Digital Agency 2.0 - How to become a boutique agency out of the pipeline

In the business model of digital agencies there are problems that make this business not as profitable as it seems at first glance. I want to talk about the decision that is increasingly common in our market and wrap it in a methodology called the Growth Team. This is the approach we implemented in hopox .

Being a co-author of the hopox service and an evangelist of Agile & Lean Marketing in Russia, I was lucky to communicate with many web studios and digital agencies, to automate the process of working with them. There is something in common in how the processes are changing now and we can already talk about trends, but first let's write out the main problems that are relevant for most agencies in the Internet marketing market:

• Low-margin sales model of employee time , veiled or directly. Big salary costs, since the daily work of the agency is a set of proven, best and monotonous practices that are hidden in employees, for example, setting up a direct, creating a landing page, or maintaining groups in social networks. The “human factor” creates problems when scaling and there is a nonlinear dependence of the turnover and profits of the founder.
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• High-margin orders are unique in their implementation , they require the redistribution of resources, increased or absent team competencies, contain great risks, cannot be performed using a set of proven and best practices. For example, this is work with large clients, when all traditional practices have already been used, growth has slowed, and the customer requires more. In these examples, line / operating personnel may be useless.
  
  
• Customer's business is not ready for growth due to internet marketing. The reasons are sometimes trivial: the business does not pick up the phone or does not call back, there are no sales scripts, processes, CRM systems, but there are also deeper ones: the customer does not know his unit economy and cannot answer the question of how expensive it is to attract a client, does not know portrait of his client, or even angry in response to such questions. Customer training can be expensive, and trying to get into a business can be an ungrateful undertaking.
  
  
• No development for employees and founders . The use of standard practices makes the work routine. Often, over time, the effect of “protein in the wheel” melancholically covers the entire business.

How to jump out of the wheel? How to deal with high-margin interesting projects? How to communicate with the customer to be able to twist his business under the created processes? How to reduce the share of salaries in the company's turnover and create a scalable process of generating non-standard strategies?

Talk that the future of digital-agencies for consulting has been going on for a long time. Especially after the cancellation of the commission for advertising in Direct, how else can you earn on direct except for consulting?

I will tell you about a solution that is partially already applied in our market and is fully applied in the western. The methodology initially changed marketing departments in large Internet companies like Twitter, Dropbox or SkyScanner, highlighting the activities associated with the growth of product metrics and the company as a whole in a separate division and team. Thus, the concept of Growth Team and the position of VP of Growth, Head of Growth, etc., appeared for the first time.

At the center of the methodology is the formation and work of the Growth Team on testing growth hypotheses by short iterations. For our ear, it would be more usual to explain by combining Perfomance Marketing plus Agile. In world practice, this combination of three directions at once: Agile Marketing, Lean Startup and Data-Driven Marketing.

Projecting the Growth Team on Internet agencies, it may seem that we are creating an anti-crisis team for managing the Internet marketing of a customer. Perhaps it is. So, closer to the methodology.

Team Growth. The principle of operation and stages of implementation:

1. We form a Growth Team around each complex project from active employees of various departments of the agency, recruiting all the necessary expertise for the project into one team. The competencies missing in the agency can be easily replenished by calling an expert for hourly work or in a friendly way. If possible, the Growth Team should have an analyst (responsible for the data and project metrics) and a technical specialist. In the Team of Growth, there must be a representative of the customer, the customer, and better the founder of the business.

2. Set the time and period for the Growth Team meetings , once a week or two. Maybe even once a month, depends on the project and team resources, but it is important to remember that the length of the sprint greatly affects the growth rate. In fact, with periodic meetings we launch Agile Marketing, which in the manifesto states:

• Adaptive and iterative campaigns instead of voluminous and complex
• Flexible planning instead of hard
• Reactions to changes instead of following the plan
• Many small experiments instead of one big

3. Meeting of the Growth Team for planning the next sprint. If up to this point you have not found anything special in the methodology, now is the time to concentrate.

Growth Team Meeting Schedule

• Focusing on the objectives of a complex project. What is required to achieve in the medium and long term in terms of: turnover, number of applications, an increase in the average check, an increase in the group in social. networks. Also, focusing on dependent metrics that affect key metrics and goals. You just have to write them out and keep in mind in the next paragraph. It is important to understand that meetings are productive, it is necessary to discuss and operate with specific metrics and goals in numbers. This is where Perfomance Marketing or Data-Driven Marketing begins.
  
  
• Growth hypothesis generation. The entire Growth Team is discussing what actions, promotions, changes or additions in channels, in a product, in scripts, in an interface, in advertising slogans, in marketing tools, in a client's portrait, etc., should be done to change the selected metrics. We write down ideas in the form of hypotheses, they are also smart tasks, that is, we indicate not only the task, but also the expected effect for the selected metrics.
  
  This part is probably the most important in the methodology and is its grain, the secret sauce, the lever of efficiency of the whole methodology. Here, each team member manifests himself as an expert. The Expertise of the Growth Team is a multiplied examination of all its participants. To drive and generate hypotheses is an art, a skill that can be quickly mastered. Especially easy if there is a background in consulting or a coach. By the way, it happens that meetings turn into a coaching session for a customer, if growth problems are on his side.
  So, it is necessary to generate many different hypotheses, since the most interesting begin when all the obvious ones end - usually in the second ten. How to generate effective hypotheses can be read in the book “Lean Startup”. By the way, most of the methodology is from this book.
  
  
• We choose the most effective hypotheses. What is the most effective hypothesis is a subjective concept, so you can choose hypotheses by voting, by eye. It is important that all hypotheses must be implemented and tested before the next sprint, so you should not take too many hypotheses into the sprint.

In subsequent sprints, the first point of the meeting should be conclusions on the hypotheses of the previous sprint.

4. Realization of hypotheses by agency staff or at an outsourcing. Since the key in the methodology is consulting and the main check comes to the customer for consulting, you can entrust the execution of many hypotheses to proven partners or even the marketing specialists of the customer.

5. Collecting results. The hypothesis performer or analyst should collect the results of testing the hypotheses and relate them to the expectations.

6. Next Growth Team Meeting. With a similar consulting management scheme, the agency builds clear processes of interaction with the customer, interaction with key employees, and interaction with line employees or freelancers. The scheme of work with complex and more profitable projects is developed. The agency’s profit focus shifts from resale of employees to consulting services and business growth.

Benefits for the Digital Agency

• The transition from the sale of staff time to consulting, in a given process.
• Reduced payroll, part of the line / operating staff may be replaced by the work of proven freelancers;
• Reducing the human factor, as the Growth Team is a flexible entity, where the competencies of each overlap and can be easily supplemented;
• Systematic work with large clients and complex projects will not allow destroying the whole work of the agency due to the emergence of a non-standard, large customer;
• Increase the average check from the customer, by focusing on large customers;
• The new scheme of work with the customer makes it a member of your team. Short iterations, customer proximity and the ability to influence the business avoids the problems of misunderstanding, high expectations, unfounded claims;
• Constant customer training at meetings;
• Punching glass ceilings in complex projects;
• A new level of motivation for employees. Remember all the benefits of moving from waterflow to agile in development.
• Continuous development of employees.

Not all agencies are ready to move to a new type of marketing. There are two types of agencies in the market. The first type is easy to compare with the conveyor, which uses the same type practices. This pipeline is ready to meet the massive demand for Internet marketing, has the problems described at the beginning of the article and most often works according to a cascade model. The second type can be called “boutique” agencies, where customer solutions are individual, contain non-standard practices and often use the agile approach.

The transition from the first type of agency to the second will require changes in the company's internal philosophy and often the dismissal of inert employees. The most difficult problem is to combine the operating activities of the marketing department with a focus on growth. To solve this problem in world companies, over time, the marketing department and the growth department are divided. Initially, the Growth Team may consist of employees of the marketing department and devote some of their time to testing hypotheses.

Is the market, the customers, ready for such a variant of interaction with agencies? Probably, customers can also be divided into two types, depending on what type of agency they apply to. And here, most likely, the first type of agencies prepares and trains customers for the second.

Market Expert Comments:

Andrei Gavrikov, CEO at Kompleto:

“We have been working on this approach for almost 5 years, before that we were almost as much a classic web-studio and seo-office.

I had to rebuild the business completely. With such an approach it is really impossible to work on the conveyor - every project is a total immersion in the client’s business.
On average, it takes about a month and a half to study the primary business: segmentation of the target audience, research of competitors, study of the total demand generated on the Internet, collection of a complete semantic core, search for all points of contact with Central Asia, analysis of current Internet marketing and sales.

The team during this time begins to understand the business of the client, what is happening in the market. Of course, not as deep as the client himself understands. Therefore, it is very important for the client to have an adequate project manager interested in success. If the tasks are set in the format “well, you are experts, do something to us, just do not touch us” - this is obviously a failure.

After all the data have been collected, we develop a strategy, and then the implementation phase begins.

The team consists of an account manager, a project manager and several specialists in advertising channels. Project managers have the level of digital directors - they grew out of specialists and know not in words what to do and how to achieve results as quickly and efficiently as possible. Each team leads no more than 3 projects.

Projects we lead in Jira. We tried a bunch of systems and stopped at this one. Before starting the project, we break it down into the smallest tasks and subtasks. Pass weekly planning meetings. I used to have to do a fly in the morning for 5 minutes, but now the need for this has disappeared.

I see how this model is becoming more and more popular in the market. This is certainly not a panacea and is not applicable to all. ”

Alexey Yozhikov, Director of Development for Ruward:

“If we talk about Ruward, we are still far from the orderliness of management and growth, although we have been deliberately working on it since the beginning of 2016. But, still not knowing about the approach of the Growth Team, I began to test a similar methodology on consulting projects. In general, he is very much in tune with the picture of the world of Nassim Taleb, the “fitting out” and the “rod strategy”, which I have constantly used since I read his “Anti-fragility”.

An important point that I have already received from personal experience is that the management of the Marketing Team and the Growth Team cannot be combined in one person. In spite of the intersections, in no case can you do a marketing specialist for a company engaged in turnover, the head of the Growth Team - the tasks of testing the hypotheses will be buried under the routine in the best traditions of "first doing urgent, and then important."

In general, I categorically join the voices that promote the model of sustainable development and continuous testing of hypotheses. ”

Alexander Bukurov, director of digital agency Webpraktik:

“The growth team idea is very close to us. Projects in which we have our own “growth teams” we call client digitization. They are really high-margin and promising, but for such a concept to work, several factors must coincide.

First, the client itself must be prepared for continuous flexible changes. Not in words at the first meeting, but in deeds. In practice, it often happens that the “wave of transformations” is quickly fading, hitting the reality of the company. And without active movement, this concept does not bring results: either we run everything or it makes no sense. To change this situation, the agency must have enough weight and access to the first person. You need to really change the client from the inside, right up to global changes in business processes and the dismissal of individual employees. To put it mildly, not all customers are ready to go for it. And you need to go there in several stages: at the beginning to grow the client to a certain level, to earn trust and then start the digitization project.

Secondly, in order for such an approach to work in full force, it is necessary to change the business agencies from the inside as well. Quality standards, business processes, KPIs of employees, etc., are changing. And all this is for a relatively small number of clients in a highly competitive market.

So you have to sit on two chairs. Subconsciously, you understand that you are wrong and you need to follow the path of high-margin business. But you are afraid of rejecting the old approach and a large number of clients ... ”

Alexander Datsenko, executive director of "Clover Lab":

“The use of growth teams is an evolution in the development of Internet marketing.
It resembles the stages of the seller’s development: at first he just sells, then he begins to think and learn from his mistakes, then he keeps a notebook where he carefully writes down the entire chronology of transactions, then connects the CRM system and ip telephony and begins work on LTV. Further only teleportation and leaps in time.

Judging by our practice, when a client’s business grows and its owner begins to purposefully engage in internet marketing, he gradually goes from understanding simple tools (contextual advertising, one-page websites, target, various metrics) to introducing more complex services - end-to-end analytics, CRM systems , Call Tracking, etc.

The next stage is the organization of the growth team and effective work on growth hypotheses.

Someone starts to get used to everything earlier, someone later. This is what we call smart marketing.

Happiness requires a growth team, Agile Marketing methodology, organization of a hypothesis test and a little time. This approach is the next level of Internet marketing. ”

Alexander Kovalenko, Director of the Bureau of Correction:

“The transition to this method of working with a customer leads to changes not only in the company's profits, but also in the work of the team itself and the manager in particular.

The close work of the customer and the team somehow brings together all parties. After all, the customer becomes not just a “person for whom routine tasks are performed”, but a member of a team that, on an equal basis, generates and tests set hypotheses. For the customer, the agency team becomes not an abstract group of people who “promote something there”, but a part of its business, which gives a lot of effort to its business and sales growth, profits. ”

Konstantin Oreshnikov, Product Manager at Digital Agency Another Point:

“We have long been faced with the nuances of working with complex projects. The fact that the article is called the growth team, we use the last few years. In my opinion, this is one of the most optimal solutions both in terms of optimizing the costs of the agency business, and improving the quality of implemented projects. Recently, hopox helps in the work, greatly simplifies the testing of hypotheses due to its multi-channel nature . ”

Alexander Vyushkov, Director of LidMashiny:

“Tedious and not interesting article. You want to say about the product, talk about the product. ”