# Highlights: Madison Avenue Makeover by Farmer, Michael  ## Metadata - Author:: [[Farmer, Michael]] - Full Title: Madison Avenue Makeover - Category: #books ## Highlights #### INTRODUCTION >[!quote] > INTRODUCTION (Location 134) >[!quote] > The Account Heads do their best, but they are not guided by an overall vision or agency modus operandi. They are guided by their clients, and this leads to a mélange of client management practices, good and bad scopes of work, attractive and unattractive fee structures, healthy and unhealthy productivity levels for individual client teams, and underperformance for the agency as a whole. (Location 231) - Note: Is this not how most agencies end up functioning? >[!quote] > The transformation should radically change the decentralized culture into a uniform, global culture. (Location 243) #### CHAPTER 1 HUGE— SUCCESS & STAGNATION >[!quote] > “Real innovation is about solving problems, not just having ideas” stated one of these articles, arguing that companies should help customers figure out how to do things better. “There’s always a way to make things faster, cheaper and easier. Start looking for problems that people complain about every day and take note of the little annoyances all around you.” The piece also championed eradicating inefficiencies: “My corporate credit card keeps an accurate record of everything I buy for my company, but I still have to save annoying paper receipts for my expense reports.” And it urged practitioners to take the initiative to solve their own problems. (Location 358) #### CHAPTER 2 MAT BAXTER— FROM ZENITH TO NAKED >[!quote] > He felt that Zenith should look at every media planning decision from a neutral perspective and recommend the solution that was right, rather than one that was most convenient or lucrative for the agency. He felt that there were right and wrong media choices to be made, and observed senior colleagues making all the wrong choices. Most importantly, he felt that an agency needed to be less self-serving and more client-centric. (Location 501) - Note: This isn't unique to media buy. Indviduals within organisations will act in alignment with their incentive package. The question then is whether the package is aligned with the goals of the agency and subsequenty whether the agency is trying tp deliver short or longterm value to their clients. Most are non-malicious hypocrites who know that saying they intend to deliver long term value is what people want to hear but they will the act based on short term consideratios because it's either easier or client budgets+scope creep force them to augment their plans into a shorter time horizon. >[!quote] > I remember he tried to sue News Corp— Rupert Murdoch— sending them a legal letter threatening to sue them for $ 10,000, and they wrote back saying, ‘Do you know who we are? Fuck off.’ I thought that was quite funny and brazen of him, but of course fruitless. However, it was about driving a need for clients to respect us as their agency partner. (Location 532) #### CHAPTER 3 MAT BAXTER— FROM AUSTRALIA TO NEW YORK >[!quote] > By his own account, Baxter expanded the job and “meddled in every aspect of Mediacom’s operations.” (Location 578) - Note: Hmmm. I have a tendency to do this as well. #### CHAPTER 4 INDUSTRY PRICING, REMUNERATION, AND SCOPES OF WORK >[!quote] > There were many reasons for a change in the agency compensation model. A key factor was the inflation in media costs for clients from 1975– 2000, which saw media space and time inflate at twice the rate of GDP inflation, due to high demand and a shortage of media. Since agencies were paid on the basis of media spend, they benefited from media price inflation, collecting more revenue but incurring no additional costs. Yet, clients were paying the bill, not only for the increase in media spend, but also for increases in media remuneration based on the fixed-percentage commission. Clients were fed up with this situation and forced a change in the compensation model from media commissions to labor-based fees. With this change, agencies were surprised to find that their clients, who had been marketing executives in the past but now included procurement and finance people, were terribly interested in the nuts and bolts of agency operations. “How much do you pay your employees?” they asked. “How much overhead do you incur to support your operation? What are the specific cost elements that make up your overhead? What kind of profit margin do you earn, and what should your profits rightfully be on our account?” Unwisely, agencies let the Association of National Advertisers (ANA), the industry’s trade group, define the structure of their labor-based fees rather than taking control and structuring a system for their benefit. The new standard labor-based fees had the same structure as government-contracting fees. If overall employee salaries plus benefits equaled $ 1 million, for example, these costs would be paid as ‘direct costs.’ If the agreed overhead rate was 100%, then there would be additional compensation of $ 1 million, identified as ‘overhead costs.’ Total costs would be $ 2 million. If the contract permitted the supplier to earn a 10% profit margin on the $ 2 million, the total fee would be $ 2.222 million ($ 2 million divided by 0.9). The 10% profit would be $ 0.222 million. Often, this formulation was shortened to ‘the billing multiple is 2.222,’ meaning that the employee salary cost of $ 1 million was multiplied by 2.222 to achieve fees of $ 2.222 million, at a 10% margin if the overhead rate was 100%. Labor-based fees meant that clients could stick their noses inside the agency tent for the first time. Client procurement departments entered the picture and began to negotiate with agencies to lower their fees. Procurement professionals gained power as they developed an understanding of agency economics. They used various tools, like salary and overhead benchmarking, to compare one agency’s costs to another’s, and used this intelligence to drive down fees. Agencies conceded to procurement-led fee demands. What else could they do if they wanted to retain their clients? There was always another agency, waiting in the wings, prepared to steal a major client by offering to do the work for less. This was an awkward game for ad agencies to play, but since they still had some headcount fat left over from the salad days of media commissions, agencies could acquiesce to the demands for lower fees, cut their staffs, do the media or creative work and still generate a profit. The flaw in this thinking was that they agreed to a fixed number of people to carry out an unknown amount of work, since clients were not very explicit about how much an agency would have to do for a given fee. One of the many things agencies did not anticipate was the relative loss of power in their client relationships. Giving in to clients and letting them determine how much would be paid, and how many people could be used, eroded agency power and influence. Where they had once dominated client relationships and provided proactive media and creative solutions, agencies now became more service-oriented as they scrambled to respond to ever-moredemanding clients. Give them what they want became the industry mantra, underpinning the client-service business model. (Location 716) #### CHAPTER 5 THE HOLDING COMPANY OWNERS #### CHAPTER 6 THE FIRST OFF-SITE MANAGEMENT RETREAT >[!quote] > He decided to use the first evening’s dinner as an ice-breaker, and spend the following day and a half exploring seven fundamental questions: 1. What is the purpose of this get-together? 2. What makes a great company? 3. What sort of company do we want to be? 4. How do we set up the company for success? 5. What are the roles of the Chief Operating Officer and Chief Experience Officer? 6. What would ‘great’ look like at Huge? 7. What are our priorities for 2022? (Location 933) #### CHAPTER 7 THE BUSINESS MODEL COMPANY LIMITED >[!quote] > Here, she was explaining the framework she’d use to review Polpo’s progress: Before jumping into the value journey for each archetype in each door, let us understand the intent behind the framework and each part of the structure. The front door, as we said, is the reason the client engages with us. Client archetype is a summary of the high level goal the client is looking to achieve. The client buyer is a C-suite level client we are contracting and partnering with to deliver outcomes. The commercial value journey is the key concept framing how we will deliver value for the client in the context of that door. Output delivered is the high-level strategy they are planning to follow, to deliver the outcomes, and achieve their goal. And the commercial outcome is the business level KPI linked to the goal, objective, and strategy. (Location 1342) #### CHAPTER 8 HUGE’S PRODUCTIZATION STRATEGY >[!quote] > I asked Baxter if he thought Huge really needed 45 products. Didn’t this create a burdensome development effort for the productization team? Wasn’t the team’s creativity being pushed to the limit to identify and describe so many different offerings? And would clients really have such an extensive, granular list of needs in the first place? Baxter explained: I could have simplified this. I could have told TBMC at the beginning that we would work with three doors, three performance challenges ,and only three drawers, and mathematically this would have led to 27 products, rather than 45. That might have eased the pressure on our productization team. But who is to say that 27 products is right and 45 is too many? We began productization with zero products, and our team had no experience. We brought in TBMC because they had extensive productization experience, and the 45-product framework they provided was their recommended framework. I reasoned that it made complete sense to follow their guidance, rather than tinker with it from a position of ignorance. We hired them for a reason, and we followed their guidance. We understood from the beginning that these 45 products were theoretical products until they had an actual track record with clients. Experience will prove that some of the products are neither effective nor salable, and we will drop them. (Location 1458) #### CHAPTER 9 REORGANIZATION >[!quote] > “We believe that our work towards being a diverse and antiracist company is never done,” (Location 1636) - Note: noticed that "being antiracist" was mentioned a few times. Was this such a big problem at Huge? #### CHAPTER 10 MANAGING RESOURCES— GLOBALLY #### CHAPTER 11 CRITICAL REVIEW >[!quote] > As Edison was reported to have said, “I didn’t fail 1,000 times. The light bulb was an invention with 1,000 steps.” (Location 1815) >[!quote] > As a result, companies face collaboration challenges— figuring out how networks or groups of individuals can work effectively together. Companies design rules of engagement, like RACI systems, 25 to let the executives or specialists in a matrix organization know what roles they can play. Within a matrix, who calls the shots? Who is responsible or accountable? Who needs to be consulted or informed? (Location 1862) #### CHAPTER 12 ASSESSING PROGRESS— THE THIRD RETREAT >[!quote] > The conversations were in the spirit of making the company better, making our people and our culture better, and making us as a leadership team better. And that’s what we are here to do. It can feel overwhelming for three days to sit and do what this group does, which is to self-analyze and criticize its own actions and its own performance in a way that only a high-performance group can. That’s the real danger when you get a bunch of high-performing people together— everyone’s self-critical, leaving you with the belief that the whole thing is running off the rails. There are many things going on here that worry me and make me nervous. And do you know what? I reflected on them last night and I reframed them in my head. The fact is we all sat around and did what we did, and got a grasp of all of the things that we know we have to get better at. That is great leadership. That is us running the company properly. And so, I want us to come away from these last three days feeling as though we have done our job as leaders, and that we have not fallen into an internal echo chamber of how great we are and how great everything is. It is not all great, and it should not be. (Location 1994) #### CHAPTER 13 PROGRESS >[!quote] > We had no choice about this. We had to go very far and very fast to get to a new place, and although we have not solved everything we face, we eventually will. We’re already in a much better place. Being a 180 mile-per-hour business simply will not cut it. Our ambition is to be a 200 mile-per-hour, high-performance company. And in order to achieve that sort of performance, you have to believe in the integrity and quality of the vehicle you have designed and are driving. You must have the courage to keep your foot on the accelerator, flat to the floor, and avoid the temptation to back off, even when things get a little wobbly and you’re approaching a curve in the road. You cannot flinch, not even for an instant. Instead, you have to believe that you will not crash the car— that you, and the car, can handle the conditions. That’s how you reach 200 miles-per-hour, and that’s how you truly transform a company. (Location 2025) #### CHAPTER 14 PARADIGM SHIFT >[!quote] > Thomas Kuhn introduced it in his seminal 1962 book, The Structure of Scientific Revolutions. 26 (Location 2050) >[!quote] > The articulation of the new results paradigm set Huge off in new directions. And, inevitably, new directions create new issues and problems. New paradigms do not, in and of themselves, solve all the problems associated with the previous paradigm. As Kuhn pointed out, “[ We should] remember what a paradigm debate is about. When a new candidate for paradigm is first proposed, it has seldom solved more than a few of the problems that confront it, and most of those solutions are still far from perfect.” (Location 2141) #### NOTES >[!quote] > NOTES (Location 2597) >[!quote] > Cultish: The Language of Fanaticism, Amanda Montell, Harper Wave, 2021. (Location 2648) >[!quote] > The Structure of Scientific Revolutions, Thomas S. Kuhn, University of Chicago Press, 1962. (Location 2659)