World Economic Forum and Bain's "Digital Enterprise: Moving From Experimentation To Transformation - Part 2: The Business Model.

The basic Agency/Client economic model of how agencies get paid probably won’t change all that much – at least not until the underlying business model of what agencies do changes. But apply the premise of the report to the agency-client relationship, and a new business model begins to take shape.

Answer its central question – What is your customers [clients] raw need? – and we start to see…

“an effective way to unleash innovation and reimagine the [agency/client] business model.  Raw need is the essence of what customers [brands] value in a product or service, and digital insurgents unencumbered by history, may more easily zero in on it and find a better way to meet it than other companies. “  So, what is the raw customer [client] need?

The Bain study focuses on a few clear-cut B2C cases (Peleton, Wallart, Netflix), but the logic holds for Agency-client cases too.

The customer for agency products and service is normally the CMO.  And the expertise required of the CMO are famously fluid.  At first glance, this makes their “raw customer need” a moving target – what they need changes day-to-day with the marketplace.  But on a 2ndlook, maybe change is the constant, and points to a new business model opportunity for agencies.

The CMO is captain of a large ship, with oars in all parts of the enterprise:  product, sales, customer service, technology, HR, communications, brand and marketing among them. Is the raw customer need to have a steady stream of actionable insights, case studies and strategies for each area of the business?

Like a great sommelier, the CMO’s expertise is a product of their own experience – they know what has worked in the past.  But they also must lead bravely into the unknown, helping teams in each area of a company to develop a process for learning new ways of involving the consumer (data) testing their way forward.  Is the raw customer need to have a process that balances past expertise with an iterative test-and-learn process, so their teams can manage and innovate?

This rich roiling enterprise of marketing is a complicated place to inspire, direct and manage. Is the raw customer need to engineer simplicity, to keep all the knowledge (and cost) in-house, and to preserve transparency? Does the CMO just need a simple cloud-based real-time dashboard to keep track of it all – like a pilot in the cockpit?

Or is the raw customer need to be surrounded by a ring of dependable staff who manage an outer ring of vendors – agencies, consultants and freelancers – who bring category expertise, culture and capabilities?

Most agencies focus on this last need.  They know to follow the money, and the CMO does spend on brand design, media, strategy, campaign creative and production. But as media companies and publishers now offer basic creative campaigns, along with in-house expertise of ad tech and of course, media, agencies are left with ever less bill for.

And so they have to diversify to include other raw customer needs to grow.

Management consultants are diversifying into the traditional domains of agencies – creative.  Can agencies compete with consultants on the merit of creative?  For sure. Can agencies go head-to-head with management consultants on their home turf of business strategy, product, sales and marketing operations?  Highly unlikely.  If the business model of agencies is to change, it will likely be in 2 ways:

1. Partner with Management Consultants to supply the creative expertise they also want to sell to clients.

2. Go after the brands small enough to be uninteresting to the global consultants, but large enough to fund an experiment into an expanded role.

“A whole breed of competitors is likely rediscovering the raw need of an [agency’s] customers right now, and creating innovative ways of addressing it.  To remain competitive, those challenged company’s may well have to deliver a customer experience quite different from what they deliver today. “