Fighting monopolies in the age of AI

 

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The sudoku problem and the delusion of conservative ad men

This is in response to Mr. Rory sutherland’s article about targeting in advertising. Read that article before reading this one.
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“By deluding everyone that the whole of advertising is reducible to “the efficient and inexpensive delivery of targeted messages” through the extensive use of data and algorithms, two companies have gained a multi-billion-dollar rent-seeking monopoly over the majority of advertising activity.”

– The extraordinarily persuasive Mr. Rory Sutherland in his campaignlive article.

Bang on. But right after identifying the problem correctly, he then completely misses the big picture.

1. Platforms are relevant beyond advertising. Agencies aren’t.
Yes, facebook and google create the illusion of measurable effectiveness of comms through targeting, even as it turns out, it is just as much a gamble as traditional media was. But Mr. Rory doesn’t comprehend the broader utility of these technological giants. They aren’t simply channels of communications. They are default platform of commerce, knowledge & social connections. They inform not just marketing but supply chain strategies, go-to-market strategies and even new product development. These platforms are fundamentally shaping the new era of business growth. The ‘sudoku’ like big picture consciousness needs to take this into account. It needs to take into account the fact that these platforms are fundamentally changing the way we work, we behave, we interact and we live.
So, my first moment of ‘wtf’ came when Mr. Rory thought that the multi-billion dollar rent-seeking was just about ‘advertising activity’. Either he needs to appreciate the far broader footprint of that ‘activity’ where creative agencies don’t compete or he should look for reasons within the creative industry for why we aren’t getting a share of any of that activity.
I don’t particularly like the tech giants myself. But advertising industry is no innocent minnow either. It has always been a morally grey industry. So for its statesman to target the tech industry while absolving itself of its failing fortunes, felt a bit weak. The sense one gets is “we don’t need to change, you should. we are not muddled in our heads, you are.”  Which is horseshit ofcourse.

2. False duality of Targeting/ Creativity:
I wholehearted agree that obsessing about targeting is problematic, not just strategically but even morally and hopefully eventually legally.  But with metaphors of sudoku and door man, he ends up creating a false sense  of comprehensiveness with targeting & creativity. Indeed he talks about sudoku – the big picture consciousness needed to solve the problem, but doesn’t take into account the big picture of advertising operations. We are way too busy advising businesses about their transformation to notice the need for our own transformation.

He essentially creates a false duality about targeting & Creativity. Advertising comprises of far more acts than that of creative messaging and targeting. As a matter of fact, technology’s relevance for advertising is precisely outside of these two acts – servicing, client feedback, HR, research, basic analysis even creative inspiration … all these tasks that support creativity can be improved with technology. And they can improve only by ‘breaking-down-to-manageable-parts’ approach. The sudoku metaphor, though very enticing feels wrong. The sudoku metaphor is relevant for big picture strategy or pure acts of creativity. But no other process beyond it. and there are far too many processes beyond these two processes in advertising.

3. The untold story about the doorman: So in Rory Sutherland’s piece, tech company automates the door and boom – end of the hotel. But in reality, there is a story after that. Unlike our industry, tech industry is notoriously good at improving with feedback. They are famously ‘forever in beta’. They would recognise the error, and plan ahead. perhaps by creating  gadget for the doorman to greet different patrons in different language. Perhaps, by creating a entry chamber that is even more secure and pleasurable to enter into. The possible improvements are endless with creative thinking.
What I am trying to get at is… tech will improve the processes that it can improve until no improvements are needed. And unless agencies get on with the ‘arms race of feedback led improvements’, we are doomed to get thrown out by the doorman like he would a bum.

4. Tech’s role in advertising:
Do clients want us to be more nimble, more responsive? how can it happen without tech?
Digital media is creating a Just-in-time and plug and play mentality for solutions. can we deliver solutions JIT and PnP without tech?
Agencies service just the largest corporates in the world. we can’t profitably service SMEs. Is that the world we want to be in where the biggest get unfair advantages of our talent? Can technology help agencies in servicing at scale?
Most of our time goes in idiotic tasks such as filling time sheets, arranging meetings, reworking forever due to bad feedback… Each of these tasks can be improved with tech.
We are using tech to reduce productivity actually – Take for instance the process of installing a font currently – raise a ticket, wait for technician, who installs it. the first two steps are completely unnecessary. but we do it, because we don’t take tech led improvement in processes seriously, even as we idolize Apple.
Most importantly, effectiveness of campaigns is still akin to picking a lottery ticket. There is no scientific algorithm to achieve right effectiveness. Similar to the problem faced by stock-brokers. But people like Mandlebrot have been suggesting scientific and a different approach to that problem. Maybe, there is much to learn for us from that approach. (Stochastic and as such programmable to an extent. but not anytime soon.

5. ‘Creativity’ has been agencies’ excuse for long to get away with their privileged complacency. Advertising agencies are too expensive,  unreliable and inaccessible. Tech will disrupt advertising agencies soon enough, because industry leaders echo Rory’s myopia.

And here’s the blueprint for that disruption – Agency as a platform.

The Mad World of Monopolies Over Brains

Microsoft bought semantic machines.

Google, FB etc keep buying smart companies all the time.

A handful of global companies keep buying smart companies before they can get a product out to the market.They are essentially creating monopolistic moats over not just cutting edge intellectual property, but also the intellectuals – the men and women capable of creating/ leveraging new technologies.

So many startups now start with the end in mind, the vaulted ‘exit’. What happens when all the technological advancements get concentrated in fewer and fewer hands? The only anti-dote to Marx’s dystopia of ever accumulating capital was the intellectual capital that allowed anyone to give it a go with limited risk and succeed. Is that anti-dote of intellectual capabilities relevant any more?

Any body can learn to code, etc. But can everyone access the infrastructure and the necessary accelerating feedback loops to improve as fast as these few companies can? That pace of accelerating innovations is the new Capital for 21st century.

If we don’t want an increasingly unequal world, we will need to view this capacity to rapidly innovate as a capital that needs to be seen similarly to other capital assets – land, machinery, channels of access to consumers.

Which means, it is time for regulations. We can’t let ever fewer investors and companies to corner the ability to rapidly innovate.

This is essential. Unlike 15 years ago, when a zukerberg could code out of his dorm and build an empire. Now another zukerberg could code just as well, but if his idea & code is any good, it will either get copied by these juggernauts or get bought early on. Look at how FB is copying snapchat to its death. It is not a level playing field anymore. A successful digital company now will require a war chest of billions. There are investors ready to fund these war chests. But the problem is, that these investors are same few folks from California (and one notable Japanese guy).

There is no Nigerian, no Indian, no Brazilian, no Greek, no Swedish….(and a 190 countries later) person among those few people who control the new engine of human innovations.

A side effect of this narrow competition is the poverty of ideas that the best minds are working on – google glasses, automated vehicles, AI assistants … are these the biggest challenges for the humanity? As Climate change, growing inequality and rising xenophobia tear the world apart, should the people who can create the infrastructure of the new world be spending their times on elitist pursuits?

It is not difficult to copy them and become the new age capitalist. However they have created a high-entry barrier by turning it into a mad game of bluff. Their tactic is to value companies at ridiculous valuations. The valuation is divorced from reality and based solely on the potential of possible monopolistic leverage. Naturally, most sensible people, stay away from this capricious game.

These people are feverishly gambling with the intellectual capacity of humanity. It is a mad mad world. They need to be stopped if we want a better world.

Essential Mutations for the 21st Century Brands

1. Rise of the walls

21st century weather report

The world is reeling under the hate wave of right wing xenophobia, binaries of ‘Us vs. Them‘. The hate wave is projected to continue and expand as people turn their back on ideals of liberty, equality and fraternity, which had yielded unequal fruits for the globalised citizens of the 20th Century. While the globalisation opened up the barriers for free-flow of money across the world, the flow of people has been artificially impeded creating great pressures at the arbitrary borders. The potential energy arising from the stalled flow is bound to turn into kinetic energy, overpowering the borders – eventually. That possibility of bursting of dam obviously scares people on either side.
Uncertain times, uncertain times.

In times of uncertainty, people seek certainty –the privileged seek Certainty of ‘walls’ to save their way of life. The underprivileged ‘others’ seek certainty of the better life on the other side of the wall. Hence, we have Trump’s wall, refugee crisis across the globe and right-wingers gaining political power.

Netherlands, India, Australia, Nigeria, Philippines… xenophobic demagogues are gaining political power everywhere. Are we collectively getting more selfish? Or is there something else beneath our collective psyches that needs recognition?

The new Modernism: From globalist to Nativist

For the purpose of this essay, understand ‘Modernism’ as essentially blinkered optimism and ‘Post modernism’ as the recognition of futility of Modernism’s idealism. So most –isms (Capitalism, Socialisms, Casteism, Communism or even Taliban’s vision of Islam or even art movements such as Dadaism, Constructivism) that imagine a simplistic utopia, that propagate a simplistic worldview are essentially modernist imaginations. Modernism is about believing that utopia is within reach and that ‘only if these things change, the world will be perfect and harmonious’. Those who want walls are also modernists in that sense – they believe that closing their worlds to others would solve their problems.

Post-modernism is about recognizing the tragedy of modernism – that the world is simply way too complicated for any utopias to come to fruition. Dissolution of Soviet Union, Quantum Physics, LGBTQ pride parades, Crypto-currencies, Tech Billionaires eschewing suits, memes… Events like these puncture worldviews of modernists. ‘Sacrilege’/ ‘Blasphemy’/ ‘Traitor’ they yell. The edifice of certainty comes crumbling down. Nothing hurts as much as disavowal of a dearly held worldview – the source of one’s identity, the coordinate of one’s perceived reality.

When the pace of change becomes unbearable and humanity needs a carpet to dust away its confusions and dissonance under, modernist rail against the symbols of authority, symbols of status-quo in an attempt to ‘reset’. They hope to start over to ‘do it right this time’. Hence, Americans want to make America great ‘again’ and Chinese & Indians want to ‘regain’ old glory.

What does this have to do with brands?

The cultural role of brands is now fundamentally changed. It is an important shift that marketers must understand. In the last century, global brands were at the forefront of propagating western values of individualism, freedom to enjoy & dreams of building personal wealth, accessing evermore-exclusive lifestyles. The globalist philosophy of brands marginalised national, cultural, tribal identities & associations. There was one ideal lifestyle, one ‘-ism’ shaping the global culture most stridently– that of individualistic consumption over everything else. Slavoj Zizek qualifies this cultural force engineered by brands as the ‘obligation to enjoy’.

However, people are reacting to that imposition now. Some by questioning their consumptive choices, some by questioning the globalist legacy of brands and some by outsourcing their consumptive choices to search engines/ suggestion engines/ Alexa.

Let me illustrate this with two recent historical events.

From the Berlin wall to Trump’s wall

November 1989 – The Berlin wall was brought down by the will of people.

November 2016 – Americans elected a real estate developer as their president for his promise to build a ‘beautiful wall’ at the southern border of USA.

What had changed between November 1989 and November 2016?

In the 80s, East Berliners craved for the choices that the West Berliners had – to own stuff, to travel, to listen to music, to use deodorants, to smoke cigarettes. A thirst for freedom to choose one’s own destiny brought down the Berlin wall in November 1989. Eventually, the freedom to choose destinies was conflated with the freedom to choose brands. Bbrands used that confusion to their advantage.

27 years since, the realisation is setting in – choosing brands of your choice is not the same as choosing your destiny. A recession and a few maxed out credit cards later, a typical consumer is beginning to realise that the very act of consumption is ensnaring him/her in a vicious cycle of debt, instead of setting him/ her free.

It was implied with overwhelming branding, that the consumer would succeed, would be happier due to his brand choices. Instead, it only helped him project his success and happiness at the cost of actually gaining success & happiness. Without actual success, the credit card loans caught up with him. Without actual happiness accruing from individualist brands, he was left in want of social relationships, a cultural identity. He was left feeling powerless – he had to suffer in the recession and then the bad economy, even as he was doing what was expected of him. That resentment was amplified by accelerating inequality.

Since we cannot accept our own powerlessness, we direct our blame at ‘others’ – South Americans, Africans, Muslims… It is psychologically easier to find a scapegoat, rather than confront our own powerlessness against the real tyrants. Hence, people elected a real estate developer promising to build a ‘beautiful wall’ at the southern border of USA.

Implications for brands

  1. The role of brands in our culture is changed. Brands are not beacons of progressive ideals of individualistic freedom and fraternity anymore.

In a walled-in world wanting out, brands were symbols of freedom, of free globalist identities.
In a wall-less world wanting in, brands are addictive identity crutches that must be pared down, in favour of collectivist identities.  

This is the reason for meteoric rise of brands like Patanjali in India (which is positioned on Indian heritage and traditional know-how) or rise of agitations against global brands (such as these ones in China).

  1. There is no single ideal that can be universally understood as ‘progressive’. Is wearing a burkha patriarchal or is it a will-full choice? Are revolutions always desirable or not? Is science always progressive or should we be worried about its advances? (For instance with GM foods). Does individual’s rights matter more than nation state’s priorities? The right answer is – it depends! There are no absolutes. Contexts matter. Hence, brands need to be cautious about their stances.
  2. Local relevance: In the pre-liberalised world, accessing an ‘imported’ Dove moisturiser in South Asian countries was in itself an adventure, an occasion to celebrate and talk about. Never mind the product was not made for the skin type or the weather. One was happy to be able to access an international quality brand. That is not true anymore.
    The profusion of brand choices means that people are used to accessing brands that are more sharply relevant to them. There is no incentive now to go for a global brand that does not answer the local, contextual need.
  3. Cultural currency: The internet was supposed to open the world. Instead, it has created ‘filter bubbles’ – echo chambers for people who exchange local cultural memes at warp speeds. In such a world, language, ideas, cultural heroes, stories mutate and gain layers of meaning on an hourly basis. To be relevant to different cultures, different ‘bubbles’, one must be immersed in it. You cannot skim it; you must devote a part of you to it. That necessitates a fundamentally decentralised and spontaneous way of working.
  4. Rise of the need for ‘Authenticity’:
    A wall-less world is a free-fall world where there is no concrete identity, no concrete reality. For example, ‘If you are defined by your profession alone, how are you different from the hundreds doing the same job across the globe?’If you are a global citizen, where do you exactly vote?’
    Hence, in an uncertain world, we need the buoys of brands to shore up our identities. For example – ‘I might be a replaceable software engineer, but I am an irreplaceable Indian who likes classical music’. It is easier to build a seemingly authentic identity by wearing a FabIndia kurta (a traditional shirt from South Asia) and to ‘like’ a local artist on Facebook.

A walled world is concrete world, not just of concrete walls but also of supposedly ‘real’ culture – with predefined customs, biases, beliefs, rituals and heroes. It is a more comforting world with lesser cognitive tax of building identities by simply subscribing to an existing one, instead of building identities independently.

2. Rise of platforms

Brands in a world of mediated choices

1989: From freedom to choose

To

2017: Unlimited scroll of choices accessed through few platforms

Prof. Byron’s influential book ‘How Brands Grow’ suggests that advertising should build and reinforce associated memory structures. But the nature of these very memory structures is changing now. A Columbia University study found that Google and other search engines are literally changing the way our brains process and retain information.
We forget things that we are confident we can find on internet.
Brands are on internet.
Ergo… Google, Amazon, TripAdvisor become the primary portals of brand discovery. Now you do not need to remember brands, the search engine and the suggestion engines would do that for you.

This dependence on internet to remember things is an illustration of a concept called transactive memories, where one depends on others to recall a memory. This is in contrast to independent memories, which rely on one person providing complete recall. The interdependence to remember, to consider, to prioritise has accelerated with platforms. We are dependent on others’ reviews, others’ opinions and platforms’ ability to serve these to us. For instance, you will not straight away go to Dove’s website to buy its moisturiser. Most probably, you would search for the best moisturiser for your skin type for your local weather on Google or Amazon.com. Based on consumer reviews and suggesting engine, you would choose a brand to buy.

This has profound implications for brands as more and more people shift their memories & decision making online.

The strategic perspective towards building brands must change accordingly. The goal of branding then is not necessarily to build ‘memory structures’ of individuals, but rather to make it easy for the brand to be recalled by the transactive memory of the hive-mind of platform-users combine.

There is an important nuance to understand here. Brands can still build ‘memory structures’, but that is not ‘essential’ anymore to grow. What is essential is to be ‘available’ for the hive mind to find you and like you. The profound shift is that of addressing the ‘memory structure’ of a collective instead of the ‘memory structure’ of an individual. This perspective, if understood well, can give tremendous competitive edge to marketers.  For instance, imagine the savings on ‘not doing commercials for Superbowl and instead putting that money in improving product access, product experience, encouraging consumer to review it or instigating a cultural conversation in the platform-users hive.

Platform brands & brands sold on Platforms

There are essentially two kinds of brands – platform brands and brands that are sold through these platforms. In the new economic ordering, there can exist a limited number of platforms, but almost an unlimited number of ‘long tail’ brands (precarious, unless governments regulate online platforms). Understand what you want to be and adapt accordingly.

Becoming the next platform is very different from winning in the long tail.

To succeed as a platform,

  1. One must understand that it is a race for monopoly. It might be a specialised platform, but for that particular purpose/ consumer set/ needs targeted, there can exist only one platform in the long term.
  2. The growth strategy is about building a network of users and leveraging the network effect’. Network effect is the phenomenon of some services to become more valuable as the number of its users increases. For platform, this is universally true. With each new user, the platform gets better data, improves its service and enhances its relevance. Therefore, to succeed, it is imperative to recruit the biggest segment of users and to incentivise them to stay in that platform.
  3. Platform brands succeed when they create egalitarian access to valuable exchanges that were not possible earlier. Hence, the focus of the brand has to be on making such exchanges possible and communicating the value of it.

To win in the long tail,

  1. People key in their queries, as against asking an attendant to help or seeking a brand directly. This is true even in some retail shops these days as the attendant key in keywords on consumer’s behalf). This behaviour shapes the nature of brands that would come on top. It is in the nature of keywords to be linear and additive – People get more and more specific until their needs are met. To acquire a consumer before he has to get specific, brands need to build ‘memory structures for the hive of platform-users’ for the specific need it uniquely fulfils.
  2. This incentivises brands to be specialists – the sour tasting chips, the scented toilet papers etc. Be a specialist.
  3. There is a limit to growth for ‘a’ brand. The flip side of this level of segmenting and specialisation is the limit to the size of addressable segments. The brands would necessarily be not large or global.
  4. The key branding considerations for a brand are how to become easier for the consumer to find it, use it, and recommend it?

The essential mutation

There is no escaping change. In a world of resurgent nativist identities, global brands need native mutations. Brands must audit their local relevance and the authenticity of their engagement with culture. Secondly, technology is changing the nature of exchanges between consumers and brands. To succeed in this new reality, they have to appreciate and leverage the fundamentally different market dynamics of platforms.

Advertising industry’s new ‘Pivot’

No planet for old businesses

Exhibit 1:

On 16 June 2017, Amazon.com Inc. announced that it is acquiring Whole Foods Market Inc., for $13.7 billion in an all-cash transaction.
By the end of that day, Walmart, Kroger, Target & Costco had lost their market caps by 5.8%, 7.1%, 9.1% and 15.7% respectively.
On the eighth day of the announcement, Amazon’s market cap had increased by $18.9 billion.

In a sense, not only did investors reward Amazon by funding the acquisition, they also punished the competitors of Whole Foods for not being acquired by Amazon.
The situation is such that as soon as Amazon enters any category, leaders in that category lose market valuations almost instantaneously. That is the promise/ threat of platforms like Amazon.

Exhibit 2:

“In 2017, almost 80% of every incremental ad dollar spent globally will accrue to digital. In their domestic market of the US, Google and Facebook are capturing more than 100% of this growth, up from 85% in 2015.” So read the 2017 Redburn Report titled, ‘Ad Agencies Marginalised.’
“More than 100%…”

If someone captures a share of more than a 100%, it means that that share came at someone else’s expense. Certainly, many digital advertising companies and ad exchanges saw decline in share of digital ad spends. Advertising agency holding companies too bore the brunt of Google and Facebook’s growth. 2017 perhaps has been the worst performing year for WPP since the recession of 2008-09. For the latest quarter Q3, the firm reported a 2% drop in organic growth.

Essentially, growth is almost a zero sum game now in which platforms are winning. This is in stark contrast to the nature of growth in the last century, where globalization created avenues for many to grow: It was not a zero sum game then. The monopolistic ‘Platforms’ are stealing lunch of legacy businesses – ours too.

Platforms are winning in today’s zero-sum game of growth. The monopolistic Platforms are stealing our lunch.

What are platforms?

A platform is essentially an enabling infrastructure/ environment that,

  1. Gives freedom to connect with others
  2. Enables valuable exchanges which were not possible outside of the platform
  3. Enables external applications/services to be built on top of it, (APIs)

Platforms like Amazon, Facebook, Google and Uber are enjoying unprecedented growth and consequently unprecedented investor interest, because they allow that egalitarian access to valuable exchanges that were not possible otherwise. By their very nature, the exchanges become more useful, more valuable with expansion of user base. Amazon is able to fine-tune its suggestion because it has access to purchase history data of billions of its customers across the globe. People use Facebook because all their friends use Facebook. This phenomenon, of increase in usefulness and consequently the value of a service with increase in the number of users, is called ‘network effect’.

The sinister consequence of the network effect is the potential of monopolies. The logic of Platform growth inevitably leads to hollowing out of existing market structures. The logical conclusion of Platform economy is a world of monopolies rising upon the ashes of old businesses.

Shift in client priorities

From ad spends to spends for innovations in product, supply chain or marketing.

As if the threat/ opportunity of ‘Platforms’ was not enough, companies these days also have to wrap their heads around 3D printing, Blockchain technology, CRISPR/Cas9 and so on. These are amazing technologies promising revolutionary changes. These technologies present new opportunities that we never knew existed before.  However, many legacy businesses are ill equipped to respond to them.

Thankfully, a whole industry has sprung up to cater to these needs – needs of business transformation in the face of existential threats posed by new technologies. Traditional consultancies have adapted to offer new expertise to clients. Specialist big data analysis agencies are helping companies make sense of their consumers. There is even an AI (Artificial Intelligence) agency now, that helps create ‘intelligent agents’ for brands. Market is demanding newer mutations of agencies like these, mutations that help them navigate the brave new world of the new economy.

Market is demanding newer mutations of agencies; mutations that help them navigate the brave new world of the new economy.

The question that we must ask ourselves is – do advertising agencies matter as much in these testing times? On one hand, the budget allocated by clients for marketing is under pressure. On the other, technological investments, specialist hires and consultancies are claiming an increasing share of the budget. Will this twin phenomenon erode the value of our services? Will the share apportioned to advertising shrink further?

Advertising agencies, if they remain what they are, will secede their privileged partnership status to digital transformation agencies, to business consultants and to platforms like Google, Facebook and Amazon.

One obvious yet terribly difficult-to-pull-off implication of this is – to become an advertising platform. I have discussed this in detail earlier. The reality though is, not everyone can win in that race to become a platform. For the majority of marketing services agencies to survive and thrive, we need a ‘specialist’ strategy, not a generalist one. Here is why.

Age of specialists

Creative agencies are made up of a unique set of people: People who can think laterally, think big, think informally. Apart from a few top tech companies, not many companies have the asset of free thinkers who are not stifled by hierarchies and suppositions. As such, creative agencies are uniquely positioned to create new solutions for brand growth, beyond branding ideas.

For marketers trying to make sense of a fast changing world, agencies need to adapt to remain the priority partners they turn to for help. Can the planner’s customer centricity help companies improve their business plans? Can the creative talent’s mastery over conceptualization propel a client brand’s product and service design?

Why not to be a generalist?

Advertising agencies help clients ‘position’ their products as distinctly relevant. But we forget to apply those lessons to ourselves.

Google and Amazon is fundamentally rewiring our brains – even our clients. The ‘search’ and ‘suggested’ result mentality means that for every emerging need, the client searches for services he/she needs with sharper definition. She is more likely to send out a specific query out in the world – either digitally or among peers – ‘Who is the best at product design in our category?’, ‘Who can help me assess Blockchain’s potential to disrupt our category?’

What results she might get? Would people respond with a generalist agency’s name even if they have the capabilities? Will a generalist be on ‘Top-Of-Mind’ for such queries?

Well, many private agencies can choose to continue doing what they do, with likeminded clients catering to traditional consumer segments. But that set of marketers is shrinking, the addressable opportunity is getting smaller. That means making peace with low growth.

However, for publicly traded advertising holding companies, coming years could be the years of transformation – either willingly or engineered by activist investors who demand growth.

Hence, it is increasingly likely for large advertising players to ‘Pivot’ to go for the biggest emerging opportunities.

What is ‘Pivot’?

The purpose of a pivot is typically to go after a bigger & sustainable growth opportunity in the market that can ensure companies’ prospects for near future. You do so by changing the direction of your enterprise if the need be, while staying grounded in your core competency.
Firstly, it requires reassessment of your old business in the context of emerging opportunities/ threats. The reassessment should ideally throw up useful insights about your clients, your product/ service relevance or the way you work. Consequently, you quickly test possible improvements to your service. When you hit on something that works, you scale it up and go to town with it.
You might end up changing something about the way you do your business, while keeping some aspect of the business constant. For example, it might entail shifting to new markets/ consumer segments/ new clients. It might entail prioritizing a different sales channel or to gain new capabilities. It might even mean reinterpreting a consumer need and creating a completely new offering.

At its core, it is about changing with an ear to ground. An ear to the ground tells us of seismic shifts in advertising industry with issues of trust (Pritchard, 2017), profitability, and marginalization (Bianca Dallal, 2017) posing threat to advertising industry’s prospects. Common sense tells us that something needs to give – something must change.

It is about time advertising agency business models change for the better.

The pivots of advertising agencies

At its most fundamental level, advertising agencies exist to help marketers grow (Purpose). They do so NOT by helping make the product/ service better, nor by helping reach more consumers. They do so by helping create consumer demand with distinctly persuasive communications. (Competency) The perspective to understand here is that of two variables: Core competency and Purpose of existence. Hence, to evolve, agencies can either look at radically reassessing their competencies or their purpose.

To evolve, agencies can either look at radically reassessing their competencies or their purpose.

Pivot 1. Core competency:

a.      Marketing services agencies:

Typically, creative agencies’ core competency is in their access to creative & strategy talent. W+K, Droga5 or Ogilvy are well known for their creative rock stars. Yet another agency might be built on the strength of decades old client-agency relationships. A media agency might boast about the scale of media spends that it controls and can influence. A research agency might have proprietary methods of inquiry or access to qualitative data.

The logic of pivot tells us that – for advertising agencies, there is an opportunity to pivot with their creative talent. What is the biggest business growth opportunity for the kind of talent they have? Beyond ‘advertising’ what high-value products/ services can this talent create?
Similarly, a research agency might look at its proprietary tool and reevaluate its potential. How can they augment the value of their intelligence the most? Would tabulation of existing qualitative studies help build an intelligent map of consumer behaviors? Who might be interested in such products? If ‘Big Data’ is the new oil, why are research agencies not making their big data usable at scale?

Here is an example of Pivot thinking applied to creative agency business.

The “If You Build it, They Will Come” agency:

This pivot is about keeping company’s people and their abilities at its heart and purpose. It seeks not to build radically new capabilities or hire radically disruptive talent. Instead, it seeks to find the biggest opportunities that the existing teams can deliver on, with greatest amount of satisfaction for the team.
For a creative agency, that means identifying the distinct talents of its teams and then finding the biggest possible commercial opportunities for them, may it be in advertising or beyond.
Creative talent remains the biggest asset of any creative agency. Yet, there is a growing sense of being overworked and underappreciated among the creative teams. There is a sense of ‘missed opportunity’ among people who see others creative people garnering fame and fortune with digital content. YouTube stars, Vice, Refinery29 and so on, have shown that there are bigger avenues for creative expression that could be financially rewarding too. There is a market for every conceivable creative style, expression, idea, app, activity or content. The creative team’s dilemma is – whether they will be better off with a career in advertising or in new age digital companies or by going solo with content creation, curation or aggregation?
Each creative person grapples with these choices. It would be in the agency’s interest to see the potential of its people before the people themselves do. If their team is passionate about a certain kind of creativity, find the biggest market for that creativity. This logic perhaps would not have been very sound 20 years ago. The surest way to make money with creative expressions and ideas was with advertising alone. However, today, a creative person can do much more with his/ her ideas.

If one looks at an idea objectively beyond the context of its birth, it looks much grander. Here is a thought experiment to prove my point.
Think of the last idea you had for a client’s campaign (or if you do not work in advertising, consider ‘what were they thinking?’ for any of your favorite commercial). Now think a logical conclusion to that idea divorced from the brand. Put that idea onto another stage/ context/ medium – see how it expands. If it is a good idea, it will always fill up the volume of your imagination – more than any brand can do justice to the idea.
For example, divorced from Dove, imagine the biggest expressions for the idea of ‘real beauty’. Can it be a movement? Who would like to contribute to it? Which brands would like to associate with it? Would the idea find place in the women’s marches? Would it lobby against skin whitening creams among policy makers? Would it run community centers? What would be the business plan, revenue model for the fullest expression of this idea?

If it is a good idea, it will always fill up the volume of your imagination – more than any brand can do justice to the idea.

Imagine an agency that has a set of issues/ themes/ ideas that it works on instead of set of clients. Will it be more interesting for the creative talent? Could it be more profitable? I believe it can be.

Ideas can translate to bigger things if you let them run free. The digital world has brought down the cost of realizing ideas drastically. It has given us the tools to translate and mutate ideas in infinite ways. Creative shops must make it part of their credo, to not let any good idea go to waste and to bring to life only the biggest expression of it.

The tragedy for many creative people is to see their magnificent ideas not reaching their full potential, being rendered impotent for a smaller cause, smaller venue. Instead, this new agency would recognize the bigness of ideas and put their efforts and capital in realizing those big ideas. The belief being – If You Build it, They Will Come.

b. Holding companies:

Unlike consultancies whose competency is in housing domain experts, holding companies do not have palpably distinct competency any more. A holding company is as good as the companies it has in its portfolio. The value of a holding company used to be in its ability to help portfolio companies to scale. However, it seems to have exhausted its scaling potential, evidenced by lack of organic growth.
Holding companies are trying a few things to improve their value. WPP is hedging its bets on ‘Horizontality’; Publicis is attempting to create an AI enabled personal assistant for its employees called ‘Marcel’. However, unfortunately, both attempts lack vision and conviction.
In an interview for ‘Strategy + Business’ in 2016, PwC Principal Deborah Bothun asks Sir Martin Sorrell, “How far can you take that?”, referring to Horizontality – the effort to get people from different WPP companies to work together for certain clients. Sir Marin Sorrell responds, “Not far enough.”
If the idea cannot be scaled across the company, is it even strategically relevant? At best, it seems to be a tactic to keep key clients happy.
Marcel too seems to be born of a narrow vision; it simply is an internal talent-sourcing tool. Wit AI, and the data that Publicis already has, it can be much more – but there simply is no evident will to create something groundbreaking.
Currently, the business incentives for a holding company are structured in such a way that they cannot radically change their course. However, many of their operating companies can.

Pivot 2. The purpose

In this pivot, we remain true to our purpose of helping client businesses grow. What changes is the ways in which we help them grow. The competencies become variable here. This means for this pivot to work, we must be radically adept at bringing in expertise for most growth needs of the client. If the client requires blockchain expertise, the agency must be capable and willing to provide that expertise. The key focus here is to become the de-facto growth partner of your client.

The “specialized business growth drivers” agency:

This pivot keeps the client base, the market, as constant and re-evaluates its options to seize the biggest opportunities in that market. Therefore, if your client base still feels that their biggest priorities are advertising/ branding to fuel their growth, continue doing the same. However, if your client base feels that their biggest priorities for growth are about leveraging emerging digital platforms or managing reputation in the age of instant outrage, adapt and train your teams to fulfil these needs well. The days for generalist agencies that could do everything for a client moderately well are numbered. Today, marketers need sharper, targeted expertise, which they can get most efficiently by looking at smaller, more specialized ‘vendors’. There is good money to be made servicing these myriad business growth needs. Specialize in driving growth for a certain kind of clientele with a set of competency they prioritize.

New age, new agencies

It is about time that agencies wake up to the reality of working in the digital world. It is not the time to be afraid and to be defensive. It is time to make bold new steps, to ‘fail fast’ and to ‘pivot’. It is time to start new adventures. The technological and societal revolutions are not threats, but opportunities for growth. It is time to grow magnificently with these new opportunities. Grow by either sharply adapting to emerging client needs or by investing in ideas you believe in. It is a brave new world, ready for the best of our ideas.

“That is the creative challenge”

If clients, planners, management folks and even creative directors make a habit of envisioning their idea before talking about it, we would be spared of a lot of bullshit.

So recently we presented an elegant campaign that was not ‘exciting enough’ to the client. They thrashed it mercilessly.

“Its a 20 seconder, we don’t have the time for a story.”
“Print needs to say ‘this’ and ‘that’ and ‘that’ and ‘this’. Make it all big. How will consumer know this. He needs to know that too……”

Essentially, they wanted to talk about five different things in an exciting manner in a twenty seconder ad that should also be clutter breaking since they had low budgets compared to competition.

I told them that the ad might work better if we concentrate on the most important thing – one thing to talk about. We might then have a chance of making memorable successful campaign. But nop. They wanted to say it all and apparently that is the creative challenge‘.

‘That is the creative challenge‘ is a phrase I have heard often enough. Its the lazy way out of having to make decisions. It is the lazy way out having to work as a team to arrive at better ideas.

It is precisely at this moment that one knows – the campaign is going to be  a dud. At a strategic level, the client has already made a mess and does not want to own up to it, to make sense of it. And no amount of creativity now is going to salvage it. And even if by the stroke of dumb luck, creatives come up with something workable, the idea will get ‘dialed up, dialed down‘ as the client tries to retroactively make sense of his / her strategy.

The antidote – Make people think along

If by some means you could inculcate a habit, inculcate this. For every meeting – briefing, brainstorming, client presentation etc., – make it a habit of visualizing the idea being presented. What could the idea mean actually? What are the best/ worst ads you can think of in that direction?

So if the planner gives you shitty brief with big words – ask him to give him an example of a ‘bad ad’. Give it a go. The planner has not thought through his brief if he doesn’t already have a few ideas himself.

So if the servicing guy comes back with client feedback that seems to worsen the creative work – ask him/ her to think along – how do they visualise it? how has the client visualised it?

so if the client asks to ‘dial up/ dial down’ or add this/ that – ask them to think along. ask them,

What should the ad say?”,
“What would the people remember from this ad?”

If no one has confident answers for these questions – there is no point in starting to work on a script/ idea. Get clarity about ‘what the ad needs to say/do’ first – not in abstract bullshit terms but words that anyone can visualise, actions that anyone can relate to.

Agencies as platforms – setting up for failure

Publicis is trying to become a platform with ‘Marcel’.

PHD has ‘Source’ – another platform idea.

Ogilvy also has its OS – more or less a similar idea.

Every global agency wants to become an Operating system/ platform where it could efficiently put to use the thousands of creative minds, departments for its thousand clients across the globe. The idea theoretically is  pretty awesome. Now that the agencies have grown to global proportion, how do yo make sense of the scale? How do you break the silos? How do you partner global brand’s global operations? A digitally enabled global platform sounds about right.

But will it actually work? There are two things that make an idea work. One is clarity of purpose. Second is people – Who is supposed to make it work and does he/ she gain anything from it?

And I think the agencies have lost the game on both fronts.
I think Publicis has potential but they have underestimated the power of AI or are shy of actually using its potential. The examples shown in the video are pedestrian. The queries showcased do not require ambitious AI. They can pivot to a bigger opportunity with a bit more of imagination and conviction.

Secondly, the people.
The value of a platform or a network is really in its ‘network effect’. Facebook is valuable because all my friends are on facebook and so are their likes and their suggestions. It is worthless if my friends were not there. So a platform is as good as the number of active people on it.
And I doubt there is strong enough an incentive for agency workforce to go digital – use that digital add-on of a ‘platform’.
Let me elaborate. Starting with vision.

  1. The AI’s story

    Professional assistant sounds like an exciting idea. But the examples shown in the demo video for Marcel makes me think that they really haven’t thought it through yet. The potential of a professional assistant in my pocket is huge and I doubt they have the conviction, the drive and the ability to truly create a product that could help me with my work. The video showed examples of fairly simple queries (for reports, for teams, for projects… simple keyword searches) – something that a simple google search would yield an answer. If that is the ambition, then the product is worthless.
    I imagine a professional assistant for a strategist to know up-to-date information of my client’s business performance, brand matrices, social listening etc. I will need it to analyse that social, market data for me.
    For a creative professional, an AI enabled professional assistant could help fetch examples of a certain emotion being portrayed in movies, novels etc, or find the right cultural conversation to target, find right examples of older/ competitive ad that conveys something. From a coding perspective, it requires technology that can scan videos for emotions, scan novels for metaphors, suggest content that might be useful for my current project, scan global market indices, scan social conversations for expressions, not just sentiments.
    That is a sophisticated product that I can use. And also, a sophisticated product that is technically very difficult to create. There is a reason it doesn’t exist yet.

    It would be economically more viable for Publicis to sell these products in open marketplace with high margins, instead of restricting it to their employees and clients.

    Euromonitor and their ilk have not yet shown a willingness to improve their delivery with AI. Understandably so, because of the economics of it and the coding prowess it requires to create an intuitive and powerful AI that will actually be useful. If Publicis or Ogilvy, has that kind of coding prowess, they would be better placed to monetise it for strategy projects rather than as  value-adds, to advertising!

    Why would you give away something more valuable for free with something whose value is depreciating. Would you sell a bicycle by giving away gold bars free with it?

  2. Conviction: It is a platform if it is the primary interface for a defined purpose. Otherwise, it is simply an onerous add-on.

    The nature of advertising business demands close co-ordination, casual comfort in conversations, intellectual proximity… None of which will exist if digital becomes the primary interface for inter-agency/ or agency-client relationships. People like to meet, talk and see if they find others as being agreeable. Even within an agency, if a CD doesn’t like my (planner’s) attitude, he would simply not bother even reading my brief. In the ego chamber that is an agency, relationships determine  if people even attempt at listening to other people. I have a hard time getting creatives excited about most of my briefs. I am sure they won’t get excited over anonymous briefs gathering digital dust on the ‘platform’ – a brief that doesn’t get an appointment, doesn’t challenge them intellectually, doesn’t provide them a startling new insight, doesn’t smile encouragingly, doesn’t empathize with their issues, doesn’t complement on their excellent creativity… is a dead brief.

    Indeed, many business relationships are based solely on the merit of nothing more than strength of actual people to people relationships. What happens to those if digital platforms become the primary interfaces?
    And if that is not the case and real world remains the primary interface with digital being an add-on, why would anyone want to invest extra time and effort on a platform that has diminishing returns for the primary purpose of fruitful relationships.

  3. Relationships vs projects: Should our industry incentivize the philandering behavior of clients?

    There are two kinds of clients – those that build a trust based relationship with an agency and works closely enough to grow their brands. Increasingly, however, trust is giving way for power tactics – clients who get agencies to pitch for every little project.
    The ‘platform’ idea is more suitable for the latter kind of clients. It is in the nature of ‘open relationships’ to put out briefs that hide more than they reveal. The lack of transparency means that the planner has to work harder in ‘guessing’ the brand challenge and strategy, in absence of hard numbers and concrete objectives from clients. Which means, more possible ‘routes’ to work on. which means more work.
    Do we really need to do more work that might not see the light of day, or less of it?

  4. Best creative brains do not want briefs from elsewhere.

    Consider a over-worked Creative Director with 5-6 projects (with at least one ongoing pitch) on his plate with deadlines of yesterday? That practically is every other CD in increasingly poor agencies (Look at retainers going down and businesses asking to pitch for every little project). Would a busy CD from China want to work on that superbowl commercial for a US client? I doubt it. Maybe interns and junior copywriters would like that opportunity. But typically the best creative brains with enough experience wouldn’t be going out to search for extra projects. They might do so, if they already have an idea/ script and need now a client to sell it to.
    So perhaps, the platform will become a Craigslist for ‘idea in need of clients’.

  5. Every brief a pitch

    This system, in a manner of speaking, is further fragmenting the whole pitch business. In a sense, every Publicis brief then becomes a pitch. Which planner/ creative director wants that?
    Pitches essentially are blackholes for good ideas. ideas that titillate clients, but that have much smaller chance of seeing the light of day.

  6. The knowledge bank – why quora works but internal Q&A does not

    I have worked in multiple global agencies. All of them had strong internal ‘knowledge bank’ networks. I even oversaw making of one of those, long time back.
    None of them worked. No one ever contributed answers, knowledge to the supposed bank.
    Or rather, the same person who might spend hours writing a thorough answer to a question on Quora, would never write (or even read a question posed by someone else) in the internal network.
    The reason – While both public and company networks can give you validation – only company networks might be unforgiving for your faux pas/ ignorance. You don’t want to be seen as an ignorant buffoon to all your global colleagues, do you? But if it happens on facebook or quora, your post just might get buried and no one has to point fingers at you for more than a few days at worst.
    A stupid answer would brand you stupid among your peers. A career suicide.

    Secondly, I have seen differences in the nature of questions. A Quora question may be fairly open-ended, it might seek opinions, experiences, expertise. As against, most of the questions on internal networks of agencies are boring specific asks for a certain requirement. Nobody wants to do the homework for you.
    So while I maybe willing to answer your question, “What is positioning?”, I am absolutely not interested in answering your question, “How should I position xyz car brand in China which is dominated by abc?”
    Do your work, don’t ask me to work for you! I don’t have time for that.

  7. How then is a freelance networking company different from WPP/ Publicis?

    Lastly, I feel a freelance networking company has better incentive to create a platform like this. If it is going to be open, why not completely open? Anyways, senior creative rock stars are not going to search for briefs themselves. They want client and servicing team to come to them for briefs. So it is marketplace for junior talent. And if it is junior level talent we are talking about, might as well keep it open for junior level talent across the world.
    So essentially, it might make your existing junior-middle level creative talent insecure. I doubt you want that to happen.

A better way to go about this process is with a different perspective – one not about technology as a stop-gap solution, but technology that solves a real problem. And the real problem is not ‘access to best talent’, or ‘access to reports’ – the problem is decline in value of our creative ideas, the decline in our growth. The answer is open source. Read about it here.

Update: I have since written about a better way of creating an agency platform.