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Friday, November 22, 2013

Can Your Ad Agency Survive The Two Revolutions?

Recently, I read THE INNOVATOR’S DILEMMA by Clayton Christensen of the Harvard Business School. Many analysts consider it THE book to read on disruptive change in the business world. One point that Christensen makes clearly and often is that well established firms generally fail when their industry is confronted with new markets and technologies. The logical extension of this is that this cannot bode well for the smaller and mid-sized players in the advertising industry if his thesis is correct.

Christensen is not brutal in his comments. He does not say that managers of struggling firms are lazy, corrupt or intellectually limited. The point he makes is “there is something about the way decisions get made in successful organizations that sows the seeds of eventual failure.” People are very wedded to the axiom that, “if the machine ain’t broke, don’t fit it.” Well, that is fine for normal times but, in a revolution, it no longer works.

My take is that in an era as we have now in communications a leadership team at an agency has to be able to spot paradigm shifts and adapt to them quickly. What concerns me is that all but a few agencies below the major advertising holding companies are equipped to do it or have the financial resources to buy companies and people who can.

What are the two shifts? To me, it is not simply the erosion of TV as an ad medium that many people point to as THE key issue. Rather it is the twin paradigm shifts taking place--the emergence of Big Data and the emerging (sic) middle class in emerging markets.

We discussed Big Data at some length in an earlier post “The New World of Ad Agency Mergers” (Media Realism, 10/28/13).  The major holding companies have set up exchanges that can purchase on line impressions at a depth and cost that cannot be replicated by smaller shops. The second shift is what is going on in emerging markets. Every marketer in recent years nods vigorously when the abbreviation BRIC is mentioned and can proudly list Brazil, Russia, India and China as the countries making up the term.  Yet, the BRIC companies are not where the real action is these days. Less obvious choices such as Indonesia, Malaysia, and Vietnam in Asia, much of Latin America outside of Brazil and selected countries in Eastern Europe are showing stellar growth. As their middle classes grow, the need for advertising is soaring. The giants are ready to take advantage of this trend but the mid-sized and smaller shops generally have to watch it from afar.

In the United States, package goods companies increasingly are putting more money in to promotion and many advertisers are beefing up Public Relations and Interactive and Internet Marketing. Again, this puts the non-giants in an awkward position. They may be able to do solid Public Relations for smaller clients but they will increasingly be outgunned when it comes to Internet Marketing.

So, clearly there is a revolution going on in advertising both with the advent of Big Data and the shift away from North America, Western Europe and Japan in terms of dynamic advertising billing and simply economic growth.

When I try to talk or e-mail people about this, they often claim that they have the right people and will be fine no matter what happens. While this is a bloodless revolution, who survives and prospers in revolutions? Almost always, if you look at history, it is people who are wired differently than most of us. And, they do not always take the traditional straight path that to success. Both Bill Gates and Steve Jobs were college dropouts--no MBA’s for them. Billionaire investor George Soros claims that his father’s wise decision to leave Nazi-occupied Budapest steeled him for his later life. They abandoned an upper middle class lifestyle for a new life on a new continent. People who succeed in upheaval just see things differently than most people in existing successful companies. They are smart and focused and think outside the box as they have little or no vested interest in the status quo. Look at all the 20 somethings in Silicon Valley. They may be irreverent but they embrace the change and often make it more rapid. Virtually all started as outsiders.

One fellow wrote to me recently and said that he has a young digital designer who could be a young Steve Jobs incarnate. My answer was that if that were true the young genius would be bored at his shop and quit. He laughed but told me that my point was very well made.

So, as you hire going forward, look for the unusual. Perhaps she is a stat freak who sees things that you do not in consumer data. Or, perhaps she can link data from different sources together into a coherent strategy in a way the rest of your team has never considered.  Maybe he is a better forecaster than your researchers as he has no baggage from the past to muddle his thinking.

If you have a team that has been together for a while it is probably a good idea to get some new injections in to your agency gene pool. The crazy or two that you bring on board may not be so crazy and could lengthen your corporate life.

If you would like to contact Don Cole directly, you may contact him at doncolemedia@gmail.com

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