I’m afraid I need to have a moan. If I read another statement from a struggling digital agency explaining that paying more attention to its key clients, focussing on key verticals and bring its resources into line with current demand is a radical new strategy, I will scream! Paying attention to your top clients and focussing on verticals is not a strategy, its just what any professional services firm should do as a matter of course.

The question agencies need to ask themselves is ‘what do I have that my competitors do not?’ or to use a hackneyed expression, ‘what are my core competencies?’. There is no doubt that digital services companies need to review their business models, but they also need to decide what they are. If they decide that they are full service agency, they better have the scale to be able to offer real depth of service in all areas of digital service. Alternatively, they need to focus on what they are good at and find partners for the rest.

The digital services industry is rightly proud of the fact that it is able to think out of the box when formulating strategy for its clients, but at the moment, this strategic flair is sadly lacking when examining its own navel. More clear strategic thinking is what is required to get the industry over its current problems, not vertical market specialisation and hiring a few account managers.

Looks like I’m going to have to play devil’s advocate on this one…

1. Superb client service and focusing on key clients

Obvious? Maybe. The number of times I experience poor service in day-to-day life, and the infrequency with which I am even asked what I felt about the customer service, leads me to believe that although this may seem obvious it is clearly important for a service company to assess itself on how well it is performing on this front. And who better to ask than the customer / client? It’s amazing what you find out.

And focusing on key clients? For ‘key’ I imagine we are understanding ‘strategically important’, ‘profitable’ etc. Focusing on one’s most valuable customers, largely for retention and loyalty reasons (which in turn drive profitability), is fundamental to Customer Relationship Management (CRM), one of the ‘new’ buzzwords on the block. CRM and good customer service are not new concepts by any means but the shift towards customer-centricity, as the balance of power moves ever towards the customer, is changing the way entire businesses structure and manage themselves. This is not just a professional services or digital agency issue. It reflects more macro-economic shifts from product-centric to customer-centric, attracting to retaining customers, transactions to relationships, goods to services etc.

Clearly the professional services industry (digital agencies included) should always have been customer-centric. However, “focusing on key clients” is a shift in emphasis (not a “radical new strategy”, no) that is symptomatic of the industry maturing as well as the current market conditions. A digital agency 2 years ago just needed a few of the required skills, which very few others had and clients desperately needed, and business walked in the door. Couple this with a drive to grow the business in a race for scale and critical mass, and it was clear that customer acquisition, the length and breadth of one’s client list, was the key driver. The harsh reality of the markets, increased competition, more savvy and demanding clients etc. means that agencies now need to fight much harder to win new clients and cannot afford not to retain existing ones.

2. Vertical positioning

If you look at cycles of how service companies position themselves over time you will see, crudely speaking, a shift from sector focus to ‘new expertise’ focus to sector focus to new expertise focus etc. This positioning does not always represent an actual internal re-structuring, more how they bundle and market their services. By ‘new expertise’ I mean something new that has shaken up an industry, or business more generally, such that there is a huge demand for the relatively few people who possess this expertise. The Internet is a classic example. Digital agencies arose and grew so quickly because they were much faster (than the Big 5 consultancies or ad agencies, for example) to capitalise on the huge ‘new expertise’ demand that the Internet created. This demand was initially not vertical-focused.

Now that this new expertise is less new and the markets are feeling tired and burnt by the whole experience, the swing is back to vertical sectors. Witness how many of the Big 5 type consultancies and system integrators have sort-of created ‘e’ divisions and almost merged with ‘e’ type companies only now to be quietly bringing these initiatives back into the vertical fold.

Why is it wrong for digital agencies to grow up and build on sector expertise? If clients want the best solutions they need people who can best understand the problem and have experience of addressing it effectively. “Thinking outside the box” aside (which I agree, should be a given), what about really understanding the competition? What about really understanding the end customers in a particular sector, their needs, their value and decision drivers? What about understanding industry or sector specific issues such as regulatory or legal challenges? Why is it that big consultancies are structured around sector practices, or top strategic consultancies tend to specialise in verticals?

Presumably what a client wants is an agency that can really add value (excuse nasty phrase) through a combination of things: an ability to deliver effective solutions to a client’s problem or need, to do so at a competitive price within competitive timeframes, as well as meet ‘softer’ criteria such as cultural and people fit. Surely sector expertise can only enhance a service provider’s ability to deliver to a client in these areas?

Amongst the big challenges in the digital arena are: choosing and deploying the correct technology, delivering targeted value propositions to e-customers who will go elsewhere if you cannot, souring and maintaining the best content to attract and retain customers. Imagine you are a large international financial services organisation. Agency A has experience in deploying the financial services modules of the major content management and personalisation platforms. They also have existing relationships with suppliers of financial services content. They know what the competition is up to. They know about compliance issues and data protection variances in the financial services market across Europe. They know about recent de-regulation in Germany and the opportunity or threat that represents to the client. They know how to trigger a 2% uplift in online ISA-buying conversion rates. Or Agency B which has done some great work with a video-streaming start up? A little extreme as an example, of course, but what is so wrong with vertical expertise?

3. Strategic imperatives

The core questions that digital agencies need to ask themselves are, as Ian quite rightly points out “What are we?”, “What are we good at?”, “Where and how do we compete?” etc. Most importantly, you can append the words ‘now and in the future’ to these questions to get a more strategic view – “What are we good at now and in the future?”. Digital agencies haven’t really had to answer these questions over the last few years, as they have been too busy fulfilling the huge demand that easily came their way. The wake up call has recently sounded.

Issues of scale versus niche, market positioning and perception, reputation, and core value propositions to the client must now be fully addressed.

Agree that many agencies seem to survive depsite not being up to scratch on what I call 'givens'. I would say that this is not entirely their own fault either - much of the blame must lie with incompetent clients with more money than sense. However, I would say that things like great client service, out of box thinking, focus and true levels of expertise / specialisation are givens for agencies who want to be at the top of the ladder. For these agencies the question must be 'where do we go next?, how can I help my clients better than anyone else?'.

This for me is the crux of the problem for many digital agencies - I know they can more than deliver on digital specifics, but how are they going to beat my other 'communicaiton' agencies to deliver even more efficient and effective programmes via their specific expertise. For example, how are they going to move from 'Yes, I can make your web-site more technologically advanced from your competitors' to 'Did you know that using this piece of expertise I can make that £100k you spend with your ad agency work much, much harder?'

On 9:56:23 9 March 2001 ashley wrote:
>Looks like I’m going to have to play devil’s
>advocate on this one…
>
>1. Superb client service and focusing on key clients
>
>Obvious? Maybe. The number of times I experience poor
>service in day-to-day life, and the infrequency with which
>I am even asked what I felt about the customer service,
>leads me to believe that although this may seem obvious it
>is clearly important for a service company to assess
>itself on how well it is performing on this front. And who
>better to ask than the customer / client? It’s
>amazing what you find out.
>
>And focusing on key clients? For ‘key’ I
>imagine we are understanding ‘strategically
>important’, ‘profitable’ etc. Focusing
>on one’s most valuable customers, largely for
>retention and loyalty reasons (which in turn drive
>profitability), is fundamental to Customer Relationship
>Management (CRM), one of the ‘new’ buzzwords
>on the block. CRM and good customer service are not new
>concepts by any means but the shift towards
>customer-centricity, as the balance of power moves ever
>towards the customer, is changing the way entire
>businesses structure and manage themselves. This is not
>just a professional services or digital agency issue. It
>reflects more macro-economic shifts from product-centric
>to customer-centric, attracting to retaining customers,
>transactions to relationships, goods to services etc.
>
>Clearly the professional services industry (digital
>agencies included) should always have been
>customer-centric. However, “focusing on key
>clients” is a shift in emphasis (not a
>“radical new strategy”, no) that is
>symptomatic of the industry maturing as well as the
>current market conditions. A digital agency 2 years ago
>just needed a few of the required skills, which very few
>others had and clients desperately needed, and business
>walked in the door. Couple this with a drive to grow the
>business in a race for scale and critical mass, and it was
>clear that customer acquisition, the length and breadth of
>one’s client list, was the key driver. The harsh
>reality of the markets, increased competition, more savvy
>and demanding clients etc. means that agencies now need to
>fight much harder to win new clients and cannot afford not
>to retain existing ones.
>
>2. Vertical positioning
>
>If you look at cycles of how service companies position
>themselves over time you will see, crudely speaking, a
>shift from sector focus to ‘new expertise’
>focus to sector focus to new expertise focus etc. This
>positioning does not always represent an actual internal
>re-structuring, more how they bundle and market their
>services. By ‘new expertise’ I mean something
>new that has shaken up an industry, or business more
>generally, such that there is a huge demand for the
>relatively few people who possess this expertise. The
>Internet is a classic example. Digital agencies arose and
>grew so quickly because they were much faster (than the
>Big 5 consultancies or ad agencies, for example) to
>capitalise on the huge ‘new expertise’ demand
>that the Internet created. This demand was initially not
>vertical-focused.
>
>Now that this new expertise is less new and the markets
>are feeling tired and burnt by the whole experience, the
>swing is back to vertical sectors. Witness how many of the
>Big 5 type consultancies and system integrators have
>sort-of created ‘e’ divisions and almost
>merged with ‘e’ type companies only now to be
>quietly bringing these initiatives back into the vertical
>fold.
>
>Why is it wrong for digital agencies to grow up and build
>on sector expertise? If clients want the best solutions
>they need people who can best understand the problem and
>have experience of addressing it effectively.
>“Thinking outside the box” aside (which I
>agree, should be a given), what about really understanding
>the competition? What about really understanding the end
>customers in a particular sector, their needs, their value
>and decision drivers? What about understanding industry or
>sector specific issues such as regulatory or legal
>challenges? Why is it that big consultancies are
>structured around sector practices, or top strategic
>consultancies tend to specialise in verticals?
>
>Presumably what a client wants is an agency that can
>really add value (excuse nasty phrase) through a
>combination of things: an ability to deliver effective
>solutions to a client’s problem or need, to do so at
>a competitive price within competitive timeframes, as well
>as meet ‘softer’ criteria such as cultural and
>people fit. Surely sector expertise can only enhance a
>service provider’s ability to deliver to a client in
>these areas?
>
>Amongst the big challenges in the digital arena are:
>choosing and deploying the correct technology, delivering
>targeted value propositions to e-customers who will go
>elsewhere if you cannot, souring and maintaining the best
>content to attract and retain customers. Imagine you are a
>large international financial services organisation.
>Agency A has experience in deploying the financial
>services modules of the major content management and
>personalisation platforms. They also have existing
>relationships with suppliers of financial services
>content. They know what the competition is up to. They
>know about compliance issues and data protection variances
>in the financial services market across Europe. They know
>about recent de-regulation in Germany and the opportunity
>or threat that represents to the client. They know how to
>trigger a 2% uplift in online ISA-buying conversion rates.
>Or Agency B which has done some great work with a
>video-streaming start up? A little extreme as an example,
>of course, but what is so wrong with vertical expertise?
>
>3. Strategic imperatives
>
>The core questions that digital agencies need to ask
>themselves are, as Ian quite rightly points out
>“What are we?”, “What are we good
>at?”, “Where and how do we compete?”
>etc. Most importantly, you can append the words ‘now
>and in the future’ to these questions to get a more
>strategic view – “What are we good at now and
>in the future?”. Digital agencies haven’t
>really had to answer these questions over the last few
>years, as they have been too busy fulfilling the huge
>demand that easily came their way. The wake up call has
>recently sounded.
>
>Issues of scale versus niche, market positioning and
>perception, reputation, and core value propositions to the
>client must now be fully addressed.

In my opinion there are problems wherever you sit on the spectrum from agency to s/w house or vertical to full services provider. Having a clear short term strategy may be one answer - a willingness to be flexible is another. The market does appear to be going in to a recession and for most, strategy tends to get stretched and adapted in the face of client demand.

The alternative is to define the market space you want, build the relevent competencies and have a clear strategy for building market presence. To do this you need funding and funders are quite nervous of service firms at present - although NEC just gave Zefer $48M.

Those that are interested are not following any clear segment focus - I think it comes back to management, client base, quality of earnings projections and the extent to which you can protect your turf in a world where the boundaries between firms is blurring and distinctive advantage is something that doesn't last very long.

On 9:18:27 11 March 2001 ispence wrote:
>I think you've hit the nail on the head with your comments
>on how the top agencies (the ones that take the 'basics'
>for granted, but look for more). These top agencies now
>need to decide how to compete with traditional suppliers
>of marketing and technology expertise. In a sense, this
>takes me back to my original point about whether agencies
>try tp everything or specisalise. This should be at the
>heart of corporate strategies at the moment. I think that
>some of the smaller agencies need to get out of this
>mindset that they need to do everything.
>
>What's you view as a user of these services? Would you
>hire a number small agencies with specialist skills and
>take on all of the management headaches that entails or
>would you always go with a larger, genuinely full service
>agency?
>
>On 11:56:4 9 March 2001 shilen wrote:
>>Agree that many agencies seem to survive depsite not
>being
>>up to scratch on what I call 'givens'. I would say
>that
>>this is not entirely their own fault either - much of
>the
>>blame must lie with incompetent clients with more
>money
>>than sense. However, I would say that things like
>great
>>client service, out of box thinking, focus and true
>levels
>>of expertise / specialisation are givens for agencies
>who
>>want to be at the top of the ladder. For these
>agencies
>>the question must be 'where do we go next?, how can I
>help
>>my clients better than anyone else?'.
>>
>>This for me is the crux of the problem for many
>digital
>>agencies - I know they can more than deliver on
>digital
>>specifics, but how are they going to beat my other
>>'communicaiton' agencies to deliver even more
>efficient
>>and effective programmes via their specific expertise.
>For
>>example, how are they going to move from 'Yes, I can
>make
>>your web-site more technologically advanced from your
>>competitors' to 'Did you know that using this piece of
>>expertise I can make that £100k you spend with
>your
>>ad agency work much, much harder?'
>>
>>
>>On 9:56:23 9 March 2001 ashley wrote:
>>>Looks like I’m going to have to play
>>devil’s
>>>advocate on this one…
>>>
>>>1. Superb client service and focusing on key
>clients
>>>
>>>Obvious? Maybe. The number of times I experience
>poor
>>>service in day-to-day life, and the infrequency
>with
>>which
>>>I am even asked what I felt about the customer
>>service,
>>>leads me to believe that although this may seem
>>obvious it
>>>is clearly important for a service company to
>assess
>>>itself on how well it is performing on this front.
>And
>>who
>>>better to ask than the customer / client?
>It’s
>>>amazing what you find out.
>>>
>>>And focusing on key clients? For ‘key’
>I
>>>imagine we are understanding ‘strategically
>>>important’, ‘profitable’ etc.
>>Focusing
>>>on one’s most valuable customers, largely
>for
>>>retention and loyalty reasons (which in turn drive
>>>profitability), is fundamental to Customer
>>Relationship
>>>Management (CRM), one of the ‘new’
>>buzzwords
>>>on the block. CRM and good customer service are
>not
>>new
>>>concepts by any means but the shift towards
>>>customer-centricity, as the balance of power moves
>>ever
>>>towards the customer, is changing the way entire
>>>businesses structure and manage themselves. This
>is
>>not
>>>just a professional services or digital agency
>issue.
>>It
>>>reflects more macro-economic shifts from
>>product-centric
>>>to customer-centric, attracting to retaining
>>customers,
>>>transactions to relationships, goods to services
>etc.
>>>
>>>Clearly the professional services industry
>(digital
>>>agencies included) should always have been
>>>customer-centric. However, “focusing on key
>>>clients” is a shift in emphasis (not a
>>>“radical new strategy”, no) that is
>>>symptomatic of the industry maturing as well as
>the
>>>current market conditions. A digital agency 2
>years
>>ago
>>>just needed a few of the required skills, which
>very
>>few
>>>others had and clients desperately needed, and
>>business
>>>walked in the door. Couple this with a drive to
>grow
>>the
>>>business in a race for scale and critical mass,
>and it
>>was
>>>clear that customer acquisition, the length and
>>breadth of
>>>one’s client list, was the key driver. The
>harsh
>>>reality of the markets, increased competition,
>more
>>savvy
>>>and demanding clients etc. means that agencies now
>>need to
>>>fight much harder to win new clients and cannot
>afford
>>not
>>>to retain existing ones.
>>>
>>>2. Vertical positioning
>>>
>>>If you look at cycles of how service companies
>>position
>>>themselves over time you will see, crudely
>speaking, a
>>>shift from sector focus to ‘new
>expertise’
>>>focus to sector focus to new expertise focus etc.
>This
>>>positioning does not always represent an actual
>>internal
>>>re-structuring, more how they bundle and market
>their
>>>services. By ‘new expertise’ I mean
>>something
>>>new that has shaken up an industry, or business
>more
>>>generally, such that there is a huge demand for
>the
>>>relatively few people who possess this expertise.
>The
>>>Internet is a classic example. Digital agencies
>arose
>>and
>>>grew so quickly because they were much faster
>(than
>>the
>>>Big 5 consultancies or ad agencies, for example)
>to
>>>capitalise on the huge ‘new expertise’
>>demand
>>>that the Internet created. This demand was
>initially
>>not
>>>vertical-focused.
>>>
>>>Now that this new expertise is less new and the
>>markets
>>>are feeling tired and burnt by the whole
>experience,
>>the
>>>swing is back to vertical sectors. Witness how
>many of
>>the
>>>Big 5 type consultancies and system integrators
>have
>>>sort-of created ‘e’ divisions and
>almost
>>>merged with ‘e’ type companies only
>now to
>>be
>>>quietly bringing these initiatives back into the
>>vertical
>>>fold.
>>>
>>>Why is it wrong for digital agencies to grow up
>and
>>build
>>>on sector expertise? If clients want the best
>>solutions
>>>they need people who can best understand the
>problem
>>and
>>>have experience of addressing it effectively.
>>>“Thinking outside the box” aside
>(which I
>>>agree, should be a given), what about really
>>understanding
>>>the competition? What about really understanding
>the
>>end
>>>customers in a particular sector, their needs,
>their
>>value
>>>and decision drivers? What about understanding
>>industry or
>>>sector specific issues such as regulatory or legal
>>>challenges? Why is it that big consultancies are
>>>structured around sector practices, or top
>strategic
>>>consultancies tend to specialise in verticals?
>>>
>>>Presumably what a client wants is an agency that
>can
>>>really add value (excuse nasty phrase) through a
>>>combination of things: an ability to deliver
>effective
>>>solutions to a client’s problem or need, to
>do
>>so at
>>>a competitive price within competitive timeframes,
>as
>>well
>>>as meet ‘softer’ criteria such as
>cultural
>>and
>>>people fit. Surely sector expertise can only
>enhance a
>>>service provider’s ability to deliver to a
>>client in
>>>these areas?
>>>
>>>Amongst the big challenges in the digital arena
>are:
>>>choosing and deploying the correct technology,
>>delivering
>>>targeted value propositions to e-customers who
>will go
>>>elsewhere if you cannot, souring and maintaining
>the
>>best
>>>content to attract and retain customers. Imagine
>you
>>are a
>>>large international financial services
>organisation.
>>>Agency A has experience in deploying the financial
>>>services modules of the major content management
>and
>>>personalisation platforms. They also have existing
>>>relationships with suppliers of financial services
>>>content. They know what the competition is up to.
>They
>>>know about compliance issues and data protection
>>variances
>>>in the financial services market across Europe.
>They
>>know
>>>about recent de-regulation in Germany and the
>>opportunity
>>>or threat that represents to the client. They know
>how
>>to
>>>trigger a 2% uplift in online ISA-buying
>conversion
>>rates.
>>>Or Agency B which has done some great work with a
>>>video-streaming start up? A little extreme as an
>>example,
>>>of course, but what is so wrong with vertical
>>expertise?
>>>
>>>3. Strategic imperatives
>>>
>>>The core questions that digital agencies need to
>ask
>>>themselves are, as Ian quite rightly points out
>>>“What are we?”, “What are we
>good
>>>at?”, “Where and how do we
>compete?”
>>>etc. Most importantly, you can append the words
>>‘now
>>>and in the future’ to these questions to get
>a
>>more
>>>strategic view – “What are we good at
>now
>>and
>>>in the future?”. Digital agencies
>haven’t
>>>really had to answer these questions over the last
>few
>>>years, as they have been too busy fulfilling the
>huge
>>>demand that easily came their way. The wake up
>call
>>has
>>>recently sounded.
>>>
>>>Issues of scale versus niche, market positioning
>and
>>>perception, reputation, and core value
>propositions to
>>the
>>>client must now be fully addressed.

Whoops! - please excuse appalling spelling, my head's all over the place this morning following big night out last night!

On 9:3:14 13 March 2001 shilen wrote:
>Whilst I value the specialist expertise a small, didicated
>agency can bring, the additional management headache is a
>massive put-off. The way we have solved this on Guinness
>in Ireland is to appoint a 'progamme' agency (say one that
>specialises in music events or youth marketing or quality
>etc) and then get this agency to effectively manage the
>relationship with all other specialist agencies. In other
>words, we brief the 'keystone' agency on what needs to be
>done and then they sub-contract to specialist agencies on
>some specific areas (digital being one for us). As the
>client though, I ensure two things happen to make this
>work effectively: first I ensure that all agencies (even
>freelancers) are involved in the day-to-day running of the
>brand - so whilst they are all being managed by mey
>'keystone' agency they all have daily contact with me and
>my team. Secondly, I dictate and appoint the sub-contract
>agencies. Obviously I take advice from the 'keystone'
>agency on people they recommend but in the end it is my
>call as to how is appointed.
>
>This probably sounds very confusing but it isn't really
>and I have found it the best way to get brialliant work
>out of smaller specialist agencies without the management
>headache and the problems associated with multiple
>agencies (in-fighting, coherence of the output etc). From
>the model of working, I guess the interesting point for
>the smaller speciaist agencies on their strategies is how
>to form effective relationships with bot clients and other
>agencies who might throw work their way...
>
>I really do beleive that most so-called full-service
>agencies never deliver the goods on at least some fronts.
>The only times I have seen such large-scale agencies work
>is whe they are really an alliance on smaller specialist
>agencies working as a network.
>
>
>On 9:18:27 11 March 2001 ispence wrote:
>>I think you've hit the nail on the head with your
>comments
>>on how the top agencies (the ones that take the
>'basics'
>>for granted, but look for more). These top agencies
>now
>>need to decide how to compete with traditional
>suppliers
>>of marketing and technology expertise. In a sense,
>this
>>takes me back to my original point about whether
>agencies
>>try tp everything or specisalise. This should be at
>the
>>heart of corporate strategies at the moment. I think
>that
>>some of the smaller agencies need to get out of this
>>mindset that they need to do everything.
>>
>>What's you view as a user of these services? Would you
>>hire a number small agencies with specialist skills
>and
>>take on all of the management headaches that entails
>or
>>would you always go with a larger, genuinely full
>service
>>agency?
>>
>>On 11:56:4 9 March 2001 shilen wrote:
>>>Agree that many agencies seem to survive depsite
>not
>>being
>>>up to scratch on what I call 'givens'. I would say
>>that
>>>this is not entirely their own fault either - much
>of
>>the
>>>blame must lie with incompetent clients with more
>>money
>>>than sense. However, I would say that things like
>>great
>>>client service, out of box thinking, focus and
>true
>>levels
>>>of expertise / specialisation are givens for
>agencies
>>who
>>>want to be at the top of the ladder. For these
>>agencies
>>>the question must be 'where do we go next?, how
>can I
>>help
>>>my clients better than anyone else?'.
>>>
>>>This for me is the crux of the problem for many
>>digital
>>>agencies - I know they can more than deliver on
>>digital
>>>specifics, but how are they going to beat my other
>>>'communicaiton' agencies to deliver even more
>>efficient
>>>and effective programmes via their specific
>expertise.
>>For
>>>example, how are they going to move from 'Yes, I
>can
>>make
>>>your web-site more technologically advanced from
>your
>>>competitors' to 'Did you know that using this
>piece of
>>>expertise I can make that £100k you spend
>with
>>your
>>>ad agency work much, much harder?'
>>>
>>>
>>>On 9:56:23 9 March 2001 ashley wrote:
>>>>Looks like I’m going to have to play
>>>devil’s
>>>>advocate on this one…
>>>>
>>>>1. Superb client service and focusing on key
>>clients
>>>>
>>>>Obvious? Maybe. The number of times I
>experience
>>poor
>>>>service in day-to-day life, and the
>infrequency
>>with
>>>which
>>>>I am even asked what I felt about the customer
>>>service,
>>>>leads me to believe that although this may
>seem
>>>obvious it
>>>>is clearly important for a service company to
>>assess
>>>>itself on how well it is performing on this
>front.
>>And
>>>who
>>>>better to ask than the customer / client?
>>It’s
>>>>amazing what you find out.
>>>>
>>>>And focusing on key clients? For
>‘key’
>>I
>>>>imagine we are understanding
>‘strategically
>>>>important’, ‘profitable’
>etc.
>>>Focusing
>>>>on one’s most valuable customers,
>largely
>>for
>>>>retention and loyalty reasons (which in turn
>drive
>>>>profitability), is fundamental to Customer
>>>Relationship
>>>>Management (CRM), one of the ‘new’
>>>buzzwords
>>>>on the block. CRM and good customer service
>are
>>not
>>>new
>>>>concepts by any means but the shift towards
>>>>customer-centricity, as the balance of power
>moves
>>>ever
>>>>towards the customer, is changing the way
>entire
>>>>businesses structure and manage themselves.
>This
>>is
>>>not
>>>>just a professional services or digital agency
>>issue.
>>>It
>>>>reflects more macro-economic shifts from
>>>product-centric
>>>>to customer-centric, attracting to retaining
>>>customers,
>>>>transactions to relationships, goods to
>services
>>etc.
>>>>
>>>>Clearly the professional services industry
>>(digital
>>>>agencies included) should always have been
>>>>customer-centric. However, “focusing on
>key
>>>>clients” is a shift in emphasis (not a
>>>>“radical new strategy”, no) that
>is
>>>>symptomatic of the industry maturing as well
>as
>>the
>>>>current market conditions. A digital agency 2
>>years
>>>ago
>>>>just needed a few of the required skills,
>which
>>very
>>>few
>>>>others had and clients desperately needed, and
>>>business
>>>>walked in the door. Couple this with a drive
>to
>>grow
>>>the
>>>>business in a race for scale and critical
>mass,
>>and it
>>>was
>>>>clear that customer acquisition, the length
>and
>>>breadth of
>>>>one’s client list, was the key driver.
>The
>>harsh
>>>>reality of the markets, increased competition,
>>more
>>>savvy
>>>>and demanding clients etc. means that agencies
>now
>>>need to
>>>>fight much harder to win new clients and
>cannot
>>afford
>>>not
>>>>to retain existing ones.
>>>>
>>>>2. Vertical positioning
>>>>
>>>>If you look at cycles of how service companies
>>>position
>>>>themselves over time you will see, crudely
>>speaking, a
>>>>shift from sector focus to ‘new
>>expertise’
>>>>focus to sector focus to new expertise focus
>etc.
>>This
>>>>positioning does not always represent an
>actual
>>>internal
>>>>re-structuring, more how they bundle and
>market
>>their
>>>>services. By ‘new expertise’ I
>mean
>>>something
>>>>new that has shaken up an industry, or
>business
>>more
>>>>generally, such that there is a huge demand
>for
>>the
>>>>relatively few people who possess this
>expertise.
>>The
>>>>Internet is a classic example. Digital
>agencies
>>arose
>>>and
>>>>grew so quickly because they were much faster
>>(than
>>>the
>>>>Big 5 consultancies or ad agencies, for
>example)
>>to
>>>>capitalise on the huge ‘new
>expertise’
>>>demand
>>>>that the Internet created. This demand was
>>initially
>>>not
>>>>vertical-focused.
>>>>
>>>>Now that this new expertise is less new and
>the
>>>markets
>>>>are feeling tired and burnt by the whole
>>experience,
>>>the
>>>>swing is back to vertical sectors. Witness how
>>many of
>>>the
>>>>Big 5 type consultancies and system
>integrators
>>have
>>>>sort-of created ‘e’ divisions and
>>almost
>>>>merged with ‘e’ type companies
>only
>>now to
>>>be
>>>>quietly bringing these initiatives back into
>the
>>>vertical
>>>>fold.
>>>>
>>>>Why is it wrong for digital agencies to grow
>up
>>and
>>>build
>>>>on sector expertise? If clients want the best
>>>solutions
>>>>they need people who can best understand the
>>problem
>>>and
>>>>have experience of addressing it effectively.
>>>>“Thinking outside the box” aside
>>(which I
>>>>agree, should be a given), what about really
>>>understanding
>>>>the competition? What about really
>understanding
>>the
>>>end
>>>>customers in a particular sector, their needs,
>>their
>>>value
>>>>and decision drivers? What about understanding
>>>industry or
>>>>sector specific issues such as regulatory or
>legal
>>>>challenges? Why is it that big consultancies
>are
>>>>structured around sector practices, or top
>>strategic
>>>>consultancies tend to specialise in verticals?
>>>>
>>>>Presumably what a client wants is an agency
>that
>>can
>>>>really add value (excuse nasty phrase) through
>a
>>>>combination of things: an ability to deliver
>>effective
>>>>solutions to a client’s problem or need,
>to
>>do
>>>so at
>>>>a competitive price within competitive
>timeframes,
>>as
>>>well
>>>>as meet ‘softer’ criteria such as
>>cultural
>>>and
>>>>people fit. Surely sector expertise can only
>>enhance a
>>>>service provider’s ability to deliver to
>a
>>>client in
>>>>these areas?
>>>>
>>>>Amongst the big challenges in the digital
>arena
>>are:
>>>>choosing and deploying the correct technology,
>>>delivering
>>>>targeted value propositions to e-customers who
>>will go
>>>>elsewhere if you cannot, souring and
>maintaining
>>the
>>>best
>>>>content to attract and retain customers.
>Imagine
>>you
>>>are a
>>>>large international financial services
>>organisation.
>>>>Agency A has experience in deploying the
>financial
>>>>services modules of the major content
>management
>>and
>>>>personalisation platforms. They also have
>existing
>>>>relationships with suppliers of financial
>services
>>>>content. They know what the competition is up
>to.
>>They
>>>>know about compliance issues and data
>protection
>>>variances
>>>>in the financial services market across
>Europe.
>>They
>>>know
>>>>about recent de-regulation in Germany and the
>>>opportunity
>>>>or threat that represents to the client. They
>know
>>how
>>>to
>>>>trigger a 2% uplift in online ISA-buying
>>conversion
>>>rates.
>>>>Or Agency B which has done some great work
>with a
>>>>video-streaming start up? A little extreme as
>an
>>>example,
>>>>of course, but what is so wrong with vertical
>>>expertise?
>>>>
>>>>3. Strategic imperatives
>>>>
>>>>The core questions that digital agencies need
>to
>>ask
>>>>themselves are, as Ian quite rightly points
>out
>>>>“What are we?”, “What are we
>>good
>>>>at?”, “Where and how do we
>>compete?”
>>>>etc. Most importantly, you can append the
>words
>>>‘now
>>>>and in the future’ to these questions to
>get
>>a
>>>more
>>>>strategic view – “What are we good
>at
>>now
>>>and
>>>>in the future?”. Digital agencies
>>haven’t
>>>>really had to answer these questions over the
>last
>>few
>>>>years, as they have been too busy fulfilling
>the
>>huge
>>>>demand that easily came their way. The wake up
>>call
>>>has
>>>>recently sounded.
>>>>
>>>>Issues of scale versus niche, market
>positioning
>>and
>>>>perception, reputation, and core value
>>propositions to
>>>the
>>>>client must now be fully addressed.