The risk of undervaluing creativity

Agencies’ creative perspective, the very currency of the business, is at risk and can only be realized by shifting billions from tech to fund creative differentiation.

“The value of agency creativity is at risk of disappearing”

The marketing industry is woefully out of balance, from agency/client relationships to new business requirements and compensation. The healthy tension of creativity that once balanced the needs of the brand with the needs of its customers, the commercial effectiveness of the work versus its cultural impact, and the needs of agency economics versus the client’s growth is all eroding. These are now one-sided issues. The tension is no longer healthy. Nowhere is this more evident than in agency economics. Agencies today barely grow at the current rate of inflation. Insourcing, margin compression, cost-cutting, new competitors, and tech priorities threaten the existence of agencies and undermine their value.

“Customer experience has stagnated”

Strong evidence of creativity’s languish is already underway. Customer experience has stagnated. Forrester’s Customer Experience Index (CX Index™), a study of 100,000 consumers and 300 brands that has been run for more than a decade and acts as a barometer for CX performance, is flat for the fourth consecutive year. Most brands are stuck in the middle, struggling to improve over competitors. Zero brands are rated to have an excellent experience. Forrester determined that there are four types of CX performance: the Languishers, Lapsers, Locksteppers, and Laggards. No brand is performing well. Worse still, for every 1-point drop in CX Index score, companies lose 2% of their returns. It’s only a matter of time before companies’ growth is impacted.

“We’ve commoditized the brand and homogenized experiences”

The issue is that the work looks, feels, and behaves too similar. The industry obsession for meeting every customer need and want for ease and convenience by using technology has left little room for creative differentiation. That has come at a cost. The front door to your brand is a web or app experience that is virtually indistinguishable. Fashion experiences look the same. Quick-service restaurant and coffee apps allow you to order ahead and skip the line. All airline apps allow travelers to check in, manage travel, and use a mobile device as their boarding pass. What can make one brand different from another when the experience is built from the same common technology platform, designed to solve the same user or category need, and programmed for the same two devices? Creativity.

“We’ve overfunded technology and underfunded creativity”

Unfortunately, just when creativity is needed the most, business leaders are investing in it the least. Forrester forecasts that spending for adtech, martech, data, and analytics will grow between 9% and 11% through 2022. Agency spending will only grow a mere 2.4%. And client budgeting and priorities are only part of the problem. Agencies are underfunding creativity, too. As of 2014, agencies had spent $12 billion-plus for data and technology resources and acquisitions. While the agency data platforms do power media and audience activation, all but one integrates with the creative process. And creative departments remain skeptical and dismissive.

“It’s time to fund creative differentiation”

Forrester developed an ROI for creative agency investment that determined that moving a portion of the marketing budget out of technology and into agency creativity will bring a higher return on investment compared to currently projected spending levels. This serves as a six-year growth plan for CMOs that ultimately helps achieve 20% growth for the entire industry. These are not new dollars but rather a reallocation of currently projected spending that maintains significant adtech and martech investments.

“It’s time to reinvent creativity”

To deliver clients the growth they need and customers the experiences they demand, agencies must innovate their structures, capabilities, workforce, and process. Structurally, data, technology, media, and creative should all come together and put creative problem-solving at the center. This means the newly acquired data, tech, and operating agencies should also come together. And especially, it means agencies leaders will need to make consolidation and coordination a priority. Tough decisions must be made in the name of agency brand coherence and a model that is easier for clients to engage. Training today’s workforce to be tomorrow’s data-, technology-, and creative-literate is critical. And creative departments must embrace data- and tech-driven creativity.

We’re living during one of the most interesting times in the history of the industry, with the opportunity to shape and define it. A whole new era of amazing marketing is only possible if we fund the balance of creativity and technology. Take up the mantle to modernize the industry. Reinvent the creative process.

Author: Jay Pattisall

Source: Forrester

The status of AI in European businesses

What is the future of AI (artificial intelligence) in Europe and what does it take to build an AI solution that is attractive to investors and customers at the same time? How do we reimagine the battle of 'AI vs Human Creativity' in Europe? 

Is there any company that is not using AI or isn’t AI-enabled in some way? Whether it is startups or corporates, it is no news that AI is boosting digital transformation across industries at a global level and hence it has traction not only from investors but is also the focus of government initiatives across countries. But where does Europe stand with the US and China in terms of digitization and how collective effort could push AI as an important pan-European strategic topic? 

First things first: According to McKinsey, the potential of Europe to deliver on AI and catch up against the most AI-ready countries such as the United States and emerging leaders like China is large. If Europe on average develops and diffuses AI according to its current assets and digital position relative to the world, it could add some €2.7 trillion, or 20%, to its combined economic output by 2030. If Europe was to catch up with the US AI frontier, a total of €3.6 trillion could be added to collective GDP in this period.

What comprises the AI landscape and is it too crowded?

I recently attended a dedicated panel on 'AI vs Human Creativity' as a part of the first day of the Noah conference 2019 in Berlin.  Moderated by Pamela Spence, Partner of Global Life Sciences, Industry leader EY, the discussion started with an open question on whether the AI landscape is too crowded? According to a report by EY, there are currently about 14,000 startups globally which can be associated with the AI landscape. But what does this mean when it comes to the nature of these startups? 

Minoo Zarbafi, VP of Bertelsmann Investments Digital Partnerships, added perspective to these numbers: 'There are companies that are AI-enabled and then there are so-called AI-first companies. I differentiate because there are almost no companies today that are not using AI in their processes. From an investor perspective, we at Bertelsmann like AI-first companies which are offering a B2B (business-to-business platform solution to an unsolved problem. For instance, we invested in China in two pioneer companies in the domain of computer vision that are offering a B2B solution for autonomous driving'. Minoo added that from a partnership perspective Bertelsmann looks at AI companies that can help on the digital transformation journey of the company. 'The challenge is to find the right partner with the right approach for our use cases. And we actively seek the support of European and particularly German companies from the startup ecosystem when selecting our partners', she pointed out. 

The McKinsey report too states that one positive point to note is that Europe may not need to compete head to head but rather in areas where it has an edge (such as in B2B and advanced robotics) and continue to scale up one of the world’s largest bases of technology developers into a more connected Europe-wide web of AI-based innovation hubs.

Growing share of funding from Series A and beyond reflect increased maturity of the AI ecosystem in Europe. Pamela Spence from EY noted: 'One in 12 startups uses AI as a part of their product or services, up from 50 about six years ago. Startups labelled as being in AI attract up to 50% more funding than other technology firms. 40% of European startups that are claimed as AI companies actually don’t use AI in a way that is material to their business'.

AI and human creativity go hand-in-hand

Another interesting and important question is how far are we from the paradigm of clever thinking machines? Why should we be afraid of machines? Hans-Christian Boos, CEO & Founder of Arago, compares how machines were earlier supposed to do tasks which are too tedious or expensive and complex for humans. 'The principle of machine changes with AI. It used to earlier just automate tasks or standardise them. Now, all you need is to describe what you want as an outcome and the machine will find that outcome for you, that is a different ballgame altogether. Everything is result-oriented', he says.

Minoo Zarbafi adds that as human beings, we have a limited capacity for processing information. 'With the help of AI, you can now digest much more information which may, combined with human creativity, cause you to find innovative solutions that you could not see before. One could say, the more complexity, the better the execution with AI. At Bertelsmann, our organisation is decentralised and it will be interesting to see how AI leverages operational execution'.  

AI and the political landscape

Why discuss AI when we talk about the digital revolution in Europe? According to the tech.eu report titled ‘Seed the Future:  A Deep Dive into European Early-Stage Tech Startup Activity’, it would be safe to say that Artificial Intelligence, Machine Learning and Blockchain lead the way in Europe. The European Commission has identified Artificial Intelligence as an area of strategic importance for the digital economy, citing it’s cross-cutting applications to robotics, cognitive systems and big data analytics. In an effort to support this, the Commission’s Horizon 2020 funding includes considerable funding AI, allocating €700M EU funding specifically.

Chiara Sommer, Investment Director of Intel Capital, reflected on this by saying: 'In the present scenario, the implementation of AI starts with workforce automation with a focus on how companies could reduce cost and become more efficient. The second generation of AI companies focuses on how products can offer solutions and solve problems like never before. There are entire departments can be replaced by AI. Having said that, the IT industry adopts AI fastest, and then you have industries like healthcare, retail, a financial sector that follow'. 

Why are some companies absorbing AI technologies while most others are not? Among the factors that stand out are their existing digital tools and capabilities and whether their workforce has the right skills to interact with AI and machines. Only 23% of European firms report that AI diffusion is independent of both previous digital technologies and the capabilities required to operate with those digital technologies; 64% report that AI adoption must be tied to digital capabilities, and 58% to digital tools. McKinsey reports that the two biggest barriers to AI adoption in European companies are linked to having the right workforce in place.

It is certainly a collective effort of industries, the government, policy makers, corporates to have effective and impactful use of AI. Instead of asking how AI will change society Hans-Christian Boos rightly concludes: 'We should change the society to change AI'.

Author: Diksha Dutta

Source: Dataconomy