Complexity Is a Killer!

Increased complexity began when mediabased commissions gave way to laborbased fees amp160Advertisers required agencies to submit new types of data salary costs overhead costs and profit margins amp160The new feesetting system gave birth to procurement executives and their benchmarking consultants whose joint objective was to analyze costs and then drive down agency fees amp160The feesetting process secured a permanent role for procurement increased the amount of total time involved in fee negotiations increased relationship mistrust and began the fateful powershift that marks so many clientagency relationships todayRoster complexity amp160With the advent of digital and social media in 20002010 advertisers abandoned the AOR concept and took on a raft of new agencies following the dubious principle that amp8220marketing effectiveness must go up if we hire 20 bestinclass agencies to replace one integrated agencyamp8221 amp160Learning that no one agencyamp8217s advice could be trusted advertisers shifted the center of gravity to themselves taking control of Scope of Work SOW planning and the allocation of SOWs among agencies amp160This increased advertiser power and complexity at the expense of their agencies who became amp8220execution partnersamp8221 amp160The increase in power is unlikely to change even though agency rosters are being simplified todayIn increasing roster complexity procurement executives ignored the major lesson from the supplychain revolution that saved the US automotive industry from 19701990 A fewer number of committed strategic suppliers creates higher quality lower costsSOW complexity amp160The rush to experiment with digital and social marketing led to a massive increase in unplanned and unpaid SOW deliverables for agencies amp160The number of agency deliverables increased 18x from 2000 to 2018 with the average agency creative now knocking out one lowvalue small socialdeliverable per day amp160Fees continued to decline though because fees are not based on agency workloads amp160The increase in deliverables diluted the strategic content of client SOWs good neither for brands or for ad agencies amp160Larger SOWs created logistic complexities without improving the results for brandsInhousing complexity amp160Inevitably clients began to reason that they could take digitalsocial creation inhouse calculating that an inhouse salary was cheaper than an agency salary at a 22 billing multiple amp160Running an inhouse agency while working with outside agencies creates another source of relationship complexity and mistrustHiringfiring complexity amp160With little brand value being created and relationships increasingly evaluated on a cost basis clients inevitably increased the rate of agency hiring and firing amp160Reviews and searches became commonplace with procurement frequently taking the lead in the process replacing search consultants amp160The extensive costs and delays of ongoing agency reviews have been a dead loss this is not a process that routinely adds valueOther sources of complexity amp160Globalization creates the need for agency global client heads who clash with agency office heads over fee allocations amp160Inhouse programmatic media departments compete with agency media planning departments over brand planning priorities amp160Agency finance directors cut headcounts to meet budget targets independent of the workload requirements of individual clients amp160One part of an organization competes with another diluting the energy that could be used to solve client and brand performance problemsSimplification amp160There have been too many people trying to manage and negotiate ambiguity and complexity and the hidden costs are certainly high amp160Simplification can begin once Scopes of Work are planned rigorously measured and used to determine agency resources and fees amp160That will eliminate the ambiguity that leads to excessive stressful and ongoing negotiationsFewer agencies should be engaged relationships should be strategic intimate and longterm Procurementamp8217s grip and scale over marketing processes should be challengedamp160 Procurement should be simplifying processes not adding to complexityWho has the vision for simplification amp160Advertisers should know better but CMOs are under pressure to justify their spend levels and their lack of brand achievement amp160Agencies too should know better but their CEOs are obsessed with replacing lost clients along with meeting holding company financial targetsCMOs and agency CEOs need to sit down and draw up simplification manifestos for their relationships so that each can focus on achieving success in the marketplaceCartoon at topamp160amp160Tom Cheney The New Yorker The Cartoon Bank With permissionClick the social buttons above or below to share this content with your friends and colleaguesThe opinions and points of view expressed in this content are exclusively the views of the author andor subjects and do not necessarily represent the views of MediaVillagecomMyersBizNet Inc management or associated writersamp160

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Complexity Is a Killer!

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Michael Farmer

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