In today’s #FridayFeeling, some thoughts about the future of agencies in an AI-powered business world.
Great agencies provide four core benefits:
- Raw talent to do the work (saving time and possibly money)
- Domain expertise and experience
- Less overhead
In other words, agencies offer the same benefits that many tout for AI. What must agencies do to avoid being replaced by AI?
- Outrace clients to adopt technology faster and better (temporary increase to margins)
- Outrace clients to build domain knowledge about AI in the vertical (providing training, counsel, strategy, possibly even data)
- Build systems they own (or lock in strategic partners) and can offer on subscription – agencies already well familiar with retainers, which is a fancy word for subscription
- Double down on creativity, judgement, and multidisciplinary strategy
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What follows is an AI-generated transcript. The transcript may contain errors and is not a substitute for watching the video.
In today’s Friday feeling some thoughts and feelings about agencies in an AI world and by agencies, I mean any kind of third party organizations, so recruiting agency staffing agencies, ad agencies, marketing agencies, PR agencies,
all those companies that provide services to other businesses.
When we think about it when you think about it, agencies really provide what
a handful of obvious benefits right they provide raw talent to do the work which saves the company the client time and money because the client doesn’t have to hire the talent and especially if it’s an in demand talent up to try and source agencies theoretically already got it.
agencies provide domain expertise and experience,
especially if they’ve had a team that’s been in in the field for a long time. And you get some folks, you know, the gray haired folks who’ve got a couple of decades doing work in food and beverage, or SAS, software, whatever the case may be, they have the domain expertise, agencies provide scalability, the ability to get results faster. And
behind the scenes, the client has no idea how many people necessarily are working on a project so the agent agency can add people and adds the ability to do more work theoretically faster than a company can do it in house, especially a bigger companies where
you know, it could take nine months just to hire one person you can it can scale much faster by just using a third party and having an operating expense rather than an HR expense and agencies offer the benefit.
Less overhead because again, especially as companies get bigger, every hire, you make costs, benefits and salary and a whole bunch of other stuff that you can add 2030, 40%
on top of the base salary. So those benefits the talent, scalability expertise,
reduce overhead. Those are what agencies promised their clients and
the best agencies absolutely offer those. So lotion sound awfully familiar, right? Because those benefits are what many folks tout, as also the benefits of artificial intelligence. Artificial Intelligence can provide more more workers far more than humans because you can spin up more compute instances, right? There’s less overhead because you’re not using humans. There’s scalability because technology scales really fast and with the the ability to
Create machines that think and that can ingest large training data sets. They get that domain expertise, they get a domain experience. So what does an agency do to avoid being replaced by AI? Right? That’s a really important question if they both offer the same benefits, but the AI is something that especially if you build it in house you own Why do you need the agency?
Well, so what’s an agency supposed to do? What should agencies be doing to compete in an AI world
thanks for things number one, agencies have to outrageous clients to adopt technology faster and better than their clients. This provides a temporary increase the margins because the technology obviously if you’re if you’re getting paid $20,000
a month to do X, and your costs are 18,000 because humans if you adopt that AI technology
First, and you can bring that cost down to 10, then obviously, your margins get much better. So you’ll, you’ll, for a short period of time, five, two to five years, you’ll get significantly better margins.
But by having that technology faster and better, especially if you work with bigger and bigger clients that are slower and slower to move, you will obviously reap those benefits and also would allow you to as an agency to work with a bigger range of clients. Because again, if you have if you’re using humans, you want to use your expensive humans on the most lucrative clients. If you’re using machine you could point it at like, you know, the local convenience store and do good work for them. And it would take seconds to do that not work as opposed to, you know, the humans parts that don’t scale as well. So it also opens up the field to more and different kinds of clients.
The second thing agencies need to do is build domain knowledge about AI in their vertical and this is something that they again they have to
outraised clients to do if you’re a staffing agency you better be building and the domain knowledge you need about how AI can be used in staffing so that you can provide training and counsel and strategy and maybe even training data sets to clients
to help them do their work faster. So that domain knowledge is super important.
agencies have to build that faster than the clients and retain that knowledge
agencies need to start building systems either that they own or that they lock in strategic partners and can offer on a subscription to to their clients. Here’s where agencies I didn’t have an advantage over over regular companies. They are already familiar with
the the retainers. A retainer is just a kind of a more highbrow word for subscription everybody understands subscriptions you pay for Netflix.
if agencies can build those systems or lock in strategic partners to help them, build those systems or run them for them, then that becomes something that they can offer to strengthen that relationship. It’s very much like the old client server models in the 1990s where
a company that provided you the infrastructure really locked you in. And it was very difficult to switch to switch infrastructures. So it’s a something that agencies could do to help secure those clients providing those super valuable systems that they can’t get somewhere else. And finally, on the people side, agencies have to double down on the human aspects that they bring creativity, judgment, empathy, multidisciplinary strategy, multidisciplinary experience getting people have very different diverse backgrounds that can put their heads together and come up with solutions that machines can’t.
Because machines right now can’t do multi disciplinary thinking they’re most AI right now and really commercially for the next two to five years is still going to be very narrow, narrow applications of AI. It’s you’re not going to have that general purpose stuff. Because that’s just not where
that’s just not where the machines are going yet, they will get there eventually.
So if agencies do not want to be supplanted by AI, they’ve got to move much, much faster and build that that knowledge, that expertise about artificial intelligence and begin using it themselves
and by AI also incorporates machine learning deep learning all the buzzwords of the day. But agencies have got to have that first and better than their clients so that those clients particularly as they go, you go up the food chain and they’re lagging further and further behind. They can provide real value to the clients while enjoying the benefits of AI those that scalability that low overhead
The better margins. Once you have a training data set and software and things for a discipline or an industry, then it becomes easier. Every single client you bring on after that becomes easier and easier and easier to offer significantly better services and things. So those agencies that are willing to take the plunge and jump in are going to see significant competitive advantage against other agencies and against, you know, the AI is themselves because Google’s not going to make a purpose built
ad agency application for convenience stores that belt they’ll have a general purpose system but it will still need a lot of tuning the agencies can provide that expertise to either to general purpose tools or help them customized and even build their own. So
some thoughts today about
the future agencies in an AI world it’s going to be an exciting times gonna be a scary time.
those agencies that are not doubling down on their technology and they’re building the domain knowledge are going to be in a lot of trouble those that that jump in
feet first both you’re both feet in know dipping your toe they could build sustainable competitive advantage that would be difficult for laggards to overcome. So good news for the bold bad news for the tentative.
So that’s the Friday feeling. As always, please subscribe to the YouTube channel and the newsletter I’ll talk to you soon. Take care
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