Agencies Must Embrace AI for Reinvention and Competitive Survival - Episode Hero Image

Agencies Must Embrace AI for Reinvention and Competitive Survival

Creative Agency Account Manager Podcast · · Listen to Original Episode →
Original Title: The Now, Next and Future of Agencies, with Spencer Gallagher

TL;DR

  • Agencies must embrace AI to remain competitive, as those who do not risk becoming redundant, mirroring the digital transformation shift of the early 2000s.
  • Leaders must foster a culture of curiosity and psychological safety, encouraging teams to experiment with AI and share learnings to drive innovation.
  • Reconnecting with creativity and dedicating thinking space is crucial for leaders to reinvent their businesses and identify new opportunities in an AI-driven world.
  • The agency model is shifting towards leaner, more automated structures with higher-skilled, more expensive talent, necessitating a focus on efficiency and specialized IP.
  • Account managers can proactively influence AI adoption by leveraging client feedback and presenting data-backed business cases for efficiency and profitability improvements.
  • M&A activity in the agency sector is increasingly driven by AI capabilities, with buyers prioritizing agencies demonstrating AI integration and future-proofing strategies.
  • Agencies need to focus on three core pillars--operations, client experience, and innovation--enhanced by AI to navigate industry changes and maintain a competitive edge.

Deep Dive

Agency leaders must urgently embrace AI to adapt to a rapidly maturing market and avoid obsolescence. While many services have become commoditized, AI presents an opportunity for reinvention, demanding a cultural shift towards curiosity, proactive learning, and a renewed focus on human creativity to drive future growth.

The agency landscape is undergoing a profound transformation, driven by the maturation of existing digital services and the disruptive potential of AI. Spencer Gallagher argues that agencies have reached a point where standard offerings are no longer sufficient for differentiation or growth. This maturity necessitates a pivot towards embracing new technologies, particularly AI, to redefine value propositions and operational efficiency. Historically, agencies have been early adopters of technological shifts, from the internet to flexible working models. However, the current AI revolution requires a more fundamental cultural and operational adaptation. Gallagher emphasizes that leaders must foster a "growth mindset" within their teams, encouraging experimentation and learning rather than resistance. This involves creating an environment of psychological safety where mistakes are viewed as learning opportunities, and proactive exploration of AI tools is incentivized. The implication for agencies is a leaner, more technologically integrated operational model, where higher-skilled, AI-native professionals deliver enhanced value with a smaller headcount. Those who fail to adapt risk becoming redundant, mirroring how digital natives replaced those who resisted early internet adoption.

The path forward for agencies involves a dual focus on internal transformation and client-centric innovation. Leaders are urged to reconnect with their creative instincts, carving out dedicated thinking space to explore AI's potential for reinvention. This requires stepping away from day-to-day operations to foster a visionary outlook. Gallagher suggests that this often involves rediscovering the "joy" of creation, whether through playing with AI tools or engaging in activities that spark creativity. For teams, the imperative is to become "AI native," integrating AI into workflows to enhance efficiency and client service. This proactive approach not only future-proofs individual careers but also strengthens the agency's overall offering. Account managers, in particular, can leverage client feedback to influence leadership, demonstrating the tangible benefits of AI adoption through pilot projects and case studies. The underlying principle is that agencies must offer solutions to client problems that clients themselves lack the time, resources, or knowledge to address. By embracing AI, agencies can innovate their service delivery, improve client relationships through enhanced experiences, and ultimately, secure their place in a rapidly evolving market.

The M&A landscape reflects this urgency, with AI capability becoming a critical checklist item for buyers. Gallagher notes a significant increase in agencies closing or being acquired, often due to an inability to adapt to market shifts and an oversupply of agencies post-pandemic. European agencies, in particular, are increasingly looking to acquisitions as a means of scaling amidst slower organic growth, with US buyers actively seeking European targets. This trend underscores the strategic importance of AI integration for agencies aiming to attract investment or scale through acquisition. Ultimately, Gallagher advises agencies to view AI not as a threat but as a wave to ride, focusing on three key pillars: internal operational improvements through automation, enhanced client experience and relationships, and innovative service delivery. By fostering a "high agency" culture--one characterized by proactivity, ownership, and a willingness to learn--agencies can navigate these changes and position themselves for sustained success.

Action Items

  • Audit AI adoption: Assess 3 core agency pillars (People, Technology, Asset Growth) for AI integration readiness.
  • Create AI readiness checklist: Define 5 criteria for evaluating team AI adoption and growth mindset.
  • Develop AI integration playbook: Document 3-5 practical AI use cases for client retention and operational efficiency.
  • Measure AI impact on client retention: Track 5-10 key client metrics before and after AI tool implementation.
  • Design AI-driven service offerings: Identify 2-3 new client services enabled by AI capabilities.

Related Episodes

Key Quotes

"Things are changing quickly now, and I think people need to find the joy again in what they do. They need to find the right people in the teams to come together. I think we now need to up the pace that we work. We've all been too laid back, and I think AI is almost taking our jobs because we've made ourselves redundant to a certain degree."

Spencer Gallagher argues that the rapid pace of change necessitates a renewed focus on finding joy in work and increasing the speed of operations. He suggests that a current lack of urgency has led to a situation where AI is becoming a threat because businesses have, to some extent, made themselves redundant through complacency.

"Why so many agency services have matured and what that means for your positioning and growth."

This quote highlights a key theme Gallagher discusses: the maturity of many agency services. He implies that established offerings have reached a point where differentiation and growth are becoming more challenging, prompting a need for agencies to re-evaluate their positioning and strategies.

"So I would encourage them to maybe reconnect with that creator side of them. If they're an artist, then obviously go and start to play and connect to all of the tools that enhance that. If you are a videographer, then with V and Sora, make sure that you are mastering your new craft because everyone keeps going on about the mediocrity of AI, but it's only mediocrity if you've got someone who's bad at design trying to create images on Midjourney, like me."

Gallagher suggests that agency leaders should reconnect with their creative roots and actively engage with AI tools to enhance their craft. He posits that the perceived mediocrity of AI-generated content often stems from the user's lack of skill, rather than an inherent limitation of the technology itself.

"The people that work with AI will replace those who don't. So I have pattern recognition. I blame my ADHD, but basically, the pattern recognition is in the year 2008, when we had our last downturn, all the big agencies let go of all the people that didn't understand digital, probably pretty identical to what all the big network groups have been doing in the past two years."

Spencer Gallagher draws a parallel between the current AI revolution and the digital transformation of 2008, predicting that individuals and agencies who embrace AI will supersede those who do not. He uses historical pattern recognition to illustrate how a lack of digital proficiency led to job displacement in the past, suggesting a similar outcome for those resistant to AI.

"AI. I mean, every single buyer, without exception, in the last 12 months has said, 'What are they doing with AI?'"

Gallagher states that AI capability is now a universal concern for buyers in the agency market. This indicates that a demonstrable understanding and application of AI are becoming a critical factor in agency valuation and acquisition, regardless of the buyer's specific focus.

"So I think my advice to the account managers would be, get closer to your clients, find out what they need, get that information in. Listen, owners love nothing more, leaders of business, than people that are two steps ahead of them, not one step behind."

Gallagher advises account managers to proactively understand client needs and leverage this insight to demonstrate initiative to their leaders. He suggests that by being ahead of the curve and bringing valuable client intelligence and potential AI-driven solutions, account managers can position themselves as indispensable assets to the business.

Resources

External Resources

Books

  • "Maverick" by Ricardo Semler - Mentioned as a business book that tells the story of taking over a family business and adapting to new technology.

People

  • Spencer Gallagher - Guest, founder of Blue Halo, expert on the future of agency business models and AI transformation.
  • Roy - Mentioned in relation to predictions about AI's impact on agencies.
  • Eric Schmidt - Former Chairman of Google, quoted on losing startup hunger.
  • Sam Altman - Mentioned for the phrase "ride the wave of change."
  • Joe - Colleague of Spencer Gallagher, mentioned for her proactive approach to retraining in AI and improving business efficiency.
  • Abby - Colleague of Spencer Gallagher, mentioned for her role in creating "Tabitha," a proprietary AI tool.
  • Brian - Guest on a previous episode, discussed for his insights on legalities related to AI.
  • Mark - Mentioned as someone who can help with M&A.

Organizations & Institutions

  • Blue Halo - Company relaunched by Spencer Gallagher with a focus on AI transformation for agencies.
  • Google - Mentioned in relation to Eric Schmidt's departure and AI adoption.
  • IPA Bellweather Report - Cited as a source for data on the fastest-growing areas in the agency sector.
  • Coke - Mentioned as an example of a large company that may have in-house brand managers.
  • Guinness - Mentioned as an example of a large company that may have in-house brand managers.
  • Packs - Company that Spencer Gallagher sold to.
  • Hybrid - Company mentioned in relation to legal contracts for AI work.

Websites & Online Resources

  • Account Management Skills (accountmanagementskills.com) - Website offering an AI readiness quiz for client retention and growth, newsletters, and training information.
  • LinkedIn - Platform where Spencer Gallagher can be found.
  • TechCrunch - Publication that team members were looking at for industry news.
  • Mashable - Publication that team members were looking at for industry news.
  • Typeform - Platform mentioned for creating surveys.

Other Resources

  • AI (Artificial Intelligence) - Central theme of the discussion, focusing on its impact on agency business models, adoption curves, and future strategies.
  • Digital Technology - Mentioned as a past technological revolution that transformed businesses.
  • Internet Technologies - Mentioned as a past technological revolution that transformed businesses.
  • No-code tools - Discussed as evolving tools that can be used to build applications and websites.
  • Generative AI (Gen AI) - Specific type of AI discussed, including tools like OpenAI and Gemini.
  • OpenAI - Mentioned as a provider of generative AI tools.
  • Gemini - Mentioned as a provider of generative AI tools.
  • ChatGPT - Mentioned as a specific generative AI tool.
  • Midjourney - Mentioned as a tool for creating images.
  • Synthesia - Mentioned as a tool for creating digital twins.
  • Tabitha - Proprietary AI tool created by Blue Halo, containing 26 years of knowledge.
  • WAP phone - Mentioned in the context of early mobile technology.
  • App Store - Mentioned in relation to the rise of mobile applications.
  • Spreadsheets - Mentioned as a tool previously used for business operations.
  • SAS product - Mentioned as a potential future development from spreadsheets.
  • Vibe code - Mentioned as a capability related to AI development.
  • Agents - Mentioned in the context of AI development.
  • Digital twins - Mentioned as a capability within AI tools.
  • Four-day week - Mentioned as a progressive practice adopted by agencies.
  • Growth mindset - Discussed as a crucial mindset for adapting to change.
  • Fixed mindset - Contrasted with growth mindset, indicating resistance to change.
  • Psychological safety - Discussed as an important element of team culture for embracing AI.
  • Curiosity factor - Highlighted as a core value for agency teams.
  • Service delivery - Discussed as a core function of agencies.
  • Project management - Mentioned as a skill set.
  • Client relationships - Highlighted as a valuable asset for agencies.
  • Automation - Discussed as a key benefit of AI for improving efficiency.
  • IP (Intellectual Property) - Mentioned in the context of agency value.
  • M&A (Mergers and Acquisitions) - Discussed in relation to agency market trends.
  • GDP (Gross Domestic Product) - Mentioned in the context of economic growth.
  • SEO (Search Engine Optimization) - Mentioned as a mature agency service.
  • PPC (Pay-Per-Click) - Mentioned as a mature agency service.
  • Web development - Mentioned as a mature agency service.
  • Digital transformation - Mentioned as a mature agency service.
  • Copywriting agency - Discussed as an example of an agency type impacted by AI.
  • Creative copy director - Mentioned in the context of AI-assisted copywriting.
  • Field marketing agency - Discussed as an example of an agency type less directly impacted by AI.
  • Events - Mentioned as a growing area in the agency sector.
  • Live events - Mentioned as a growing area in the agency sector.
  • Business brand experience - Mentioned as a growing area in the agency sector.
  • Brand activation - Mentioned as a growing area in the agency sector.
  • Human-to-human experience - Highlighted as increasingly important.
  • Autonomous agentic approaches - Mentioned in the context of AI capabilities.
  • Creative testing - Discussed as a benefit of AI tools.
  • Advert testing - Discussed as a benefit of AI tools.
  • Recruitment - Mentioned as a service agencies provide.
  • Marketing service - Mentioned as a service agencies provide.
  • PR (Public Relations) - Mentioned as a service agencies provide.
  • Brand managers - Mentioned in the context of in-house roles.
  • Outside perspective - Highlighted as a value agencies provide.
  • Consumer adoption - Discussed in relation to the timeline of technological change.
  • Business adoption - Discussed in relation to the timeline of technological change.
  • Artwork - Mentioned as a past agency service.
  • Company reports - Mentioned as a past agency service.
  • Illustration - Mentioned as a past agency service.
  • Typesetting - Mentioned as a past agency service.
  • Print work - Mentioned as a past agency service.
  • No code products - Mentioned as available options for building websites.
  • Proprietary AI - Mentioned as a type of AI tool.
  • UX (User Experience) - Mentioned in relation to AI integration.
  • Tax advisor - Mentioned as an example of a niche an agency could specialize in.
  • Tax system - Mentioned as a potential AI-enhanced deliverable.
  • Legal contracts - Discussed in relation to securing client relationships.
  • AI readiness quiz - Offered on accountmanagementskills.com.
  • Client retention - Mentioned as a focus area for AI adoption.
  • Client growth - Mentioned as a focus area for AI adoption.
  • Newsletters - Offered by accountmanagementskills.com.
  • Trainings - Offered by accountmanagementskills.com.
  • Podcast episodes - Mentioned in relation to accountmanagementskills.com.
  • AI adoption - Discussed as a key trend.
  • Existing data - Mentioned in the context of using AI tools safely.
  • Usage credits - Requested for AI tool experimentation.
  • Case study - Proposed as a way to demonstrate AI value to clients.
  • Commercial proposal - Advised for account managers suggesting AI initiatives.
  • Efficiency improvement - Discussed as a benefit of AI.
  • Profitability improvement - Discussed as a benefit of AI.
  • Client revenue improvement - Discussed as a benefit of AI.
  • Legalities - Mentioned in relation to AI work.
  • Economic growth - Discussed in relation to M&A trends.
  • Organic growth - Discussed in relation to M&A trends.
  • Acquisition - Mentioned as a strategy for agency growth.
  • Global reach - Discussed as a benefit of M&A.
  • Technical services - Mentioned as a converging area with agencies and AI.
  • Wire - Company mentioned in relation to technical services.
  • Performance bonus - Mentioned as a payment structure for non-exec roles.
  • Exit preparation - Mentioned as a service offered.
  • Operational pillar - One of the three pillars of an agency business.
  • Client experience pillar - One of the three pillars of an agency business.
  • Innovation pillar - One of the three pillars of an agency business.
  • Interpersonal relationships - Highlighted in business-to-business contexts.
  • Relationship experience - Part of client experience.
  • Outcomes experience - Part of client experience.
  • Revolutionary changes - Potential outcome of evolutionary progress.

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