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Advertising industry under disruption

Advertising industry’s voluntary interest body, Zimbabwe Association of Accredited Practitioners in Advertising (Zaapa), through its chairperson, has all but confirmed what we have always known was going on — Zimbabwe’s advertising industry is under disruptive attack. Nearly two years ago, this column, in its introductory articles on the phenomenon of disruptive innovation, warned about the disruptive forces that were sweeping through the advertising industry.

The Human Capital Telescope by Brett Chulu

Horse’s mouth

The chairperson of Zaapa, Praxedes Dzangare, in a recent interview published in the media, lamented: “Digital advertising is killing conventional advertising. We have companies using bulk messages on social media. Some are using WhatsApp and others are on Facebook. This has rendered conventional advertising redundant. Technology has taken over in the advertising industry. If someone has a laptop and can design he/she sets up an advertising agency.”

Her lamentation continues: “We have every Tom, Dick and Harry setting up advertising agencies. We now have one-man advertising agencies and briefcase agencies. This is not good for the industry because the agencies compromise ethics and the general code of conduct.”

This pretty sums up the dynamics and effects of disruption. Briefly, we will dissect Zaapa chairperson’s statement to pinpoint the salient forces buoying the disruption mechanism in Zimbabwe’s advertising industry.

Disruptive innovation, in its classical form always begins as “substandard” products despised by the top-end customers of the top firms in an industry. Advertising industry strategists, especially those from established or big-name agencies, need to be warned of the danger of classifying advertising products/services into standard and substandard based on industry or big-ticket customers’ consensus. Apart from illegal and unethical practices that threaten healthy and safety, quality is in the eyes of the customer.

Disruptive innovators are smart chaps —they will not initially gun after your prized big-spending clients. Instead, when they start, they either choose to go after your worst clients, the ones you are happy to offload or woo in completely new clients.

Forced standards will backfire

It would be a very grave mistake if advertising industry strategists resort to precluding new players from participating in the advertising industry through requiring them to be members of an accredited standards body. If the real reason is to enforce ethical standards, fair and fine. If the ulterior motive is to force members not to drop their agency fees below certain levels, that will not save the advertising industry from disruption.

In fact, such a move will accelerate disruption. What this will do, is to strengthen the bargaining power of big-spending clients. Big-spending clients will be presented with the knowledge that services can be obtained at much lower prices. That will set in motion a process that will result in the disaggregation of services. Big-spending clients will slice off some of the activities from big-name advertising agencies and give them to small-name emerging agencies.

Big-name agencies rely on solid reputations or brands to levy premium agency fees. That means that even fairly standard activities that can be done by “every Dick, Tom and Mary” at much reduced fees will be billed at premium rates. In an economic environment where demand for products is depressed by lack of disposable incomes, even big-spenders are facing liquidity problems.

It is not wishful thinking that these may be forced to look closely at their advertising budgets and instruct their marketing heads to get more for less. One way of getting more for less is to lope off some activities from existing advertising agencies and do them internally or give them to emerging agencies that may do a good-enough job at much reduced fees. This is a stark prospect facing the advertising industry.

Legislation and ganging up against disruptors to squeeze them out of business has been known to fail dismally. Where local strategists normally err is to assume that all disruptors are fly-by-night pretenders. They miss a key trait of disruption; disruption is not an event — it is a process. These so-disparagingly labelled “fly-by-night” agencies will with time improve their services to become good-enough for big-ticket companies. They will fly past big-name agencies on the basis of maintaining low price points while delivering services that meet the minimum expectations of big- ticket clients.

What’s really happening

The greatest threat to advertising incumbents comes from their semi-skilled and skilled who are willing to charge clients far less than agencies. Technology enables that by enabling low-cost models to be viable.

In search of improvements in income, some operational employees such as designers from the older agencies leave their agencies to “do their own thing”.

Their single biggest weapon is the selling of the proposition that they can do good jobs at much reduced rates. Take a creative designer, for instance, he/she may not be excellent at copy writing. However, years of interacting in project teams, working with copy writers, creative directors and suppliers can make a designer conversant with the advertising industry’s operational ins and outs. This experience can be used to do “a good-enough” job for new and less demanding clients.
The designer will greatly reduce operational costs by integrating the functions of designing, copy writing and creative direction. Not encumbered by the pressure to project a big-name image, they can do with, for instance, low real estate costs such as a garage or a single office.

Reflect on it

Disruptors love it when they are called fly-by-night. It gives them time to plot how to inflict the greatest damage to big-name firms by quietly working towards meeting the quality expectations of the prized clients of brand-name agencies at low price points.
Chulu is a strategic HR consultant and business strategist pioneering innovative HR and business practices in both listed and unlisted firms in Zimbabwe. — brettchulu@consultant.com

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