I was saddened to read about the end of Barton F. Graf. Over the last decade, Gerry Graf and his team has done some great work that’s pushed the culture and the ad industry. As a fellow entrepreneur in the advertising and marketing world, I feel for Gerry as he described his journey.
The reality is that technology has rendered any company built on an analog business model obsolete. Naively, I thought this would happen a long time ago. I once thought that the industry was headed for the dustbin of history if it didn’t change. Watching all of the agency social media feeds coming out of Cannes this year, it didn’t seem like things had changed at all for these dinosaurs. There were still agency yachts, fabulous beach parties and stars galore.
How does this happen in a deflationary period for an industry? Did I get it totally wrong?
Since my time at Havas, I’ve been studying how incumbent organizations go through the process of changing. While we looked back at the V&S and Havas experience through the lens of two Harvard Business School case studies, we’ve realized that the issue wasn’t that we didn’t provide the incentives needed to encourage innovation. Instead, the core issue was identity.
The people running traditional agencies have built their identities on being agency creatives, strategists or account executives. This identity gets them stuck in a mindset that is out of sync with reality.
We see in industry after industry that the most successful organizations are the ones most threatened with extinction because their success—and excess—is based on an old paradigm that is deeply misalignment with clients. It is estimated that 35% of every dollar of expense for any large company goes to keeping the bureaucracy alive. My hunch is that inside agencies, that number is much higher, maybe even between 60%–70%.
Digital tools can now efficiently replace the 60%–70% bureaucratic costs of matching and managing the right talent to a project and instead put more resources into expanding the creative and strategic talent that can help drive the business forward.
New digital platforms can now do the work faster and cheaper with the same outcome. Recently, an agency exec told me that his agency did a $140,000 project for a client. To experiment with how this would compare to working in the gig economy, he sent the brief to an on-demand talent platform. The platform came back with a bid of $5,000 for the same work.
Agencies now have a choice. They can still reinvent themselves, like many other incumbent organizations in many industries. They can remove these archaic layers of friction and streamline their teams. If they don’t rebuild their foundations on a digital business model, they will risk ending up in the dustbin of history.
But how do you do this?
After a three-month-long research project working with a dozen incumbent organizations that are on the cutting edge of figuring this transition out, all are using a four-step process: learn, experiment, build and scale.
Sell the vision. Focus on education, culture and communication with the intention of creating a coalition of the curious and the willing.
Prove it works. Practice using new tools and systems, measure results, have results to share and secure buy-in.
Create the infrastructure. Establish an open talent practice within the organization that has a specific identity, structure and measurable outcomes.
Fully integrate. Create a model that has a fully integrated open systems method of thinking and working throughout its entire culture and systems.
At the end of the day, all of the technical tools and processes proven successful can’t overcome the issues of culture and identity. These pillars that made the best agencies even better are now the very things that are holding them back from getting to the future. I hope that the dinosaurs can re-envision themselves as furry or feathery creatures, exploring a new environment.