11 September 2007

Migrating Upstream

The generally accepted truism is that it is always easier to migrate downstream than upstream. It's easier for a high-touch boutique design firm to start offering production/execution/volume services than for a job-shop to start selling strategic insight.

But it doesn't seem to stop folks from trying to fight against the current.

I've mentioned in the past that there is (in my opinion) an enormous opportunity coming as a result of the sustained sequential increases in interactive spends. As companies spend more and more money in this space... they're going to want (and need) more than order-takers. They are going to demand not just tactical execution but also strategic planning and vision.

Right now there are a very small number of (mostly small) firms out there that are both capable of delivering these services well and consistently and that are actively marketing such services. These firms simply don't have the bandwidth to satisfy more than a tiny fraction of the demand.

There are, of course, a large number of mid to large sized agencies that actively sell this expertise within their offerings -- but fail to deliver on the promise. Then again, this is, has been and always will be the norm in this industry.

And now it seems like I'm not the only one who has noticed this opportunity. Organic has announced that they are going to create a dedicated strategy practice within the company. While it is nice to see some validation of my theory - I have to wonder if this is going to be successful for Organic. At this point in time, the brand is firmly cemented in the tactical execution space - and it sounds as if Organic is not going to go outside and hire new talent to staff this practice but merely re-purpose existing headcount. So the company is planning to try and migrate upstream without re-branding or adding marketable new talent. And it doesn't seem like they're going to create this as its own specialized brand or business unit - which means that it won't have that PR leverage, and will have some significant cultural issues - especially around metrics. Doing this well tends to require a much higher tolerance than the company has been used to for high fully burdened costs per employee and low utilization numbers (and instead a focus on high revenues per billable employee per year).

I can understand why Organic would want to be in this space. Especially given their stated aim or selling this practice to companies who are currently not clients for Organic's execution services. But the challenges are going to be significant.

1 - Convincing clients that Organic can, in fact, offer these services (given the brand and the talent) is non-trivial.
2 - Protecting against the appearance (and in fact the reality) of this practice turning into nothing more than a paid business development arm is going to be difficult.
3 - Creating a practice with profoundly different metrics and management methods than the current Organic culture supports will be, let's just say, interesting.

Delivering on the promise (given all the above as well as the general challenges of doing true strategy work) is going to be very, very hard. And if you can't deliver on the promise you can't charge the rates and if you can't charge the rates you can't retain the talent and if you can't retain the talent you can't deliver on the promise.

I still think there is a huge opportunity here. And it seems like I'm not alone.
I'm just not buying that Organic can in this case be one of the rare examples of successfully migrating upstream.


Post a Comment

<< Home