By David Jowett

I studied history at university. It wasn’t a natural feeder into advertising, but it did teach me that understanding the past is critical to foreseeing the future.

When I apply that lens to our industry, I would argue that disruption and profit have both helped define the last 40 years and will continue to shape advertising’s future. Except, I’m not sure everyone is paying attention.

Prior to the ‘80s, disruption was principally about large corporations driving new product innovation and globalizing, while full-service agencies were paid handsomely for building beautiful TV ads. Done well, the system delivered great work that influenced consumers’ lives, built clients’ businesses – and did so with incredible simplicity of structure. One agency did virtually everything for the brand.

So why did full-service agencies start to break up? Was it because paying clients wanted it? No. It was the result of disruption and profit. Media channels started to fragment, challenging the full-service model by identifying the need for specific media expertise. There was an opportunity to charge clients separately for this skill and so the profit motive, along with disruption, combined to spin out media agencies.

That pattern accelerated through the next 30 years, with digital technology being the driving force of media change. Now we get to 2018, and the magnifying glass is on the same two subjects: disruption and profit.

First, further disruption through dizzying change in technology and consumer behaviour has been so fundamental that agencies are being forced to look at structures to deal with this digitally interconnected world. Clients themselves have jumped into the fray. Most radically, P&G in the U.S. recently had multiple holding company rivals create a standalone creative agency to help it cut costs and create efficiency.

Secondly, now that clients have uncovered the depth and breadth of money-making by media agencies, holding groups are forced to reassess legacy structures. They simply cannot maintain heavy layers of national and global management for each agency brand, plus the holding company, in this new economic reality.

However, in reality, these new models are hacked versions of existing agencies with multiple cultures, disparate leaders, bonus schemes, and so on. They are band aids, not meaningful, systemic solutions.

If we are going to create agencies that are fit for today – and poised to adapt to an ever-changing future – we must learn from history, and through the lens of disruption and profit.

First, disruption:

• Build a nimble structure that can adapt quickly. Constant disruption is lurking around the corner.
• Employ people who embrace change and make change part of your culture.
• Build truly integrated strategies that understand and address all touchpoints.
• Build for smart growth, not scale. You don’t win on Google by being big.

Second, profit:

• Build the agency for the client’s financial benefit, not yours. No one, least of all clients, is against profitability. But be radically transparent.
• Build a team that fits with your client. Do not fight “fix and flow” or “in-house” – embrace it.
• Solve a problem only once. Strategy, finance, HR, technology, etc. should be done once for creative, media, PR, CRM, etc. It is hugely efficient.
• Strip out unnecessary waste and non-essential costs. You do not need a heavy overhead in 2018.
• Earn profit only when you drive tangible value. It creates true alignment between agency and client.

Now, look back through history and decide if your business is built to be disruption-proof in this profit-driven world.

David Jowett is a partner and head of media at agency No Fixed Address.