Ad agencies: Do they really need a “Head of Innovation”?

Yesterday, while on a business trip to San Francisco, I had coffee with a good friend who is looking for a job as the “Head of Innovation” in an ad agency.

Until recently, I had thought the title ‘Head of Innovation’ was a title reserved for technology companies. I guess I was wrong. The title has migrated to ad agencies. Agencies now are aggressively trying to work that title into their culture with the hopes that it will help foster more innovation and ideas, and most importantly, bring new business in the door.

Looking for business opportunities that were not previously there

Here’s what my friend told me: “Innovation in ad agencies is about finding better ways to solve problems as well as opening up opportunities that were not previously there.  It’s about creating compelling and practical solutions, marrying an idea with solving a business problem. It's all integrated, which means ideas aren't limited by a media discipline or channel”.

In response to his job description, I told him that I found the role of “Head of Innovation” rather confusing—another title added to all the others brought on by the digital world. As I see it, I just don’t think the title is necessary in our industry. I think every firm needs creative people scanning the horizon and looking to incorporate innovation into existing processes. Frankly, does “Head of Innovation” sound like something someone handling client accounts really has time for? No. It has to be a dedicated position.

Ideas are what we sell

Besides, I believed the best advertising people in the business have been creative and innovative for years. It was expected of them—even before digital came along. You were only as good as your last idea. And ideas were what we sold. The great agencies of yesterday, today and tomorrow have a desire for innovation and questioning 'what if' as an integral part of their DNA. Being innovative and creating ideas has always been the decades-old bedrock of our existence. We did work so that consumers could see their world in new ways. Our industry still worships at the altar of originality. Who of us doesn’t want to do ground-breaking stuff? Hasn’t working on real projects and helping introduce new ideas to clients and into consumer culture always been a given?

Today we have digital as well as traditional media, and the integration of the two is what is expected of us today. So what’s really changed? One of my heroes, John Hegarty, founder of Bartle Bogle Hegarty, recently participated in a “Wired Global Conversation” panel where he said: “Advertisers must put the consumer first, not the technology. We have a major problem in that our work isn’t as good as it used to be, and consumers value it less and less – that’s the first thing we have to address. We talk about what we can do on this platform or that platform. The only space I want to occupy, the only space that’s interesting to me, is the one between people’s ears. That’s where I want my message to go and how I get there is an irrelevance.”

We’re all after new business

A few beers later, and much deeper into our conversation, my friend asked about my own agency and what we were doing to find new business. I told him that we did more than just make ads for clients. I told him that we embraced the idea of Innovation several years ago as one of our founder/partners is a high-tech, hardware and software entrepreneur. “He’s the reason that we’ve attracted several technology clients to our door,” I said.

“Many businesses are looking to ramp up their innovation and R&D capabilities,” I continued. “Truth is, they don’t need yet another ad campaign or to do more social networking. What they really need is to upgrade their existing product offerings, be more innovative with product or service ideas to stay competitive. We’ve found several businesses lumbering along because their products and service offerings were outdated. So why spend advertising dollars if your products are not competitive. That would be a waste of time and money”.  

In fact, our agency views “innovation” in a totally different way. When we talk “innovation”, we define innovation as putting ideas into valuable action. This means that merely being creative is not enough. An innovative firm must move ideas from the concept stage to the evaluation stage, through a new product development or prototyping process, and then launch that new product or service.

Innovation is a business process

Thus, innovation can be thought of as a business process which can be managed just as quality is managed, as the sales pipeline is managed, and as other business processes are managed. In a nutshell, innovation is the way to drive growth in an organization. The other processes are generally geared toward wringing the most efficiency out of the current business—cutting costs. You can’t cut your way to growth. You have to have people who can collect ideas, pick the right ones rapidly, and put them into action that generates value.

Most companies do not have the right people to address their innovation needs. All too often, in many firms, a “champion” is designated to push an idea forward, but he/she doesn’t possess the skills needed for innovation and innovation management. To help our clients overcome this challenge and build a sustainable innovation culture, we advocate a more collaborative and holistic approach, leveraging the insights and the skills of many different people.

Ultimately, no matter how good your ideas are, and no matter how strong your processes are, if your teams don’t work to support innovation then your firm won’t be innovative. The people and the roles they play hold a real key to innovation.

When I look outside the advertising industry, I find some of the most outstanding sources of stimuli, the innovation that is inventing new categories, melting down old industries and rebuilding them. All this is happening well outside of adland. If an agency wants to build its culture around “innovation” they should begin doing some work with start-ups, because it’s highly likely that the next big business opportunity will come from these “new” entrepreneurs.

Searching for new business

Start-up companies, for the most part, are some of the more unlikely sources for new business, in that one-out-of-ten find success and the rest fail. Small agencies have to choose their clients carefully, as start-ups often take more effort than a client with a decent budget.  Another source for new business for agencies could come from collaboration, creating a nexus between one client marketer and another, so that new products and services may evolve. Without exploring new avenues, our industry risks coming out of this bad economic climate a lot less fit than it went in.

The future for agencies continues to look good to me, given all the new innovative products and services popping up everywhere. And several of them have the potential to create wonderful advertising opportunities. Besides, agencies seeking new business can also gain some great PR for themselves by partnering with these innovative companies because the media loves to soak up innovation stories—they make for great headlines in the news.

The future for agencies is innovation

Innovation companies are based around disruption, automation and efficiencies, whereas ad agency business models are based around increasing billable services. I believe the present ad agency model is becoming unsustainable. If agencies want to survive in the 21st Century, they need to reassess their business models. And one good place to start in by looking at companies that innovate.

Innovation companies are led by entrepreneurs with an appetite for big ideas and for calculated risk. They understand the need to keep costs low and generate market value. The successful ones are then rewarded by the marketplace. Agencies are led by marketers who are encouraged to increase (billable) costs and whose incentives aren’t directly tied a return on the investment. Instead, their reward comes from industry accolades. This is a conflict.

I think the future for agencies is innovation. Agencies should be willing to personally invest in their own ideas. Innovation companies accept failure as part of the process. Understandably, trial and error isn’t well-regarded when working with someone else’s budget, But why aren’t agencies willing to put skin in the game and invest in their own Intellectual Property? 

Thomas Edison was famous for inventing the light bulb and holding thousands of patents. It was actually one of his early failures that taught him the vital relationship between invention and marketing. In 1869 he patented an Electronic Vote Recorder. It flopped. Edison had a great idea, but he completely misunderstood the needs of his potential customers.

Edison realized that marketing and invention must be joined at the hip. “Anything that won’t sell, I don’t want to invent,” he said. “Its sale is proof of utility, and utility is success.” He realized he needed to put the customers’ needs first and tailor his thinking accordingly, despite any temptation to invent for invention’s sake. This mindset paved the way for tremendous marketing success. The six industries (and their offshoots) Edison pioneered between 1873 and 1905 are estimated to be worth more than $1 trillion today.

Mike Fromowitz