The Unfolding Disruption of the Advertising World

Advertising advertising

Advertising advertising (Photo credit: Toban B.)

Within the last few years, the concept of “disruptive innovation” has become clearer, especially with Christensen’s book bringing it to the forefront of business leaders and managers alike. Christensen’s idea is not a novel concept, as Levitt himself wrote about deliberately incorporating obsolescence into the planning cycle of products and services before competitors make them obsolete.

To this end, my spotlight shifts towards the advertising world. My wife is an art director in an agency and she has worked with big players like Sony, HP, financial institutions, government bodies, not-for-profit organizations, etc, and from my observations of the industry, there is a clear level of disruption taking place that is currently unfolding before our eyes.

Here is the deal: advertising works by calling a target audience to pay attention to a product or service. Subsequent direct or indirect sales take place through various other channels. In the media age before the advent of the Internet, people consumed content through a controlled number of channels – primarily print, radio and TV and these channels had high barriers to entry due to the application and approval of licenses to operate them, and the infrastructure of setting up, not to mention the overheads.

It was in this environment that ad agencies thrived and grew in popularity as they were able to showcase their value through the leverage of the economies of scale from in-house designers, art directors, creative directors, FA artists, etc. to pitch projects and see the process through. This applied for both below-the-line and above-the-line forms of advertising. To create greater value through the service that they provided, they would engage in buying media spots to secure prime space for their clients.

Enter the Internet, the age of fragmentation and spawning of fickleness and fleeting loyalty. This challenged the current model content consumption and immediately threw content providers off their high horses, with falling readership/viewership dragging some of these big media companies to bankruptcy. Advertisers who have used the traditional channels find themselves with a smaller pool of clients using the traditional media and have to now find creative ways to add value to the advertising service suite to account for the value that they provide.

And this is where the Goliaths of the industry will start finding themselves surrounded by Davids. Their competitors are no longer just other bigger boys vying for a smaller pie of key client jobs using traditional media, but much smaller outfits who can offer the same value at a much lower price. Big players of the media age would have now grown to hierarchical levels that mean the ones sitting nearer to the apexes of the organizations continue to be paid insane amounts of money as they leverage off the work of the aspiring designers.

The question is – “Do they still have maneuvering room to remain on their horses?” This comes from the fact that in putting out a tender for projects, the transparency of larger organizations like government agencies or multinational corporations are concerned that their important projects are done well and the brand name of bigger players do provide a cushion of security that no screw-ups will be made, since bigger players have a greater stake and risk of losing reputation should that happen.

But the ball game has shifted as MNCs and governmental agencies alike are beginning to realise that size may not necessarily matter all the time. The reverse logic here in the Internet age is that smaller players with good reputation may well be key to lowering costs. They are nimble and can operate quickly, and since they do not have a great deal of people down a hierarchical chain, the costs of operation are also substantially lower. The key of course, would be to identify and provide them the opportunity to shine. In fact, if a single freelancer who is renowned in the industry for the work produced can be identified, that would result in the elimination of layers of costs. While searching costs of identifying such freelancers would be high in the media age, the Internet age is vastly different; where networking sites and contacts play a huge role in the recommendation of excellent and substantially lower-cost players in this game.

Will the bigger boys suffer death in the age of disruption? Here are some of implications in how bigger players may be run:

It depends on how they align themselves to capitalise on this shift. In the bid to maximize leverage, two of the biggest players in the advertising world have recently merged. It is believed that some of the costs of operations will be shaved off since certain functions like media planning/buying, accounts/finance, etc. can now be done by a single unit instead of two separate ones.

But in order to thrive, the game would be to operate a big player in autonomous cells. Breaking up the firm into small players housed under a bigger conglomerate umbrella could well provide the nimbleness of a smaller outfit while giving them the opportunity to leverage on the shared services provided by the mother company. Plus, each small cell does not need more “mini-CEOs” or director-level personnel, just an overall manager to run and keep things in check while reporting back to the main holding. This means that staff strength can be eliminated not from bottom-up but top-down to make the structure trim and fit. Since the real work is done by the “creative and art” teams that conceptualise and execute, they should ideally be given the autonomy and responsibility for the bottom-line. The overall manager should be articulate and able to sell their ideas.

In a strategic sense, the entire industry will be reshaped to working with smaller players who are ready to leverage on the brand name of a bigger player for a fee to secure important projects. “People analytics” and big data will transform the way personnel will be graded, hired, promoted and removed. Despite the implications painting a dystopic view of the industry, there are in fact, sparks that the creative folks can work on to ensure not just employability, but a shot at being an owner of one’s own business, tied to the brand name of a big player. That sounds like having your cake and eating it!

– J.CJ (@jasonlimcj)

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