Recently there were two stories in the local trade press in Australia that caught my attention. Not because the issues were new, but that neither of the marketers offered a tangible solution to the problem they had identified.
First was David Morgan, CMO of Nestles Oceania operation bemoaning the fact that marketers spend so much time managing agency relationships that they have too little time left to do their job and that this has to change.
The second was Mark Buckman, CMO of Australia’s largest telecommunications and media company who was stating that the sixty year old P&G brand model needed to change for the always on, 24/7 world we live in and that agency structures need to change to accommodate the ‘newsroom’ approach to customer engagement.
I agree with both of these observations, but I am proposing a model to address both. The City Model.
What is a city?
A city usually has a Central Business District where the larger core financial businesses can be found. Surrounding this CBD is a succession of suburbs. Each suburb will have its own character and style. The suburbs often radiate out from the city centre, with the more expensive and desirable suburbs closer to the CBD than those further out.
In the same way we can apply a framework to an agency roster model. In the heart of the model is the CBD where the brand team and the valuable brand stakeholders reside. Closest to the brand team are the suburbs (agencies, resources, disciplines) of most value to developing and delivering value. Further out are the other suburbs of less direct value, but important suburbs (agencies) and at the fringe are the least valuable suburbs (agencies, suppliers and vendors)
Defining strategic and financial value
In talking about value I mean strategic and financial value. Our Strategic Alignment Process categorises agencies into three segments – Strategic, Specialist and Simple or General. The problem is that few agencies are able to be separated in the first two categories. The problem is that marketers and agencies have traditionally not invested in strategy development and agencies have traditionally offered strategy either free or subsidised by the fees for implementation.
In my presentation to the Caxton Award Seminar in 2010 we had undertaken an analysis of the spend mix across many of our clients and found that of the total A&P budget, less than 1% was spent directly on the development of strategic and creative ideas. The balance was consumed in the implementation and administration.
This means that while agencies are a source of strategic and creative thinking, these resources are locked into and provided largely as a way of securing a share of the 99% that is not related to solving strategic problems or creating innovative ideas to deliver value.
Effectively the first two segments are welded together and increasingly difficult to separate. This difficulty is two fold:
1. The agency is wedded to this strategy and fearful of providing the resources without the guarantee of securing a ‘more than their fair share’ of the rest of the budget.
This is usually expressed by the thought that only the creator has the ability to oversee the implementation to ensure it fulfils the promise. This is also why the current process is anti-collaborative to David Morgan’s point and why marketers spend an inordinate amount of time managing these relationships.
Only the agency that provides the strategic and creative thinking can manage the implementation is also restrictive to addressing the increasingly complex issues facing marketers. This is also why agencies are rapidly diversifying their range of offering’s either through acquisition or development to capture a wider range of services to ‘control’ the implementation across the ever increasing channel executions.
2. On the other hand, marketers are so used to getting strategy and creativity with their implementation, that they have difficulty either valuing or paying for this separately. And why should you pay for this when the agencies are so ready to offer this at a discounted rate?
This is a hindrance to the changes Mark Buckman is suggesting, because the newsroom requires an always-on strategy and implementation.
So how can marketers access these resources?
Building the City Model
The first stage is to put the brand team at the centre of the process in the CBD, with all of the infrastructure and support required. This has been difficult in some organisations, as the responsibility for the brand has become increasingly dispersed across multiple stakeholders.
Also some brands have outsourced the responsibility and ownership of the brand strategy to third parties due to lack of resources and capabilities. The ownership and associated responsibility needs to be centralised in the CBD. Not necessarily with the brand team.
Around this central axle are the suburbs: research, data analytics, strategy, media, retail activation, CRM, content creation etc. These can be internal resources or external resources. The placement of the suburbs is informed by the strategic value of their role in developing and realising the brand value.
Of course this will vary based on the requirements of the brand – category, market, brand maturity and the like are all considerations to inform the placement of the suburbs. The placement of the suburbs is simply to categorise and define the role and responsibilities of the various suburbs. But it also becomes the basis on the way each is engaged, structured and remunerated.
But how does this structure operate and how does it address the issues identified by Messrs Morgan and Buckman?
Activating the City Model
The activation process is designed to deliver the right resources to the process at the right time and without linking strategic development to implementation. But as the agencies have traditionally linked the two, it requires a new approach to accessing and engaging these resources.
The agencies are a good source of strategic and creative thinking. Creating solutions and providing innovative thinking motivate these people – the larger the task or challenge, the greater the engagement.
Rather than engaging the whole suburb, which is purpose built currently to deliver this thinking and the implementation, you cherry pick the right people within a range of suburbs based on the immediate requirements of the brand strategy. This could be the digital strategist from one agency, a research strategist and the channel planner from another, the creative director from another and a technology innovation specialist from a third.
The size and the composition of this team is based on matching skill sets to the task at hand. This can also change at any time to meet the specific changing needs of the brand strategy and requirements. What is not required is the resources within those suburbs that are focused on and dedicated to the implementation. Although some administration may be required to support this team, it is important that the selection and appointment of these resources is also clearly decoupled from the implementation.
The purpose of this team is to work with the brand team or brand owners to either:
- Solve specific strategic issues or problems
- Develop longer term strategic solutions and ideas
- Manage the on-going strategic requirements and direction
Beyond these functions, it also assists in the selection and apportioning of the implementation tasks, budget apportioning and assessing results.
The purpose of this approach is that the brand team or brand owner can access the resources within the various suburbs and engage them as required to work collaboratively in developing the strategy or solution.
The decision to engage the team longer term depends on the requirements of the brand strategy. If the model is always-on engagement then the team would be with the brand owner as an editorial board in the newsroom model as it is required to develop and manage the brand strategy against the constant changing requirements of the customer and the market.
The obstacles to change
The greatest obstacle to change is the fact that the demand must come from the marketers. The trouble is that most marketers may feel that the system is not optimal, but they are willing to ‘risk’ change for fear that the alternative is worse. In the meantime the agencies are trimming around the edges with superficial innovation in most cases, trying to create a point of differentiation.
The fear the agencies have with the City Model is that their experience of more collaborative roster models usually means they end up sacrificing a share of the budget as revenue. Offering up their best strategic and creative resources across all disciplines puts them at risk of not recouping on these resources costs and not securing their share of the much greater revenue spent on the implementation.
This means that marketers need to be willing to truly pay for the resources in the strategic brand team. Not just token payments, but actual cost recovery and profit margin. The difference is that rather than simply getting the resources the agency provides, you will be able to specifically select the best and brightest to suit the brand requirements.
This transforms the agency from an ad factory to a talent repository. In much the same way the big talent agents in Hollywood are resources for valuable talent – actors, directors, screenwriters etc. Their livelihood us based on their ability to get the deal up front and even make money on the way through. (It is therefore not surprising to see the recent investment by William Morris Endeavour in Droga5). Eventually agencies may actually transform into talent repositories, or the talent agents of the entertainment industry may bring their skills into this category.
In the meantime, the same agencies will also continue to position themselves as the best implementation solution. But now the brand team and the strategy team will be collectively making the decisions on the best solutions and the apportioning of the work. This creates a more representative and collaborative process and separates the strategic development from the ideation and implementation stages of the process.
The next steps?
Change requires a first step. The first step here is clearly defining the requirements of the brand and flaws or failures of the current structure and process. For David Morgan at Nestle, it is the huge time and resources required to make the agencies co-operate or collaborate more efficiently. The City Model addresses this.
For Mark Buckman at Telstra, it is the transformation from the campaign model to the always-on ‘newsroom’ model for customer engagement. As the money is traditionally in the execution, the City Model separates out the strategy or ‘editorial’ philosophy and direction from the implementation.
What do you think? Could the City Model work for you?