How Agencies Can Make Project Work Profitable [Notes From #MirrenLive]

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Agencies lament the fact that more and more clients are moving to a project-based model and away from the beloved agency of record model.

And that’s fine. We can all be nostalgic for the days when clients stuck around for 10 or 15 years, and we could count on a source of consistent revenue and proactively plan for hiring and investments based on this.

But does that mean the project model is bad for business?

Making projects work for your agency was a topic tackled by multiple speakers during day two of the Mirren New Business Conference. 

This change can be detrimental to an agency's business if it is not prepared to change the way it works. You can’t expect to manage and support project work in the same way that you manage a retainer. For instance: time sheets have little value in a project world.

“Depending on time sheets to manage a project is like depending on the smell of burnt cookies to monitor the heat of your oven,” said Tim Williams, founder of Ignition Consulting Group, during a talk on how to thrive in a project-based world.

To deal with this new reality, agencies need to change their approach and understand how to price and deliver project work that is efficient and effective.

“If we look at it [project-based work] as a constraint against which we can now implement and innovate new business models, it might be a blessing in disguise,” Williams said.

Changing your agency to manage this "blessing" can be a way to improve your overall business, including your structure, hiring practices, value proposition, pricing strategy, and approach to new business.

How One Agency Made the Transition

DDB Vancouver has gone through a three-year transformation to better structure its agency for handling project-based work, said Patty Jones, executive vice president.

The agency faced a few different competitive issues: There were immersed in a city with many legacy agencies. There was a diverse group of independents that they were pitching against. The economy was weak and unstable. And while they were or wanted to pitch more modern marketing ideas, the cost of learning and executing on these strategies were not always recoverable.

While they still had a few AOR clients, the majority of their work was moving to projects. The agency scaled up with new projects and contracted just as quickly. It was unreliable from a financial perspective and disruptive for staff.

In this oversaturated and difficult market, DDB needed to transform.

“We needed to stop doing the same thing over and over again and failing,” Jones said.

The first question the agency team asked themselves was: What can we live without?

They decide to divest or outsource anything that didn’t drive results. The team decided to:

  • Reduce excess space.
  • Explore how to share back-end resources with other DDB offices in Canada.
  • Offer more freelance work or contract-based work for projects.
  • Limit spending on creative awards and applications.

The second question the team asked was: What is non-negotiable for our agency?

DDB leadership team decided that they could not lower their standards in the agency’s culture and wouldn’t budge on their commitment to thought leadership and their creative product.

One of the most radical changes DDB made to deal with the project-focused landscape was to destroy the account management role. They changed the client relationships structure so that each client was matched with a business leader (which replaced the account management role) and a project manager, the later which would be more concerned with efficiency and managing scope.

DDB restructured its creative department to remove silos that had formed, and it changed up its workflow to be less linear. It adopted an agile process.

The team audited its client list. It created a map of its relationships, comparing the profitability and creativity of each account. It divided clients into four quadrants: diamond, coal, fool’s gold, and semi-precious.

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From this exercise they learned a few lessons. Not all clients are equal. You need enough “coal” clients to support the agency. You need to protect your “diamonds,” and you need to get rid of the clients -- those in the “fool’s gold” quadrant -- who bring in little revenue and also provide the agency with no outlet for doing remarkable work.

How to Make Projects More Profitable

Restructuring and reorganizing your agency to be more efficient with the type of work you actually get is one way to deal with the changing revenue model, but there are also ways to make individual profits more profitable.

“Our task is to figure out how in a project-based environment we going to be able to retain quality of work that we all want and the quality of profitability that we all need,” Williams said.

He gave some advice on how to manage the transition and set up the agency for more profitable project work:

Build category expertise.

Project-based work means brands are looking for specialists. There are no buffers for getting up-to-speed, unlike a retainer or AOR relationship. And clients who are looking to assign this type of work know immediately that your agency is the right fit -- you have results-oriented case studies, client testimonials, and the industry knowledge they are looking for. Internal expertise will lower the time spent on the project while still allowing your agency to deliver results.

Don’t believe the idea that maximum capacity is optimum capacity.

Maximum capacity might work for the manufacturing industry, but as you well know, you’re not a production facility. Agencies that work at maximum capacity fall victim to delivering work behind schedule and at a lower quality. Remember: with project work, each engagement is a test of your agency's capabilities. 

Learn about agile.

Agile project management values outputs over inputs. It focuses on collaboration. And it is responsive to change, which is necessary when brands want to respond to culture and trends more quickly.

Become an expert in pricing.

Agencies need to be skilled in the language of price and value.

"We’re not trained," Williams said. "We’re amateur sellers up against professional buyers."

Understand the psychology behind pricing and the presentation of options. Use the word price, not cost. Talk about results. This language will change the conversation you have with prospective clients. 

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