How realistic is it -- in these near-impossible economic times – to invest in building brand relationships when there are insufficient budgets to drive sales today and tomorrow? For consumer brands, the decision is difficult enough. For business-to-business marketers that are enmeshed in a pressure cooker of downward pricing demands and intensifying competition, it's a near-impossible goal until the market stabilizes. But for service agencies and organizations that have next-to-zero margins and commoditized offerings, investment in brand differentiation is a mandate for survival.
It's this reality that is leading companies of all types to shift from their traditional competitive business model to one focused on collaboration. Rather than engaging in intense pricing battles with competitors and instead of driving vendors to offer terms that are near-unprofitable for the provider, companies are exploring new models that encourage partnerships, alliances and brand-building initiatives.
At last week's "Televisual Day" event hosted by media agency MPG under their Collaborative Alliance umbrella, more than 25 online video media companies gathered in a trade show environment to demonstrate their capabilities and services to executives of MPG, sister companies Media Contacts and Chrysalis, and parent Havas. This is the third such event hosted by MPG, led by interactive media guru Mitch Oscar and agency COO Steve Lanzano. The goal, says Lanzano, is not only to educate his staff on emerging media opportunities but to encourage collaborative relationships. Each staff member is required to report back to Lanzano with specific client opportunities and to move forward with at least one initiative.
Companies participating at the event run the gamut from Hulu, the joint venture of NBC and News Corp, to My Damn Channel, an emerging online video service. Google, Yahoo!, CBS, NBCU Interactive, Revision 3 and ESPN participated as did For Your Imagination, Hungryman TV, Daily Motion, Magnify, AnswersTV, Overlay and Tubemogul. While deals between MPG and any of these companies will inevitably factor in costs and value, the MPG and Havas teams come to the event with a mandate to identify opportunities for collaboration. Typical interaction between media buyers and media sellers is focused on adversarial cost negotiation.
In the advertising and media business, the large holding companies own and control a disproportionate percentage of agency services required by leading consumer brands. Creative… media planning and buying… public relations… promotion… research… direct marketing… all fall under the umbrella of services offered by Optimedia, Publicis, WPP, Interpublic Group, Aegis, Havas and a couple other massive global groups. Within these companies live hundreds of large and small divisions that compete for a share of clients' rapidly eroding budgets. Competition, consolidation, divestiture, trading, and unbundling – all are on the horizon. Throughout the 1990s, success at these organizations was measured by mass, scale and clout. While this remains an important criteria, in the future success will be defined by service offerings and capabilities that are truly differentiated and focused on the core customized needs of their clients.
The conundrum faced by every service company – large and small – is how can they invest in collaboration and long-term vision when the fundamental resources required to service their clients on a day-to-day basis are being eroded? How can they invest in events such as MPG's Televisual Day, which require manpower and support, when every man-hour needs to be assigned to a specific client task in order to optimize revenues?
Our business is becoming increasingly commoditized as the economy worsens. The reality is that service companies have no option but to define their long-term vision and goals. If they are unable to invest in achieving these goals, then they should seriously consider whether their business model is a viable one. Managing the Collaboration Conundrum is one key to future success.
Jack Myers writes a weekly blog for JackMyersThinkTank.com and The Huffington Post, and consults with companies on defining, developing and implementing new business models. He can be contacted at firstname.lastname@example.org