The New Paradigm for Agencies

Why the Time is Now to Design the Agency Model of the Future

The marketing landscape has fundamentally changed: more fragmented, more competitive, and harder to navigate.

During this time, technology and AI have reshaped and democratised how marketing services are executed, raising important questions for marketers in how they organise themselves internally, alongside their agency and tech partners externally.

‘Build, buy or rent’ used to be a binary choice; now, it’s become a little bit more complicated.

A new paradigm has emerged for clients and their agencies, one where ownership, talent, strategy, and interoperability have replaced ‘scale’ as the key enabler and differentiator.

These shifts are summarised below:

1. Consolidation has created a sustained erosion of choice

Consolidation and integration of capabilities within Holding Companies has ushered in a perceived erosion of choice for marketers, who may be forgiven for feeling limited in their choice for agency capabilities at scale. While this is more perception than reality, marketers are having to balance the desire for simplification and integration with the need for differentiated capability.

2. Ownership matters more than scale

Historically, scale was a critical selling point for agencies: scaled media, scaled data, and scaled people. Today, access to ubiquitous technology, data, and platforms has become more widespread, reducing the distinctiveness of scale alone. It means that differentiation is more nuanced, and what matters most is the ability to meet marketers where they are (in their environment), not where agencies want them (in their environment). Competitive advantage will come from what organisations can own and direct, not exclusively from what their scale can leverage.

3. Identity is important, but no panacea

Identity has become a major focus for agency groups and technology providers as a vehicle to enrich 1st party data and enable enhanced personalization, insight, and measurement. It can also be extremely margin accretive for agencies & technology providers, and it’s leaving many marketers unsure if identity is as transformative as it is positioned – particularly outside of mature markets. Identity is a clear strategy for agencies, but marketers must not forget the strategy is what identity (and data/tech more broadly) enables.

4. In-housing has pivoted: from sourcing to systems

The role of AI has accelerated a shift in the in-housing narrative, with marketers rethinking if the traditional sourcing model enables them to create true competitive advantage. The shift towards ‘systems’ reflects a strategic recalibration of in-housing, designed to build and preserve those elements which enable ownership, flexibility & interoperability. Accordingly, ‘systems’ of data, technology & strategy are increasingly replacing sourcing of executional media buying or content production.

5. Table stakes are increasing

Technology and AI has made specialist capabilities more accessible. Those same capabilities marketers may have sourced independent, specialist agencies for are increasingly being tabled through AI, meaning technical expertise is no longer as big a differentiator. Instead, value is increasingly coming from how effectively capabilities are combined and applied to solve broader business challenges.

6. ‘Re-coupling’ of capabilities

De-coupling of capabilities made sense in an analogue world, where specialisation was necessary to create advantage across each discipline. With many now redefining how we categorise ‘media,’ content, trade marketing, or even PR (with data and technology at the core), marketers are on a journey to re-couple capabilities, either through consolidation (fewer, bigger, better agencies) or doubling down on the importance and art of integration.

7. AI is transforming delivery, but not replacing talent

While AI is reshaping workflows and improving efficiency, human judgment has never been more critical to ensure the right decisions are being made to create brand differentiation and drive growth. AI is being exposed for its inability to navigate ambiguity, challenge hypotheses, or make strategic trade-offs, and marketers and agencies have yet to strike the right balance between strategy and execution. The key question for marketers is not whether agencies (or their own teams) possess AI capabilities, but how effectively they are embedding them into everyday work, with the right balance between Human & AI.

8. We need to talk about strategy

Data-driven marketing has ushered in a significant dilution of strategy, with thinking being supplemented by automation and platform bias. With more ways to reach consumers and differentiation harder to come by, marketers are facing a crisis of prioritization, with recommendations all too often based on the interest of external partners, or priorities based on what’s available, not achievable. The drive for more (campaigns, touchpoints, data, content, etc.) must be readdressed with what is fundamentally right for the brand and consumer expectation.

9. Commercial bravery unlocking new commercial models

Margin pressure and the role of AI at agencies has accelerated the introduction of new (and braver) commercial models designed to create a ‘win-win’ for marketers and their agencies. This is less about the reported shift from ‘time and materials’ to outcome-based compensation (still too early), but greater partnership to construct models which establish shared risk/rewards and improve visibility across all the critical fee components (people, data, technology, content, etc.), ensuring clarity across the total cost of ownership.

10. Selection may get harder but it will create stronger partnerships

With similar technologies and operating models, differentiating between potential partners has become increasingly challenging. And while the temptation is to test everything, effective selection processes prioritize the capabilities that matter and focus on ensuring the value of change outweighs the cost of change. When executed effectively and anchored in a clear and interoperable internal/external operating model, client/agency relationships will grow stronger.

In summary, these 10 shifts point to a common theme: sustainable advantage and differentiation will be created by ownership, talent and strategic thinking rather than scale alone.

Rethinking your agency model? Connect with us to explore how you can build the right partnerships, capabilities and operating model for the future.

By Ryan Kangisser, Chief Strategy Officer