Tuesday, February 14, 2006

Reorganizing Agencies?

If Fortune 2000 companies talk about the constant reorganizations of their marketing organization (under the premise of ongoing optimization) – from product to customer segment centric, from centralized to decentralized, from a line reporting to a complex matrix structure – why do marketing agencies rarely talk about it? It can have several reasons: they have found the perfect organizational form (perhaps), they don’t care as much about organizational structure since it’s a very strong personality driven business (very likely), or because they have learned that the constant reorganizations by their clients have rarely generated any qualitative improvement or real value (definitely true).

Let me share my perspective of what’s going on with marketing services and their good fortune of organizational ignorance. The impact of organizational structures for marketing services companies is extremely overestimated. It has much less importance than most people believe. Why? Because good marketing agencies focus on three things, and they get it done in any kind of structure: Client focus, Creative Brilliance, and Innovative Insights into the Consumer Mind. The focus on these three core elements outweighs any organizational structure.

Additionally, organizational forms will further lose its importance due to two overpowering forces that delete any claim to the power of org charts: Company culture and Talent. Whoever has the most aggressive, innovative, and consumer obsessed culture will win and grow relationships with Fortune 2000 companies. Whoever has the best talent will be hired and will be able to deliver great impact for clients. Strict organizational structures, at least in marketing agencies, will become more and more the relict of an old world - Great ideas, collaboration, and quickly created and disbanded task teams will win. The war is about culture and talent, not about titles and divisions.
But not everything is peachy in the marketing agencies world. Most talk about a lack of accountability in their work for clients. I prefer to call it the questions of "Value Creation". Do the fees paid to an agency generate sufficient incremental net profit for a client to justify the fees? Agencies, who will focus on solving and answering this call of proven value creation, will win. Agencies, who are trying to mirror the speed of their client's reorganizations, will be very busy, but it won't matter; they have already lost.


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