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Is it ‘shit’ or bust for the agency business model?

In modern marketing everybody’s searching for that elusive Big Idea. But agencies of all types are starting to wonder if they are getting properly remunerated for the special creative sauce they bring to the table

This was the topic under the microscope at a SXSWi session hosted by MDC creative agency KBS+, entitled “In Defense of Inventors: Yes, We Make Shit.” Moderators Ed Brojerdi, president and co-chief creative officer at KBS+, and Matt Powell, CIO and executive director of creative technology at the agency, set the scene for a fascinating discussion.

Powell said: “We love our brands and clients, but the hourly model is just not working. Procurement is eating up [our margins] from the bottom, and the holding companies are eating [them] from the top.”

They suggested things agencies can do to pivot away from an obsession with billable hours and client revenue streams to morph into pseudo inventors who can go from concept to market and produce a physical product to boost revenues that involves creating something much more than just a conversation.

They used the example of KBS+’s recent nail-polish initiative, whereby the agency acted on a key insight that women wanted custom shades and that there was a market for manufacturing short-run quantities of non-standard colors.

The firm prototyped the product on a 3D printer and identified a manufacturer that would take on such a niche project. Now it is in the nail-polish business – and it apparently already has a buyout offer on the table. And it is not worried by potential conflicts with clients in the beauty space, because “we are competing on a different plain – we have no scale or distribution.”

This is not a one-off. Other inventions have been, or are being, produced or conceived by agencies on behalf of clients, such as Durex Fundawear – connected underwear dreamt up in Australia – and another KBS+ venture, Momdoms – a prototype condom that includes sensible messages your mom would give you. KBS+ also bounced around an idea for a French fry straw that you consume with your milkshake, based on the insight that people like dipping their fries.

Brojerdi and Powell understand this is a totally different mindset for agencies, based on a VC-style model where only one idea out of 10 is likely to work. But they seem frustrated enough with the current agency model to invest agency resources in this new approach. And early signs seem encouraging.

But is this what agencies should be doing? And what are the IP and ethical considerations when clients do or don’t take up agencies on these new ideas?

A concept that gets everyone excited in the room when the agency is pitching to client marketers or communicators can quickly lose its luster when in-house lawyers and procurement departments get involved for a conversation about intellectual property.

The KBS+ team explained that, if possible, it is much better to have these dull but necessary discussions nailed up front so everyone is aware of the playing field conditions. Otherwise an agency can find itself in the bizarre situation of having to buy back the rights to its own ideas from clients.

But, as one client attending the session said, marketers want to encourage outside-the-box thinking and the special sauce agencies offer because they often don’t have this inspiration in a corporate scenario, where cultural boundaries can be incredibly constricting. “I want to hear things [from my agency] that scare the shit out of me,” he said, “even if I won’t always use the ideas.”

That scenario raises the further issue of what happens when a client turns down an idea and the agency wants to pitch it to someone else, especially when the client may have paid some fees for the idea generation and consultancy. Who owns the idea? Is it like the film industry where a movie company can pass on a project but leave it on the shelf for eternity so no one else can benefit from it?

And so to an age-old question: what happens when one of your carefully constructed Eureka moments of inspiration suddenly appears on the market attached to another client, brand, or agency?

The cynics among us all know there’s really nothing completely new out there and every agency can point to numerous examples of their Big Ideas suddenly appearing elsewhere in a different guise.

Powell suggested the recent unveiling by a high-profile CPG brand of a bacon-based alarm app that mimicked sizzling sounds and included a bacon aroma was remarkably similar to an idea KBS+ had presented last year.

Was it Oscar Wilde or TS Eliot who said “talent imitates, genius steals?” Who knows… but I think I’ll leave the lawyers and procurement folks to sort that shit out.


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