by Tom Kelshaw, Director of Technology at Metalworks by Maxus
First published on CampaignAsia February 2015 (Print Edition).
Look at technology companies, not tech itself.
In 2015 our industry might advance more through learning from the new breed of “exponential” technology organisations, than from technology itself. We'll need to behave more like Google, Facebook, Uber, Airbnb—tech companies we admire, but should also fear.
The media agency industry is highly specialised yet highly competitive and commoditised. We bemoan procurement-led pitches, whilst “lowest CPM” is a regular part of our vocabulary.
How do we escape commodification? By taking cues from technology companies. Yuri Van Geest & XTXTXT from futurist Singularity University recently released a book detailing these technology-led "Exponential Organisations". Exponential organisations avoid fighting battles of sameness via 10% difference. They aim for what tech companies call “10x” (ten times) impact. Exponential Organisations introduce radical changes to industries: Remember newspaper classifieds, film photography, travel agencies and CD singles? Destroyed by exponential organisations.
Radical difference could be the key. Tesla dominates through supply-chain. They own the batteries, the plants, the chargers and most importantly – the dealerships. Tighter integration of supply chain could be an answer for media to “go exponential”.
Exponential tech companies subvert an important concept in economics called "marginal cost". After you've built your company, your brand, operations and begin selling, the ideal is to reduce the incremental cost of each product to near zero. The first Model T, after R&D and production line, was very costly to Ford. The hundredth... much more profitable.
It costs Google zero to service a new client in Adwords. Airbnb can supply ten new hotel rooms for nothing. Uber can add 100 cabs for zip.
Yet for media agencies, the more clients we win, the more data we collect, the more planning we do and the more media we buy, it rarely gets cheaper. Of course our holding companies deliver huge efficiencies where they can, but the real day-to-day impact can’t increase exponentially.
The challenge here is to use technology to radically reduce our marginal costs of servicing clients. Programmatic everything (even creative?) may be part of this, but we need to go further to survive.
The difference here is blue ocean vs red ocean strategy. Blue ocean demands innovation, R&D and trying new things. This of course requires getting lost, back-tracking and failing. Red ocean strategies imply saturated, shark-filled waters in a frenzy of indiscriminate biting. You might get a feed, but you're just as likely to be fed on.