The Art of Evolution

A short aside today, before we return next time to the Art of Change.

Dave Rolfe at Crispin Porter + Bogusky blogged yesterday about a powerful initiative that the agency is undertaking. As some people know, we are working with CP+B to help them design, navigate and implement this evolution. 

And while we make it a point not to discuss the specifics of our work with clients, Dave’s post speaks volumes for how successful companies become and remain so.

“We’re eyeing a model that will explore how post-production can best function in the overall creative process.” 

There are two truths on which to build a more valuable creative business. The status quo is where the funerals of once great companies are planned. And the future has no rules. Great companies live in the space between the two. They are pragmatically fearless. 

“We’ve been working like this since the beginning.”

Evolution is a state of conversion. The from being as important as the to. A business that sells subjectivity is built upon core values. Defining them clearly helps you make big leaps feel like small ones. 

“The best in talent will be sought to lead, and the best will be developed within the system.”

The art of growing a talent-dependent company is based on investing in those that can teach. From experience. And achievement. And in those that can learn. From others. And themselves.

“Made to take advantage of and connect the agency's geographic and cultural diversity.”

Geography can be an obstacle. Or a benefit. And culture is the DNA on which sustainable growth depends. First you need to recognize their importance. Then you need systems and processes to unlock the power of both.

CP+B’s evolution presents both threat and opportunity to many other companies. As Jerry Solomon commented at the bottom of Dave’s post, “We should view it as a challenge. If someone can do it better, faster and cheaper they deserve the business. And, if they can't our value becomes greater.”


The Art of In-House

For fifty years the advertising food chain was linear and static. Agency. Advertiser. Production. You could fight within your peer group. But not above or below. A state of competition that comforted and restricted in equal measure. 

Today that food chain has been blown up. Advertisers produce. Producers develop. And agencies try and figure out at which table they want a seat, while trying to make sure they're not the ones standing when the music stops. 

Seismic evolution or revolution? Your choice. The future being restricted only by your vision of what it holds and your capacity for change.  

For many companies, the vision includes adding new services. A strategy which is flawed only if you believe that the ease with which your suppliers provide them is an indicator of the simplicity of adding them yourself. Which is the same as deciding to extract your own tooth because you have a great dentist. You save the money. But the results are messy.

Service businesses - the definition of every creative company - need to successfully add new capabilities if they are to grow. Indeed, it is a strategy so tried and tested it has a chapter of its own in every MBA textbook: ‘Vertical integration.'

For creative companies, successful vertical integration is the result of making a clear strategic choice about how best to do so based on the structure of your organization and its capacity for change. There are two models:

  • Immersion: in which the new capabilities are fully integrated into the core business. This structure is often seen in new companies that incorporate multiple capabilities into a holistic organizational structure from startup.

  • Independent: in which the new capabilities are built and developed in their own right, using intimate understanding of the needs of both the company and its clients to maximize the value of the new In-House offering.

Of these, by far the most common is the Independent approach. The successful deployment of which requires avoiding five mistakes. 

Succumb to them - as many companies do - and you throw away brand empowerment, operational scalability, marketing gravity, profitability, creativity and ROI.

Here, in the order in which they are most likely to occur, are the mistakes to avoid when adding In-House:

1. In-House as Add On

Creative companies often act tentatively when moving outside their base capability. This often manifests itself as a failure to commit fully to the operational foundations necessary to ensure the investment in new services will produce a return.

When In-House is built as an add-on, you:

  • Cede the advantage to the competition - your former suppliers - for whom your 'add-on' business is their only business; a full-time commitment your competitors invest both heart and soul into every day.

  • Expect your staff to behave as clients, while you treat them like staff. The fastest way to have them end up being neither.

2. In-House As Department

For companies that make it past their fear of commitment, the next most common mistake is to treat the newly formed business as a department. Here, the parent commits serious resources - usually time, money and space - but then imposes its own traditional management structures and operating practices. 

This works as well as having your mother select your spouse. She has a lot of knowledge about important issues. But not necessarily those that determine the success of your marriage.  

3. In-House as Subsidiary Brand

This is a stumbling block for so many creative companies who have successfully navigated hurdles 1 and 2.

Fearful that the success of the new business will undermine the brand value of its parent owner, the parent inevitably inserts their name into that of its new offspring. 

This is the equivalent of thinking a take-off powered by a Rolls Royce engine somehow diminishes American Airlines.

That Rolls Royce is a premium brand in its own right requires Rolls Royce to keep making better engines. 

That American Airlines picks you up and safely sets you down using Rolls Royce technology is a win-win-win.

4. In-House as Requirement

Avoiding mistakes 1-3 eliminates the biggest obstacles to turning new in-house capabilities into a successful business. 

What happens next is the pivot point.

Parent companies have awesome influence. Influence that can be misdirected into requiring that its staff will use the In-House services.

This removes the greatest advantage that the new business has - proximity to its potential clients - by exchanging choice for edict; the surest way to motivate creative people to do exactly the opposite of what you want.

Deliver extraordinarily and market gravitationally. The rest will take care of itself. 

5. In-House as Holding Company Aggregator  

Holding companies offer many benefits. A subject for another day.

But not one has yet successfully built powerful, aggregated In-House production services. 

Typically this is because holding companies design from the top down, a view that brings virtually no understanding of the needs of the creative team. 

Or from the middle sideways. Which ensures the business is built to service only the needs of one company. As opposed to those of many.

Adding In-House should take place from the bottom up, and from the future back. Two perspectives from which to ensure you have one eye on the road beneath you, and one eye on the horizon.

West Point

We're on the train into the city today. A stunning ride along the magnificence of the Hudson.

As I write this we're passing West Point, a powerful monument to strategic positioning and strong foundations. I'm struck by its permanence.

And after being home sick for a week, by our fragility.

I emerged back into the real world this morning, grateful for the power of antibiotics, but regretting last week's decision to rub my eye in an airport terminal filled with germs. It seemed unimportant at the time. Six days later, it's now clear it was not.

The power of technology has allowed me to remain productive. Virtual meetings, online presentations and free conference call services maintaining both our methods and our margins. Important foundations on which to build a better business.

The diversity of companies with which we work continues to expand. One week, a solo entrepreneur. The next, a global holding company. The scale and complexities change, of course. But the fundamentals remain inexorably the same.

What are we trying to achieve?

Why are our customers our customers?

Who will be our next generation of customers?

Every other question becomes a subset of these three.

Profitability: Do you want to maximize operating margin or build scale? Are we a parity product competing on price, or have we found a way to articulate our value in unique ways?

Expansion: Are we taking full advantage of the talent and capabilities we've already built? Do we add offices, services, both or neither?

Marketing: Are we built to talk or built to listen? Are we consistent? Are we surprising?

Talent: Will the people we have today solve the problems our clients will have tomorrow? Do our systems and workflow help them do better work, and help us identify the great ones faster?

It requires discipline to ask these questions. And honesty to answer them clearly.

And you may have temporary success without them.

But if the effort you put into your business is not matched by the quality of the foundations you are building, one of two things are certain.

The cost to repair them will be memorable.

Or fifty years from now, passers by - whether physical or virtual - will be looking at something other than the business you so painstakingly built.

Going Horizontal

Adding new offices to an existing business is almost inevitable if you’ve been around long enough.

In part this is a practical result of looking for new ways to expand once local markets have been maximized.

In part it’s anthropological. A nod to the explorer that exists within every entrepreneur.

Adding new offices is rarely done well. And often in such a way that the potential benefits are reduced by more than fifty percent and the costs increased by a third. A quantifiable piece of analysis based on comparative studies.

Most businesses succumb to these results because they fail to identify the characteristics that made them successful locally.

  1. They understood what they were selling

  2. They understood why that was valuable to the local market

  3. They were trusted by local customers

  4. They learned from their mistakes and applied the knowledge to make themselves better

  5. Their systems were designed to support their business and improve their customers’ experience

  6. The employees believed in the owners’ vision and were motivated to help the entire business grow

  7. Employees were rewarded for creating value

  8. Investment decisions were made that benefitted the whole company

When you add a second or third location, each of these characteristics is immediately put under threat. And many are eliminated entirely.

They need not be. But getting geographic expansion right requires the following:

  • A clear strategy

  • The ability to identify your company’s core DNA and to find someone who can plant it and nurture it in new locations

  •  The elimination of the ‘not invented here’ pathology that most human beings instinctively bring to the table

  • Systems and practices that don’t just connect each location, but inter-twine them

  • A financial management and compensation philosophy that aligns everyone's interests

  • A willingness to defend the whole while supporting the parts

These are not easy to come by. But they are critical to any successful expansion.

And to making sure that ‘going horizontal’ is a growth strategy.

Not an analysis of your P&L.

Planning The Last Day First / STEP 2: EXPANSION

The first year went by in a blur. A few signs of optimism. A lot of anxiety. But through it all we really did act locally and think globally.We had hired David Brixton, a very talented editor from London and convinced him and his wife Jemma of our dream. They moved to Chicago and brought European flair, creative credibility, a work ethic that matched ours and extraordinary social sensibility.

Jump In

Breaking news this morning that the unemployment rate is beginning to turn around.

Running a better business means combining empirical information and instinct.

Based on that, I think this is as deep as the talent pool gets. In every industry, incredible people are looking for new opportunities.

If you think there is even a one in one hundred chance you might need to add someone this year, now is the time to go looking.

In our lifetimes, there will never be a better moment.

First and Ten. Do It Again

Having big dreams for your business is powerful fuel. If you're going to work this hard, why not aspire to greatness?

But once you know where you want to get, the temptation is to do big things that make a big difference.

That's natural. Big things create big results. Big attention. Big possibilities. Sometimes, even big bank accounts.

But big things are not sustainable. No matter who you are.

If you want a successful and sustainable business, the first thing to ensure is that everything you do is designed to move you forward.

Then throw a big thing on top once in a while.

If they work, great. If not, you're still making progress everywhere else.

Then once a year, stop and deliberately look back.

You'll be amazed how far you've come.