DDB launches innovation lab; but are ad agencies any good at developing new products?

Following on from its Australian branch, DDB New Zealand has now also launched an in-house innovation lab called Shaper. 

Established with the bold goal to “solve real human problems and create new revenue streams”, the new addition to the DDB offering will aim to “own and monetise ideas developed in the lab”.

In a release, DDB’s chief operating officer Chris Riley says that the creative skills available at the agency provide the potential of delivering more than just advertising.

“This is ground-breaking territory for a New Zealand agency and we believe it will become an agency business model for the future,” he says. 

Despite the fact that the Shaper initiative has already been active in Australia, Riley says DDB’s move into this space is not due to pressure from above.

“There is no global mandate behind the launch of Shaper in any market,” he says. “DDB Australia launched their Shaper programme about 18 months ago, and it’s been a tremendous framework for them to be able to create and value some incredibly useful ideas, that they are currently in the process of securing commercial partnerships for.”  

He says the strategy being employed here is unique.

“We’ve taken a slightly different approach here in New Zealand, and our relationship with [the Government’s research and development body] Callaghan Innovation allows us to tap into their huge wealth of knowledge when it comes to structuring our resources from both DDB and Callaghan, behind each idea we plan to take to market. Every idea will obviously be approached differently, some will need the expertise and advice of Callaghan Innovations to assist with how we take to market, others will be able to be developed quickly through the resources we have within the agency currently.”

As part of the project, DDB staff members are being invited to pitch ideas, which are then evaluated by an assessment panel that includes Callaghan Innovation stakeholder Toby Littin (pictured here). 

“Overall [the idea] needs to deliver commercial outcomes for all parties,” says Riley. “It would be a pointless exercise, unless it is focused on generating value for clients, for our people and for the agency.”

Riley believes Littin’s knowledge and connections with how incubator ideas get to market will help provide a framework for turning the ideas into marketable products and services more quickly.

Once successful applicants have been given the go-ahead, they will then be given a day per week to work on turning the idea into a reality and will ultimately share in the financial upside from any successful initiative.

“The programme will allow us to test the opportunity to develop IP and monetise this throughout the network,” says Riley. “If the idea is good enough, we’ll have no hesitation in committing a percentage of the agency’s revenue into R&D, as required to get a Government grant.”

The agency intends working with chosen partners and potentially clients to bring ideas to life in what will be a shared ownership and revenue model, and Riley says this type of approach is well overdue.

“The advertising industry has evolved significantly during the last two decades; however, generally speaking, the way the industry gets remunerated for the work it creates has not,” he says. “Agencies the world over are still happy to hand over consumer insight, strategy, creativity and ideas for little income, and in cases where this work is used in multiple markets by a client, it’s very rare the agency will have a remuneration deal linked to the use of this work, or the success it creates for a client.  In most cases the best ideas are created by some of the best brains in the industry; it’s nonsensical that this intellectual property can’t be monetised more effectively.”  

However, Riley does not feel that the initiative will detract from the traditional goal of advertising, which is, of course, to increase a client’s revenue. 

“It is clear the advertising industry—in particular agencies—need to innovate and redefine how we create, deliver and capture value in our respective organisations, whilst at the same time ensuring we focus on the most important thing, which is success for our clients’ businesses. It’s our view that the better our thinking and ideas are, the more value they will create for a client, allowing us both to create competitive advantages gain market share and create differentiation.” 

Although Shaper has been dubbed a first in New Zealand, it’s by no means novel in the international context, with Wieden + Kennedy’s Portland Incubator Experiment (PIE) having been established informally in 2009.  

On its website, Wieden + Kennedy provides the following summary about the project: “PIE’s mission is threefold: innovate business models and create tech-fueled cultural disruptions, build platforms rather than one-offs, and act as a tech-entrepreneur accelerator and social hub.”

DDB’s Australian arm also delineates a three-point plan for Shaper on its website, saying that the project aims at developing an appetite for innovation within the people of an organisation, feeding the hunger for innovation through process, and expanding the interest through harnessing partnerships.

Across the ditch, this initiative has already resulted in two completed prototypes and one in development. The first is a wearable tech solution within the active lifestyle segment, the second a platform solution toward public safety, and the third in development is aimed at cyber bullying.  

In some ways, this seems like a natural progression for creative agencies, in sense that they often have to develop creative solutions to overcome problems. But despite the seeming compatibility between innovation and the creation of advertising solutions, creative agencies have thus far failed to convince when it comes to product development.

In his book titled Madison Valley, author Leif Abraham argues that campaign development differs markedly from product development.

“Since the 1960s there has been a process established for campaign development,” he says. “Everything from concepting to airing a new TV commercial has been template-ised with well-defined roles at each point in the process. At its core, a spot from 10 years ago is similarly produced to the one you saw today. 

“This is not true for product development. Even though many smart people and companies have found a system of creating things, there is no real template to follow because every product is very different from the next. Yet when agencies start doing product work, the way they treat the production of an app, for example, is very similar to the way they treat the production of a TV spot.”

He explains that the ad agency approach is not usually conducive to product development, because advertisers usually only aim for the instant gratification of some hype before moving onto the next project.

“When most ad agencies launch something product-like, they have no plan in place on how to maintain it,” he says. “They treat the launch of a product the same way they treat the launch of a new campaign and therefore have no teams set up to maintain it afterwards. And as soon as they get their press and maybe some awards, an ad agency will lose interest in the product and move on to the next thing.”

Despite this apparent pessimism, Abraham doesn’t shut the door on ad agencies innovating entirely. He proposes that agencies should rethink their billing model and introduce a system that shares the risks and potential rewards of the project.

“Creating product work with your clients with a shared interest established will let your agency move from being a vendor to a co-founder of a new venture,” he says.   

He proposes that the project should be treated as a disparate company rather than just as a campaign or a one-off endeavour.    

“I believe agencies should not build a product team internally, but rather build a team together with the client,” says Abraham. “These are people who are specifically hired for this company, not agency resources. Agency resources can definitely help create a first MVP, minimal viable product, but those resources should not run the company or product. It’s important that the funding for this team comes directly from the funder and not through the agency.”

Many of these suggestions—including independent funding, a shared revenue model, willingness to collaborate and the goal of product development—have been emulated in the model that DDB has chosen for Shaper. However, the suggestion that DDB staff will be giving about 20 percent of their weekly work time to selected projects runs against the grain of Abraham’s recommendations for a workable model.    

In contrast, Wieden + Kennedy’s PIE initiative does not necessarily involve its staff but rather invites outsiders to pitch ideas for development.   

This being said, while differing, both PIE and Shaper have enjoyed some success abroad, and it will be interesting to see how successful the introduction of an innovation hub will be in New Zealand. 

As a side note, this isn’t the only example of DDB extending its offering beyond simple advertising, because Marty O’Halloran, the chair/chief executive of DDB Australia and New Zealand told NZ Marketing last November that the agency was also considering branching out by introducing management consultants into the team.  

“I think that will be a very exciting evolution of what we do,” he said at the time. “This is the most exciting time to be in our industry because of data and changing technology. Clients are very nervous about change. And our job is to give them infrastructure to help them sleep at night so they’re taking advantage of that change rather than feeling threatened by it.”  

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