My friend and colleague Shawn Callahan @unorder was working at the Cynefin Centre at IBM until he started his own business called Anecdote a few years ago.

One of the areas he focuses on is using story telling and listening as a way to drive strategic and cultural change within organisations and they are very successful with projects for companies all around the world.

We have spoken extensively on our Sunday walks about the idea of storytelling in advertising, but in the context of the Cynefin Framework, explained beautifully here by Shawn, storytelling has a much larger role and implication for marketers in strategic development in this transparent and connected world.

The distinction of simple, complicated, complex and chaotic provides an excellent framework for solving strategic marketing problems.

Too often marketing strategy is developed in the simple and complicated. When in actual fact marketing and advertising, as any marketing professional knows actually exist in the complex (and some may cynically say the chaotic).

What do I mean? Well how often have these happened to you:

1. Concept testing shows a communication piece has high scores and engagement only to deliver poor results
2. Past successful campaign strategies show unpredictable or highly variable results when repeated
3. Data analytics indicates potential market share values which appear achievable but are rarely realised

It is because we live and operate in complex systems such as markets, segments and categories where identifying a direct cause = effect is almost impossible and yet most of the processes we use to inform, or at worst make, these decisions are based on simple and at best complicated systems.

Rather than relying on defined and determinable cause = effect, complexity relies on test and learn methodologies where you had a stimulus or change to the system and look for desirable and non-desirable changes against predicted outcomes.

It has the ability to completely change the way marketers think and engage with the market. It also provides tools to work with the complexity of the market.

In what areas can you see the Cynefin Framework could help you in your marketing strategies? Lets discuss here by leaving a comment.

I was reflecting on the recent conversations I have had in regards to media agency remuneration, both globally as a strategic partner of the WFA and locally with our strategic partnership with the AANA, and thought that there are many parallels with my experience with financial advisers.

My personal experience with financial advisers has not been a happy one, but I have explored remuneration models that include commissions, retainer fees and performance fees and I have to say while none are perfect, some have definitely worked better than others.

Negotiation remuneration models for professional services can be like negotiating a maze

In the mid 1980s as a medical research scientist, before the introduction of compulsory superannuation, I engaged the services of a financial adviser who immediately sold me a superannuation policy. Over the coming years he sold me another and another and another. There was no financial transaction with him directly as he explained that the Insurance Company paid him a commission on the policies, much like the media commission system. The more I spent the more he was paid.

Then the Government introduced the Superannuation Guarantee in 1992, my employer at the time,  encouraged me to roll my super into the company fund which I did. It was at this time that the company appointed Financial Adviser informed me that the previous adviser had effectively robbed me as each time I wanted to increase my super contributions he opened a new policy to increase his commission rather than simply increasing the existing policy which would have yielded a smaller return to him. The impact on me was less superannuation contributions.

I continued to contribute to the company fund and transferred this to successive employers with the understanding that a fixed fee was paid to the adviser each year for their work, much like the labour based fee. The relationship was mechanical with no more input from the financial adviser than was paid for and certainly produced an unspectacular result.

In 2000 I established my own business and the Financial Adviser that had managed my superannuation over the past 8 years suggested that he could take on a larger role based on a combination of fee and performance success based on returns each year.

The relationship quickly deepened and become more encompassing with the Financial Adviser providing advice beyond superannuation to include property, family and testamentary trusts with all of the associated complexity. This was a boom time and the results were excellent and the Financial Adviser reaped the rewards of this growth on top of the fee.

This continued, but there were concerns that the investment strategy was high yield but high risk. At the time advice that the boom would continue were soon to be proven false and in 2008 the correction proved that the eight year growth strategy was flawed.

So what are the lessons?

The commission system provided an incentive to the adviser / agency to look for ways to maximise their return even at the expense of my long term performance and provided no incentive for them to be proactive beyond selling me more products.

The head hour fee based retainer model provided a level of service and attention from the adviser / agency but there was no incentive for managing performance or requirements. It became a very pedestrian relationship driven by the transactional nature of the remuneration.

The performance based remuneration model provided a high performance relationship, the the adviser / agency with proactive advice and subsequent growth. The important lesson was that the success metrics must be considered carefully as the focus on annual performance only was executed with an unacceptable high risk.

But certainly where you are investing significant amounts, it is important to achieve alignment where possible between the buyer and supplier and not just treat the relationship as a simple transaction of services.

In media and investments this is especially important where the ultimate sellers of the media / investment products are able to provide incentives much greater than the fee you are comfortable paying for those adviser /  agency services.

What remuneration models have worked for you in any sort of business / commercial relationship and why? Let me know here by leaving a comment.

This is a guest post by Stephan Argent - a member of the Marketing FIRST Forum, the global consulting collective co-founded by TrinityP3

When it comes to digital and “traditional” media, clients and agencies seem to have come to a chasm that can best be described as a “Digital Divide”.  It’s not good for clients. It’s not good for agencies.  And worst of all, it’s not good for consumers.

What’s the digital divide?

Some years ago, we had two types of communication described as “above” and “below” the line.  Then along came the thing called “digital” and we stuck our web designers in a corner and let them build websites and banners thinking they wouldn’t do any real damage.  After all, it was just a website, right?

But bit by bit, the bicycle and tattoo department (a quote from a former boss, by the way) started to create a dialogue with the consumer.  Consumers were able to buy stuff.  Send feedback.  Ask questions.  Express opinions.  Choose.  All kinds of typical marketing activities were now in near reach of digital resources.

And so the divide between “traditional” marketing and media, and digital came into view.

For now, let’s call it the D-M-Z or Digital Media Zone.

So in the D-M-Z we’ve got agencies scrambling to deliver online strategies, services, campaigns and solutions and clients screaming for strategies, solutions and campaign executions that address the full 360 perspective of their businesses.  At the same time, client based C suites are questioning their organization’s very DNA and trying to figure out whether or how to integrate marketing and digital initiatives, and whether the thing called Facebook belongs in PR or Marketing.

To be honest, it’s a shambles.

Nobody’s really stepped up to the plate with a cohesive plan to deal with the full range of communication tools that’s now on offer.  Very few are providing holistic thought leadership.  And agencies are still dividing and conquering – “Press one for traditional.  Two for digital.”  It makes no sense.

As an industry we’ve got to come up with a far more holistic approach to our marketing, digital and communications needs without creating silos along the way.  And that applies to both agencies and clients.

Clients need to look at more holistic roles that encompass the required communications skill-set.

I would argue the idea of a Chief Digital Officer, by way of example, is already an anachronism.  It was perhaps fine when we were stumbling around trying to create websites, but digital tools, whether we realize it or not, are now firmly entrenched in the role of Marketing.  We need to stop creating leadership digital roles and then leadership marketing roles that create a split in leadership.  Or have one dominate the other. CMO’s should now be armed with a deep digital skill-set as well as a full grasp  of how those digital tools can drive the business, generate insights, generate loyalty and generate profit.

Agencies need to step up too.

We need stop dividing out traditional and digital agencies (or department silos within agencies) and step up with a structure that’s going to help drive clients’ businesses.  Sure, there are agencies that have taken steps to “integrate” but do those agencies have leadership that fundamentally have digital DNA ingrained  in them?

Structural and organizational challenges aside, one of the key business tools agencies have to address is stripping the planning and briefing process back to its wires and creating something that’s a truly intelligent encapsulation of how to drive a client’s business.   A good example is the summation of the target market outlined in a planning or briefing document.   We’ll see demographics and psychographics, perhaps a persona or two and maybe an encapsulation of how we want them to react vs. how they’re reacting now.  But it’s not enough.  Where’s the broader ecosystem of influencers and reference points that help drive those decisions?    How is all that mapped into a strategy that can drive creative solutions across all media?

When I very first started in this business in England, at what was then Lowe & Howard-Spink, the planning and briefing process was masterful.  It needed to be.  Hundreds of hours of development time had gone into creating key questions that enabled breathtaking creative solutions.   But the world’s changed.  And that process doesn’t work any more.

Companies and clients have glossed over the planning process in a reactive scramble to get a brand presence in online and in social media so they appear digitally savvy with their customers.

Serious mistakes made by not planning before launching a social media campaign are painfully evident, yet many clients still don’t want to invest time and money to get it right the first time. Do a quick search on Nestle and baby formula on Facebook to see just how badly wrong social can go if you don’t get it right.

Yes, there are some evolutionary versions of the planning process  – but nowhere are there revolutionary versions of it which address the fundamental DNA questions clients  must ask as a matter of urgency.

So here are my top ten suggestions for evolving our business to where it needs to be:  A partnership between client and agency specifically for the purpose of driving that client’s business in the digital age:

1. Clients and agencies:  We need to stop thinking about “Digital” and “Traditional” as two separate entities.  They’re the same thing.  Stop creating silos and accept the D-M-Z is where your business is going to thrive if you set it up properly.
2. Everybody in your C suite, Marketing functions and chosen agency needs to get digital.  If they don’t, they need to be educated.  If they can’t get there or can’t operate effectively in the D-M-Z – you need to switch out for people who can.
3. Clients need to demand more sophisticated planning and briefing processes.  Agencies need to spend time putting real horsepower into developing those with a view to the end state being a truly 360 D-M-Z solution that encompasses the whole ecosystem.
4. Feeling Social? If you can’t stand the heat, don’t go in the kitchen – because you won’t get out!  Social strategies need to be planned out so they’re integrated into your company’s DNA, not bolted on as a marketing nice-to-have.
5. There’s no silver bullet, so avoid the “shiny object syndrome”.  The adoption of any new technology as the holy grail of solutions can’t exist alone.  If you decide you want to test QR codes in store for example, you’ve got make sure you’ve got the technical infrastructure and in-store training to back it up.
6. One of the keys to driving our business forward is “responsible experimentation”.  We’re in an industry that’s changing so rapidly, both clients and agencies need the elbow room to experiment with solutions and strategies in their own D-M-Zs.  And if the strategy needs adjustment along the way – so be it.
7. Hire smart Project Managers. Personally, Project Managers drive me nuts.  Always pushing timetables, GAANT charts and booking update meetings.  Regardless of how I might feel during the process, a great project manager is a golden asset in navigating through D-M-Zs and getting your project delivered.
8. No matter what digital solution you’re creating as part of your ongoing marketing initiatives, consider how it fits in to your broader marketing strategy and what its going to take to run, adjust and measure it.
9. No matter what technologies appear in future, The brand is still king.  Everything you do needs to be focused on the customer and reflect the core attributes of your brand.
10. Follow the money. I’m not suggesting that every initiative has to have a quantifiable R-O-I off the bat, but I am suggesting that agencies need to do more to focus on the client’s bottom line revenue and EBITDA targets.  And clients should expect no less of the agencies they partner with.

I know that no one except lawyers, and some procurement people enjoy reading contracts, but in fact contracts are interesting and important documents as they define the terms and conditions of a relationship between two parties.

My legal friends tell me that most litigation is due to the variations of interpretation of the language within the contracts and disagreement over the meaning of those interpretations and the consequences and implications.

Therefore imagine my surprise and horror when asked to review a current agency contract worth several million dollars which defined the scope of work of the agency as:

“To provide the strategic, creative and production implementation to fulfil the advertising requirements of the <company> as directed by the Marketing Department”.

While it is short and simple and could be seen as an excellent description of the services the agency is to provide, it is no “scope of work”.

In fact it is a particularly bad scope of work.

Why?

1. The scope of services to be provided is too broad – how can the agency possibly know what type of resources are required in an increasingly complex market place where general terms like strategy, creative and production can mean anything from advertising to experiential to digital to sales promotions and direct marketing.
2. No defined quantity in the scope – how can the agency resource the right level and mix of resources without understanding quantity and timing of the requirements. Will the Marketing Manager require few senior resources or more junior resources. And how do you resource for the peaks and the troughs in the marketing plan.
3. No correlation between the fee and the outputs – as the marketing requirement increases, how do you draw a correlation between the level, type, mix and cost of resources to deliver the increased scope. This is the primary failure of lack of defined scope.

So how do you define scope of work? Read on here.

There are many ways to define scope of work. These are the most basic requirements, but what do you use? Let me know by leaving a comment here.

The final day of the conference closed with a focus on the challenges shared by the CFO and the CMO, courtesy of IBM, the challenges of managing global marketing services and the on-going challenges of agency remuneration, or as the Americans insist on saying compensation.

The ANA Marketing Financial Management Conference 2012 was held at the Boca Raton Beach Resort & Spa, Boca Raton, Florida

The challenges of the CFO and the CMO

Ron Kline @rfk5 from IBM shared the findings of their recent 2011 IBM Global CMO Study, which I had seen several times before. More interesting was the paralells he pulled from the 2010 IBM Global CFO study.

Both CMO and CFO are taking a broader role in enterprise. The CFO is increasingly advising on all aspects of the business strategy and yet increasing feels under equipped in this role. Likewise the CMO is dealing with the broader remit caused by technology and the increasing channels, the fragmentation of audiences and the pressure for marketing accountability and ROI.

Both also suffer from the fact that organisations appear to rarely invest in the technology to provide up to date, real time data and analytics, with both in most cases relying on manual processes to provide this information. Clearly a huge insight for a technology solutions provider like IBM.

But from the CMO perspective, they are looking to answer this challenge by looking externally for help and assistance in addressing this shortfall. They just need to convince the CFO that the cost is justified and here enters procurement.

The challenges of managing global marketing services

Alan Rutherford, Global President of the IAA and chairman of consultancy group Axiology used the first part of his presentation pitching how to select a consultant.

But he made the point that in the increasingly diverse and complex marketing environment, with multiple cultural and political agendas, multiplying media channels, increased levels of governance and  accountability it is important to ensure that the quality and professionalism of the consultant matches or exceeds the relationships and transactions they are assessing.

He pointed out the low cost of entry for category consultants and the lack of rigour and structure in their methodology. Some consultants are known to use the agency’s own data as benchmarks back against the agency or to share the data of one client / agency relationship with many different clients.

The challenges of agency remuneration

David Beals presented the ANA Agency Compensation Survey which he has been associated with for many years, but last year it looked at Global arrangements for the first time and looked for differences and similarities with US practice.

The findings were that mostly the world was following a generally US centric approach with fee based payments, but that in some countries outside the US, like India, Japan etc there was a higher incidence of a combination of commission and fee.

One highlight was the fact that in 2 years the level of Value Based Compensation had risen from 0% to 4% showing the growing start of a trend in this area.

The discussion moved to to the general failure of performance based remuneration PBR and the fact that only 3% of Agency Holding Company revenue was composed on performance based payments.   The general consensus being that PBR is largely used as a stick to reduce agency fees, rather than a carrot and so was no incentive at all when used this way.

The ANA Marketing Financial Management Conference is a great annual opportunity to spend 3 days with 500 procurement, marketing, agency finance and consultants from the USA and increasingly overseas and to find out that everyone is facing the same challenges. But there is interesting progress and trends in many of the business challenges facing the industry.

This post also appears in AdNews