Microsoft Advertising's Oliver: Agencies fall behind when it comes to innovation

With innovation fast becoming a buzzword for marketers, many are noticing this is seldom driven by agencies.

This sentiment was seconded by Jonathan Oliver (pictured), global head of innovation at Microsoft Advertising.

“I truly do not think the traditional agency model will be around in the next two years. The rate of change gets faster every day and the next two years will be hyper fast. Agencies need to evolve to become consultants,” said Oliver in a conversation with Marketing.

He added that traditional agencies are fast becoming disintermediated and brands are coming directly to companies such as Microsoft as they see these companies as providers of tech and innovation.

Oliver said that while many agencies were today trying to evolve, this was still a struggle. However, Publicis buying Sapient does mark a good start for the advertising industry.

“Agencies are in an interesting predicament because they have to move as fast as culture is moving and constantly changing. There’s a lot of risk on the agencies’ part – they are always playing catch up, but at the same time they have a client to convince. And if it goes wrong they get fired and clients find someone new.”

A fear of failure and high expenses

Innovation is proving just as difficult on the client side as well.

Innovation, said Oliver, has to be wrong to be right. If it’s true innovation, it has to be something that has not been done before.

“However, brands do not really want radical innovation because it is very expensive and has a high failure rate.”

He added that while brands wanted media firsts, the problem was they don’t usually define what kind of innovation they want and the level of risk and marketing spend they were willing to fork out.

A good way to understanding innovation – which is still difficult to define – is that innovation should help communicate the product at hand and it should be embedded throughout the company culture. A practical breakdown of spend in the marketing budget for a company dabbling in the innovation pool should be 70% on traditional, 20% on new, but tested technology and 10% on true new innovative products.

“The measurement of success is how quickly you funnel in money to make that 10% a 20% then turn that into a 70% – that’s key,” Oliver said.

Is data to be blamed for a lack of innovation?

“When you have too many choices, it usually leads to a choice paralysis – that is where we are with data.”

He added that while data was vital, we should not lean on it too much.

While companies can refine and understand data patterns, there is still a “handbrake on innovation as marketers are too scared to make decisions based on all the data they have”.

On the opposite end of the spectrum, however, when there is not enough information, innovation is also equally difficult.

Furthermore, because of the availability of data today, there is a rise in a number of decision-makers thinking that failure rates in innovation should be lower as data leads to a clearer understanding of customer behaviour patterns.

But the truth is, said Oliver, it doesn’t. This is primarily because data is always looking backwards rather than forward. True customer insight is not in the data, but rather in the gaps in the customer journey and experiences.

“If companies looked backwards with the data at hand we wouldn’t have the iPhone or CNN channels and many other products. Data would have told them not to do indulge in these product innovations. If you look at data too much you can’t really see the real insights.”

However, data alone cannot be blamed for a lack of marketing innovation.

In Asia, culture plays a big part in the lack of marketing innovation, said Oliver. Historically, in many Asian cultures, failure is not welcomed.

“The US is leading in innovation and pulling ahead of many markets because in the US failing is seen as a badge of honour. In Asia it isn’t looked at positively or harboured.”

To truly successfully innovate, marketers must be ready to fail, said Oliver.