Evolution of the agency business

Alison Clarke, Principal, Alison Clarke Communications believes that there’s a chasm emerging between the business model of traditional agencies, and the demands of modern clients. Smart agencies are building businesses in this space.

This industry faces the biggest challenge in its history. Our business model was built on the premise of strong, creative talent bringing contacts, ideas and expertise to help solve client problems. All this was in return for an on-going relationship fee calculated on time.

It’s an incredibly simple model and yet it has witnessed a paradigm shift that threatens its future. The fundamental elements of the model present a contradiction that we need to resolve – and fast.

We operate a fixed cost base of talent working in offices with technology and an infrastructure. Clients need flexible, fluid consultant relationships that are available 24/7 but purchased on an ad-hoc and project basis much of the time.

It’s worth reflecting on the component parts of the model to see why a commitment to evolve is the only way to survive.

Talent: generation gaps

We have nothing to offer if we don’t attract and retain the best talent. But this is an industry led by Baby Boomers at the top of the major holding companies and Gen X in the smaller independents. It has much to learn about how to motivate and inspire Gen Y, millennials and beyond.

The cost of talent acquisition is so much greater than talent development that we have to make it a priority. We still need to find new models of engagement with those generations that goes beyond flexi working and duvet days.

But it’s not without its challenges. One consultancy statistic on churn revealed that over 60% of departures at junior to mid-level had left the industry altogether. This isn’t just about promotion, pay and progression. This profession is tough and demanding and not as appealing to all as some of us might think.

Client need: knowledge, project driven

As in-house practitioners and departments become ever more sophisticated their demands and needs are changing. They want sector expertise, in-depth knowledge and understanding and increasingly they want to buy this on a project and ad hoc basis.

Commercial reality

Overlay the talent challenge and flexible client needs with a fixed cost heritage and structure and you can start to see the tension. This challenges growth, margins and both staff and client retention.

We need to re-examine our offer as a matter of urgency.

As all sales best practice knows, this isn’t about what we have, where we are and what we offer. It’s about listening to what clients want to buy and how and when they want to buy it.

If we understand that we can start the process of redefining how we work, how we’re structured and how we engage the finest talent in order to make us truly #FuturePRoof.