Category Archives: start-ups

Why Marketing & Procurement Are On A Collision Course In The Web 2.0 Universe, And Beyond.

The environment for most brands is changing fast. A stream of new opportunities keeps flowing – social media, word-of-mouth & location – based mobile marketing right now – and the means to take advantage of them comes increasingly from start-ups. In this universe being entrepreneurial is key to Marketing success and a well-intentioned but misguided Procurement department can be as great a threat to brands as the competition.

Differentiation is Both Quantitative and Qualitative.

Companies have to differentiate what they produce in a relevant way. That makes them stand out against competitors and makes their brands valuable. Ad agencies often do this through distinctive creative output. When they resort to scam ads it suggests they haven’t grasped the ‘relevance’ issue. What marketing service providers must do is to price the value they add, or the savings they generate, for clients. If they don’t their service may seem generic, inviting client Procurement departments to squeeze them on price.

Most procurement methods originated to reduce production costs by managing how standardized commodities and homogeneous goods and services are bought. They are fundamentally quantitative, which leaves qualitative, ideas-based or creative services particularly vulnerable to being under-priced. Recent trends toward quantitative RFPs submitted online with no Marketing department participation and no qualitative performance measures, are clearly misguided and a cause for grave concern.

Don’t get me wrong,  Procurement management is critical for all forms of production. However, marketing services contain creative problem-solving elements – not just ad ideas – which are not homogeneous, and which even their producers struggle to value accurately. I went into this earlier in the post on Creative Services and the Vicious Cycle of Procurement.

Wisely applied, Procurement is Good.

The thing is, successful supply chain cost management is vital to business success. If a company can produce consistent, sustainable, marketable quality at a lower price than its competitors it will tend to gain market share and benefit from economies of scale, all increasing ROI. Marketing services companies need to become just as savvy about Procurement as their clients and must apply it in their own businesses too. That TBWA recently appointed a global head of Procurement makes an interesting statement. That their competitors responded with a deafening silence does too.

Where problems arise is with the “consistent” and “sustainable” aspects in that previous paragraph, especially producing the specialty services provided in marketing communications. For example, media agencies slicing income to win business volume for larger buying discounts, a process rampant for a decade, is an unsustainable “Race To The Bottom”. I wrote on this in ’03 working at Carat (Media, 23 March).

What happens is this: after winning a new piece of business with a low bid, a media agency can only afford to staff it with cheap, lower quality staff, overseen by an overstretched senior if they’re lucky. Procurement is happy but Marketing soon complain of weak advice, errors and unresponsiveness. When it comes to a head they put the media account up for pitch again. Procurement lends a hand and the account goes to the lowest bidder. Work into a lather. Rinse. Repeat. Soon nobody in Marketing has much hair left and all the media agencies are producing poor service and making no money.

What Happens When It’s A Race To The Top?

Procurement departments not used to valuing and buying marketing services often have unrealistic expectations. Network media and ad agencies with big holding company parents have helped those develop. As a result many believe that if you lean on a marketing services supplier they’ll find a way to drop their price and keep providing the service. The near sweat-shop conditions in some major agencies probably prove their point.

However, real trouble strikes when Procurement meets Entrepreneurs. The company best positioned to offer cutting edge social media and other innovative services needed for a brand, is increasingly a relatively new start-up. These new firms are staffed with very focused people with little knowledge of procurement methods, nor time to learn them while pulling 18 hour days. Critically, they have limited funds.  To survive and prosper they must build their business up to long term health as fast as possible. In pioneering fields, for start-up founders, and their angel investors, it’s really a Race To The Top.

Start-ups need business, but not on destructive terms. They realise that quickly, or die. However, as any entrepreneurial 21st Century marketer knows, you need these specialists and their new services to differentiate, defend and build your brands in these exciting but complex new arenas. Currently it’s social media, search, and location-based mobile marketing. There’ll be something more within a year.

The Procurement Curse/Benefit Analysis For Marketers.

Whether it all ends in success or tears for any given marketer depends on three main drivers:

1. the marketing company’s culture – exploratory & innovative Vs scared & defensive;

2. that company’s senior leadership & vision  – supportive Vs punitive and;

3. how well their  Procurement department is trained and for what purpose – pure cost saving Vs helping brands be as competitive as possible.

In the bigger picture this applies to dealing with long established ad and media agencies just as much as to social media engagement experts and branded app developers.

If Marketing gets only what Procurement lets them pay for, the question facing marketers has to be: “Does our Procurement department have the skills to help us buy these services successfully?”

If they do not, they will compel you to use and become, second best.

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Ad Industry Leaders Storm the Exits and Start Innovative Marketing Communications Companies.

Thermal Image LED lamp. ©NatGeo/Tyrone Taylor/WWF

Escape To Entrepreneurship

Increasing numbers of senior people are quitting their ad industry jobs. Some out of sheer frustration or exhaustion, but others are starting innovative new marketing communications firms. This is a critical time for an industry in desperate need of reinvention. By joining & supporting these start-ups we can help build a better industry of Marketing Communications Professional Services.

Nine months ago in “Leadership, Management & The Rising Tide”  I wrote of the 150% jump in already employed people looking for jobs. There were 3 main reasons for the surge:

1. my company is going nowhere and our management is clueless at the helm;

2. our bosses keep beating us up because their bosses keep beating them up;

3. my company retrenched so many colleagues I can’t stand working here.

Most wanted a new job because their managers were too useless, too awful, or had damaged companies too badly for quality people to want to work near them any longer. What had been a growing problem before was magnified by the pressures of the Great Recession. Poor managers had been shown up and quality people wanted out!

Now that the economies of many countries are improving and marketers are increasing their communications budgets, people are on the move as predicted. However, there is now a further and more vital driver of their movement – the Escape To Entrepreneurship.

Talented Leaders Are Quitting, but not Leaving.

In June 2009, Omnicom announced Michael Birkin’s resignation as Vice-Chairman of Omnicom Group Inc and CEO of Omnicom Asia-Pacific. Birkin is no holding company leech. He was global CEO of Interbrand for 8 years, during which he invented their Brand Valuation model. He sold Interbrand to Omnicom, who were so impressed they made him head of Omnicom’s Diversified Agency Services division – half the revenues of the entire holding company, then later, CEO of Omnicom Asia-Pacific.

Last month Birkin launched The Red Peak Group. Brand Strategy & Design, Experiential, CRM, Sponsorship… Their clients? Anheuser-Busch, Intel, McDonald’s, Sony Ericsson… Birkin isn’t just the CEO. He’s hands-on as their Chief Strategist and leader of the Intel relationship. How many other CEOs, Presidents and similarly rewarded heavies can you say that about? Most clock few if any billable hours against paying clients. Ask any agency group CFO.

Last week the two top leaders of JWT North America quit to start their own company. Colleagues in JWT and seniors in WPP expressed surprise; even shock. There was probably envy and shame too.

Recently, self-styled “working class heroes” Iris Nation relocated their founder CEO and several top leaders to Asia. They have made it clear they’re not your average UK- or US-centric network. They know where their future revenues, and retirement funds, will come from and have the independence and wisdom to act on it.

Ad agency leaders feel like they’ve been tossed in a river with their arms and legs bound. They get no respite from holding company strictures, so the best they can hope to achieve is to keep their heads above water and be carried down-stream. It’s soul-destroying and prevents them delivering the service improvements marketers need. Rumours are now circulating of breakaway talks among top mar-comms industry leaders, and those talks are including marketers who are equally frustrated with the situation.

Entrepreneurship To The Rescue

There has always been a healthy trend of entrepreneurship in the marketing communications industry. A steady flow of visionaries, and of the frustrated, leaving to do their own thing. It used to keep the industry fresh, creative and adapted to the changing world, but in recent years too much of that innovative energy has been siphoned off into holding company acquisitions and management service fees.

Many of the best brains in the business work in the holding companies which acquired their businesses. From there they can do little, despite all their talent and skill, to reinvent the industry that made them rich and famous. These are the people who have done it before, know how to succeed, have the money to break away again and are a powerful force for good in starting or helping new ventures in marketing communications.

Rumours are that more of these, like Birkin, are starting to move en masse. If so, that’s great news. It couldn’t come at a better time to save the marketing communications industry.

Critically, marketing communications entrepreneurs must address the 7 pressing issues of:

1. Delivering consulting grade recommendations with fully integrated planning, technology, content management and business building ideas;

2. Getting paid fairly for all that despite the rise of qualitatively illiterate Procurement departments;

3. Tracking and proving the value they add, instead of just winging it old-school style, which will help keep Procurement at bay;

4. Recruiting, training and retaining top quality people including industry outsiders with the new skills needed – content strategy, mobile technology, data analytics and visualization & neuroscientific research included;

5. Rewarding all their people honestly and properly for their efforts;

6. Staffing to the right levels instead of driving their people to exhaustion, stress, despair and depression, none of which produces great thinking, unique ideas or added value and;

7. Resisting the temptation to sell to one of the holding companies as the exit strategy. A good-sized block of stock in a thriving independent will make a much better retirement annuity.

It takes the right people in the right environment with time to think and work things through to deliver a professional service. Pressure, fear and panic give bad advice.

Treat them any other way and quality, professional people simply storm the exits.