Square peg, round hole

A lot of CMOs come with the wrong question. This is where it gets challenging. We need to challenge the client organisation itself. They come to us and say, “We need a digital strategy for my business”, whereas an agency should be in a position to tell them, “No, you need a business strategy for the digital age.” That’s a big difference because in the first approach, if it was a new channel, then you need to build a strategy for that channel. Then you end up taking a very small view of what you can do.

The problem is, you don’t need a digital strategy. The world’s becoming digital. The question is, how do you rebuild your business strategy to fit in with the new world? That business strategy cannot be the same as 20 years ago when the means of communication and technology have evolved. People are getting on cloud marketing for tools, to get access to data and so on. This is where you get into business transformation.

Advertising agencies integrated the digital into their existing businesses like matching luggage. So at the tail end of what they do, they started to come up with campaigns and banners — all the things that do not work in digital. Therefore, instead of challenging the way brands are being built, they shoehorn digital age into offline, which is totally crazy. This is where it’s the wrong end of the stick. It’s a big deal because a bulk of their revenue is still from traditional advertising. It’s always very difficult for people to put most of their resources into building something that’s very small, instead of protecting something which is very big. That is why transformation never comes from inside the industry.

It is always an outsider who will change things. It’s never an insider. It was not the photo film industry that revolutionised pictures. It was mobile phones. Kodak went bust not because new film companies put it out of business but because the whole ecosystem changed and it did not see their revenues coming from somewhere else. If you look at banks and insurance these days, they are looking in the wrong direction. Banks are not competing with banks. Retail banking is going to be challenged by social commerce platforms. In China, consumers leapfrogged from cash payments to mobile, surpassing the debit card-credit card revolution.

The whole retail banking infrastructure is a large organisation that brings little value. Banks try to embrace the online revolution exactly like advertising agencies. They say, let’s build the same offline system digital.

The problem with clients going to crowdsourcing for their advertising ideas is that the advertising system has not integrated with the digital age, but the digital infrastructure has altered the value chain. Crowdsourcing is making some of the things that were priced at a premium 20 years ago into a commodity.

They are pricing their creative resources far too high. Because of the democratisation of advertising where crowds contribute advertising ideas, the agency’s ideas no longer command the value they got in the past. So, if the value is changing, you need to question where you put the money. Crowdsourcing is never going to take the creative professional away. You cannot replace every creative resource in the agency through crowdsourcing, but that line of business is becoming less lucrative and you need to move up the chain. You will not come up with a great application or digital idea that involves putting technology together with crowdsourcing because it becomes complicated. It’s just that the nature of the value that you created has changed.

Some of the business models are dead. You need to change the organisation to fit the world that we are in now. The value of things has changed and businesses have great difficulty in accepting that. In the transport space Uber is becoming a symbol of digital disruption.

Uber is a great service for anybody who’s failed to get any value out of the traditional taxi system. If you look at the UK, the black cabs are the very best example. The best value that you got out of the black cab 20 years ago was that any black cab driver knew absolutely every street in London and that had a price. With Google Maps that value is suddenly worth nothing.

(As told to Prasad Sangameswaran. Vincent Digonnet is Chief Growth and Transformational Officer, International, Razorfish.)