The Tyranny Of the Billable Hour: Should PR Agencies Act More Like Software Startups?

By Bob Geller, President, Fusion PR

Fusion PR was once asked to pitch for the business of an MBA program. Why, we wondered, would a university seek the services of a tech-focused agency?

"We want the kind of PR you’d expect for a tech startup," was their answer, and our team considered this to be a compliment, that the school turned to Fusion for an aggressive PR program, the kind that is more typical of feisty startups than staid academia. I think it also says something about how we romanticize entrepreneurship, and put startups up on a pedestal.

I was reminded about the episode as I read a couple of articles recently that ponder ways in which agencies might act like tech startups. In this two-part series, I offer my perspective on the subject, and try to answer the question in light of the Innovator’s Dilemma (which says, essentially that it is hard to innovate without leaving old ideas, technology and models behind — see this TechDirt definition of Clayton Christensen’s famous theory and book of the same name).

The first story ran in Fast Company and got lots of attention: How Ad Agencies can Act More Like Startups

Although the topic was about ad agencies (and not PR per se), the title jumped out at me; it is a time of great change in the media and hence PR worlds.  Some in our industry have debated new models.  Whether you are in the tech field or not, many of the changes are tech-driven, and reinvention and disruption have been recurring themes.

Adam Glickman writes:

The "Why ad agencies should act more like tech startups" meme has been making the rounds…  The conversation tends to focus on social media strategy and incorporating tech talent into creative teams. But this sidesteps the bigger picture…

He goes on to list points of differentiation and how agencies might adapt accordingly; for example the author maintains that it is hard to innovate and break out of the box when we are beholden to client budgets, and, in the case of the recurring retainer, the billable hour:

Retainer-based relationships, by nature, encourage bureaucracy and inefficiency…. Agencies are led by marketers who are encouraged to increase (billable) costs and whose incentives aren’t directly tied a return on the investment. … This is a conflict.

Other points Glickman brings up are that startups are about automaton and efficiencies, while agencies are about creativity; agencies support client market opportunities, and  not their own; and that they start with budgets and then exploit big ideas, while startups do the reverse.

His prescriptions?  Agencies should shift from clever storytelling to providing real utility, explore pay for performance models, and favor flexible, ad hoc teams:

Using the Web 2.0 approach, becoming … decentralized networks of ideas and specialized talent where creative directors work more like creative curators, able to tap into an eclectic database at need rather than relying on a single, convenient team that must continuously justify their cost. (This sounds to me a little like warmed over Alvin Toffler, author of pop business classics from the 80s like Future Shock and The Third Wave; he and others argued years ago that the job as we know it will disappear).

In terms of offering utility over stories, Glickman cites examples like The Michelin Guide and Grand Ole Opry –agency creations that transcended ads and supported the client’s market opportunity, and asks:  What keeps Nokia’s agency from creating the next Foursquare?

Last week, writing for Media Post Online Spin, Matt Straz rebutted with the story: Why Agencies Should NOT Act More Like Startups.  Matt says:

Agencies are startups that have made it… [they] make for lousy software companies. With the possible exception of Avenue A giving birth to the ad server Atlas, the record of agencies developing and then supporting a great software product is mostly unblemished by success.

He further argues about the important role that agencies continue to play, and maintains it is a function that can’t easily be taken in house.

I enjoyed both articles.  However, they left me vaguely dissatisfied, and I felt the need to expand on these ideas and share my view of how they might relate to the PR field.

Please stay tuned for the second part in my series.

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