It used to be easy. Cut the marketing budget into an advertising agency, throw some to the PR agency and use the rest to sponsor a few sports teams and a couple of conferences. The client-side team structures are arranged by product or by brand channel and everyone marches along nicely and completes an annual marketing plan.
We now have to ask some questions like:
- Do we need a fulltime agency? What do they do and what do we do?
- Why are we buying media? Should we be making our own media? Should we have a newsroom and a newsreader-type person?
- How do we hire and manage the most skilled people when we don't have the skills ourselves? How do we assess what a good mobile-first strategy is when we've never done one?
- How do we make sure we have the best technology for the future when we don't have knowledge about what the 'best' even is?
If it all seems a bit confusing then you are probably on the right track. Just take a look back to the influential management article 'The Nature of the Firm' by RH Coase from 1937.
"Apart from variations in the supply price of factors of production to firms of different sizes, it would appear that the costs of organising and the losses through mistakes will increase with an increase in the spatial distribution of the transactions organised, in the dissimilarity of the transactions, and in the probability of changes in the relevant prices. As more transactions are organised by an entrepreneur, it would appear that the transactions would tend to be either different in kind or in different places. This furnishes an additional reason why efficiency will tend to decrease as the firm gets larger. Inventions which tend to bring factors of production nearer together, by lessening spatial distribution, tend to increase the size of the firm.
Changes like the telephone and the telegraph which tend to reduce the cost of organising spatially will tend to increase the size of the firm. All changes which improve managerial technique will tend to increase the size of the firm" p 397.
Run that by me again?
“efficiency will tend to decrease as the firm gets larger. Inventions which tend to bring factors of production nearer together, by lessening spatial distribution, tend to increase the size of the firm.
Changes like the telephone and the telegraph which tend to reduce the cost of organising spatially will tend to increase the size of the firm. All changes which improve managerial technique will tend to increase the size of the firm."
So what he's saying is
- The bigger you get, the more inefficient you get
- Inventions and technology increases the size of the firm, thus increasing inefficiency
- To combat the inefficiency, you improve managerial technique
- Improved managerial technique increases the size of the firm
- Rinse and repeat
So the answer then is the startup right? Spin it all off. Move to smaller structures for organising resources. However, the advantage of the startup is invention and efficiency. Both of these factors lead to growth and hence, inefficiency, so you’re actually on the same wheel according to Coase. Eventually you will have to loop around and make decisions about how resources are structured and directed. The organising mechanisms will need to be in place whether the activity takes place in your company or outside in an agency. At what stage do you start to build client-side capability and learn the new methods?
The article summarises this relationship by stating that we "thus have a theory of moving equilibrium...the question always is, will it pay to bring an extra exchange transaction under the organising authority.”
In simple english, should we be doing this or should we be getting someone else to do it? It is the problem of management to be solved so don't feel you're not making progress if you have some frustration and reservation about the way your marketing activities are structured. Keep having the difficult discussions because, if Mr Coase is correct, then you are trying to achieve an equilibrium and not a perfect, static solution in your organising authority (marketing team) and new technologies will keep shifting the balance. It's just change management I guess.