What is a creative agency?
If you work in the creative services industry, one of the hardest questions to answer can be, “what does your company do?”. This is especially tough if it’s asked by a friend or family member who knows very little about the world of creative services. How do you answer that question while balancing the need to be clear and concise with the desire to convey what makes it interesting and challenging? This is the question of identity, and I think it is a central challenge of building a business, particularly if the industry you work in is not well defined. It’s much more than just explaining to your mom what you do for a living, your identity helps you find your clients, gives direction to employees and helps the business leaders create a vision for the future.
In the process of building our own company, I’ve had to face this challenge numerous times as we have reinvented Playground over the years. While we have always called ourselves a digital agency, I’ve always found it particularly difficult to define what that really means. In a recent exercise I created a framework to help me identify and categorize agencies in an attempt to better understand our own company and the industry we work in. I chose four factors that I think define a company: Services, Employees, Business Model and Values. By analyzing these four factors, I believe we can better understand where the different types of service companies sit and how they compare to each other. For this process I’ve selected many of my favourite agencies and have attempted to categorize them, but keep in mind this is merely my interpretation, some of these companies may see themselves differently.
The first factor I want to explore is a company’s services. I think the services a company offers can tell you a great deal about who they are. What is important to note is that while most agencies are very dynamic and will offer a wide range of services, it is often a small list that they are very established in and known for. Additionally, many companies will offer services that they outsource — they do not have the capabilities for these in-house so I will only mention those if the company is well known for that service.
I have broken the services offered by the creative industry into four categories: Strategy, Design, Technology and Advertising. Strategy represents the consulting, planning and research services. Design is the visual, UX, photography and video services. Technology is the engineering, data and systems services. Advertising is the promotional, PR and marketing services.
1. Full Service Digital Agency
These agencies excel at executing on complex projects where many disciplines are required. These are often the largest and most profitable organizations within creative services. While they have all four service categories, it is often the advertising component that leads the business and most projects serve larger campaigns or a marketing goal.
Top Full Service Agencies
- Critical Mass
- Sapient Nitro
2. Digital Agency
These agencies are similar to full service agencies but most commonly they do not offer full advertising services. This means that they focus on building platforms or products over advertisements or microsites. These companies prefer to focus on building lasting relationships with clients and help them create and execute a digital strategy for their business. Digital agencies focus on Strategy, Design and Technology, and typically forgo advertising services. A subset of the digital agency is something that I call a Product Agency. These companies have the capability of digital agencies but often focus on creating products both for themselves and clients.
Top Digital Agencies
- Big Spaceship
- Fantasy Interactive
- Hot Studio
- Happy Cog
- Code & Theory
Top Digital Product Agencies
- Teehan + Lax
- Jet Cooper
3. Design Agency
These agencies focus on design and often work with external partners like ad agencies, consultants or engineers to fully deploy their work. They often offer both digital and print design services as well as branding specializations and sometimes interior and product design. As a result they focus on Design services and occasionally offer some strategy services.
Top Design Agencies
- Bruce Mau
4. Interactive Agency
These agencies focus on building great projects for the web. They often are hired to create digital experiences that are a mixture of innovative technology, great design, and multimedia content. Although they are sometimes hired to simply create a great website. They work with ad agencies or consultants to deliver on a complex component of a campaign or a large digital project. Often these organizations focus on Design and Technology over Strategy and Advertising and have a great deal more production capability in the form of digital video and motion design.
Top Interactive Agencies
- Rally interactive
- The Secret Location
- Black Negative
5. Engineering Agency
These agencies focus on being technology experts. They offer engineering services to companies of all sizes, partnering with in-house teams and other agencies to build complex projects. They often work with many technologies and platforms and solve some of the most complex technical challenges. Engineering agencies focus on Technology services and often offer some Strategy services as they pertain to technology.
Top Engineering Agencies
- Pivotal labs
- Extreme labs
- The Working Group
6. Advertising Agency
These agencies focus purely on marketing and advertising services. They prefer to work with specialist partners to build technology or complex design. They are PR companies, social specialists and traditional ad agencies. While traditional ad agencies often include many of the other services, they typically focus on Advertising and Strategy.
Top Advertising Agencies
- Wieden + Kennedy
- Leo Burnett
7. Consulting Agency
These agencies focus on strategy and big ideas. They often do a great deal of research and specialize in particular markets and industries. These companies can grow to become very large and often encompass professional and creative services under one roof. While they will often have R&D departments that include many other services, their key offering to clients is Strategy.
Top Consulting Agencies
8. Design innovation
These agencies specialize in using design to solve big problems. They pair deep insight and industry knowledge with design thinking to create some of the most innovative products and ideas. These companies often include nearly all services in order to prototype and deploy their ideas but focus on Strategy and Design.
Top Design Innovation Agencies
- Adaptive Path
While a company’s services can tell you a great deal about who they are, understanding the employee makeup of a company and how it is lead also plays a critical role. For example, if a company offers both design and engineering services but is made up of 90% engineers then it would be considered an engineering agency. An agency can also be defined by how it is managed, a company lead by a creative director would be very different than one lead by a technical director. Understanding the key positions that make up an agency and how it is lead is key in understanding the agency.
- Business Manager
- Creative Director (advertising)
- Creative Director (digital)
- Product Director
- User Experience Director
- Technical Director
- Art Director
- Graphic Designer
- Frontend Engineer
- Software Engineer
- UX designer
Business and billing models
Understanding the business model of your company is another key factor in creating an identity. For example, two companies that have the same services and organizational structure may be vastly different companies based on their business model. These two companies could both be equal parts design and technology, both offer client services and have roughly the same number of employees in each department. The difference is one makes 100% of its revenue from client work while the other makes over 50% of its revenue from an internal software product it sells. In this case these companies are differentiated from each other on business model. Since we are looking at the creative services industry let’s explore the common business models in that field.
Time and materials
This is the most basic business model and often the one most used for simple projects and smaller agencies. The principal is to charge an hourly rate for the service you provide plus the cost of any materials purchased on behalf of the client.
This model is used for the majority of small to medium size engagements between clients and agencies. The idea is to agree on a price and scope of work to be done over a set period of time. It can often be a fixed or variable price based on the preference of both parties but is often based on time and materials.
AOR & long term contracts
This system is favoured by larger agencies as it provides stability and predictable revenue. It works by a client committing to a minimum spend over a period of time with an understanding of the type of work the agency is to do and the goals of the client.
Value based billing allows an agency to capture the high value they create for a client on what might be a relatively simple project. Unlike project based billing this is not based on time and materials, rather it is based on an understanding of the value to the client and likely tied to some percentage of that.
Revenue sharing and commission
This model allows for the agency to share in a percentage of revenue rather than billing by time and materials. This is useful for long term partnerships where the client needs to create an incentive for high quality work that can increase revenues. It can also be used when complexity makes it difficult to scope a project’s price or otherwise use another model.
With this model an agency trades time for equity using their services to invest in another company. By investing time, an agency is paid through an acquisition of their investment and/or dividends paid.
Software as a service
This model allows an agency to create a software product that they sell. This model is favoured as it has the potential to create non-linear growth in revenue for the agency if the product is successful.
A less commonly used model is to patent concepts based on extensive R&D. This model is favored by the innovation companies as they are regularly conducting research. These patents are often sold or licensed to other companies.
Although not truly a business model, many companies seek acquisition as a primary goal. This does affect the decisions they make and often how they structure their company. Since we are talking about service companies, most acquisitions are to acquire people rather than technology or other assets.
The last factor that I believe defines a company is its values. While not as tangible as the other three factors values have a large impact on a company’s identity. Values are often what differentiate companies that are very similar; they do not change what the company does, they often change a great deal about who they are. While not exhaustive, I have put together what I think are the key categories of values that most agencies follow. The values at your agency’s core determine a great deal about who you are.
Commitment to customers
An agency committed to clients is all about customer service and client service. They focus on keeping their clients happy and preserving their relationships.
Commitment to employees
A commitment to employees is about making a great workplace and the belief that the best workplace creates the best work.
Ethics and honesty
Honesty and ethics often manifest in an agency that focuses on pushing clients to do what is right rather than what they want. They also highly value ethics in all business practices.
Profitability and growth
An agency that focuses on profitability makes decisions that will maximize efficiency, margins and growing new business.
An agency that focuses on social responsibility chooses people and projects that will allow them to make a difference. They also focus on the way in which they operate their company to be socially responsible.
Innovation and creativity
Agencies that focus on innovation put R&D, prototyping and new ideas at the forefront.
An agency with adaptability at its core is highly agile and flexible to change at many levels. The company will try new ideas, services and clients regularly.
Excellence and quality
Agencies with excellence at their core focus on the quality of their projects above all else.
So what is a creative agency?
It is a company that offers a combination of strategy, design, technology and advertising services to clients, it is creative or expert lead, it’s made up primarily of creative professionals, and it’s often strongly defined by values. They come in many shapes but knowing what you are is very important to growing as a company. Identity helps you understand what you are good at, where you create value and where you are headed.