There are at least three transformations taking place in the marketing industry today, and your agency's survival might depend on how far along the curve your transformation has progressed.
The first is brand transformation. This takes place when an experience is so rich, compelling and useful that its very usage transforms entire perceptions of a brand. In essence, the experience is the brand. This is quite distinct from what marketers call "brand experiences"—which are often just events or demos. A brand transformation occurs only when an experience reinfuses the brand with meaning through its actual use.
My current favorite example of brand transformation is Nike iD. Nike iD isn't an ad campaign. It's Nike, through technology and advanced manufacturing capabilities, offering consumers the option of designing their own products. The very usage of nikeid.com will transform the Nike brand over time. Nike will become known as a brand that offers unprecedented customer control in the area of performance athletic apparel.
Contrast Nike iD with Subservient Chicken, the darling of the award shows. Subservient Chicken is a brilliant piece of communication. It's an entirely novel and viral way of reinforcing the brand positioning of Burger King—"Have it your way." But it's not a brand transformation. Subservient Chicken isn't something you actually use. You experience it, you have a laugh, you are reminded of Burger King's promise, and perhaps you pass it along to a friend. While Subservient Chicken delivers the promise that Burger King lets you have it your way, Nike iD actually delivers. You design the shoes—your way—and with the click of a mouse, the sale is complete. Your perception of Nike is forever changed.
Most agencies are in the business of communicating about brands. It is our job to reinforce the "brand truths" of our clients—as Subservient Chicken does brilliantly. But occasionally, agency work aspires to this even higher level of brand transformation. Looking at our own portfolio, I can point to other times when this has occurred: The Purina Cat Chow brand was transformed by introducing mentors for pet owners on catchow.com and subsequently using the mentors as a focal point in offline branding. Or the Reuters sign in Times Square, where digital technology creates the illusion of a cable news station operating on autopilot. Other examples are all around us. Think about how iTunes transformed Apple, or how Dell's "build to order" process transformed the PC industry.
Most often, brand transformations (in my definition) are achieved by interactive agencies, since it's the usage of a particular experience that leads to the transformation. And usage is the domain of the "inbound" interactive channel, not "outbound" traditional advertising. In a world where products are commoditized at the speed of light, I believe clients will continue to demand more and more brand transformations. Agencies will be asked to develop work that doesn't just say Brand X is different, but actually makes Brand X different.
This demand is driving the second transformation: that of the agency. Since agencies are in the business of servicing clients, new client demands are now shaping the industry. And the fact of the matter is, traditional advertising is currently commoditized because, among other things, traditional agencies typically cannot deliver brand transformations. In the commoditized world of traditional advertising, just a handful of agencies command an intellectual (or PR) premium based on the exceptional quality of their creative output. The rest are treated as interchangeable commodities by clients and procurement officers, punctuated by constant agency reviews.
One way to get out of the commoditization trap is through transformation. If you think about the agency business in terms of a bell curve—with the least transformed agencies on the left, a big mass of agencies in flux in the middle, and a small group that have made it to the other side—then the key to survival is to move as quickly as possible to the right side of the curve, to the side of transformed, creatively differentiated agencies.
I often wonder which traditional agencies operating today will get around the curve and offer clients work that transforms brands. By definition, this kind of work is multichannel and database-driven, with technology and the customer experience at the core. Yet how many traditional agencies have made investments in building out technology capabilities or truly understand customer engagement—and usage—from a multichannel angle?
The third transformation is within clients themselves. Right now, clients are getting ahead of their agencies. They have a deeper understanding of the need for brand transformation. The fact that they value commoditized agency services less is wholly reflected in the marketplace today, in the compensation agreements and in new slaps across the face—like Hilton's recent demand to own pitch work regardless of whether the agency is hired.
But in our experience, clients themselves occupy their own curve in the transformation scheme. On the left are the commoditized brands fighting for survival. In the middle lie the brands duking it out for second or third or fourth place. And on the right of the curve are the leader brands, the market-share leaders and innovators. Leader brands are already demanding brand transformations and better creative from their agencies. After all, that's why they are the leaders. It's just a matter of time until all clients demand the same.
It will be interesting to see which agencies are still standing in the transformed world unfolding before us.