Can the culture of a boutique ever survive after selling to a network? And who's the best Succession character?

This week's podcast guest was Henry Chappell, Founder and CEO of Pitch Marketing Group. Below is part of an extended email exchange that took place after the recording. To get the podcast, go to UnofficialPartner.com or subscribe via Apple, Stitcher or Spotify.

@Henry Chappell:

It was good to see you the other day, and thanks for having me on the podcast. I hope we covered some areas of interest and you can edit out (or should I say ‘doctor’!) the boring bits… and the swearing!

One thing I would like to have discussed further is the opportunities for agencies in today’s sports and marketing industries, as well as the undoubted value that consultancies can still provide. We covered some of the challenges for agencies in a competitive, procurement led, platform driven environment. But there is still cause for optimism for agency land, and I think it’s important this is better understood both by agency employees and clients.

@Unofficial Partner:

To be honest Henry, I’m confused about the agency question. Having looked at them from the outside, I’ve spent a bit of time inside the tent over the last few years.

It’s clear to me that the whole sector is undergoing change, but I think that might always have been the case, and agencies have always existed in the spaces that clients can’t or don’t want to do themselves. That said, we appear to be at an interesting moment.

I always look at how agencies define their area(s) of expertise. Quite often there’s a temptation to claim to do everything...’just get the work in and we’ll find a way of getting it done’...which is particularly prevalent in PR and general activation agencies, where the outcomes are experiential (‘arms and legs’) or digital content (‘video stuff’).

But as you mentioned in our interview, the big rights holders are doing a lot of this themselves, and brand clients are building out their sports specific capability, meaning that agencies are sometimes in competition with their own clients for work.

The breakout agency brands of the last few years have tended to tell what I call a ‘narrow expert’ story, by which I mean they build around one specialism, eg Two Circles and data, or Goat and influencers. This has its own challenges, particularly if they want to expand beyond that specialism. But it’s an easier story to tell because it has a defined edge. The other story that cuts through is the ‘big and clever’ story that networks can tell, with the promise (often false promise) of sport expertise being integrated with other generalist marketing disciplines across international markets.

What’s your view on the positioning question?

@Henry:

I think you’re absolutely right to be honest. Being a ‘narrow expert’, as you say, is great for successfully establishing an agency, but not great for scaling it, unless you can take that narrow expertise to different industry verticals (beyond sport) or to different markets (beyond the UK).

Positioning is just the first part of setting up shop – it’s the ‘what’ you do. Once established with clients across the key categories, your positioning needs to become broader to grow. And the bigger you are as an agency the broader the positioning needs to be. Having said that, becoming a generalist, and losing your core expertise in the process, is dangerous.

Your positioning is obviously vital for the market to understand, as that’s how clients buy agency services.

But given how competitive the sports marketing sector is and how many established agencies there are across different marketing disciplines (be it commercial, creative or consultative) your positioning doesn’t have an impact on the quality of the agency or how successful you are going to be. Positioning just gets you in the game.

Instead, I think the overall success of an agency really depends on 3 things….

1. Proposition – if positioning is the ‘what’ you do, your proposition is the ‘how’ you do it. An agency with a differentiated proposition that meets market needs will thrive.

2. Pricing – it’s vital to work with clients who value the contribution of an agency and are prepared to properly reward you once proven value has been created. We will charge for time for the creation and delivery of campaigns, but our best quality and most profitable campaigns have occurred when we have an upside, such as a bonus arrangement against agreed metrics. Without being paid properly you can’t reinvest in the agency’s development.

3. People – it’s bleeding obvious but often not prioritised enough. Whatever an agency’s positioning or proposition or even, God forbid, its purpose, we are all people businesses. In the investment world, VC’s don’t invest in businesses, they invest in people. And in marketing, clients don’t hire agencies, they hire a group of people who come dressed up as an agency. I’ve learnt that if all you are good at is hiring great people, you’ll have a great agency.

@Unofficial Partner:

The people thing is worth pausing on, as it’s been a bit of a theme of our podcasts over the past six months or so. I was standing at Leaders and wondering how many of the people in the exhibition hall would be in sports marketing in five to ten years time. I’m probably exaggerating to make a point, but as we discussed previously, the demand for marketing services is shifting and with it the demand for other skills that don’t traditionally reside in the CV of a sports marketing or sponsorship agency professional.

Clients will want access to sports specific expertise in data analysts and scientists, AI merchants, econometrics, algorithm monkeys etc etc, and maybe less of the generic ‘bloody love sport’ types who can put their hand to a bit of content and experiential but won’t be able to re-skill to the more technical stuff. The new skills are also more expensive, and agencies have always been about keeping wages down to make a margin.

But the margins to be made on an econometrician are probably very healthy...

Can you see the nature of the people you employ changing? Will that change the culture of an agency?

@Henry:

For starters, and with apologies to Jimmy Worrall, I’m not sure the Exhibition Hall of Leaders is truly representative of the diverse and hugely talented people already working within the sports industry. It’s certainly not representative of the talent within Pitch as I’m about the only person at our place who goes to Leaders!!

I think the nature of people whom agencies are employing has already changed. I can’t speak for the industry as a whole, but at Pitch over the past couple of years we have hired creative director from an ad agency, animators and editors from production companies, a strategist from a consumer PR agency, and so on. And moving forwards we are certainly going to hire more data and tech specialists.

What hasn’t changed for us is a healthy ‘youth policy’. I was luckily enough to be given great opportunities at the start of my career and I have always wanted Pitch to replicate that. It’s a big part of our culture and we are very proud of the fact that there are many people having very successful careers within the sports industry who started their careers at Pitch. There’s Pitch alumni at the IOC, the Premier League, The FA, the RFU, and Formula 1 to name a few. It works for us because we can bring on board clever, ambitious young people who aren’t ‘bloody love sport’ types, but who are hungry to succeed and have great potential. They can be trained in specialist skills and very quickly soak up the culture of our agency. The cast list obviously changes over time, but the pool of young talent looking to make their mark has always been the lifeblood of our agency, and I can’t ever see that changing.

One other point to add in relation to people, is the challenge agencies face in recruiting the best people, at every level. On the podcast we discussed how sponsorship agencies are competing for clients with platforms, from the likes of Facebook to Copa 90. As well as competing for clients, we’re also competing for talent. And try as we might, it’s hard to match the compensation and benefits that a company worth $500 billion (Facebook….not Copa 90!) can offer. This is becoming a big challenge for marketing agencies across all sectors.

@Unofficial Partner:

I take your point on the Leaders lens, it’s a subset of a particular bit of the business. Your point about agency culture is really central to this. It’s the intangible bit of the value equation, which I suspect makes or breaks whether they get hired or not. The rest of it - the procurement BS, the idiocy of the pitch process etc - is secondary. The client likes the feel of the place and the people or they don’t. The rest is just post rationalising.

I’m wondering where culture comes from. It’s obviously true that the leadership is a part of it, particularly if it’s a smaller shop or still run by the founder. But it can also be shaped by one or two personalities, particularly in the first line of management, who are the link between the CEO and the people who are doing most of the client work day in day out.

Then there’s the organisational issue, such as when a cool boutique sells out to a big network. Can the culture of the boutique ever survive when it’s inside the big corporate HQ? Can you think of any examples of when that’s worked well? When an agency was better after it was bought than it was before? I’m struggling to think of one.

@Henry:

I agree that the culture of an agency has to come from the top. As Emerson said “An institution is the lengthened shadow of one man” (credit for that quote to Shiv Roy!). And this is true for many businesses of all sizes – just look at Apple and Steve Jobs, Facebook and Zuckerberg, News and Murdoch. And at the other end of scale, the likes of Barstool Sports and Dave Portnay. And it’s particularly true of many marketing agencies because we are people businesses.

However, whilst the culture of an agency has to start somewhere, how broadly and deeply the agency’s culture is spread depends on the things the company does. Its proposition has a big part to play in this. And I think it’s the agencies with a clearly defined proposition whose culture can survive and grow when they become owned by a big network or third party.

As examples, I’m thinking of the likes of Freuds to AMV and then to Publicis; BBH to Publicis; We are Social to Blue Focus; and Two Circles to WPP. All of these agencies had clearly defined propositions and their culture thrived under third party ownership. As well as having a robust proposition, the other common thread with these examples is that the new owners (whether with a minority stake or full ownership) left them alone to continue to grow as they are. In other words they bought great businesses and let them prosper as they are, so as not to fuck up the very valuable commodity that is a strong agency culture.

@Unofficial Partner:

Final thing. You mentioned Shiv Roy. Who’s your favourite Succession character? Mine’s Tom Wamsgan (played by Matthew Macfadyen).

@Henry:

It’s a tough call as there are so many extraordinary / totally fucked up characters in it, but for me it has to be Roman Roy. I mean, he bought the wrong football club trying to impress his dad, and thought a scotch egg was a giant arancini!

Unofficial Partner is a podcast about the sports business. Go to our site to explore the back catalogue of previous guests including Ed Smith, James Brown, Paul Hawksbee, Jimmy Worrall, Derek Pringle, Steve Martin and many others.