Confessions of a former agency innovation head: ‘It’s all smoke and mirrors to get more money’

This article is part of our Confessions series, in which we trade anonymity for candor to get an unvarnished look at the people, processes and problems inside the industry. More from the series →

Advertising is awash with agencies proclaiming their love for startups and all things innovation, but all too often, there’s not much behind the fancy talk. In our latest Confessions, in which we exchange anonymity for honesty, the former innovation boss for a well-known advertising agency reveals why so many creative shops roll out innovation labs. Here’s our conversation, lightly edited for clarity.

There’s so much talk about why innovation is important to agencies. Why are so many not taking it seriously?
The agencies that have to adhere to shareholders are buttoning down costs as they have been doing for some time, meaning it’s more about appeasing the shareholders with monthly figures. If you are a back-end entity that’s part of the back-end costs at an agency, it’s harder to get it [innovation] paid for by clients. Therefore, innovation expertise is seen as a drag to the company, which is made worse due to the lack of tangible measures for them to know that it has a long-term effect. So many times recently, we’ve witnessed “shiny new toy” syndrome in both clients and agencies. And you can add to that some very short-term thinking. Clients tackling the wrong challenges and not dealing with the causes but the effects.

Just because it’s harder to quantify innovation doesn’t mean that you shouldn’t do it.
There are certain CEOs that have an appetite for innovation, and there are others that can’t see a need to invest in it because it doesn’t affect their day job. You can spot the difference between the two by whether the agency boss has insisted on a set of robust KPIs. When there’s a clearly defined set of KPIs against the word innovation — which means anything that is bigger, better, stronger and different — then you’re able to see a lot of growth. The way forward is almost certainly a hybrid model but heavily grounded in client outcomes and metrics and based on models that promote mutual value — unlike many of the traditional agency models.

Are the agencies without KPIs for innovation just doing it to win additional budgets from clients?
It’s all smoke and mirrors to get more money. Outwardly, agencies will have an innovation hub or an in-house specialist to look trendy and forward-thinking, but actually, they’re just delivering a business that hasn’t changed in 60 years. I’m seeing so many agencies doing exactly the same as they’ve always done.

So agencies are using innovation to mask shortcomings elsewhere in the business?
Look at Publicis Groupe, for example. The group has announced it won’t be spending any money on awards so that they can concentrate on the artificial intelligence they’re building — Marcel — to benefit the company and its clients. But it could be smoke and mirrors. It could be that they don’t want to spend money on awards, and so, therefore, they’ve decided to put out a PR story about putting money into startups, whereas it’s easier to see the more money that goes into awards.

How are brands responding to this?
Clients, [on the whole], are much wiser as to how agencies make their money — technology means it is all transparent, no smoke and mirrors — and have many more direct alternatives coming to them via all means on social media. They are looking for evidence-based solutions and are not always convinced by superficial partnerships or cobbled-together alliances.

How can agencies fix that issue?
It is still not seen as mission-critical with most CEOs to make the changes needed to truly innovate. It is enough for them to “sprinkle innovation and new and shiny pixie dust” to make their clients happy. The clients are not brave either in terms of buying innovative work. But most of all, many companies don’t realize it is all part of business transformation, and when they see what would need to be done to really embed innovation or innovative thinking at the heart of their company, it is just too difficult for them to get their heads around — hence so many disrupters out there disrupting the existing models, a la Uber, Airbnb, etc. The new models of agile nimble players are coming through.

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