The Moat Around Your Agency: True, Sustainable Competitive Advantage

When I commissioned this illustration, I thought the accompanying insight piece would be fairly easy to develop. The idea was to write about your competitive advantage and how to protect your agency from competition.

Not so much! Writing it has taken three times as long as normal, and it’s forced me to reexamine how I think about the topic. I will think out loud about the five things I tossed on this journey and then we’ll settle on the three that make sense.

As the principal of a creative firm, one of your duties is to defend the agency from external threats, similar to how a moat protected a castle. It was the first line of defense against invaders. Back then, though, the enemies were few and easily identified. Now they chip away at the walls from all directions. Some are actual competitors (other agencies), some are sea changes (client-side work replacing the very castles themselves), and some are existential (how we think about marketing). You aren’t repelling a huge mass of marauding cretins every decade; now the competition is a way of life, hitting the castle walls around the clock.

Your moat (competitive advantage) cannot be:

• Money. You simply don’t have enough to last forever. It’s not a battle that you can wage indefinitely by throwing more expensive people or a shiny office at the problem.
• Scale. Ditto. Besides, agencies throwing scale at a problem are usually not thinking very deeply. Scale doesn’t scale, if you get my meaning. It adds complexity and hides behind deliverables.

So after eliminating two early options for the sort of protection that a moat can provide, we’re still searching for an answer. Here is where I think we need to add “sustainable” to qualify the search.

Your moat (sustainable competitive advantage) cannot be:

• Referral Base. I introduced some thoughts on that subject here last week. Referrals can be wonderfully efficient, but they are not sustainable and you have no lasting control over them.
• Client Relationships. These are notoriously fickle and your rotating account people look positively stable compared to the carousel of marketing people on the client side. Great agencies outlast at least one CMO change, and sometimes even two, but at great internal cost. Pricing is depressed, time is wasted defending an account, and in the end a CMO just wants “new” for the sake of it.

At this point I hear some of you leaning on your “proven process” as a competitive advantage. You know in your heart that it’s not proven, and so you’ll reluctantly agree that….

Your moat (true sustainable competitive advantage) cannot be:

• Process. Which isn’t proven. But even if it is, they pretty much all look the same, anyway. Four or five steps. Tagged with alliteration. An expanded Venn diagram. You get the point.

No, I would say that there are three true, sustainable competitive advantages that you might employ and trumpet from the parapet on your castle wall:

1. Positioning. Your stated focus facilitates repeated observation to surface patterns in what you see, over and over again, giving you a leg up in solving issues for clients. Every new challenge is an opportunity to solve the same challenge for most of your existing clients. Every few months you’re quite a bit smarter than before, which is quite a bit different than just doing the same work…for more clients.
2. People. Team members who embrace that same positioning and who are more interested in competence than variety. These are people whose personal lives are so interesting that they bring a broad context to a deep focus. To make this work, you need a healthy, vibrant, differentiated culture to attract and then keep the best people. They must feel like working for you enhances their career like a university degree or an internship at some famous firm. Your people management skills must be good enough to not be distracting. Employees must have a chance to shine individually and develop their own personal brands.
3. Black Box Research. This one is tricky because it’s easily misunderstood. I mean “black box” because it’s proprietary and not because it’s inscrutable. It’s real data. Real algorithms. Answers that you arrive at quicker and more reliably. It’s a little bit of certainty in the world of marketing where there is precious little certainty. You protect it not with IP locks but by constantly enhancing it. Making it deeper. I have about forty clients who rely on their own black box. Blair Enns and I did a webinar on this a few years ago, for an event we have already held, but it’s still worth listening to.

If these three things (positioning, people, black box) are hosted inside an agency with the appropriate mix of business fundamentals, calculated risk-taking, and grinding discipline–you are as untouchable as any creative enterprise can be.