1. Marketing services: Why holding agencies must reimagine their organisation model

Marketing services: Why holding agencies must reimagine their organisation model

A few decades back, ‘advertising’ holding companies moved on from holistic offerings to become specialist agencies like creative, media and PR with an aim to unlock value, market capitalisation and buying power.

Published: June 13, 2017 2:00 AM
Marketing services, advertising, digital transformation, CMO, CIOs, CDO In 2017, CMO spends on technology solutions are estimated to be two to four times the size of the total ad spends in India.

A few decades back, ‘advertising’ holding companies moved on from holistic offerings to become specialist agencies like creative, media and PR with an aim to unlock value, market capitalisation and buying power. Over the years, clients started cherry-picking the best specialists from different networks and took on the mantle of integration in-house by beefing up their marcom teams. Things trudged along fairly well for a while. Then the world changed. Clients’ businesses were disrupted in a matter of a decade. The broad term ‘digital transformation’ probably reflects the businesses’ scramble to cope with change. CEOs are sprouting grey hair working in the trenches with CMOs, CIOs and now CDOs to figure it all out. Happily enough, the agency business has been getting disrupted too. After being off the pace in embracing the digital shift, many networks scrambled to pick up every business with a D in the descriptor. Now that the dust has settled, they are left with the task of integrating these outfits to deliver value while planning for a new D — data. In 2017, CMO spends on technology solutions are estimated to be two to four times the size of the total ad spends in India. Globally, CMOs are spending as much on technology as CIOs.

The big four consultancies and leading IT companies have been quick to spot this opportunity shift. IBM Interactive and Deloitte Digital are now global agency behemoths. Accenture and others have been acquiring creative outfits like Karmarama. Recently, Ben Tolley, partner at M&A advisory Clarity, made bold statements about the six big ad groups being ‘minnows’ compared to these consultancies and speculated that at least one of them would be bought out by the big fish within a year.

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Independents such as Wolfgang point to a recognition that the future lies in being able to deliver a 1:2 ratio of agency and technology/consultancy skill sets. The arms race today is to find true integration models to connect the dots across diverse cultures and capabilities, thus delivering end-to-end marketing solutions to clients.

Sounds easy? Hardly. How should an integrated offering look and feel like from a client’s perspective? Integration today is not about having a hapless SPOC (single point of contact) promising to string together myriad offerings. Too many left and right brain skill sets spanning data, creative, technology, media, etc are needed at the table at different times. Clients, too, have their specialists.

To borrow from technology, it’s about creating a simple user interface for clients, which keeps the complexity within the agency, but allows them to easily tap into deep specialisation from different verticals for their requirements. Just like an app allows us to access complex functions and utilities without dealing with the underlying code. For instance, account management may pass the baton to technology project management in transition from design to development phases with a T-shaped executive sponsor overseeing the process. Recent chief integration officer appointments are a precursor to this model.

What are the barriers to change?

Networks need to move from passive ‘holding’ roles to being active connectors between their brands and stop viewing themselves as ‘advertising’ or ‘communications’ companies. If they aim to offer end-to-end marketing solutions, then they are marketing services companies. Further, legacy capabilities view themselves as masters of the process, while emerging capabilities view them as dinosaurs. This must give way to partnership and a client solution focus. Then there’s also the matter of revenue turf wars, with each business unit trying to maximise its share from a client rather than bringing in specialists from within the network.

Networks are addressing this with new financial models which align goals and take away conflict of interest. People react based on how their success is measured and these models link the fate of all stakeholders. Increasingly, employee KPIs are also being aligned to collaboration targets. Infrastructure also plays a key role in facilitating integration. Shared tools, co-location and other such factors go a long way, and the companies leading the change are making these investments.

Most importantly, it’s about the talent itself. A majority of the workforce is young and has never worked in an integrated environment. Further, subject matter experts and specialists thrive in peer environments. Strategists with deep knowledge in blending teams, and balancing vertical and horizontal considerations have a key role to play in shaping cultures which turn collaboration into an intrinsic behaviour over time.

The author, Amaresh Godbole is MD, DigitasLBi India

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