Tag: "specialization"

Industry specialization: Great! Until maybe it isn’t.

When people are free to do as they please, they usually imitate each other.
–Eric Hoffer 

Posted by:
Tate Linden

We’re frequently asked by prospective clients whether or not we’re specialists in particular industries such as healthcare or technology. The answer is that we’re not. And we don’t ever intend to be. While this sort of specialization was intriguing to us in the early days at Stokefire’s, we ultimately decided it would be better for our clients (and thus our long-term success) to go in a different direction.

I acknowledge that this decision seems to run counter to the traditional wisdom given to businesses of all types. And I’m good with that.

I can’t argue that industry specialization is universally bad. Far from it. It’s a critical ingredient in successful financially oriented businesses, such as auditing and investment banking. Even if the entire organization doesn’t specialize, employers retain industry experts that lend credence to an organization’s findings. Similarly, Stokefire employs or contracts with specialists to handle behind-the-scenes jobs that require specific training and experience, such as certain illustration styles, animation, or programming. Each of these is an industry of sorts. (No one, least of all me, wants to see what would happen if I tried to do this stuff by myself.)

I’ll also grant that, for the vast majority of organizations, industry specialization may actually be a good plan. But my reasons are something you probably won’t like.

As Jean Marie Caragher suggests in her article for AICPA, industry specialization includes benefits like high profitability, economical marketing, easily identified prospects and competition, fewer geographical barriers, prestige, increased knowledge of clients, and more. Studies (including this one by Craswell, Francis, and Taylor in 1995) find a link between industry specialization and the ability to charge more for the same services.

With a list like that, it’s hard to imagine why anyone wouldn’t jump on board.

Put yourself in a client’s shoes for a moment and reread the list from their perspective. How many of the benefits help them? One could argue that industry experience helps projects run more smoothly, allows for common tasks to be done very quickly, and increases confidence that the work will meet industry standards. For accounting or other services that aren’t traditionally visible to the client’s target market it makes a lot of sense.

But what happens when the industry specialist’s work is front-and-center rather than hidden under layers of organizational process? What happens when it’s a branding, marketing, or advertising organization that decides to focus on a single industry? What happens when it’s the essence of who you are and what makes you the best in your industry that is crafted by an industry specialist?

Put on the client’s shoes again, if you would (this time as a client of an agency.) All the stuff that was desirable in the back-office is now questionable at best. Sure, the agency knows your competition, and may have even worked for them. But what does it say about the quality and importance of that work (or the ethics of the organization’s leaders) that they’re willing to immediately sell the same services to you? How could they avoid contaminating the guidance they give you with information gained from private meetings with your competitors? And if they share this information with you (overtly or not,) what would stop them from sharing your secrets?

Regardless of how they may position themselves, industry specialists serving most audiences are limited in the concepts that they can bring to you, since if they were to propose a concept that actually pulled market share from another client they might be liable for damages. An agency that gets a reputation for selling out its clients is an agency that won’t have that problem for long.

So, to my way of thinking, a creative agency that farms a single industry either doesn’t believe their work has the ability to materially change the fortunes of its clients (and thus can sell to direct competitors without worrying about conflicts of interest), or they don’t care that each new contract they get in their industry is likely to devalue the work they’ve done for others.

That’s why Stokefire doesn’t go in for industry specialization. When given the freedom to do great work for our clients we’ve enabled new industries and reshuffled old ones. To then go back to all the competitors our work has marginalized or impeded and say, “See what we did for XYZ Co? If you want to stand a chance against them then you’d better hire us.” is lacking in scruples even if it might make short-term business sense. (It’s not all about morality, though. Another reason we don’t do it is that many of our larger or more strategically-minded clients pay a premium to ensure we won’t work in their field for a period of time following our project on their behalf.)

I’ll again grant you that industry specialists may work faster or more efficiently, and that these qualities have the potential to result in lower over-all costs since they’re not billing as many research and administrative hours. I’ll even grant you that it’s a helluva lot easier to run a profitable agency that specializes in one industry. But I can’t seem to connect either of these with the sorts of outcomes creative work is capable of achieving or that clients actually need.

To those consultants who espouse industry specialization for creative agencies, and to those agencies that farm single industries for profit, I ask you this: How does your industry focus tangibly improve outcomes for your stable of competitive clients?

Anyone willing to venture in and share their contrasting views?



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