Robert Sanders is a new business consultant and head of the Sanders Consulting Group in Pittsburgh.
The marketing world has been abuzz over the failed merger of two giants: Omnicom and Publicis Groupe. The initial hype was all about how this would create a new type of advertising entity, something that would offer fully integrated marketing and better return on investment to clients. Now it’s nothing but a memory in the dustbin of history. But the underlying message could not be clearer: to survive in the marketing world, you must learn, anticipate and adapt.
A page from military history
I spent a decade serving in the military in several war zones (and understand all too well the meaning of FUBAR and SNAFU — not to mention Murphy’s Law). Even truly great militaries can fail. Eliot Cohen and John Gooch’s “Military Misfortunes: The Anatomy of Failure in War” is a highly interesting study of such failures, and what really causes otherwise great armies to suddenly fumble. The lessons can be applied to any industry fighting for survival.
Cohen and Gooch propose three basic concepts that can lead a winning force to lose: 1) failure to learn from the past, 2) failure to anticipate what the future may bring, and 3) failure to adapt to the immediate circumstances on the battlefield.
A military can suffer from any one of these three but still succeed — what the authors call a “simple” failure. A very lucky military, with some great leadership, can even overcome two out of the three — an “aggregate” failure. But if any military suffers all three, or a “catastrophic” failure, there is no recovery.
During World War II, the stunning loss by France to the Germans in May-June 1940 is a classic example of a catastrophic failure. The French had more tanks, more troops, home turf, great defenses and had even seen the German battle plan in action in Poland. And for some reason, they didn’t learn, didn’t anticipate and never adapted. And they lost. In a little under six weeks, the Germans were able to accomplish what millions of causalities and years of war had failed to do in World War I.
So what does that have to do with Publicis-Omnicom?
Think about it. The marketing and advertising marketplace is currently more fragmented and dynamic than ever. The agencies competing on this battleground have to respond promptly and effectively to these new challenges: How best to integrate fragmented client-marketing needs? How to handle evolving standards and competitive innovations? How to enhance their creative product and service offerings? All the while maintaining existing client satisfaction and retention. Not to mention trying to win new business in the middle of all this upheaval.
Increased competition among traditional ad agencies has resulted in the loss of market share, reduced prices, and reduced margins. Any one of these can cripple a firm. All three make for a catastrophic failure. The failed Omnicom-Publicis merger was just another example of how the mega-agencies are struggling to adapt. What can a traditional agency do?
Below are a few ideas that can help you adapt, anticipate and become flexible — and help avoid your own catastrophic failure.
- Reduce costs. Cutting costs is an essential step to free up resources and invest in the future. Reduce or eliminate the lingering overhead from days long gone. If your agency isn’t generating close to 20 percent profit, look closely and start making some difficult decisions.
- Increase existing client revenue. Adapt a client solutions market strategy versus an advertising or marketing strategy. Focus on selling strategic thinking, methodology and value-based ideas. Work hard to provide a more holistic solution to clients instead of piecemeal services.
- Increase new client revenue. Understand that a new breed of client demands a new approach to agency growth. Clients today have come to believe that all agencies are equal. Check your brand, develop an effective outreach program, and change how you close with a focus on speed.
- Restructure the agency. Restructuring goes far beyond the normal tactics of reducing payrolls, slashing overtime or stopping the drain on cash flow. Restructuring involves repositioning your agency to take the best advantage of the new market realities. Organize your agency with an eye on capturing the projected future market. The agency brand, culture, structure, processes and technology should all be revisited.
- Improve efficiency. Get better at service and production. In today’s environment, efficiency climbs to new heights of importance because the cost of errors cannot and will not be passed on to clients. Errors, waste and spoilage all come out of the bottom line and must be reduced significantly or eliminated entirely. At the same time, the delivery of services has to speed up. No longer will clients be willing to wait weeks for a response.
- Expand services. Meeting the more broad-based business needs of individual clients not only creates a strong bond with the client, but it also stimulates ideas for adoption across other clients. Develop a broad-based service offering based on a keen understanding of clients’ business and needs. This understanding can provide the basis for a total client-solutions market strategy. This is much more of a consultative model and is not in the traditional agency’s wheelhouse.
The advertising industry’s very foundation is changing structurally. Indeed, nearly every facet of the process is undergoing change, including how work is produced, the types of products and services offered, and the very methods used to communicate with clients. To paraphrase Eliot Cohen and John Gooch, agencies today need to learn from the past, anticipate what the future may bring, and adapt now to the current crop of clients. Start the process: learn, adapt and anticipate before it’s too late.
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