Your Four Advantages Over an In-House Department

In-house creative departments aren't going anywhere, so David wants agencies to be mindful of the unique value they bring to the projects for which their clients still need them.

Sketchnote by Emily Mills

Transcript

Blair Enns: David, in May of 2019, over two years ago, we recorded an episode called, selling to clients with in-house resources. Today, we're going to go deeper into that. I'm going to interview you on your suggested topic here, your four advantages over an in-house department, but before I let you speak, you have an alternative title that made me grin. What's the alternative title.

David C. Baker: Four ways to crush in-house departments, but this was one of those cases where I didn't have your-

Blair: Discerning eye.

David: -such valuable input on titles. How would you title this thing, because this is a pretty boring title really?

Blair: Well, I'm interested in the thoughts behind it. Do we need to crush in-house departments?

David: No. I'm kidding, we don't. In fact, I think that's the way we used to think. It didn't serve us well at all. They were the enemy to us, but we were the enemy to them too, because they didn't want the work. They wanted the fun stuff. Then while I'm the big stuff like back when he used to do annual reports, that got shipped out to you for $230,000, and they're just shaking their heads, those days are gone. I haven't heard any rumblings in the marketplace about that competition stain, but there still are some old-timers in the field that remember it and maybe have a little bit of a roots in that.

Blair: Yes. I think as we've talked about before, I think there's a certain age cutoff and I'm slightly above it, but I'm trying real hard to fit myself into the cohort beneath. That is at some point, people younger than us and maybe the cutoff is around 40 or somewhere or maybe it's not there I'm just imagining it. At some point people understand that it's just a more cooperative world and it's not so zero-sum. I think that better way and probably more accurate way to look at this is departments are here to stay and we've got to find a way to work together.

The point of this episode is let's understand what advantages we bring to the table, and that's going to help us understand where we can add value and maybe some areas where we need to really just see over to the in-house departments. You called it shit work. I used to refer the stuff that I didn't want to do in the business, I would call it the shit work. Then somebody said to me, you can't call it that it's only shit work to you, other people love that stuff.

David: Yes. Wouldn't a lot of the listeners here appreciate the role that in-house departments played. They're doing things that the agencies don't want to do sometimes. They're also helping to build consensus internally and also give away secret information to help wax the floor is a little bit, so I agree. I shouldn't say shit work. I guess I'm in a little bit of crazy, but this could get dangerous, I would say that.

Blair: Oh, excellent. These are the best ones. Okay. Let's start by. You've got some sort of taxonomy of clients in terms of how they think about or use in-house resources.

David: I think the shortcut here is that there are broadly speaking, obviously lots of exceptions, but broadly speaking, there are three kinds of in-house departments. I think it's useful to start by thinking about these different types of in-house departments and what implications those brings. First kind is the big fortune 5,000 client that doesn't have any in-house department at all.

They really need you and because there's no in-house department, there's no middle person here. You are working usually with the decision-makers, so large fortune 5,000, they have no in-house department, they're used to using you, those are great clients. Second type would be the big clients who have a small department, or they could even be mid-size companies that have a small department. What I see is the small departments are between one and five people and they really need you too, because there's just a lot of stuff they can't do.

A lot of levels, they can't speak to a pie because they just don't have the respect that you have as an outsider. The key there is to work with those departments and not be refused access to decision-makers. If you're working for a company that has a one to five person in-house department, you can't afford to be roadblocked right there. You have to be connected to people who are above that department and who are the internal clients. That's the second.

The third, which is increasingly becoming the case, is the large internal department, so six to 100, I've worked with some clients that have 400 people in their marketing department, and those are that's anybody's guess, the stakes are really high. You almost need to be a bigger firm or you're one of eight. You need to be able to speak at those board levels conferences. You need to defend, you also need to be very confident about your fees because otherwise, they'll just run you over, all the procurement stuff we've talked about. No department, small department, or big department, and there's a future for you with all of these, but you have to play the game a little bit differently. How do you hold your own?

Blair: I was going to ask you about which of these is better. It doesn't matter. Your relationship is whatever it is. You just have to find your place in it. Is that accurate?

David: Yes, I think so. I would say if you were at asking that question of one of the big ad agency holding company members, they would probably only want to work for the last ones, the ones with really big internal departments or maybe no department at all. I think for our clients, for our listeners, I would say the best clients are the ones that have a small department. I need to think more about that. I haven't thought too much about that question, but in my experience, when I look back anecdotally at the kind of best client relationships, it's not the ones who have big departments or no departments, but they have a small department. Have you thought about?

Blair: No. As I'm thinking about it now, I don't know that I see an advantage. I think your point about the middle and the small department, one to five, as long as you still have access to senior decision-makers, it seems to me to be the key for both the middle and the large. Although with the largest ones, you're not, you're going to have access to the people at the top of that department.

There are marketing departments and we don't think of marketing department typically, or at least I don't, as in-house resources. It's when they have creative developers,

David: Video.

Blair: Yes, that's when you start to think of these are in-house resources that are competing with us. Okay. Again, the topic is your four advantages over an in-house department. Judging by the title, there are four of them. Where do you want to start? I'm sharp today, baby. [chuckles]

David: How could I ever find a more perceptive podcast partner? The way you pick shit up is amazing.

Blair: I've laid the trap because you've miscounted, they're actually five.

David: No.

Blair: Just kidding. Let's go.

David: All right. Don't feel the need to jump into any other part of our discussion today, okay? Feel free to just take a nap. All right. The first one is positioning. We've said that word a million times, people are really tired of hearing it, but I'm going to take a different approach on this. We're talking about the four advantages you have, the first one, not in any particular order, but the first one I want to talk about is positioning. I am not talking about your public positioning. I am talking about whether you have taken advantage of being in front of many clients, where similar things happen and you've noticed those patterns and you apply them to your work. That is happening.

That pattern matching is happening by some firms who are very poorly positioned but they've seen this before. It's also not happening by firms who are very well positioned in some cases. A lot of people stop there, they figure out what's the right positioning, but it doesn't yield better work, it just yields a better marketing plan. I'm talking about better work. I'm talking about the pattern matching that comes because you have seen this train before and you know where it's headed and you know how to get it back on track. That's what I mean by positioning.

They're sitting there, they know everything about their company. I don't think you should promise to know more about their company than they do. I hear that silly promise a lot.

What you should promise is that you're going to know more about their company than any other outside advisor, but you're never going to know more than they do, but you do know a lot about other companies that are like theirs, whether it's vertical or horizontal positioning and they are hungry for that stuff. They're always asking you, "Hey, what do you find out there about this?" That's the stuff you bring to the table that they simply cannot do because their competitors are just not going to be that open with them. That's the first one.

Blair: As you're saying that, I'm thinking that's a great explanation of why branding for X, for say vertical market is not really a positioning. Because you do branding for a vertical. I don't know that there are patterns to spot in branding in a vertical. There are patterns to spot across multiple verticals, I suppose.

David: If you say we focus in healthcare, well, okay, now you're 20% of the GP, that's not very narrow. You could start to pick up a lot of patterns that is narrower than that. Or just simply approaching your work very differently. Asking very different questions and thinking we're doing too much of this start-and-stop projects, we're not thinking enough about how our work for this client impacts our work for this client. It's happening accidentally, but we're not intentionally building up layer-by-layer like reverse-peeling an onion insight, that results from our position decisions. That's another way to look at it.

Blair: You're saying your first advantage that you have over the in host department, you call it positioning but I have to admit when I read it, I didn't quite understand it until you explained it. What you're really saying here is you're bringing a point of view that you've amassed from working with a bunch of different firms like this one.

David: Yes, right?

Blair: You are not the expert on this firm, but you have some category. If you're positioned focused in the category, you have some experience in working with-- You're seeing broader patterns of whatever problem we, the client, might be facing at any one time.

David: Yes, exactly.

Blair: You're bringing that broader experience to bear.

David: You're an experienced advisor. You're not just an advisor. We've talked so much about position. I probably don't need to explain that and really, the point is it's beyond public positioning. You've seen this so much. You're a conversational AI firm and you've seen the typical problems to integrate this across seven silos at these B2C companies. You can speak to that out of the gate which they can't do. All they can speak to is what they are faced with and they can't see it in a bigger context.

Blair: I'm imagining an agency owner who needs to hire a management consultant to help with like pick an issue some HR issue or maybe it's a profitability issue. They could go hire any number of management consultants or they could hire you and if they hire you, one of the things you bring to the table is and I'm sure you get asked this a lot is, what do you see in other firms like ours? That pattern matching across the category our listeners need to understand that what you bring to the table in this situation.

While your in-house resources against which you're competing, it might have more depth of knowledge about what or how things work in this company. They don't have the breadth across the category. They can't bring to bear this point of view on well here's what a bunch of companies in this category are doing, here are the common mistakes, here the areas that most progressive or advanced companies are beginning to explore, here's some areas where these companies are getting into trouble.

David: Yes and that's why it's so important that is viewed as a partnership. Because all the other things that people are doing, some of those apply and some don't internally or they've tried some of those things or there're some unique constraints or political or money or something like that or regulatory. That's why it's so important for you to have a partnership, but recognize how valuable your half of that partnership is.

Blair: Yes. You would see not only the patterns, you would have some filtering mechanism for understanding which of these patterns apply to this client's business and which don't.

David: Yes. It's a feedback loop where you just get smarter and smarter and more useful to your clients.

Blair: Okay. First advantage is your positioning as an expert in this space it's not an expert in the client's business but you see patterns in similar types of businesses and you bring those patterns to bear in your role as an outside advisor and then your second you've got courageous objectivity.

David: Yes. In the last book I wrote The Business of Expertise — ding ding, a little push for that. You were wondering how long it takes me to. There's an illustration in there where you have the client inside their own jar and they're trying to twist their neck to read the label that's on the outside of the jar but they're inside the jar. That's exactly where your clients are in that they can't read the label from the outside and so what you bring to the table is this observational power, that simply is impossible from the client's vantage point.

Now, that's the first half of this courageous objectivity. That's the objectivity part. You also have to be courageous or it's not all that useful. You have to be able to speak to their situation based on your external perspective. Even if they could read the label from the outside, they seldom can bring that courageous objectivity to the table. Because part of the incentive system that makes these fortune five thousands work, is the notion of teamwork. There's only so much you can press the envelope until you cross a boundary where they don't think you're a team member anymore but you're just antagonistic.

There are many conversations you've had where you have said something in a presentation to your client. Later on a break quietly, somebody who works at the company comes up to you and says, you know what? I've been saying that same thing for three years but they haven't been listening to me. It wasn't an issue of objectivity at that point, it was simply an issue of listening to you differently and then maybe the way you say it.

There are a lot of realizations that occur at your clients that have to go unexpressed because they still need to retain this label of being a team player or their advancement slows down. It's the courageous up to activities, seeing things from the outside, and having the courage to state them because what's at stake for you it's just not as good. In fact, what's at stake, if you don't speak to those things courageously; you're probably not going to be listened to. Part of your job security is to be a truth-teller in that situation, even though it may feel uncomfortable.

Blair: That's a great way to put it. I come back a lot to the definition of creativity that I really like, which is creativity is the ability to see, to bring novel perspectives to a problem. If you think of that, if you are a creative person or a creative firm, that's your superpower. You combine these two things, this outside perspective, which is the objectivity that you talked about, and the fact that you have this ability to think about things differently from the get-go. You have this doubled advantage, you can see things that others cannot, and then you've married to that the requirement to be courageous, to be a truth-teller. I think that's a powerful and one without the other isn't nearly as meaningful or as powerful.

David: This, I think highlights something that I know you've been thinking a lot about, and that's what makes an effective account person. How does somebody grow an account? I can tell you that an order taker who's sitting in the am role is not going to be a-- They could be objective, but they're not going to be courageous about that. That just highlights the importance of somebody who can not only see but also speak to something without offense.

Blair: We're talking about your four advantages over an in-house department. Advantage number one was your positioning and the point of view that you gained from that positioning. Advantage number two was your courageous objectivity. What is advantage number three?

David: It's really nimbleness. I don't have as much to say about this one, but I want to make sure that people don't misread that as speed to get things done. Because even though there is some element of the value of getting things done quickly and you certainly can work faster than they can. I'm really nervous about hanging my hat on that one. I really mean nimbleness, I don't mean speed. By nimbleness here I mean your ability to change direction quickly, not so much to get things done quickly but to change direction quickly.

They have to overthink things. This is very much like the way the sausage is made in the political world. The fact that it seems so inefficient is what protects us all from stupid laws. Even though they still make it through in the corporate world, they really have to get a lot of approvals. They have to overthink things. The whole idea of MVP, a minimally viable product. They don't even know what that means in that world. You can turn on a dime and at many times in the relationship, this will be the most valuable thing they get from you is your flexibility.

That's why I think it's important to think about the service offering side in a way that you can be flexible. What I mean by that is the right kind of people that don't require all kinds of boundaries working on staff. It might mean having a stable base of contractors who are happy to pick up a short job and do something in the evenings or whatever that means. I just think this nimble is important. There is not much nimbleness at that level. In fact, that's what attracts people to that world is the lack of nimbleness. This is an advantage for you. You're a small ship you can turn quickly. That's the third one.

Blair: That's primarily in a relationship where you're dealing with the larger companies. As they get larger, there's more bureaucracy and as entrepreneurs and creative people, we tend to look at that word negatively. I still think of it mostly as negative, but there's a reason why we have bureaucracy. It slows things down. You think of a government, it inhibits the likelihood of any one individual making a mistake that will have a catastrophic effect on a whole bunch of us.

It's hard to do things so you get these larger companies that have a more bureaucratic culture and they need to move quicker. They can't do it in-house. They look to you and there's something about your size and probably your culture too. Is that what you're saying, that allows you to move more nimbly?

David: Yes, absolutely. They're the giant cruiser, giant cruise ship, and you are the little battleship. There's a lot of times when you're just not going to bring in a firepower, but there are a lot of times when they really need you to respond Because you can turn quickly. This is not the most important of these four. It's also one that goes without saying, I just want to make sure that you're able to talk about this and able to think about it. That's why I'm really in favor of not putting so much system in place so that it feels like a big company. Leave it a little bit looser, leave it more flexible leave it a little bit more fun. This nimbleness thing is not the most important, but it is an element of why they want to work with you.

Blair: When I think of my idea of The Inofficiency Principle, which is that innovation and efficiency are posable objectives, you can't increase one without decreasing the other. I think about this and I think of a large efficiency-seeking organization has a moment where it's like we've got to innovate on something and they just don't have the capacity to do that because culturally, the organization is way out towards the efficiency-seeking out of the spectrum.

In theory, I'm just thinking out loud here, in theory, they would look to you or firms like yours, outside firms that are more entrepreneurial, are more nimble, are more innovative and all three of those things are related to give them that shot of innovation that they wouldn't be able to pull off so quickly or adroitly in-house.

David: If we have this need for innovation, you're going to jump to it by tomorrow afternoon, they're going to put a plan together about how to be flexible. That's the difference. [chuckles]

Blair: I don't want to belabor this point, but it's just springing all these different thoughts. When companies get larger, often, they give up on R&D, pharmaceuticals, in particular, comes to mind. I don't know why, but I'm sure there are many other categories. When they get really big, it actually becomes cheaper to buy other companies than it is to actually do your own R&D.

In some sense, I don't know why, but I see this parallel where large companies, when they need that nimbleness, that quick thinking, let's pivot quickly, et cetera. I can see how that expertise just cannot reside internally. You would have to go get it through your external partners, your creative marketing, digital agencies.

David: I think that is exactly right. The corollary to that is that some of the ideas that you give them, most of them will probably never see the light of day, but what actually does happen, the innovation that does happen wouldn't occur without those initial steps with you. You're impacting that, even though it doesn't look like it. I think the way you've described it is exactly right.

I think that stuff needs to be talked about more and you and I have talked a lot about process, which makes everything more predictable and drawn out, but there's an asterisk there about how quickly we can respond nimbly to something that comes up. I don't know that you can talk too much about that. I think it's just, when you have the opportunity to do it, they're going to see it very quickly, even though it wouldn't have hit them if you described this ahead of the time when they actually needed it.

Blair: I'm looking at your first three advantages that we've covered. I'm just combining them in my mind. I'm thinking of a situation back in my career, where a guy I worked for, president of an agency, reached out to the president of a big publicly traded client that we had, and basically said, I'm seeing these patterns in other spaces. I know you've got a problem. He could see the patterns from the positioning, number one. Two, he brought out within himself, this courageous objectivity, and he brought his point to bear.

He basically said, hire us to help you on this. The guy didn't in the end, we were already engaged to do something else, but he was so appreciative of it. This was the CEO of the company that we didn't really have regular access to, but he was really appreciative of the outreach. You think of what were his alternatives in that moment where his internal people, A, going to see the broader patterns, B, speak up and C, have the ability to execute nimbly on what they thought should be done? No.

David: Right. I think there's so much there. I don't know. Maybe we should talk more about that at some point. Also, if we tie this to pricing, when they have a need for innovation, which should exist all the time. When there's some special call for it, there is enough pressure behind this call to spend money. There's something happening. There's some justification to spend a little bit more money than normal. This can be very highly paid work as well because of its urgency.

Blair: All right. The fourth on your list of four advantages you have over an in-house department is talent. I love this one and there's some more depth here than I initially considered. Do you want to explain this one to us?

David: Yes, in all fairness. I never really thought about this until you brought it up during one of our earlier recordings. I've been thinking about it since then. Is like, "Oh, yes. I never really thought about that." The kind of people in the past, the kind of people that will work for an in-house department, and the ones who would work for an independent private firm, were very different, and there was very little crossover.

There's now more crossover than before, but it's still attracting certain kinds of people. What you mentioned back then that's really got me thinking is this idea that there are certain people that a big client has access to at an independent private agency that they would never have access to because those people would never work for them. You could think of some copywriter or some crazy software engineer or whatever, and they just would never work for them. I think this highlights the fact that your company is made up of specific people.

There's some element of who those people are, that draws them to your world, not just to your firm, but to the fact that it's not on the client-side, I don't really know how to sell this. I'm not even suggesting you put these four things on your website, I'm just saying, in your mind, always bring this up, always think about it to yourself. This last one is really interesting to think about because it should impact the kind of people you look for.

Not everybody you have working for you should be only suitable for working in an independent firm. That'll be a lot strange people. It should be an element of this because if you could picture them going to work for IBM or something, how are you going to match that salary, it's also related to money too, these people need to be working for you, not just because of the money and the culture and so on but because they get to do things that they would not get to do on the client-side. That is a competitive advantage for you.

Blair: One of the things I love about this business that you and I serve is it's just home to all the freaks in the weirdos. I live in this little remote mountain village in the middle of nowhere and one of the things I think about all the time about this place is if you feel like you don't have a home anywhere else in the world, you probably belong here. I feel the same way both the creative industry and the independent agency in particular, even within the creative firms space. I've heard stories of firms gets bought by a holding company, I'm out, people just leave, there's no way I'm going to work for a bigger ad agency or company that owns an ad agency.

The first agency I ever worked in, it was owned by a really conservative owner and he had this thought one day and it was before I arrived. His thought was, I think everybody should wear ties. Then somebody on his team said, well, you own the firm, if you want everybody to wear ties, you just tell everybody they've got to workwear ties, so he passed this law.

[laughter]

Immediately. It was a small firm, I think it was like 20 people in the firm. The next day, two people in the creative department quit. "Good for them."

David: Even the bookkeepers are interesting in this field and that's not true anywhere else.

[laughter]

Blair: Again, back to this idea of The Inofficiency Principle is that is a cultural thing. Culture is the answer to the question like what do we do when nobody's looking? I forget who I stole that from, maybe it was Seth Godin, I don't know, but you have an understanding from the culture, how we decide on these certain decisions in certain situations. In an efficiency-seeking culture, we're not taking a lot of risks. We don't incur a lot of waste.

We do things as quickly and as wastelessly - is that the word I'm looking for - as possible. But in an independent, creative firm, it's like we don't think about that we rebel against doing our timesheets if there are timesheets at all, and it attracts people with a high propensity for risk. I'm reading your notes here rebellious risk-takers, hungry learners never satisfied.

If I own an efficiency-seeking organization, and I, all of a sudden, need some risk-takers to move quickly to think innovatively, et cetera, I just don't have that talent internally because if I ever had the talent, they were either assimilated, I rewired their neurons through the culture or they left. The only way I'm going to go get that type of talent. If I can hire that type of talent, I'm going to kill them, I'm going to make them like everybody else. There isn't really a home for that type of talent in a large efficiency-seeking organization. If I'm the CEO of that company, when I need access to that talent, I have to accept that I've got to go hire an independent firm to bring it to me.

David: If you're trying to hire those people who are going to be the rebellious extra time thinkers and non-conformists, then don't come whining to me when they're hard to manage to because that's who they are.

[laughter]

Blair: Your name is just on a desk made out of Lego.

David: [chuckles] Not wearing a tie, and they're not going to do timesheets, you can have it both ways.

Blair: Casual Fridays does not mean drunk.

David: There's no new information in here. I think it's interesting to just take a pause here and say keep in mind the advantages and play on these things as you talk a new business or you push back on clients and all that stuff.

Blair: If our podcast had a positioning statement it might be, "There's no new information in here."

David: [chuckles] Yes.

Blair: Okay, let me recap. We've been talking about your four advantages over an in-house department. Advantage number one is your positioning or the benefits of your positioning, and that's the ability to match patterns and bring a point of view on what others in the space are doing. Advantage number two is your courageous objectivity and as you pointed out, David, it's got to be both. You've got this objectivity from being an outside observer, but you have to bring the courage. Advantage number three is your nimbleness, your ability to pivot and change direction.

As you pointed out, it's not so much about speed, but willingness and ability to change. Advantage number four is the talent. You are able to hire and retain the freaky people that do all of the cool magic and it's a lot harder for a client to be able to do that. This is a really good topic. I know you had your doubts before we pressed record about whether there is enough here, the nimbleness in particular, where I think you felt you just wanted to just go over fairly quickly. I hadn't thought about it all that deeply before. I think there's something profound there that as your clients grow larger, they lose that ability to be nimble and you can be a provider of that.

David: Yes. This has been fun. Good discussion, sir.

Blair: Yes. Thanks, David.