Agency 3.0: Survival of the Fittest


fittest_smallADOTAS – There is nothing abstract about the concept of Agency 3.0. It’s all about strategy and performance required for an advertising agency to be competitive and productive while staying cost-effective in the rapidly changing digital environment.

Its purpose is to respond to the opportunities created by the rise of what used to be called the “new media” spawned by the Internet and morphed into such social networks as Facebook and Twitter, which have emerged as marketing tools from retail to politics. Their proliferation has led us to smart phones, mobile devices, iPads, tables and the associated media content consumed by tens of millions of consumers worldwide. What this means is that “digital” is driving an increasingly Darwinian evolutionary process for ad agencies

However Agency 3.0 goes well beyond outreaches to social networks and cell phones and encompasses all agency operations in a digital world that seems to have no boundaries. Its purpose is to enable agencies to get on board by modifying business operations, focusing more on the work than the workflow, managing costs and agency compensation, and effectively fulfilling client needs. This concept is the product of new strategic thinking for dealing with internal and external business challenges in order to better meet the needs of brands and their consumers.

The Evolution of Agency 3.0

Too many agencies have been operating on a model based on older technologies, which are not equipped to deal with the speed and relentless competitive pressure required in the digital world. Creative performance has always been the standard by which agencies get their reputation and increase clients.

But thanks to digital, the rules of competition have been rewritten and clients know it. They recognize new digital influences as valuable marketing outlets, and they expect the agency to incorporate these influences effectively in every campaign.

At the same time, agencies are forced to respond to the other necessities impacted by the digital revolution, such as branding needs and margin. Do their current business models contain the tools to effectively respond to these radical changes? The answer in most cases is, “no.”

Agencies, for the most part, are not oblivious to the issues posed by the growth of digital. They understand that they are at a crossroads and their current approach, Agency 2.5, may no longer be the best solution. Agency 2.5 did modify the traditional model to some degree by emphasizing agency transformation and attempting to integrate it with planning, budgeting, and digital influences, but the latter kept changing and 2.5 has not kept pace.

One example is the growing role of technology and its prevalence in all aspects of agency business spawned by the digital influence. It’s not that agencies don’t recognize the importance of keeping abreast of technological improvements that have become the primary mechanism for core work, client deliverables and strategy.

Agencies recognize there is no choice but to invest in more advanced technology despite the tough economic market. All of these pressures are forcing them to be more strategic in their investment, especially in finding those technologies that can unify all internal and client functions to maximize operations. That is precisely what Agency 3.0 is designed to do.

In fact, it is the client who is driving the transformation to 3.0. Client expectations and demands are changing with the digital era and its easy accessibility; e.g. “there’s an app for that.” It has given clients a better idea of what they want, how they would like to see it completed and, most telling, what they expect to pay for the work, no doubt less than previous agency models dictated.

Digital has forced agencies to change the way they do business in the methods they use to develop advertising strategies, produce their deliverables and measure them, particularly given the vast amount of social media that must play a role in today’s marketing. There is just no time for a learning curve.

Then there is the business model itself, a product of older times when compensation was based solely on retainers and other hourly fees for developing and delivering print and broadcast campaigns. Like it or not, standard rate models are under attack. Clients no longer accept the retainer base model and increasingly prefer project-based rates.

3.0 Increases Agency Capabilities

Enter Agency 3.0, an industry concept and a growing movement: an internal and external operating system that adjusts scale, volume and process to the digital environment. One of its major features is the integration of best practices from other industries, such as project management, resource allocation and business.

The system is all about data—a centralized location to access, manipulate and drive service to operations and client projects at all times. It has to be that way because digital does not recognize limitations posed by operating under “normal business hours.” It takes data from hard drives, shared drives and spreadsheets and converts it into usable electronic workflows to keep the agency at optimum efficiency.

Agency 3.0 can analyze all campaign data and apply it to client needs, including the creation of electronic job jackets to help reduce paper flow. It can streamline media planning, buying and execution through powerful data management. In the case of a client audit, Agency 3.0 can make data accessible to the client online, reducing the need for time-consuming and costly searches and paper documentation.

The system’s numbers-crunching capabilities offer additional numerous benefits; among them:

  • Tapping into potential new revenues through integration of Customer Relationship Management software and making CRM a core element of agency operations as it is in many other industries.
  • Analyzing the most profitable clients and generating new ideas to support their needs.
  • Utilizing business intelligence and other resources to assist development of better compensation packages.
  • Developing shared services in which finance, production and accounting systems are centralized.
  • Improving efficiencies while cutting costs.

Clearly one of the most important features of Agency 3.0 is its model framework for all agency operations with systems geared to revenue-enhancing client satisfaction and supporting agency compensation. It does this by integrating core best practices around change management and through maximum best use of resources, processes and technology. It is a response to the recognition by agencies large and small that they’re spending entirely too much time on paperwork that could easily be converted into electronic data to achieve their client and revenue goals.

Client advertising and public relations budgets have declined in recent years, but the goal remains the same. Agencies have to do more with less if they expect to retain and grow accounts. The rise of digital influence at a time when margins and compensation are under pressure require the sophisticated response of an Agency 3.0 and its ability to process every function and potential revenue stream and help generate new revenue streams.

Digital represents an evolutionary change in business practices and no reminders are necessary about the fate likely to await those who don’t change with it.

Jonathan Bourke, managing partner at Encompass Digital, provided assistance with this article.


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