The 5 In-Housing Models

I was invited to take part in the annual ‘Great Cannes Debate’ at the Cannes Lions Festival of Creativity in 2019. The topic was “Will in-housing creativity fail?” and I was there to put the emphatic case for YES. It will fail, and it is failing. I was up against the alternative view, including from the then internal creative leader at Uber.

We each landed our messages, and while no winner was called, with an audience like Cannes it was like I was arguing in front of turkeys to cancel Thanksgiving. Ironically, here I am now extolling the virtues of what I then challenged.

I was wrong then, and this is right now.

The market has changed, the tools and capabilities required have changed, and the impetus to create at the speed of culture has changed. These are all part of the case for post-agency marketing that we have been exploring together.

So far, we have covered this case for change, discussed the 3 i’s model for post-agency marketing and in the past fortnight have looked at both sides of the AI coin – both its power as a marketing tool, but also the responsibility to use that power ethically and legally.

With this as a foundation, this week we are starting to look at the different capability models that you will consider as you plan and execute for this post-agency world. As a client for almost 20 years, and then as an agency industry leader for 13 years, I’m covered in the scar tissue of having experienced each of these approaches. So, I share the pros and cons of them from that experience.

We are just going to take a quick tour through the 4 different models in this newsletter – then in the coming weeks we will go into more detail on how to transition to these models successfully, with cases and example from which to learn.

Which is the best model?

This is the wrong question. There is no best model, just the optimal model for your brand and business. For some it will be continuing to operate in the agency world, with great external partners to support your growth. For others it will be to build the in-house capability to lead the full spectrum of marketing. Others will be somewhere in between.

To inform how you might judge the specifics of potential post-agency models, the Association of National Advertisers (ANA) offers valuable guidance in The Continued Rise of the In-House Agency: 2023 Edition . According to the ANA's research, a significant number of brands have transitioned to in-house agencies, with 82% of survey respondents confirming the establishment of such models within their organizations as of 2023. This shift reflects a departure from fleeting trends to an enduring feature of the marketing ecosystem.

As brands ponder the shift toward in-housing, considerations outlined by the ANA include the scope of services managed internally, the interplay with external agencies, and the benefits and challenges of this arrangement. Staffing and key performance indicators (KPIs) are also crucial, with business performance gaining prominence as a KPI over cost efficiency. For those considering this significant step, the ANA's findings provide a foundational understanding of the in-house agency's role and impact within the broader marketing context.

At the risk of over-simplification, and with the considerations above as a guide, once can map the alternative paths based upon their potential impact (ROI, accountability, efficiency) and complexity to execute (cost, speed, legal, governance, brand safety).

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Each model offers unique benefits and is designed to cater to different organisational needs and objectives. Here is a brief overview before we look at each one in turn:

1. On-Site Agency Teams: This model involves dedicated external agency teams working within the brand's premises (or, more precisely, within its access and ways of working in this more remote working world), closely integrating with internal teams while remaining employed by the agency. It facilitates seamless collaboration and swift execution of projects. This is “In housing Light”, as in the change in housing itself is the largest shift.

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2. Building In-House Capabilities: The commonly understood approach where brands develop their marketing teams internally, aiming for expanded control over their marketing strategies and execution by sequentially building these capabilities and changing the nature of the engagements that they have with their agency partners.

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3. The JV (Joint Venture) Approach: In this collaborative model, brands partner with a lead agency to create dedicated teams within a new or dormant legal entity, blending the best of both entities for mutual benefit. They share governance of the entity, and the client-side has >50% share to reflect revenue and earnings.

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4. The Build, Operate, Transfer Approach (“BOT”): External partners build a standalone marketing function to the brand's specifications and, once operational, transfer it to the brand's ownership. This approach is ideal for specialist skills where the client has low capability and needs greater engagement from an external partner to build it from scratch and ensure that it works before integrating.

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5. Agency Acquisition: A brand purchases an existing agency, perhaps one where they already represent most of the agency’s business. This is very rare, very complex, but still an option open to a brand to pursue.

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Each of these models represents a strategic choice for brands navigating the complexities of post-agency marketing, offering varying degrees of control, flexibility, and expertise. Let’s explore the alternatives a little more.

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1. On-Site Agency Teams?

Strictly speaking, this is not really in-housing nor taking full advantage of the post-agency contemporary marketing world. Having said that, it’s very common. Something of a security blanket for a brand: the agency is still accountable, but they are your team, and they are on-site.

The On-Site Agency Teams model represents a hybrid approach that blends the expertise and innovative perspective of an external agency with the intimate brand knowledge and operational control of an in-house team. This model offers the distinct advantage of having agency professionals work alongside a brand's internal staff, fostering deep collaboration, quick iteration on projects, and real-time feedback. It effectively bridges the gap between the agility and creativity of agency resources and the strategic focus and brand alignment of an internal team.

However, this model is not without its challenges. It requires meticulous management to ensure cultural alignment and effective collaboration between the brand and the agency personnel. There's a risk of blurred lines regarding decision-making authority, potentially leading to conflicts or inefficiencies. Furthermore, while on-site agency teams can offer cost savings over traditional agency models these are limited, they will still entail higher expenses compared to fully in-house operations. There is also the non-financial price of this approach: does it get you the best talent? The best ideas? Or is it just a middle-of-the-road attempt at integration?

?Considering the ANA report's findings, this model addresses the growing preference for business performance as a key metric, suggesting that the close collaboration inherent in on-site agency teams can drive significant improvements in marketing outcomes. Nonetheless, brands must carefully navigate the balance between leveraging external expertise and maintaining control over their marketing strategies to harness the full potential of this model effectively.

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2. Building In-House Capabilities

At the other end of the spectrum is taking the initiative to build from within. Building in-house capabilities allows brands to take full control of their marketing strategies, fostering a deep alignment between marketing efforts and the company's overall business objectives. This model ensures a consistent brand message across all channels and allows for rapid response to market changes or opportunities.

The advantages of this approach are numerous. It enables brands to build a dedicated team that possesses an intimate understanding of the company's mission, products, and audience, leading to more authentic and effective marketing campaigns. In-house teams can also react quickly to feedback and data insights, allowing for agile marketing practices that can significantly improve campaign performance and ROI.

However, building a competent in-house team presents its own set of challenges. It requires a substantial upfront investment in recruitment, training, and technology infrastructure. Finding and retaining top talent can be difficult, especially in competitive markets where specialized skills are in high demand. Additionally, in-house teams might operate in silos, potentially leading to a lack of fresh ideas and innovations that external agencies, with their diverse client experience, can bring.

The ANA report underscores the importance of considering these factors, emphasizing that while in-housing offers closer alignment with business performance goals, it also necessitates a commitment to continuous learning and adaptation to new marketing technologies and trends. Successfully navigating this balance can empower brands to harness the full potential of their in-house marketing capabilities, driving significant business outcomes through strategically aligned marketing efforts.

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So that’s the diet version and the full-fat version of the model. What about the other 3 alternatives, perhaps they are the right ones for you.

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3. The Joint Venture Approach

The Joint Venture (JV) Approach in marketing is a collaborative model that merges the internal capabilities of a brand with the external expertise of an agency or another entity. Using a fresh or dormant legal entity the two parties bring different value to the JV, and then this value is reflected in the governance of the JV. The most likely governance is for the client owner to have the majority control.

This model is particularly beneficial for brands looking to innovate without bearing the full brunt of the costs or risks associated with new initiatives. By pooling resources, knowledge, and technology, JV partners can pursue ambitious projects with shared investment and risk, potentially leading to ground-breaking marketing solutions that neither could achieve alone.

However, the JV model also presents unique challenges. It necessitates a high degree of alignment between partners on goals, strategies, and operational processes. Misalignments can lead to conflicts, inefficiencies, and a dilution of brand messaging. Additionally, establishing a JV often involves complex negotiations regarding ownership, control, and profit-sharing, requiring clear, legally binding agreements to avoid future disputes.

For brands considering the JV approach, it's crucial to conduct thorough due diligence on potential partners, ensuring a complementary fit in terms of capabilities, culture, and vision. Effective governance structures and ongoing management are also vital to navigate the partnership smoothly and ensure continued alignment and synergy between the partners.

In summary, while the JV approach offers a path to innovative marketing solutions through collaboration and shared risk, it demands careful planning, compatibility between partners, and robust management to realize its full potential and mitigate inherent risks.

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4. The Build, Operate, Transfer Model

The Build-Operate-Transfer (BOT) model is a strategic framework that allows companies to partner with external entities to develop a specific marketing function or capability. Initially, the external partner is responsible for building and operating this function, utilising their expertise and resources to ensure that it aligns with the brand's objectives and specifications. Over time, once the function is fully operational and meets the predefined success criteria, its control is transferred back to the brand, effectively integrating it into its in-house operations.

This model presents a unique blend of benefits, offering brands the opportunity to leverage external expertise and technology without the long-term costs associated with traditional outsourcing. It's particularly beneficial for developing complex or specialised capabilities that require niche skills or significant upfront investment.

However, the BOT model also carries risks and challenges. The initial dependency on an external partner for critical functions can pose risks related to quality control, data security, and alignment with the brand's culture and values. Furthermore, the transfer phase requires careful planning and execution to ensure a smooth transition of knowledge and operations from the external partner to the brand's in-house team.

Successfully navigating the BOT model demands a strong strategic partnership, clear contractual agreements outlining each party's responsibilities and expectations, and a comprehensive plan for the transfer phase to ensure continuity and operational efficiency.

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5. Agency Acquisition

The acquisition of an existing agency represents a direct and impactful approach for brands seeking to rapidly enhance their marketing capabilities and expand their service offerings. This model involves a brand purchasing an already established marketing or advertising agency, thereby immediately integrating the agency's resources, talent, and client relationships into its operations.

Acquiring an existing agency provides immediate access to specialised skills, established processes, and a seasoned team, speeding up the integration of advanced marketing capabilities. It allows brands to diversify their marketing services quickly, tapping into new areas of expertise and technology without starting from scratch. The acquisition brings along the agency's existing client relationships and market presence, offering instant expansion opportunities and potentially increasing market share. While challenging, successful integration can lead to a strong, unified culture that blends the dynamism of the agency with the brand's values, fostering innovation and collaborative growth.

There are some significant cons to this approach, so it is not for the faint-hearted or those inexperienced in M&A. The upfront cost of acquiring an established agency can be substantial, requiring significant financial resources and due diligence to ensure a beneficial investment. Merging different cultures, systems, and processes can lead to integration difficulties, impacting employee morale and productivity during the transition period. There's a risk that the brand's core values, and identity may be diluted if the acquired agency's culture or way of working clashes significantly with the parent company. And it goes without saying that the change in ownership may lead to uncertainty among the agency's existing clients, risking client relationships if not managed carefully.

The acquisition of an existing agency is a strategic move that can significantly accelerate a brand's marketing capabilities and market reach. However, it requires careful planning, due diligence, and post-acquisition integration efforts to realise its full benefits and mitigate potential downsides.

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Case example: Kraft-Heinz’s “The Kitchen”

Kraft-Heinz has taken a notable approach with its in-house agency, The Kitchen, by leveraging AI technology to enhance their marketing capabilities, powered by MediaMonks. Launched in 2020, The Kitchen was established to create data-led social campaigns with agility and cultural relevance. Since its inception, it has expanded its footprint internationally across various markets including Europe, Australia, China, and Brazil, evolving from delivering social media snippets to handling a significant portion of the group's 335 brands.

The agency's model effectively combines data, technology, analytics, and content creation capabilities to drive a culture of creativity and innovation within Kraft-Heinz. This strategic approach allows The Kitchen to deliver personalized campaigns that are not only quick and creative but also build upon larger creative ideas from external partners. Through collaborating with tech experts, The Kitchen organized workshops to explore and identify AI opportunities that could drive high value across its operations. The aim was to increase efficiencies, save costs, and elevate strategic, creative, and production output.

A key outcome of this initiative was a strategic AI roadmap that outlined implementation plans for high-value AI use cases across four focus areas: sharpening primary insight, social trendspotting, creative ideation, and brand virtualization. This roadmap is designed to guide The Kitchen in leveraging AI to enhance brand virtualization foundations while executing pilots that promote the adoption of tools, learning, and creative ideation.

This approach demonstrates Kraft-Heinz's commitment to innovation and the strategic use of AI to bolster its marketing efforts. By identifying 64 AI use cases and providing actionable findings, The Kitchen is positioned to change the trajectory of its value, unlocking new opportunities and adding more value to Kraft-Heinz's business model.

For more detailed insights into The Kitchen's expansion and its approach to integrating AI into its operations, you can visit the Media.Monks case study here and you can watch the 2023 highlights reel from The Kitchen here .

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Today's exploration into the realm of in-housing and alternative marketing models unveils a landscape where brands are innovatively harnessing the power of in-house capabilities and strategic partnerships. We've journeyed through various models — from On-Site Agency Teams, the traditional in-house build, the collaborative efforts of Joint Ventures, to the strategic foresight of the Build-Operate-Transfer (BOT) model, each presenting unique advantages and considerations.

As we reflect on these models, it's evident that the shift towards this post-agency world is a strategic move to gain greater control, enhance brand consistency, and drive cost efficiencies. However, it's also clear that each model comes with its complexities, requiring a thoughtful approach to balance the benefits against potential challenges.

Which of the 5 approaches is right for your brand? You don’t need to double-down on only one of them but can combine the models to build a portfolio of approaches while building your capabilities.

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Next week, we'll dive into one of the most debated aspects of in-housing: Kylie Jenner:

Not just that..... we’ll explore the challenge of nurturing creativity within the confines of an internal team. The perception that in-housing can stifle creativity is a significant hurdle for many brands considering this shift. Yet, as we'll explore, numerous brands have successfully debunked this myth, proving that with the right culture, processes, and technology, in-house teams can be hotbeds of creativity and innovation.

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Join me as we dissect this challenge, drawing on insights and examples of in-house teams that have not just maintained but elevated their creative output. Our journey will continue to provide you with the knowledge and inspiration needed to navigate the evolving landscape of marketing.

See you next week, please keep sharing your comments, ideas and questions – it’s extremely helpful as we answer these challenges together.

Cheers, Justin