The key words to that paraphrase of a truism are “learn” and “doomed.” But let’s replace the “and” with “or” to get to my point a little faster than usual: Learn or Be Doomed.
When it comes to crafting and curating an agency’s book of client business it’s amazing how many once-promising shops forgot that a key to long-term viability is diversification.
Diversification certainly means having a balanced portfolio of different clients, ideally ones with businesses that are counter-cyclical. That’s a tall order to actually fulfill, yet it’s a worthy effort to make. It also means growing the ability to solve more kinds of problems for clients: Wider ranging creative capabilities, more facility with multiple marketing platforms, the addition of strategy to creative – and vice versa.
The case for diversification has painfully obvious (yet often ignored) foundations and some possibly less obvious.
If lack of diversification means too much revenue from any one client, then you are at economic risk. Because too much upside could easily become an awful lot of downside if:
- Your direct client leaves and his/her replacement brings another agency on board.
- The client company changes its agency philosophy from mono-agency preference to best-of-breed preference, which means that it would rather shop around its work to many and forsake fidelity to yours.
- Budgets get slashed for any number of reasons (and none of them have to be rational). You’d think this was obvious, yet I’ve known plenty of agencies and creative shops that have ignored it – to their eventual dismay. One defunct agency had as clients multiple business units in one giant corporation – about 90 percent of billings. They thought that constituted diversity of the client portfolio because the business units served a wide range of markets. That worked until the new CEO came in under a singular cost-cutting, share-boosting focus. He made sharp, fast cuts across the board. You can guess what happened to that agency.
- Someone from your team ticks off the client and the harm is irreparable. (Oh, yeah. I’ve seen that happen.)
- Your work gets stale and they need to find fresh horses.
There are just as compelling but perhaps less obvious reasons to pursue diversification. I’ll visit some of those in the next post. In the meantime, start diversifying.