The “Agency of the Future” will not be an Advertising Agency – it will be a Marketing Solutions Company

Back in August, I started talking about the rise of the Gen X CMO. Up and coming CMOs like Adobe’s Ann Lewnes and RIM’s Brian Wallace may not necessarily carry the traditional CMO title, but they are doing the work of the traditional CMO — and a lot more. As the blog suggests, Gen X CMOs are taking over at a younger age, they are more hands-on, tech-savvy, analytically oriented and financially focused than ever before.

And in the current economic climate, they are being forced to do a lot more with a lot less, especially less staff. Thus, it only stands to reason that a new breed of CMO would demand a new breed of agency —and it will no longer be an ad agency, it will be something new — a “marketing solutions” company, a “marketing consultancy,” or something that hasn’t even been named yet.

The Great Era of the “Ad Man”

The traditional agency evolved from the “Mad Men” full service shops of the ’60s, ’70s and ’80s into specialist boutiques focused “above the line” and “below the line.” Distinctions were drawn between creative agencies, media agencies, and more recently, digital agencies, with further distinctions drawn between disciplines like PR and now, search marketing. Still, the “Ad Man” had a unique and important place in the business world, often serving as personal advisor to the CEO. Leo Kelmenson was the head of Kenyon & Eckhardt in the late ‘70s and early ‘80s. K&E was selected as the ad agency for the Chrysler turnaround, and Leo was on call to Lee 24/7. “There are only six people in the world who can fix Chrysler,” Leo Iacocca was once said to have commented, ”and three of them work for Leo Kelmenson.”

As the digital age boomed, traditional offline media became comparably more expensive, less measurable and less accountable than digital media.  The digital world, however, was complex, and required newly developing skillsets.   These agencies were all still delivering just one thing though — services.  Sure, compensation models keep changing from percent of media, to cost plus, to time and materials, to retainer and now to gain-share. But at the end of the day, the core asset walked out the door.

CMOs became increasingly frustrated with their ad shops. CEOs and CFOs were demanding more immediate and measurable results from their CMOs. CMOs needed data, automation, efficiency, measurement, not just another TV commercial. They needed to deliver more strategic insights to the business, but their credibility in the C-Suite was falling. “What ever happened to the ad man?” now laments Leo Kelmenson. “It used to be that the CEO didn’t call McKinsey or Accenture for advice, he used to call his ad man. Those days are gone. We lost our credibility.”

Enter the Anti-Agency, the Marketing Solutions Company

Enter the new “anti-agency.”  New kinds of companies — software companies, consulting companies, auditing companies, and organizations focusing on credibility, accountability and radical transparency in marketing — have entered the scene. These new “agencies of the future” blend services, technology, data, insights and analytics into more than just a hot 30-second spot.

And the services aren’t just focused on creative, media, PR, or search, either.  These new companies offer strategy consulting, organizational structure and change management, business process re-engineering and systems integration as well.  The technology isn’t just HTML, Java and Flash; it includes deep expertise in database and applications technologies, such as CRM and MRM.  The data is more than market research, and the analytics are more robust than media mix modeling.  Each of the services disciplines are evolving to provide real-time actionable insights, so marketing is no longer a once or twice a year “up front” to the mass populace — it truly becomes real-time optimized and targeted to the individual.

The key challenge is the complexity, and the Gen X CMO doesn’t have time to cull through the fragmented landscape of the various services, and technology, data and analytics companies — they are going to want to get it all under one roof.

Parallels in the High Tech Industry

We can see direct parallels in the world of high-tech, probably the most self-reinventing industry.  IBM and HP were previously best known for their hardware offerings. Both companies eventually saw a significant portion of their industry commoditized, so they entered the software arena. IBM acquired Lotus, Tivoli and Rational, among others. IBM shed most of its hardware offerings, including the hotly debated sale of its PC division to Chinese manufacturer Lenovo. HP has OpenView and acquired Peregrine, Mercury and a variety of others.  But that still wasn’t enough.  They realized that their customers needed not just technologies, but strategy and process advice as well.  So the modern “solutions” company was born — a blend of software and services — providing whatever the clients needed to answer their problem. IBM famously acquired PWC in 2002, HP acquired EDS in 2008, and now Dell is getting into the solutions game by acquiring Perot Systems in 2009. IBM, interestingly, is leading the way into the analytics field with two major software and analytics acquisitions in one year — Cognos and SPSS.

First Efforts at Marketing Solutions Companies

Speaking of major software and consulting companies, those same companies have recently and aggressively started looking for growth in the world of advertising. Microsoft most notably acquired aQuantive (funded by Voyager Capital, investors in Covario).  aQuantive was truly one of the first marketing solutions companies in the world, offering not just digital marketing services, website development and display media buying capabilities,  but actual technologies like Atlas and DrivePM.  Accenture, meanwhile, has quietly bought several software and data companies in the marketing world, and recently launched their Marketing Sciences Intelligent Digital Platform. Another interesting company, the Symphony Technology Group, is also quietly and rapidly growing. Dr. Romesh Wadhwani, a leader in enterprise software, has acquired IRI, the CPG data company, Symphony Marketing Solutions, and a variety of other business software and services companies to address marketing challenges from top to bottom — including channel and supply chain issues.

In the traditional agency world, only Sir Martin Sorrell has had the true vision and the guts to start reshaping his company, WPP, to create the agency of the future, or the marketing solutions company of the future, now. Sir Martin has taken his traditional agency assets like Ogilvy and Group M and made some truly strategic “big bets” in buying 24/7 Real Media, TNS and making a sizeable investment in Omniture (now an Adobe company). These acquisitions brought a large scale ad network, a software company, a large scale data and analytics company, a research company, and an investment in the most important web analytics company, all under his control. His biggest challenge now is to seamlessly integrate the offerings to provide one voice and one core solution to the growing demands of the Gen X CMO.

ACTIONABLE INSIGHT #1:  When considering switching agencies, look for more than just great creative design or great media buying.

Many agencies are still stuck in the world of “the big idea” or telling you how cheaply they can buy certain (generally offline) media types. Marketers considering a new agency should ask about product and skills in the following areas:

• Strategy Consulting
• Business Process Consulting
• Change Management
• Organizational Behavior
• Technology (proprietary and licensed, transactional and business intelligence, reporting and analytics)
• Data and research (both proprietary and licensed) that facilitates real-time psychographic, attitudinal or alternative attribute targeting
• Advanced analytical capabilities such as predictive modeling and real-time optimization

ACTIONABLE INSIGHT #2:  No one has all of this yet, so for the time being it’s still a best-of-breed world.

The early efforts described above notwithstanding, presently no single company credibly provides all of the required services and technologies to create an end-to-end solution. For the time being then, advertisers will need to take a best-of-breed approach, rather than an all-in-one approach. This will breed complexity, with many agencies and vendors to manage.

One way to think about how to select partners and vendors for your efforts is to talk to your colleagues in IT. They have been operating is this kind of environment for years. Now, many organizations simply standardize on a company like IBM, who has proven that they really do have the best of breed IT software, and the strategy, process and systems integration services, to deliver an end-to-end solution.

ACTIONABLE INSIGHT #3:  One way around the complexity is to choose your marketing core competency and “what you want to win on.” Find the best of breed provider for that, and then use a general agency for everything else.

It’s truly hard to be great at every aspect of business, or even every aspect of the marketing mix.  At the corporate level, many companies decide what their core competency is, and either outsource or manage to good standards “the rest.” Some companies are at their core engineering companies, or service companies, or sales companies, and that’s how they win.  A new book, Competing On Analytics: The New Science of Winning shows how companies including Amazon, Harrah’s and P&G have all chosen to compete and win on analytics.

Marketers can treat their portfolios and activities similarly. Do you want to compete and win on the big TV ad or the best use of social media?  Do you want to compete on media buying at scale, or on segmenting and targeting offers precisely to the right consumers? You might consider competing on technology, automation and efficiency or competing on the insights your marketing group provides to other teams.

If focusing on a core competency will be your strategy, then hire the best people and agency partner for aspect, and then put the rest with your general Agency of Record (AOR).

Several Covario clients use an AOR for “everything else” and leverage Covario as their solution provider for everything related to search marketing.  While other Covario clients have chosen to make SEO or paid search an in-house core competency, and they leverage Covario’s software and analytical solutions to make them more effective and efficient.

The landscape is changing rapidly and the “Agency of the Future” will need to address the increasing demands on the Gen X CMO.  In the interim, break down the media silos and even the functional disciplines of marketing, and pick your partners wisely.  Choose your core competencies, and compete to win on those!

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