Presentation - State of the Nation 2022Dec 12, 2022
As we enter 2023, we face more economic uncertainty around consumer demand, inflation and recession. Watch as we step back and look at the agency space to discuss how we should approach 2023 and what we can learn from the past.
We had not one but two views of the 'State of the Nation':
1. Robert looked at the significant trends in the economy and propose the best way forward - this view is based on the latest research on what the high-achievers did coming out of the last recession.
2. Janusz delved into agency performance in the post-COVID era. How agencies have come out on top and why the under-performers failed.
Robert Craven 00:07
Hello, and welcome to what I'm calling the State of the Nation, which is Janusz and myself going through how we see things, we have two points of view to presentation. So Janusz, he is coming on first. Janusz is really giving us a collection of observations, what we see, you know, we're like a canary in the coal mine in terms of hearing how agencies are feeling. And I'm giving a slightly more general wider picture of what it looks like going into yet another recession. So, without further ado, I will hand over to Janusz.
Janusz Stabik 00:47
All right, thanks for control. Thanks, Rob. I could see everybody could see those that are watching the recording to, as Rob alluded to there, I think one of the bits of feedback that we get is that we're a bit like a bit of a radio masked a lot of our clients users as a to see what else is going on within the industry. So what this is today is a load of observations, it's rather unstructured. In putting this presentation together, I tried to find a bit of a flow for the content and couldn't really find one because it was all quite varied stuff, different, different clients, different agencies asking and telling us about different stuff. So giving you a window into what's going on rather than struct is a little bit messy. Equally, because of that, I think there's a huge disclaimer, a huge warning that comes with this, that it's a very broad brush, all of this stuff, you know, I'm probably going to say a bit of a, it depends at the end of every slide. So this is very much almost my anecdotal observation view of what's going on in the agency space.
Janusz Stabik 00:58
At the moment, I'm going to start with what our consultants are currently working on. I think this is the last slide when I put this deck together because I thought, actually, this illustrates kind of what's hot, what's hot right now. Right now we're doing a lot of training, a lot of leadership and management training, particularly for boards, directors and senior management teams, kind of where technicians within agencies have been promoted to a point of management and leadership. But they haven't really got the background in that to know how to do it. So that's kind of probably the hottest topic from a training perspective that we're delivering right now. And we have two ongoing programmes around client services, relationship management, increasing lifetime value for proper, proper account management stuff, making clients feel great and going to stick around and spend more with us. And always, always, always seem to be delivering a pitching sales type programme to from a consulting perspective, it's pretty broad vision and strategy. implementing strategy within the agencies are kind of taking the headline plan and making it a thing and getting the team on board. With the delivery of that strategy going forward. It's a couple of kind of audits going on consultants going into agencies looking at the agencies under the hood and providing kind of strategic recommendations, two or three projects on exit, kind of prepping an agency for exit and acquisition and agglomeration agencies looking to kind of shortcut growth and see what's next and looking to either merge with other agencies or to or to acquire smaller agencies, where there's a good kind of cultural fit international growth, particularly those agencies in Europe. international growth is a real real hot topic, you know, how do we get access to other international markets, cupola systems and scaling projects going on at the moment. So taking an agency that's a little bit messy, or a little bit blurry, I'm making it kind of a consistent delivery process to enable scale without increasing headcount. value prop value proposition design and positioning, always a couple of projects going on in that arena. And also, I've called L two coaching, level two coaching. So that's one of our coaches working, not necessarily with the business owner, but with, again, the leadership teams and enabling these teams to grow more into that kind of leadership role. So I just thought it was an interesting kind of perspective on those topics that are hot right now.
Janusz Stabik 04:31
Next, was front of mind into mind being what's the kind of stuff the agencies are talking about, that agencies are asking about right now? Recession, obviously, and I'll go into that into a little bit more, a little bit deeper. Next slides, people are still finding people retaining people, affording people because of ongoing salary, inflation, leadership, leadership leadership, as I've said that leadership training course is kind of really hot at the moment. An agency is really really looking as they grow to enable those that that that sit below them to lead into manage the agency going forward international growth, as I said, automation and automation from the perspective of the tools that we use, be it Google, be it Web design, and Development platforms, be it E-commerce platforms, be it kind of Social media, but the impact that those tools becoming more automated and smarter and what that's doing to us, our agency and our proposition, I'll go into that a little bit deeper shortly. Increased competition, it is becoming inherently increasingly almost exponentially more competitive. I will tell you about my story from Barcelona. When I go into that in a little bit more detail, and also this move to consulting kind of goes hand in hand with this, this automation piece, I think, in that tools are doing more for us. Therefore, what we deliver is becoming kind of increasingly more commoditized. And therefore how, how do we move from being a delivery partner into a consultative strategic thinker on behalf of a part of our clients. So in terms of recession, going a little bit deeper, and recession. I think what we're seeing at the moment, and Rob will talk about this in depth in his piece, client confidence is quite low. So agencies' clients' confidence is quite low. Nobody's necessarily sacking agencies, agencies aren't necessarily falling off the cliff. We're not necessarily seeing any kind of horror stories at the moment and massive cuts being made right now. But clients are kind of saying, we're going to be conservative with our budgets, and we're going to kind of hold off signing off of projects or client confidence is a little bit, I say low actually, I will rephrase that and say it's tentative, and clients are waiting to spend money from an agency perspective, there's definitely an increased awareness about what's going on the top of the recession, what to do about the recession, planning for the recession, is definitely kind of a bigger thing than I've seen previously. More agencies seem to be ahead of the game, ahead of the game means that there's workshops happening and there's cost revisions happening ahead of that recession, kind of really taking bites. So there's definitely increased awareness. And it's definitely more being done to plan for what might come. And I'm definitely seeing more agencies kind of building capital, focusing on profitability building up some money for a rainy day. So that if a pivot is needed, or if we do kind of lose some of our big clients, we've got the financial ability to do something about it at the point in which we need to do it. So there's definitely a lot of capital building going on.
Janusz Stabik 07:43
In terms of people, I mean, it's just, it's just global. It continues to be part of the narrative with agencies. My story is over the past 18 months, I've done four or five coaching calls a day, five days a week. And pretty much every single one of those calls agencies are saying, people, people, people, where do I find them? How do I keep them? How much should I pay for them? How do we retain all that kind of stuff? And it's global, we're not seeing this not being an issue anywhere in the world. Many reasons kind of see external capital, pushing salaries higher, and places like Croatia. There's a lot of outside investment from US based venture capital firms kind of hoovering up talent in Croatia and, and doubling people's salaries. So they can build nearshore and offshore, offshore teams in certain regions. So certain places are kind of suffering more than most, because of this kind of external capital coming in pushing those salaries higher. We've seen some rolls increase by kind of 100% over the past 12 months. It's really, really squeezing margins for agencies, some services as a consequence of kind of becoming unviable. I'll go, I could talk about this a little bit more in detail later. But let's take the kind of web design and development where the margins are already increasingly becoming tighter and tighter, narrower and narrower, developers are costing extortionate amounts of money to deliver that service right now. So it's just become really, really difficult if not impossible to live in to deliver certain services.
Janusz Stabik 09:17
Labour arbitrage is still possible. What it means is we are still seeing agencies, say in Western Europe, building teams or partnering or outsourcing to countries where labour is cheaper and really, really investing in those relationships. That's still happening. It's still possible. It doesn't seem to be a shortcut. There are really really credible big agencies and small agencies doing this really, really successfully. At the moment, it doesn't seem to it's not like a last ditch effort. There's some really, really strong partnerships being formed with really, really credible agencies in say, from the UK to Western Europe. So it's still possible to and it's been done really, really successfully.
Janusz Stabik 10:03
Yeah, automation. We're seeing a bit of an identity crisis, I think I'm hearing a lot of agencies saying, particularly, I don't know, Google partners. Really, I'm gonna say worrying about who they are and what they do, because what they've done, managing campaigns looking for kind of performance optimizations is becoming difficult to do. Because the tools are doing more of it for us, and the agencies are feeling a little bit lost, they almost say, what do we do now, particularly if they're charging by the hour, which we don't advocate. But if they're charging by the hour, they're saying that this job is to take us 10 hours, we now can't manage the campaigns, it only takes us 30 minutes? What do we do? Do we lie to the clients and say it takes us 10 hours? Or do we move to being a kind of consulting firm? So there's, I think my point here is there's a bit of an identity crisis, there's a lot of agency saying, what do we do now? How do we charge? How do we? How do we price our services? What services do we deliver? Do we if we've been purely performance previously? Do we build out our creative offering to start adding some value on top of that performance management? Do we move more into consulting? How do we move more into consulting? And it seems like it's urgent right now, two years ago, it was always a threat that was in the future, Google talking about it a lot, it was always gonna happen. later down the line, it's kind of now happening, and it's kind of now biting. And agencies are kind of saying we need to do something now like this identity crisis, and our pricing is being hit right now. So this is a real thing. And a lot of agencies are doing a lot about it. Again, with this consulting piece agency, saying the commoditized piece of ad delivery is now being done by the machines, we need to be more strategic, we need to think more, we need to do more value based pricing, etc, etc. It's gone from theory to reality, I think, working with a large agency in the UK, completely revised their value proposition. This is the 180 person agency, there used to be a full service digital agency, you're looking at them now. And they look like Deloitte, digital, you know, they have a very serious brand. They do white papers rather than blogs, they have small fonts rather than large fonts. They don't have primary colours, they have dark colours. So it's really, really happening, from a brand perspective, from a delivery perspective, and I'm not saying it's easy, because moving from delivering services to kind of delivering thinking is obviously a little bit different. But again, when previously, this used to be a future threat, now we're seeing more agencies saying, Okay, we need to do this now, How do we do it? I love this model. This is the challenge that a lot of agencies are facing. Somebody on this call might have made me aware of this model. Whereby those agencies that are previously just delivered stuff, but paid media or social or content marketing or web design. With the previously delivered stuff, they took them into this delivery door, the can't go through this door into consulting just doesn't move that way I can't see as a deliverer of services as a vendor. And as soon as we start saying, Hey, we're these really, really smart consultants and strategists, it's a bit of a tough sell.
Janusz Stabik 13:38
So how are these agencies moving to be more consultative, it's through brand and proposition and the new clients that they win, and they're bringing them in under a kind of a consultative banner, and they're doing the strategy and the consulting upfront. And then to cross sell the delivery and afterwards is easy, the kind of door, the door goes that way down downstream. But it's really, really difficult to kind of push the door the other way. So if this is what's happening, we need to do it because the machines are doing more for us. This is kind of how it's through brand and proposition and positioning and that initial sales piece because it's really difficult to take your existing clients upstream that kind of we have a different relationship with them.
Janusz Stabik 14:18
A competition. It's just been, it's just I don't know, maybe Rob might talk a little bit more about this, but we're constantly seeing the kind of value of projects retained has been a little bit screwy, because there's just more competitors out there. I spoke to somebody last week from Barcelona. Anybody who has been to Barcelona knows it's kind of built on a bit of a grid system. And I think within the five by five grid within Barcelona, there are 5000 registered agencies in Barcelona, you know, and I think the pandemic has just seen an influx of competitors into our space. Everybody had a laptop, I created a website, and Squarespace got a brand from Fiverr. And hey, they're an agency, you know. So it's just becoming increasingly more competitive across all, all services at the moment. So what are agencies doing to kind of differentiate themselves, we're seeing a lot more agencies talk about brand in the value of brand. Most competitors, most of your competitors, most agencies have a very service lead proposition, Hey, we deliver b services for these types of clients. And everything's kind of similar. And the pricing is quite similar. Those that are really kind of, you know, able to offer that kind of consultative element, start charging premium prices, making good margins kind of doing value based pricing, they've invested in kind of a branding consultant, given them a dip deeper, richer voice and use that to position themselves among, among others. And it's been particularly effective in Central and Eastern Europe, there's less agencies over there, historically, we've seen that they have got a really, really strong differentiated brand, a lot of the propositions in C have been very service led up until now. And those that have invested in brands are seeing kind of quite quick, bigger returns. But typically, we've seen this across the board speaking to an M&A consulting couple of weeks ago, Joe Hein from SI Partners, he said, The the agencies that are getting the highest multiples at the moment, when it comes to exit, or brand based agencies, there's such a demand on brand, across all sectors, that that's where the investment is going to provide that point of differentiation.
Janusz Stabik 16:36
First bucket said, How do I fix this? It's really broken, I'm a little bit tired of it, I'm not sure whether I should bother to continue. So they come to us having tried loads of stuff, and they're just like, Ah, if you can help me fix it, let's fix it, otherwise, I'm just not sure I can be bothered to continue. And it either comes when they knock on the door and work with us or, or after we do a little bit of discovery. Those types of agencies typically are what are called the riskier type services, those services that are more project based, that have a higher propensity for projects to overrun. And for us to lose our margin. So typically, web design and build agencies development and app based agencies and, and video production, you know, project based, a lot of cost, a lot of direct cost, big estimates involved upfront. And if we don't quite get it right, eat away at our margin. And we look at the end of the year, and there's no money left, and we've got another year of trying to figure it out. So I just put this question mark, is it a bit of a broken business model, particularly with salaries going kind of through the roof at the moment? And what should we do about it? I've got some thoughts on that in a moment.
Janusz Stabik 16:39
This is definitely a heavily caveated slide before, before I put this one out there. I kind of put clients into three buckets, you know, what, what are based on the services that agencies offer? What are they most likely to say, when they engage with us? You know, what kind of help? Are they most likely to be needed?
Janusz Stabik 18:03
And the second bucket of agency says, where is the next opportunity for growth? The kind of saying, Hey, I'm running a business margins good. I'm not too time poor. How can we grow? Where do we grow? What do we do? Putting a take on digital media, social, SEO, database agencies, sorry, data, kind of analytics and attribution based agencies where it can be kind of quite process led, there's a big demand for these services at the moment. These are the agencies that are kind of saying what next, if we only do paid media, digital paid media? Should we do SEO? Should we be social and should be adding creativity to that mix? Yeah, there just seemed to be kind of repeatable services typically kind of running around on MRR model, and has a lot of kinds of cross sell opportunities and things kind of going, okay.
Janusz Stabik 18:59
Third bucket is where, you know, we've kind of reached enlightenment. We're saying Life's good. I'm pretty happy. I'm not that bothered about growing. And I'm not thinking about whether I should bother anymore. How do I lock this in? How do I kind of retain the good life going forward, you know, we're getting good premiums on the prices that the services were delivering. And it's, and it's actually quite easy. PR, digital PR agencies at the moment just seem to be those that I've seen printing money at the moment that have really, really high value on delivering those services, typically, and small agencies. It's not uncommon for small PR or digital PR based businesses to be doing kind of 40% EBIT, because of the small amount of time it takes instead of the service and the premium charging for it at the other end. And then obviously, kind of consulting, user experience strategy type work, particularly again, kind of smaller agencies super, super high margin and life's pretty easy and traditional media agencies. We ran a workshop last week in Warsaw, one of the questions that came up is, Are people still getting rebates? Yes, traditional media organisations are still getting rebates and hiding a multitude of sins working with an agency at the moment, their EBIT without their rebates is about 12%. The rebates push their EBIT up to about 32% At the end of the year, so they don't act that way, they certainly need to be that good because the rebates with certain partners are so high. So yeah, that looks pretty good for those. And as I've said, brand agencies at the moment are just getting a bit of a bit of a premium.
Janusz Stabik 20:42
I mentioned this web broker business model thing a moment ago, it's just really stressful, it seems to be increasingly competitive. With scope creep. Under delivery, SAS platforms are doing more eating away at our margin. If we're only working with CMOS, if we're only doing kind of a marketing lead project for our clients, that was a brochure site or an E-commerce thing. Those those budgets for those projects are typically smaller 10s of 1000s, if up to sort of 200k, the big margin project sits where there's a CMO and a CTO involved involved where the CTO is managing the risk of the organisation, the CTO is paying for enterprise platforms with big licence fees, and they're paying, you know, 300k foam decay millions of pounds and euros for a project. So it's just really, really tough. And you know, if you're doing super low margin on web design, or building you have been for two or three years, you're not alone. It's the most common type of financial into performing agency that we see. Unless you're selling sprints, you're selling 10 day sprints for 10 grand and, and you're building products. And you're saying to a client, you know, this will take eight to 15 sprint's and somewhere in between that few agencies, I've seen doing this for some SaaS platforms over in California, having the products built over here. And what you're getting there is you're getting all your time paid for. So we don't advocate there. So he's selling by time, but sprint based web design and build agencies seem to Okay, or niche, more niche based agencies, those were let's say, we just work with orthodontists. And we know what orthodontists need from a website. So we built this platform where 85% of the way there before we sell the site, and then we just kind of skinned things on top. So that's kind of a high volume, low margin type model. Or, as I've said, working that CTO space, or there's a few agencies who have said, You know what, forget this development lark, it's too painful, we're going to see if we make it work with a low code, low code platform, we're going to move into kind of brochure where space no projects bigger than 50 grand. And it's working. Okay, so far, because they've got the deployment and the bug risk with those types of platforms. I'm going to speed up because I'm already over time, where we see I've said winners and losers, again, heavily caveated, I'm not seeing anybody really, really, really lose at the moment. But obviously, retail has taken a bit of a slump, post COVID as people have gone back out into the outside world and slack minute my spending money and experiences and, and holidays and that kind of stuff and stop buying stuff online that they don't necessarily need web design and build and projects in particular, this confidence from our clients, where they're reluctant to kind of spend money, it seems to be projects that are being put on the back burner until the new year till the New Year, who's doing well at the moment really well as I say PR and SEO. TikTok, there's a platform still super cheap to buy media over on TikTok so there's a lot of performance being had over there and creative or performance based agencies are adding creative in as an offering within the kind of service model.
Janusz Stabik 23:52
System systems, I put it here at the bottom here systems, there's agencies who invested in systems, I saw probably my favourite, a new favourite agency in the world a couple of weeks ago. I had to drill them on this because I didn't believe that when I said, you're doing twit, you've got 20 people, nearly 2 million in revenue and 40% EBIT. I kind of was a little bit cynical. I said, Yeah, we hear this all the time. So you know, you're taking eight grand salary and you have no load, no dividends and what's left is about 2%. And they showed me the numbers and it wasn't the case. This is a UK based agency doing 40% EBIT 2 million revenue on 20 people. Systems, processes for everything they don't recruit experienced people. They recruit junior people, and they get trained on a system. They deliver the system over and over again heavily productized as salaries are super low. The MDA is employed on 65 grand and the most of the team are between 19 and 32 because they haven't recruited really, really senior people to experience people. So I just fell in love with that business from a system perspective.
Janusz Stabik 25:06
Profit. But what am I saying with this slide, we're still seeing agencies do really well, we're still seeing many underperforming, you know, less than 18% 15% 13% can definitely do better. But across all regions, we're still seeing some doing well and some doing exceptionally well, particularly that kind of 40% EBIT agency that I showed you a moment ago. I have to say, I think the many workshops with Rob now and hearing him bang on about putting prices up, I have to say is a thing I have to give Rob credit, sadly, that whenever we do a wrap up in a workshop, and we go around the room and say, What are we all taken from this? Seven out of 10? Say, we need to put our prices up too cheap and they do and it works. And the messages I think we're still too cheap and there's still scope to put our prices up. So if I were you What would I do if you're doing any kind of web design and build work and really question your business model? Look at those direct costs, you know, can you move to that sprint based model or the niche model or whatever something to help you build out your margin? Then looking at positioning, can you go super narrow and be a more systemized type business, or more premium consultative strategic offering with high prices for your clients spending more money with you and really, really, really kind of differentiate yourself through investment of brand. So in summary, I think it's kind of business as usual at the moment, our clients are being tentative and opportunities still exist. And there's just a lot of let's see what happens after Christmas. That's kind of writing it out until then see what happens. I say for me, Rob, I apologise. I'm over time. Over to you about what's coming next.
Robert Craven 26:55
Lovely, right. So yeah, I kind of agree with all of that. In about 20 minutes, we'll take questions. At the end. Let me just share a tab and we will get going.
Robert Craven 27:08
Okay, so speculation from me, I'm taking a different point of view, which is like a much bigger picture. So we've gone from the very narrow view of what we're experiencing, like the canary in the coal mine type approach, to a slightly bigger picture view of what's going on. So leaning into 2023 there's really one sentence for me that kind of Sun Sun villa. We've been here before, you know, we were here for COVID. Many of us were here in 2018. Some of us were here during the 2009 recession. We've seen it before, the lessons I hope have been learned, but I suspect they haven't been properly. So the answer is to be ambidextrous and take action. I'll talk more about that in a minute. And actually pray for a little luck, because I think the one thing that we've seen in the previous recessions is a bit of bad luck being in the wrong niche, you know, it's a disaster. So we're gonna give you a bit of context, and we'll talk about what I believe is the good news. So for me, today, I am half full. Let's look at what your options are. Let's look at what the consequences of those choices are. Have we learned the lessons and what's the action required? So the world ahead, this came out on Friday, The Economist looking at the world of 2023. And that seems to be the best summary as far as I'm concerned. In terms of IT, one, device sales aren't going to disappoint. Everyone's already got a mobile phone, everyone's already got a laptop. People are not buying this stuff anymore. People do not need to buy TVs, and more importantly, from an IT point of view, automation is going to grow everywhere, anything to do with automation. When we actually look at the media, this is where it starts getting interesting. Dentsu believes that global ad revenue is going to grow by 5%. But hold on to your horses. That all comes around from price increases, it doesn't come around from an increase in volume of ads. And also be aware there are going to be massive layoffs in the ad revenue industry. We only need to look at 30,000 being made redundant in New York from Google 25,000 being made redundant from Twitter and so on and so forth.
Robert Craven 29:32
Good news, Digital's up to 57% of total media spend that's a record yep, yep, yep. Especially around mobile ads and short videos if I had a penny for every time I bang on about a short video. I would be a very rich man. So Lloyd short video, and especially to the third world, Brazil. He missed it. Lloyd says short video is where the growth is happening. And, and other things In the third world, Brazil is going gangbusters. India is going gangbusters right now. And then we've got the cookieless. world we all know about that. Now, Apple is blocking everything. Google is delaying stuff until 2024, which gives us some space and some time, that matter is going to be the one who's really suffering in what's happening in this. And really interesting stuff around Amazon and Walmart and the retailers. Google's biggest threat right now is probably Amazon offline. I can tell you way more about that. But online, I'm not gonna tell you anything else. But Google is now going to face how they can defeat Amazon, in E- commerce, because that's where the, that's where the search is going. So this is Europe, this is kind of what you know about it goes up, it goes down, it goes up, it goes down after winter, come spring, and then summer, and then Oh, my God, we get autumn and winter, we go up and down. When we look at the right hand side, we end up with the recession from COVID. And then the question is what's next? Possibly something like that. What we don't know is how deep the recession is going to be. And we don't know how long it's going to last.
Robert Craven 31:11
However, there is good news. Good news. Number one, as far as I'm concerned is, it's a cycle. Typically, these things last 10 months, typically, they last 10 months, slightly longer, slightly less. But typically, they are 10 months, there have been 11 recessions since 1950. Okay, 11. And they'd been somewhere between two and 18, running nearly all of them at 10 months. So maybe you just batten down the hatches for just 10 months.
Robert Craven 31:38
And the good news number two is there is a recipe for surviving. Remember, the essence of Santa quo, which I love, is that you cannot overtake 15 cars in the sunny weather. But you can when it's raining. Okay, so this, this really is the time, you know, you can actually make unbelievably, okay, driving in the wet really isn't scary. If you know how to approach it, it can prove to be a great advantage once you get it down. So this is for the brave amongst us to actually lean into this rather than lean away. Right. A whole bunch of research, McKinsey, Bain Harvard Business Review, looking at last recessions and trying to figure out who performed well, okay, the companies that outperform the competition, we're the ones who strategically invest. Okay, so that's in terms of products and services, especially, they manage their workforces really well, they keep their people and keep the knowledge with them. And they unlock the balance sheets that's about reducing costs aren't required and clever, clever investments. Okay. Those who don't do that, those who go, Oh my god, we're going into recession, we've got to cut costs, you've got to get rid of people, they're going to lose people, they're almost the same, nearly always the same with a poor investment record. As you can see, they get a 0% return, okay, it's 0% return otherwise, nothing happens to the business. Okay. Those who, as I'm saying, strategically invest, manage their workforce or not the balance sheet, look at the 17% compound annual growth rate, they are actually growing, because they're being clever. So we need to just dig in a little bit more into what that actually means.
Robert Craven 33:21
Here we go. During the recession, you can see the ones who are doing what we're recommending the 17% growth, and the losers, they just flatline. Forever, you know, they never get going. So this isn't just, this isn't just a one off thing. This is like the idea about the winter angle when you hit the golf getting stuff, right? There are winners all the way through again, we need to just look about what that actually means. So what are your options, you got a couple of options of what you can do to actually make stuff happen. So one, be defensive, you may have figured out I'm saying that it's not a good idea, battering down the hatches closing and waiting for business to return, even if it is 10 months. It is risky. Number two is be offensive, be aggressive, be out there, be making it happen. Ditto, highly risky, because we'll come to that in a minute. And number three option, which is the one that I'm saying the male and female union young child and man, whatever she knows how to thrive, is being defensive, being really, really tight on the money, being really, really careful on what to invest. But at the same time having your antenna and being offensive being the entrepreneur where it's right. And that is the option which really gives you what you want. Let me just go into a bit more. The consequences are, if you're defensive, the results are average. If you're offensive, you're gonna make one or two people in and then you will crash and burn somewhere else. So be really careful about being a Cavalier, but you get above average results if you are defensive and offensive, which is why I'm saying ambidextrous left handed and right handed doing, doing both, which isn't easy to do. And look here. Here's another example. Another example is the same model, which is resilience, the ones who are left handed and right handed, their performance is way above way above the standard for stock market and worry about the losers or the non resiliency never really get going again. So what are the lessons from recession? Successful agencies, and we're gonna run up to the pandemic. They will not think their first thing was lucky. Okay, right time, right place. Some of them just happened to be in econ. Oh, my God, they happen to be selling outdoor pinball tables, they happen to be at just the right time, right place. And that's great. But we can't depend on that. Second group of people, the ones who have incredibly deep pockets, if you went into the recession, and you'd been profitable because you have good business, then you are more likely to have deep pockets to actually be able to survive the recession. So they've got deep pockets. The third group is the interesting ones. Okay. These are the ones who left and right hand side they were strategically brilliant ones. They were agile, they could plug and play new products or services really, really quickly. And they have deep pockets. Not all of us in the room have deep pockets. That is kind of the optional extra but it's strategically brilliant. Head up looking at what's going on outside thinking about what's going on, think about what customers really need, agile all look clients now want consulting all look clients now want business, Business Information Systems, all look clients now want podcast all look and able to plug and play. Those are the ones who actually did it. Those are the ones who made it. agile business McKinsey and Harvard Business Review, you know, as your business units responded better. Yeah. By measures of customer satisfaction, employment, engagement operational. So the lesson, be ambidextrous, be really tight on budget, be entrepreneurial, and leaning. And secondly, be agile. Think about doing everything with that kind of agile mindset, everything, everything, everything.
Robert Craven 37:11
So action, the action required is relatively straightforward. three step process, whatever you're looking at, investigate, identify what the problem is, really, really just take that as a model, decide what you're going to do. It really isn't rocket science, but it's just that process of taking things on, identifying, deciding and acting and then chasing the opportunities. I'm going to offer you nine opportunities that work in COVID. They may still work now I think they probably will. But you have to Justin for yourself.
Robert Craven 37:44
One. People did really well. If they stood up and said hello to clients, we are going to help you navigate the stormy weather. We are not just an agency, we are here to help you. We want to befriend you. We will talk if we have a better idea of what's going on in the outside world than you do. So we can help you understand what's going on, we can help you make decisions. David Meister would call it a trusted advisoк. Second one is pricing for profit, just actually looking at your profit, your pricing and how you price and starting to price on the value add. If the client comes with us, this is the value that we add to the client. And therefore this is the price that we are going to charge. And that price will be based on profit, we're not going to do work with not for profit, very much profit first mentality and approach. And pre COVID lots of agencies were not pricing for profit pricing for winning the business or the market rate. So a different way of looking at profit. Third are agencies that target people who are to be a lovely, lovely idea. You actually go, Oh recurrently we currently work with businesses up to 500 staff, but the agent, with clients with 500 staff, but the client who has 1000 staff, they're going to be looking for cheaper, better and more more budgeted suppliers. So we are going to start targeting them now because in two or three months time, they're going to be looking for people like us to work with a lovely lovely model.
Robert Craven 39:23
Next we have to be ready and then the rest of the recovery that's a little bit of closing down and waiting. Your it's a big bet to assume that the recession is going to finish within 10 months it will probably finish in 10 months but it's we're playing the laws of averages. I think that's a high risk strategy spending 10 months prepping your brand waiting for it to turn personally. I think you should be much much quicker. I see no reason why your new website, new proposition, new way of talking to clients can't can't be in place within two weeks. Moving up the food chain inside your clients, I've made reference to that already the trusted adviser thing, you need to not be just talking to the marketing manager, you need to be talking to the marketing director, you actually need to be going up and trying to be talking in the board, you need to be in the boardroom when they're having discussions about their business plan and their business strategy. So that when they get their go to market strategy, you are there talking to him about how stuff actually happens. It is actually your opportunity to get in there and one of my I'll come back to that Mike rumbles in a minute. And the other one another move up the food chain is consultancy, okay? We have put ourselves in the position of being digital marketing or video marketing or video agency. Clients want more than that, and people have confused digital marketing with marketing. Okay. Marketing is about position. It's about which products we sell to who and how we sell them. The digital agencies in the room have the opportunity to lift up the visual of what they do from delivering digital marketing, to delivering or consulting not just on digital marketing, but also marketing and marketing proficiency. I see that a massive opportunity in that space means recruiting new people. That means having some MBAs maybe in the room, that I feel is the opportunity and damage that we've seen people do with this blistering movement results.
Robert Craven 41:30
Three more new value propositions refresh or pivot. What you do now is not necessarily relevant for what will be relevant in 2023. Or looking at yourself from your clients point of view. It's the agencies around dramaturgy, smiling now are the agencies which are looking at a value proposition, how are we going to market what we stand for, who we stand for, what makes us different? Those are the ones which are doing really, really well. And agencies which are still using that website from two years ago are starting to look dated and wondering why they're not getting the business.
Robert Craven 42:09
Video and social media, I can't emphasise enough the opportunity video, video is an opportunity which just most agencies seem to be shying away from, especially in the digital agencies, and social media, I've been working with 1-80 person agency, their whole business has turned around based on employing an intern doing TikTok with cross sold and up sold and now they've got five people doing TikTok, so you need to be nosy person agency for the client to have confidence in you. Otherwise, to get TikTok, you're gonna go to some kid in an attic, charging $10 an hour. So I think that seeing it is a great opportunity there.
Robert Craven 42:44
And the final one is mergers and acquisitions. This just won't go away. There will be more people wanting to get out. And there is still a lot of cash and a lot of money out there. For the right agency, just be aware whether it's a panic sale, or whether it's a sale out of competence.
Robert Craven 43:01
So as you grow bad companies are destroyed by the crisis, good companies survive that. That's your lot. And more importantly, great companies are improved by them. So I'm not gonna say it's going to be easy, but I still there's a lot of glass half full going on. I don't feel that it's a glass half empty situation because we're here dealing with it before it overtakes us. So the one sentence again, we've been here before the lessons have been learned. So be ambidextrous, and take action, and pray for a little luck because I can't. I can't say that this doesn't involve a bit of luck. I wish I could, but luck comes into this really, really important. And just remember Ayrton Senna, you cannot overtake 15 cars in sunny weather, but you can when it's raining.