While most agencies across the globe are lamenting the demise of the AOR concept, a group of opportunity-minded of agency executives can see a silver lining.
There's no doubt that project work (vs. ongoing retainer relationships) can be challenging both financially and operationally, but the new project-based environment is giving agencies the necessary motivation to sharpen their business models, which will be immensely valuable in the long run.
How is it possible to turn project-based work into a growth opportunity? Here are the key questions to consider:
- Is what you do scarce, or is it widely available?
As clients add to their in-house resources and as global providers of agency-like services continue to proliferate, it's more essential than ever to consider whether what you do is truly unique and hard to find. What's scarce is valuable, and offering scarce services and solutions is the key not only to attracting new assignments, but maintaining your margins.
- Do clients hire you because of what you know or what you do?
In every major survey that asks major marketers to name their top criteria in selecting an agency, the answer is almost always the same: "Knows my business." Especially in today's project-by-project environment, the top marketers can't afford a learning curve and will award business to agencies that have experience in their specific category. The implication for your firm? Focus on building and selling expertise, not versatility.
- Do you make your margins on ideation or implementation?
In a world where the top marketers are actively decoupling ideation from implementation, it's essential for your firm to have a clear view of how to make money in these two very different businesses. One business is low-volume, high-margin and the other is the exact opposite, which calls for both a different pricing structure and cost structure. Especially in a come-and-go project environment, it's much smarter to offer decoupled services in place of the traditional vertically-integrated approach.
- Have you traded legacy workflow management for the principles of agile?
The agency business at large is still stuck in a 20th century approach to workflow management, which creates bottlenecks, competing priorities, and lack of visibility into available resources. This is largely due to the "waterfall" approach which duplicates the sequential way cars were manufactured in the time of Henry Ford. Modern manufacturers have moved on and so have some professional services firms, who are borrowing the key principles of the "agile" framework pioneered by software developers. Agile represents a completely different way of working that runs counter to mutli-tasking environment found in most of today's agencies. And the resulting productivity gains can be astounding.
- Do you believe profitable growth is achieved by focusing on utilization or accountability?
Especially in the quick-turn world of projects, the concept of utilization ("Are you busy") is replaced by a focus on accountability ("Did you meet your deadlines?") Project profitability is dependent on effective pricing, not on year-end reconciliations of hours entered on timesheets.
In their recent book, A Beautiful Constraint, marketing professionals Adam Morgan and Mark Barden argue that limitations can not only be overcome, but actually turned into advantages. Today's emerging project-based environment can be thought of as a "beautiful constraint" that can inspire and fuel the needed transformations in your firm.
Looking for decision makers to engage around project opportunities?
Find them faster with a free trial of Winmo.