This post originally appeared in our newsletter on September 13th, 2022. Sign up to get our latest research, insights, tools, and resources delivered straight to your inbox twice a month.
Factory-Consultancy Evaluation
Complexity 2.0: The Factory – Consultancy Continuum
Digital shops exist along a continuum of complexity.
At one end, you have the factory-style shops and at the other end, consultancy-style shops.
Where you land has an enormous impact on your available strategies. It also helps explain why some strategies work beautifully at one shop but fall apart at another.
Matching strategy to complexity eliminates internal friction and makes growth easier. It lets you dial in things like your service mix, pricing, staffing, and company structure.
In this post, we’ll run through how to identify your type of shop and some common attributes. Then, I’ll offer an argument for pushing toward the extremes.
Defining the spectrum
What do you solve for your clients? Specifically, how unique and complex are your projects?
On one end, the challenges shops solve are simple and largely the same from client to client. Things like social media posts, WYSIWYG brochure websites, and PPC media designs.
Firms at this end are the factories.
Although the term can have a negative connotation, we don’t mean it disparagingly. Factories can become significant businesses if built correctly. The key is embracing it.
Factory attributes:
- Pre-defined project/service scope
- Simple workflow diagrams
- Standardized pricing
- Low project customization
- Lower talent costs
- Easier staffing
- More commoditized service mix
- Short low-touch sales cycles
- Large number of clients (low concentration)
- Smoother, more predictable revenue
- Focus on margins
- Easier owner exits
At the other end of the spectrum, the challenges shops solve are as complex as it gets. They often go beyond the purview of “digital.” Here, shops solve things like digitizing customer relationships, designing and implementing AI solutions, and implementing IoT rollouts across global networks.
These are the consultancies.
Consultancy attributes:
- Sizable “discovery” phases
- Complex workflow diagrams
- Fluid pricing
- Highly customized projects
- High talent costs
- Difficult staffing
- More cutting-edge service mix
- Long and high-touch sales cycles
- Fewer clients (high concentration)
- Choppy, less predictable revenue
- Focus on thought leadership
- Complicated owner exits
The other areas
High uniqueness, low complexity. Here, shops have a hammer, and everything they see is a nail. E.g. A social media shop that tries to solve every challenge with more social media. They come across as tone-deaf to the client’s actual issues.
High complexity, low uniqueness. If a project is complex (by necessity, not just for fun), it’s probably because the challenge it’s solving has a lot of unique qualifiers. Complex projects that solve common challenges tend to fall in the “products” domain. An agency typically isn’t the right structure to scale products.
Somewhere in the middle
As I mentioned in the opening, every shop will fall somewhere along this line. While that’s true, most tend to fall more towards the middle of the line versus either of the poles. I’ll even see individual projects at the same shop land on different points.
Be yourself but get extreme
You can cut a TON of friction in your shop by aligning your strategy with your target along this spectrum. The caveat is you need to be comfortable building that type of business. There are compounding benefits for pushing to the extremes so the faster you get out of the middle, the better.
Most of the owners I’ve met got there because they’re awesome at doing whatever it is their shop does.
They love their craft.
These owners tend to lean towards building consultancies, primarily because they can still be involved in the craft. Owners who aren’t interested in doing the day-to-day tend to favor factory-style structures.
A few months ago, I was chatting with someone who was frustrated with how much time his sales staff was spending nurturing accounts. Part of his shop was set up to run like a factory, but the sales and marketing functions (along with pricing) were set up more like a consultancy.
He thought good salespeople were just impossible to find.
They aren’t, but they do need to be in a system that sets them up for success. Adopting a lower-touch, lower-price model and standardizing the offerings would help align the revgen team with the rest of the business and remove much of this frustration.
The same kinds of challenges happen to consultancies that try to run segments like factories. I see this a lot with retainers. Consultancy owners see the steady revenue and think the grass is WAY greener over there.
It isn’t. It’s just a different shade.
Embracing either the factory or consultancy style will make many decisions clearer. From service mix, to pricing strategies, to staffing and operations. Just about every decision gets easier the closer you are to the poles.
The point of all this is to be yourself. Build your company in a way that matches where you’re comfortable. Finally, drop preconceived ideas about factories being lowbrow, or consultancies being prestigious. There are plenty of good (and horrible) examples of both.
As always, if you’d like help sorting through all this, we offer an Agency Assessment that covers this and more.
