News & Views

The Technology Treadmill: An Agency Framework for Innovation

by Contagious Contributor

This article appears in The SoDA report, a global trend report out this week. 

By Amer Iqbal, Head of Strategy, Deepend

With nearly 15 years’ experience in the digital industry, Amer is a key member of Deepend’s senior management team. He holds a degree in Computer Science and an MBA in Marketing and has been engaged by numerous organizations to deliver guest lectures and facilitate workshops on business and marketing strategy. Combining an ongoing passion for digital innovation with strategic consumer insights, Amer has led teams that have attracted several highly regarded industry awards and accolades. 

Technology is a strange thing; just when you think you’ve got it figured out, along comes the next big thing that changes the game. So if we all understand that we’re on a treadmill of ever changing technology, why are digital agencies at a standstill when it comes to “walking the talk” on innovation?

In November 1996, renowned management consultant Richard Rumelt set out to identify the recipe for success for tech companies. Interviewing 26 separate CEOs, they invariably responded that leaders in their industry had succeeded by capitalizing on an external change or “window of opportunity.” When he then inquired about their own strategy, he was surprised to discover a lot of talk about internal processes; none made mention of looking for an external window of opportunity, the very thing they’d identified as the recipe for success in their industry.

Eighteen months later, Rumelt interviewed Steve Jobs and was curious as to what Apple’s strategy might be to combat “Wintel’s” industry dominance. Jobs simply smiled and said “I am going to wait for the next big thing.”1
 
The lesson is clear – innovate or die. Perhaps the clearest cautionary tale comes from the fall of Kodak. Despite inventing the digital camera, they chose not to cannibalize their core film business. Inertia meant it was easier to keep doing what they’d been doing: “if it ain’t broke, don’t fix it.” It was all too easy for Nikon and Canon to jump on the opportunity, ultimately driving Kodak into bankruptcy.
 
Over a decade later, it seems client organizations are taking heed. An observable growth trend in “Head of Innovation” roles indicates that they see these change agents coming from internal teams rather than an agency partner. While digital agencies may see themselves as the perfect fit to play this role, the fact is that the majority of our collective revenue still comes from traditional marketing services rather than driving change across various aspects and operations of the businesses we partner with.

So why are digital agencies being overlooked in the drive to innovate?

A big part of the problem for digital agencies is that we simply aren’t being recognized as a viable option when it comes to acting in a capacity beyond traditional marketing services.

There are obvious benefits in utilizing digital agencies in an innovation capacity – we live and breathe technology and are incentivized to source and train the best digital talent in the market. We invest time, effort and resources in finding the next big thing. We intimately understand that technology is not static.

The concept of the “technology treadmill” illustrates that for agencies there will always be new windows of opportunity in technology to chase. Commoditization means that we can’t rest on our laurels; agencies are continually being squeezed out of traditional service offerings by low-cost providers, forcing us to look for new revenue opportunities. It’s a moving target that is constantly changing. Therefore, rather than asking “what type of innovation should our agency invest in?”, we should instead be set up to constantly capture new opportunities as they arise.

Let’s be clear though – I personally don’t believe we should be trying to invent new technologies, as that is a risky game better left to the start-ups and Googles of the world. Instead, agencies should be focused on discovering these new technologies and commercializing them by solving our client’s business problems across all areas of operation (not just marketing). Think “leading edge,” not “bleeding edge.”

Working together to get moving on Innovation

The solution won’t come from a simplistic call to action like “all digital agencies should innovate.” As an industry, we are reliant on client revenues to survive – it’s not typical for agencies to operate with large cash reserves to invest in speculative R&D activity. In order for it to work, innovation needs to be a commercially viable proposition.

Rather than trying to define an end solution (which will be quickly outdated), wouldn’t it be better to adopt a shared framework that successfully uses existing agency revenue models to incubate new services? If SoDA members were to reinvest a small portion of their “Current Revenue” stream into developing a “New Revenue” stream, it would serve to future-proof these agencies by moving from a shrinking and increasingly commoditized opportunity to one that may be small but is rapidly growing.

A simple example could be ensuring that 1 in every 10 pitches your agency undertakes is for a service offering in which you aren’t currently engaged (obviously up skilling to deliver successfully). You would be capturing client budgets that are currently being allocated elsewhere and would be insulated from low-cost suppliers who can deliver “Old Revenue” services cheaper than you. You would no longer see commoditization as a threat but as an opportunity. It’s just good business strategy.

The good news is that if the digital industry can work together, we actually create a positive spiral that serves our individual needs while benefiting the collective. If a critical mass of digital agencies could agree to adopt a model like the Technology Treadmill, more agencies would be engaged as an innovation partner, which in turn sets a precedent. A momentum is created in the industry for other agencies to drive this agenda with their own clients. Effectively it would serve to build a collective position of power around this key issue that is threatening the ongoing relevance of our industry.

With clients moving towards hiring internal teams, circumstances are starting to shift away from agencies. We need to fight inertia and step out of our comfort zone or the window of opportunity will pass us by. By working together to deliver innovation, digital agencies can generate increasing value for clients while fostering a sustainable model for our own collective survival. The next big thing is just around the corner – we need to shape up and hop on the technology treadmill.

 

1 Reference: Rumelt, R., 2011, Good Strategy Bad Strategy: The Difference and
   Why It Matters, Crown Business, USA