Who’s Squeezing Out Traditional Marketing Firms?

All fixed set patterns are incapable of adaptability or pliability. The truth is outside of all fixed patterns.  -Bruce Lee

The media industry is valued at over $500 billion in the United States (that’s about 3.5 percent of the U.S. GDP in 2014).[1] At first look, things look great. So, why be worried? For one, dilution is happening quickly. Let’s look at advertising, for example. The revenue for advertising is estimated at $52 billion, a sum that is distributed among about 64,000 agencies. Theoretically, this leaves a homogeneous allocation of about $800,000 to each firm, an indication of risk to enter/compete in this market.[2] This is not new — agencies feel the stress of this every quarter, during RFPs (Request For Pitches), and during budget meetings. Therefore, the competitive pipeline is important to consider in this already competitive market.

Marketing firms are not completely going away, but the landscape is changing and the entire market knows that extinction of a generation is imminent.  In order to compete, companies continue to diversify with loads of capabilities outside the comfort of their traditional competencies. Some build these capabilities through acquisitions and mergers, and some build from within with hires and training. This is nothing new. However, there is an interesting wave of new players that are emerging in the market, and they are bringing something valuable that's hard to imitate and hard to understand — and they get results. 

The popular illustration of the project management triangle shows a Venn diagram with three features — quality, speed, and cost.[3] In theory, a project can only employ two of these ideals…in reality, probably only one. Using these non-mutually exclusive ideals, here are some prominent disruptive forces that realize those ideals best:

1. The Low-Cost Quick Shops (Low-Hanging Jobs)

   This consists of small agencies (microspecialization) and crowd-sourcing services who offer fast, creative, and low-cost solutions. They are incredibly appealing to smaller firms that aren’t looking for full services. They are looking for mass execution of assets/design choices and projects with lightning-fast turnovers. Most of these shops are not brick and mortar establishments. Clients who shop here are not concerned with strategic thinking, insight/solution discovery, or SEO/SEM. They just want something pretty, and this allows clients to tap into low-cost solutions from all around the world. Many practitioners regard these services to be cheapening the market because of their low rates, but they won’t disappear any time soon. They are delivering on what they’re selling.[4] (e.g., Crowd Spring, Freelancer.com)

2. The Expensive High-Quality Firms

   These strategically driven firms are well informed, and many of their solutions are unique, scalable, and highly impactful (no boxed solutions here). They are pushing the limit in every industry and are extremely hard to imitate. Clients are inclined to pay big because their track records are phenomenal. They are not all marketing people. They are service designers, systems designers, design consultants, business designers, vision planners, and value-creating financial consultants. (e.g., Frog Design, IDEO, Adaptive Path) See Design Thinking by Tim Brown. [https://hbr.org/2008/06/design-thinking]

3. The Hybrids

   A lot of these companies have built competencies in something other than marketing and have acquired/merged their way to superior competence. They have proven to be the best in their own fields. Teaming up with the best pioneers of an adjacent practice makes them incredibly formidable. They are also expensive and dish out high-quality service.[5,6] (e.g., Accenture merged with Fjord, Deloitte has built an internal agency for digital execution, Facebook acquires Teehan+Lax) 

Then, there are other formidable players that also shouldn't be ignored: 

1. The Old Dogs

   These are the classic corporations that still have major influence in the market. Some of them are adapting quickly and effectively. (e.g., Ogilvy, Y&R, Grey, Digitas, Rosetta)

2. Power Boutiques

   These shops are heavily specialized and nimble. They continuously spit out award-winning, hard-hitting apps and tactics. (e.g., Cuban Council)

3. Leaders With The "Golden Touch"
   

   These guys are the best at what everyone is trying to do and are heavily specialized but also well-rounded. They win a lot of the “fun" brands and they’re trendy. (e.g., HUGE Inc.)

4. Heavily Funded Internal Houses

   Many of the major corporations have brought their competencies internally, and are doing it very well — they’ve got the money.[6] (Companies like Goodyear, GE, and Philips have all built innovation centers that can do a lot of things better than agencies can, and have reinforced their marketing departments with agency-like capabilities.)

Differentiation in a commoditized service market is difficult. Relationships matter, but can easily be swindled away by a competitor that’s cheaper, faster, better. According to some of the smart guys who are pioneering the design, solutions, consulting, and marketing industries, here are some points you should begin to consider: 

• Stop following the rules of a marketing firm

  Find a new methodology, one that works. Agencies use the same nomenclatures, organizational structures, and processes that were around since the 1950s — nostalgic, but not always practical. For example, many of the big ad agencies still use the Matrix Structure.[7] One of the symptoms of this is having multiple bosses who contradict each other, quickly becoming a bottleneck in a production process. Traditional practice doesn’t always create value. Rethink anything and everything. It is paramount to aim for something novel, timeless, and impactful — this truth has never changed.

• Keep cash around

  You may need to make a quick acquisition. Money allows you to be nimble, and a fast transaction makes you unpredictable to your competitors.

• Consistently target novel problems

  (see "wicked problems")[8] That being said, you can’t solve all problems. The right surgical “nudge” in the right spot in a system can make a huge impact and prove to be innovative for more than just your market. Part of the skill needed here is the ability to ask the right question. Watch Billy Beane (played by Brad Pitt) go through this frustrating exercise with experts in their respective fields.  Targeting and framing the right question is often the first step to doing something game-changing. [https://youtu.be/pWgyy_rlmag]

• Hire smart, young people to help run the show

  They have the vigor, understand the trends, have the hunger to succeed, and will most likely see the organization, market, and process in a different way than other older employees. Remember, all the moguls you see today were given these same chances as young men/women. Two years ago, Burger King installed a young CEO and other young leaders in a large portion of the executive suite.[9] Their market cap was at about $7 billion in the summer of 2013. Today, under new management, they are capping at about $15 billion.[10] (Watch Alibaba’s CEO, Jack Ma, as he advises people about the ideal career journey.)[https://www.youtube.com/watch?v=U2FwbeLHNfA]

• Don’t partition jobs that require creativity and thought into silos of “specialties”

  Since when did people think better without multiple stimuli and only in one frame of mind? Your engineers/developers, designers, writers, and other creatives may be a minefield of firepower. Keep them involved in everything. As an organization of value creation, let the builders build.

• Stop talking about antiquated trends

  Information age, big data, print vs. digital…not because it’s not important. Someone else out there is probably better at it than you. You’re a service shop, so figure out unique ways to create value for people — and this isn’t always going to be in metrics/analytics/statistics. When is the last time you went and physically observed your consumers’ behavior?

• Find new stuff

  Learn new things about anything and everything. Rebuild your sense of taste, strengthen your ability to detect superficiality, and acquaint yourself with new interests/cultures. Wisdom, discernment, and vigor are all found in places where the apathetic and lazy can’t find them. That’s why it’s so special. Obsessing over this new hobby may inform and frame a problem for you that only you can uniquely understand. 

References:

1. Value of the Entertainment and Media Market in the United States from 2015 to 2019 (in Billion U.S. Dollars). Rep. N.p.: n.p., 2015. Statista. Web. 13 July 15. <https://www.statista.com/statistics/237769/value-of-the-us-entertainment-and-media-market/>.
2. Advertising Agencies in the US: Market Research Report. Rep. no. NAICS 54181. N.p.: n.p., 2015. IBISWorld. Web. 7 Aug. 2015. <https://www.ibisworld.com/industry/default.aspx?indid=1433>.
3. Michael W. Newell, Marina N. Grashina (2004). The Project Management Question and Answer Book. p.8
4. Hussain, Zainab. "CREATIVE COMMONERS: THE RISE OF CROWDSOURCING CONTESTS IN ADVERTISING:." (2014): n. pag.Foundry Law Group. Web. <https://foundrylawgroup.com/creative-commoners-rise-crowdsourcing-contests-advertising/>.
5. "Landing LUNAR." McKinsey & Co, 1 June 2015. Web. 07 Aug. 2015. <https://www.mckinsey.com/about_us/new_at_mckinsey/landing_lunar>.
6. Vanhemert, Kyle. "Consulting Giant McKinsey Buys Itself a Top Design Firm." Wired.com. Conde Nast Digital, 14 May 2015. Web. 07 Aug. 2015. <https://www.wired.com/2015/05/consulting-giant-mckinsey-bought-top-design-firm/>.
7. Davis, Stanley M. "Problems of Matrix Organizations." Harvard Business Review. N.p., 01 May 1978. Web. 07 Aug. 2015. <https://hbr.org/1978/05/problems-of-matrix-organizations>.
8. Rittel, Horst W. J.; Melvin M. Webber (1973). "Dilemmas in a General Theory of Planning" . Policy Sciences 4: 155–169.
9. Solomon, Jesse. "Burger King's CEO Is Only 34." CNNMoney. Cable News Network, 26 Aug. 2014. Web. 07 Aug. 2015. <https://money.cnn.com/2014/08/25/investing/burger-king-ceo-age-33/>.
10. General Electric Co. (2014).Burger King Worldwide Reports Third Quarter 2014 Results. Retrieved from Restaurant Brands International database. <https://investor.rbi.com/en/investor-information/legacy-filings/burger-king.aspx?sc_lang=en&Category=earnings-release&Subcategory=*&Date=01/01/2014&DateEnds=31/12/2014>.