Using the decline of the U.S. railroad industry as an example, Levitt suggested that the railroads didn’t stop growing because the need for passenger and freight transportation declined. In fact, it was rapidly growing, but the need was being filled by other means of transportation like cars and airplanes.

The problem, according to Levitt, was that they assumed to be in the railroad business rather than the transportation business. The reason they defined their industry incorrectly was that they were railroad-oriented instead of transportation-oriented, product-oriented instead of customer-oriented.

In other words, the railroads stopped growing because they forgot what business they were in.

Now let’s imagine how Levitt’s theory might be applied for an analysis of our own industry a decade from now. 

Agencies didn’t not stop growing because the need for creative and media declined. In fact, it was rapidly growing, or the need was being filled by in-house operations. The problem was that they assumed themselves to be in the agency business rather than in the outcomes business. The reason they defined their industry incorrectly was that they were agency-oriented instead of outcomes-oriented, model-oriented instead of client-oriented.

To prevent this exercise in fiction from becoming a statement of fact, we as an industry need to ask ourselves a simple question. What business are we in: the agency business or the outcomes business?

If we are in the agency business, then by all means let’s continue to expend time, energy, ink and pixels, making the case against in-housing as an inadequate, ineffective and unsustainable solution. Because if we’re in the agency business, in-housing is an existential threat. If, on the other hand, we are in the outcomes business, our value isn’t measured by the breadth of our remit but by the depth of our impact.

With close to 80% of U.S. brands now reporting in-house marketing operations, in-housing is no longer a trend; it’s secular change, both inevitable and irreversible. But there is still enormous opportunity for agencies in this new reality, provided we can change our business paradigm.

We can remain relevant and, indeed, invaluable by integrating with in-house operations in three specific areas.

Talent

How many times have you heard talent used as an argument against in-housing? Saying that in-house operations can’t attract the same level of creative and media talent as agencies has been so overused that it borders on cliché. Then again, clichés are clichés because they are true.

Rather than using talent as a wedge issue, wouldn’t it be more productive to see it as a point of integration? Today’s marketplace demands a deep talent pool of teams comprised of individuals with diverse discipline expertise at the local or regional level, coupled with global perspective, people who are curious, collaborative and committed to exploration and innovation. In other words, the type of people that agencies are best positioned to attract, at scale. Agencies need to view their talent as a shared asset in driving outcomes and the foundation for a new relationship paradigm.

Technology 

Agency and in-house client teams must be powered by a shared technology platform that is intuitive and future-facing. Moreover, those platforms and tools should be built for clients to operate (and potentially own) themselves, enabling real-time decisioning today with an innovation pipeline that delivers competitive advantage tomorrow. Clients deserve to have a clear road map for how their agency will advance their media maturity model and maximize their existing knowledge while at the same time have visibility of tech audits, assessments and new use cases.

Process

Agencies can bring effective and efficient processes hard-coded into a technology platform to drive agile and connected decision-making. Understanding that a process must be fine-tuned to client needs to deliver business outcomes, agencies can be economic multipliers by creating customized processes that can evolve with a client’s business and offer distinct points of view as to how the in-house team can and should use their data and technology to deliver portfolio planning, budget setting and predictive modeling. By enabling visibility and speed, agencies can help in-house teams design more valued and valuable end-to-end customer experiences.

Leveraging our core capabilities to support in-house teams, agencies can transform an existential threat to a clear and present opportunity, demonstrating the critical role we play in advancing, augmenting and accelerating outcomes. Because that’s the business we are in.