The Bloating of Advertising Agencies
By Tim Williams
Have you had the experience of signing up for an exciting new software product that, over time, kept adding so many features that the functionality which attracted you in the first place became buried in a sea of features that you didn’t want or need?
This is the phenomenon of “featuritis,” made famous in the 1980s by the manufacturers of VCRs. These early video tape players, simple at first, morphed into a confusing collection of commands that showcased the capabilities of electronic engineers but left consumers bewildered.
The road to unfocus
Business anthropologists have documented a similar history with commercial enterprises of all kinds. A new company starts off with a sharp focus and limited offerings, then over time adds capabilities, products, and services based on the misguided belief they are making their business more attractive to more customers. The more doors through which the customer can enter, the better, right? Wrong.
This is the logic that turns amazing new one-of-a-kind software startups into commonplace competitors. They go to market with a unique offering that solves a problem in a startling new way, then start adding features designed to make their product a comprehensive, one-stop, all-in-one solution. They unintentionally morph from a best-in-class solution to an “enterprise” solution that copies the features of every competitor in every adjacent category.
How do you feel about Zoom now, compared to a year ago? Set-up used to be a simple exercise, and Zoom excelled as a best-in-class solution to video conferencing. The simplicity behind this product propelled this brand to its instant category dominance as businesses adapted to a virtual work environment fueled by the Covid-19 crisis. But the latest version can fairly be considered “bloatware,” as software engineers continue to add features and options that require the expertise of your IT department to configure. Far too many software platforms follow a similar trajectory: good, then better, then worse.
Business models by default or by design?
Over-diversification is unfortunately a trait of human nature, fueled by the urge to copy. As humans developed in the Stone Age, copying the successful behaviors of fellow humans made sense. Observing and adopting better hunting and gathering techniques increased our odds of survival. But in a business environment, copying creates “Karaoke Capitalism.” Like barnacles on a ship, companies unconsciously take on more and more weight by adding capabilities and competencies unrelated to their core business. This result is a business model created by default rather than by design.
The impetus behind diversification is often because “the client asked for it.” Why is your agency taking on a shopper marketing project, something you’ve never done before and know very little about? Because the client requested it, and we dare not tell them it’s not in our wheelhouse. We then proceed to lose money on this assignment and erode our reputation because the work isn’t up to our usual standards.
Is there anything your agency doesn’t do?
Visit an advertising agency website at random and you’re likely to find a long bullet-point list of competencies, services, and capabilities, leaving the prospective client with the question, “Is there anything this agency doesn’t do?” If you’re planning an expensive cruise to an exclusive location, would you feel better working with a travel agency that offers every conceivable kind of vacation or one that specializes in luxury cruises?
At the root of the tendency to over diversify is the long outdated paradigm that client organizations are looking for a one-stop shop, which drives the perpetual quest for a “full-service” business model. But Fortune 1000 companies have an average of 17 agencies. The kind of sophisticated clients you want are not looking for an Agency of Record; they’re looking for a best-in-class partner. The question for your firm is, in which area can you be best-in-class? You can be excellent in something, but you can’t be excellent in everything.
More is not better
Of course, you’re free to adopt a business strategy that makes your firm the equivalent of a family doctor, or a country lawyer, if your goal is to work for small, unsophisticated clients with limited budgets. But patients don’t expect a general practitioner to be able to perform a triple bypass. Nor do most clients expect a generalist agency to be able to execute a sophisticated CRM program.
Most professionals fall prey to the notion that narrow is the same as small. Not so. The most “narrow” professional practices have some of the largest customer bases in the world. If you’re in need of a complex form of brain surgery, you’ll have to get in a long waiting line of other patients — many of whom live thousands of miles away — who are prepared to pay a premium for a service that is not easily found elsewhere.
This is the framework you need to apply to your firm’s business strategy. By doing a few things well, you become intensely appealing to a select group of prospects, as compared to a generalist strategy in which you are only mildly appealing to prospective customers who can easily find similar services elsewhere.
