Why Some Agencies Are Dying

I have experienced a crazy trend in the past six months, the client movement to have multiple and diverse agencies working together. Tenacity5 has already experienced five partnering deals with other agencies this year and it’s only July. I may have partnered five times total in the past five years preceding 2015.

Sharing the revenue pie is not something most agencies do well. However, some agencies are suffering as a result. Others are dying. They cannot adapt to the new collaborative approach clients are demanding.

My friend Patrick Ashamalla sent me this year’s SODA Report (see the below chart), which showed that highly specialized players are taking a larger priority. Pair this with the the whole “agency of record is dying” trend and you have a movement.

digital-shops

CMOs don’t want to hire a generalist firm to execute their entire scope of work. It’s not reasonable to expect a one size fits all agency will do a decent job on all of activities in a significant scope of work. CMOs don’t believe agencies that say they can do it all. In fact, they find such claims suspect.

The Collaboration Economy

Collaborate Well
Image Courtesy of Wild Blue Yonder.

Corroborating this trend was Gary Duke’s excellent Wild Blue Yonder research presented to DC Ad Club last week. Gary dubbed this the Polygamous Client trend, and noted it is spreading like wildfire across the Fortune 1000.

Those agencies who want to remain competitive need to become more agile, collaborative and highly specialized. Those who are not evolving and insist on the mass integrated marcomm agency role are shrinking.

“Agencies must take on a collaborative approach with other agencies because they simply don’t have any other choice today,” said Gary Duke via email. “It’s not only what clients expect — it’s what they demand of their agency partners. If it’s not in your DNA to play well with others in the sandbox, then you just better pick up your toys and go home.”

Of the agency efforts I have participated on this year, some have been super fluid and one in particular was a disaster. And in that case the primary partner clearly wanted all pieces of the biz, was not collaborative or transparent, and ignored other agency/partner recommendations in spite of a clear lack of competency in some project areas. No surprise: The relationship and overall initiative blew up.

The Nimble Agency of Now

Collaboration Scores
Image Courtesy of Wild Blue Yonder.

Jeremiah Owyang likes to talk about Crowd Companies, businesses that share resources on the Internet. Well, the agency business has not quite devolved to that point, though you could argue that companies like crowdSPRING have eroded the bottom side of the market.

CMOs want access to agencies or agency teams with wide spread resources, usually freelancers and other partners. That means an agency must work well with others, share scope, and bring on third party resources as needed.

In essence, they want more nimble partners who have access to diverse capabilities. They want best of breed in every marketing function. Integration is still needed, but instead of it being under one roof, marketing organizations want agencies that can assemble or play with assembled teams that possess superior niche skill sets.

These are shared resources in many ways. That means integration is a result of project management instead of scope or overall billing. Project management across diverse creative assets becomes a necessary skill for the strategy lead. Duke hammered this point home over and over again in his presentation.

Here are some steps I am taking as a result of this trend:

  • Building a diverse agency partner network to refer and garner referrals
  • Doubling down on focus and expertise in digital content and platform creation
  • Avoiding services spread into areas that we are not good at, such as SEO, media buying, branding, media relations, etc.
  • Building stronger project management skillsets
  • Taking an adaptive attitude towards strategy, specifically be willing to drive or psimply fulfill a role as needed.

Are you seeing a similar trend with your business?

  • benkunz

    Smart post. Our shop Mediassociates has been a media planning, media buying and analytics specialist for two decades. We always collaborate with other agencies, because we have to by design, and here’s what we’ve found: two things are required. (1) A belief on the client side that a collaborative team of specialists is best (and we think so), (2) and agency partners willing to share the pie and grow it together, believing it is more than a zero-sum game. Clients often check (1), but the right agency partners are really required for (2). My advice to most agencies is given how complex the world of communications has become, it’s insane not to build a team of partner specialists. You might learn something, we all learn together, and the odds of client success are better … provided we really can act as a team.

    • geofflivingston

      That’s a really good point, Ben. They do need to become more team oriented. It comes down to management and the ethos they espouse across their organization. And now I know who to turn to for media buying!

  • Outstanding, Geoff. And completely on target.

    I have witnessed firsthand how companies are flipping the relationships with vendors, and requiring them to not only “get along,” but to stay in their lanes and with what they do best.

    I call it Modular Marketing – getting the bits and pieces of expertise that you need to power your strategy, and assembling the best team from across a lot of firms.

    • Simeon Poulin

      Great article Geoff. I am currently on a team on location with a large client. My team is comprised of people from 2 other agencies and a couple of people from the client-side.

      We work in an agile environment (scrum) that helps everyone own the project and leave the agency politics at the door. I also see this being a trend going forward.

      • geofflivingston

        Yeah, I would love to participate in a scrum like this. Seems like fun, and super engaging.

    • geofflivingston

      Makes sense to me, and after all if the buyer prefers a better or a more defined relationship, then they are going to get it. One way or another. ;)

  • New Media Angels ( http://newmediaangels.com/ ) have been working to this system for years, combining the skills and expertise of various agencies to provide an overall service to their clients.

  • Great post @geofflivingston:disqus. As I’ve stated on SEW (http://searchenginewatch.com/sew/how-to/2403614/building-the-digital-marketing-agency-of-the-future), agencies will need to take five further steps to be competitive and offer real value for clients. This is what we’ve been working on at DOZ, a kind of super agency, based on a curated marketplace / marketing software approach. (http://doz.com)

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  • Thibaut Vanderhofsta

    Totally agree with this trend, I can see this happening more and more in the entire Industry at Global Scale. Technology and communication has change the name of the Game. Incumbents must adapt themselves or will be vanished violently in this speedy market. That is why I have decided to help companies to meet the one understanding that collaboration is key. You might found some of them on sortlist.com .