Why indie agencies are prioritizing strategy

The pandemic forced agencies to embrace business thinking as entire industries shut down, according to a report by Agency Futures Index.

2020 was a rocky year, but independent agencies have been able to turn things around. 

Two-thirds (64%) of indie agencies said they are ahead in terms of revenues compared to this time last year, when the pandemic lockdowns were at their peak, according to a report by Agency Futures Index for Worldwide Partners Inc. (WPI).

Agencies that came out successful doubled down on their strategy practices as clients needed help moving their businesses online. Strategy was the most profitable service offering for one-third of agencies surveyed, followed by media planning and buying (16%), advertising (13%), digital and e-commerce (11%), content creation (7%) and social media (4%).

“Clients’ needs were not service-based as much as they were thinking-based,” said John Harris, president and CEO of WPI. “There was a need for business thinking, not just comms thinking.”

Independent agencies are also realizing they can get paid more for strategic thinking than executional tasks. 

Twenty-seven percent of independents see strategic advisory as the biggest opportunity for growth in 2021, followed by content production and distribution (20%), performance marketing (12%), data services (12%) and management consulting (6%).

“It's a race to the bottom if you [only] focus on services,” said Doug Baxter, founder and managing partner at Agency Futures. “The thing they get best paid for, and that clients value the most, is strategy.”

As indies focus on strategy, they’re also investing in talent. More than half of agencies surveyed said their primary investments have been in talent retention (22%) and acquisition (20%), compared to just 16% who are investing in new service offerings. 

“What's come out of this [pandemic] is its talent over tech,” Harris said. “[Brands] need great thinking to implement technology, or extract data from technology. So you're seeing that human component coming back.”

Project work on the rise

Indie agencies argue that they can move faster and be more flexible than holding companies, and that advantage helped them bounce back after the worst of the pandemic. 

While a majority of indies faced budget cuts in the first six to nine months of the pandemic, many reorganized around clients’ growing in-house operations to be leaner and more efficient without cutting too much staff. 

As holding companies slashed headcount, indies reinvested on senior talent and began hiring distributed, remote talent for executional tasks. Seventy-six percent of agencies surveyed plan to continue some form of remote work going forward to support this new distributed model.

“If you’re required to hit numbers, you will make the biggest reduction in senior talent because it costs more,” Harris said. “Indies did the opposite.”

Independent agencies also began shifting toward project work, which is less stable than retainer accounts, but often more profitable, Baxter said. More than half (58%) of agencies surveyed said they plan to make changes to their operating models to support this shift, including adopting performance pay models.

“By and large, every brief and pitch opportunity is on a project basis at the moment,” he said. “That's changing their business models and how they organize. They’re not tied to firm models but are elastic enough to move up and down as clients demand.”

Despite a brightening picture for indies, growth in the future isn’t as predictable as it once was. As a result, agencies are repositioning themselves, doubling down on thought leadership, solving for specific client challenges like e-commerce and going after new business more aggressively.

“We've entered the great age of uncertainty,” Baxter said. “In a project-based economy without the safety net of AOR relationships, it's much more difficult to see how you can achieve planned growth.”

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