a reflection of the siloes within client teams themselves. As siloes break down, marketers seek partners who can cut through agency fragmentation to provide smart, integrated solutions that deliver business results.
• Solving bigger problems: As the role of the CMO expands beyond communications and selling products to business transformation, marketers want agencies who can think more broadly on issues from purpose beyond profit, to innovation and sustainability.
For agencies, it’s about:
• Integration: Holding companies are consolidating their agencies into a fewer number of agency brands (WPP) or adopting a single global brand (Publicis Power of One). They are fixing financial mismanagement and aligning service and revenue models around clients not channels.
• Scaling higher margin capabilities: As CMO spend shifts to customer experience and mar-tech, holding companies are beefing up their consulting, e-commerce and marketing technology practices to prevent encroachment by consulting companies.
• Agile teams: Rigid and bloated team structures are giving way to leaner, flatter, more fluid structures where different disciplines sit together as partners. Talent and capability is being open-sourced and swapped basis client need with fewer siloes between disciplines.
For talent, it’s about:
• Role convergence: As marketing, media and technology converge at rapid rates, so too are traditional roles in strategy, account management and creative. Generalists and specialists will co-exist.
• Hybrid skillsets: There is a hunt for leaders with multi-dimensional skillsets that include business strategy, design, storytelling and rich technology acumen but also soft skills such as critical thinking, the ability to embrace change and collaboration.
• Creativity: Creatives need to marry emotional brand storytelling with clever uses of media, data, technologies and platforms. Tactics may change. The fundamentals of brand won’t.
We’re in the early stages of a 15 year cycle that will see new stakeholders, new suppliers and new economics emerge. Forrester Research calls it ‘the creative deconstruction and reformulation of the industry’.
No one knows which agency model will win. Amid the uncertainty and pessimism, there is opportunity (that's a subject for another post). And creative entrepreneurs who can cut through the noise will seize it.
