Walter block sent out a survey to the Mises blog in support of some research he has been doing. In it, he asks, what problems should Austrians solve? I read the list, and, thought that almost none of the categories of interest were actually problems that needed solving. The problems that economists need to solve are not those which derive from the antiquated process of pooling, or aggregating quantities into categories. We know that aggregation of categories a failure as a strategy. We know that we must apply statistical methods across periods of differing utility and differing sentiments in order to find correlations from which we can deduce theories of causation. It is a loose set of tools for a complex world. The problem is to define institutions that would allow us to posses knowledge of human activities so that we can measure distortions of policy. The problem is institutions and data. It is not how to further plumb the depths of error – to divine nonsense from the nonsensical. The problem is our institutions.
Form: Question
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What will be the biggest opportunities for agencies in the next 5 years? Displacement.
December 12th, 2009 § 0 Comments
We see opportunities for all categories of agencies. Large traditional agencies will continue to dominate the world of the large multi-national, brand portfolio–based clients because they are the only ones who can scale to the needs of those clients in the production of large volume, broad reach traditional media like broadcast and print.
Small agencies will thrive because they are the outlets of anarchistic creative talent. Small agencies also represent where the most specialization will occur. For every new technology, new media, and new channel, it will be the small specialized agencies that will blaze the trail for the rest to follow because they are the least risk averse and are not motivated by the same business drivers as their larger counterparts. These specialized agencies will be able to displace other agencies whose institutional mindsets, business organization, and cost structure reduce their ability to deliver creative value and niche expertise.
The greatest opportunity over the next five years will be in the midsize agencies like Ascentium though. The most successful of these will evolve out of the current digital agency world, although they will be complemented by the best of the midsize agency typified by Crispin Porter + Bogusky. These agencies will excel because of three distinct advantages: they will be freed of the financial handicaps placed on both the large and the small agencies, they will be able to build their reputations around demonstrated leadership in their particular area of specialization, and they will be able to execute their ideas based on deep technology skills.
Independent midsize agencies are not saddled with the high overhead, executive compensation, holding company taxes, and other built-in financial impediments that make large agencies more risk averse and less able to deliver services cost effectively. And midsize agencies hold a distinct advantage over small shops whose restricted access to capital can limit their ability to grow, scale, and, more importantly, attract top talent (especially business-oriented management).
While expertise in communicating using digital and emerging media is what is most often associated with the recent generation of high-growth, successful agencies, it is really their specialized expertise that makes them successful. Take Crispin Porter + Bogusky, for example. Whether it is their work for VW, Burger King, or Best Buy, they repeatedly demonstrate adeptness at connecting with a defined audience (young males, 18-34). In the same way, clients flock to Ideo whose tagline proclaims that they “create impact through design.” And we at Ascentium are very proud of our work with clients like Microsoft and T-Mobile, bringing their brand experiences to life for unequalled customer satisfaction and measurable results.
Deep experience, expertise, and thought leadership in technology are what wins us business and what every successful agency will need to achieve success in the coming years. Traditional agencies will find this hard to excel at because of their focus on delivering volume creative across vast, though not complex, distribution media. And it requires a sophistication of delivery resources that go well beyond what small agencies can muster. So, in the end, technology expertise will belong primarily to midsize firms that we associate with what have become known as digital agencies.
Technology is not a “nice to have” or a gimmick; it is the means for delivering meaningful customer experiences, with rich content, relevant to each micro segment of the audience through an inexpensive distribution channel with higher production costs.
We have had four generations now where the cost of distribution into major media has been artificially constricted by a highly distributed media selling to large numbers of similar consumers through a narrow distribution channel. This circumstance occurred in parallel with limited differences in the properties of major consumer products. We now live in a world of extraordinary diversity of choice, tribal micro communities, and complex dissimilar associations. It’s a world where people take the time to look for their information and find advertising entertaining or curiosity invoking but not necessarily actionable.
The information that consumers seek out on digital media, and the structure of that information and the trust they put in it, will increasingly require technology and media customized for that technology—where the brand imagery is simplistic and constant, but the content varies dramatically from channel to channel. In the past, we spent more money on distribution and less on creative. Over time, this trend will continue to reverse itself, requiring that we spend more on creative and less on distribution. Agencies that can implement diverse technologies and campaigns will continue to capture increasing amounts of the same revenue from clients.