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The aggregation of marginal losses

The aggregation of marginal losses
David Meikle, author/founder of How to Buy a Gorilla, on what the advertising industry can learn from the strategy of the British Cycling team.

Many have been inspired by the strategy developed by Dave Brailsford, General Manager and Performance Director for Team Sky (Great Britain’s professional cycling team): 'the aggregation of marginal gains'. Brailsford attributes Bradley Wiggins’ first ever British win of the Tour de France to this strategy.

But the aggregation of small margins can be just as useful a tool to understand why significant problems have arisen, too. While Kingston Smith have reported the lowest ever profits of their sample of ad agencies, we must recognise that there wasn’t one single event that has led us to this situation, it has been the aggregation of marginal losses over a long period of time.

Much like the apocryphal frog that only knows to leap out of boiling water once plunged in (but can be totally poached if the temperature increases gradually) the advertising business has had the heat turned up further and further to a point where, I think many would agree, had the heat been felt suddenly it would have been unanimously declared intolerable.

But as much as the aggregation of marginal gains are almost imperceptible, so too have been the aggregation of marginal losses. Consequently, there has been less impetus for radical change. As Milton Friedman put it: “Only a crisis - actual or perceived - produces real change.” And as much as these marginal losses have been painful at times, they haven’t felt like a crisis because they took time. Over decades, agencies have reduced their support-staff resources, increased their ratios of people per square metre, dropped many perks, moved to business districts with lower rent and rates, let alone been beaten down fees for client facing and productive roles in resource plans, such that the advertising business is taking too much of the strain of a seemingly global drive to get more for less. Agency employer brands suffers, thus the attraction and retention of talent suffers, and so agency value suffers. But why is this not seen as a crisis - actual or perceived?

It ought to be.

The organisers of the Business Growth Conference on July 5th perceive the crisis. Pitch frequency is high, there’s an increasing trend away from retainers and toward project-based fees, and the agency world will only suffer more if we don’t start turning marginal losses into marginal gains.

At the conference I will be presenting an overview of my new model for clients and agencies from my forthcoming book How to Buy a Gorilla. Among others, I will be in the esteemed company of Blair Enns, new business guru and author of the Win Without Pitching Manifesto, and Tim Williams, master of pricing strategy and founder of Ignition Consulting.

The challenge for agency leadership is to perceive the current crisis and bridge the knowing-doing gap - do lots of small things differently - and the Business Growth Conference will be there to help. Take the first step and we’ll see you on the 5th.

David Meikle is the author/founder of How to Buy a Gorilla.

The IPA’s Business Growth Conference will reveal and discuss the right commercial behaviours you need to deliver business success. Book your tickets here. Join the coversation on social media #IPACommercial.

Last updated 31/05/2017

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