For readers on this side of the Atlantic, I’d like to point out an interesting report released over the summer by the Value Framework Initiative co-sponsored by CIPS (Chartered Institute of Purchasing and Supply), the IPA (Institute of Practitioners in Advertising), and the ISBA (Incorporated Society of British Advertisers) entitled “Magic and Logic: Re-defining sustainable business practices for agencies, marketing, and procurement”.

This insightful report, authored by Marilyn Baxter, who conducted in-depth interviews with 24 senior respondents with decades of relevant experience at large enterprises (with names like Coca Cola, Honda, Unilever, Fallon London, Lowe London, Proximity, and Willott Kingston Smith), identifies best practice methodologies that can be used jointly by agencies, marketing, and procurement to work together in their efforts to produce “profitable ideas that make profit“. The societies came together and commissioned this report because they found that there was a general lack of alignment between agencies, marketing, and procurement in all but the market leaders. Knowing that profitable ideas result when all three parties recognize the “magic/logic” distinction and vigorously pursue the improvement of both with an appropriate balance, they wanted to provide their members and the community at large insight on how to be more successful.

Magic is defined as the production of brilliant ideas that grow brands and businesses while Logics is defined as project management, financial management, and other non-magical processes that support the innovation effort and the “magic” it produces.

The agency controls the realm of magic, needed by marketing, and procurement controls the realm of logic. The fusing of the three is necessary to ensure that marketing receives maximum value from the agency relationship. Furthermore, the agency can itself benefit from the involvement of procurement.

The agency market is more crowded than ever and agencies are being pressured to be more competitive. However, despite historical indicators to the contrary, successful agencies are run just like any other successful business and the best agencies are those that offer a differentiated product, focus on results, maintain confidence, maintain a high degree of professionalism, and have disciplined business processes that enable them to get their top-line income right and achieve better bottom line profits.

Successful agencies also have strong leaders with clear goals, coherent values, and a strong business focus. They care about cost and efficient use of their resources (the logic) as well as innovation (the magic). They put the quality of their people at the heart of their business, forming a “service/value/profit” chain. The leaders know they are in business to create value, quality, and great ideas.

However, agencies are not alone in their need to improve. Marketing clients have to improve their ability to assist agencies in developing the best possible profitable ideas for them. This includes being professional, disciplined, and well-organized at all times, knowing what they want, committing to quality and expecting to pay for it, regarding agencies as partners, and engaging procurement in the development of efficient, valuable, constructive and productive relationships.

Procurement can help marketing deal more effectively by disciplining the process and aiding marketing in the identification of precisely what it is they are seeking. They can bring consistency to briefing, standard contracts, fee structures, and reporting, and insure that third party supplies are purchased effectively. They can help control the relationship, maintain consistency in their organization’s dealings, measure effectiveness and outcomes, and help quantify, as well as increase, the value of the relationship (which is not cost, but ROI).

Procurement can also help the agencies increase their value by working with the agencies to improve their management and processes, thereby increasing the value of the services offered by the agency. Procurement is also the entity that is best suited to identify the win/win during negotiations.

This extensive report concludes with a number of detailed recommendations for agencies looking to improve the value of their offerings, marketing organizations looking to get more value out of their agency relationships, and procurement organizations seeking to help both parties work together more effectively. It also includes some great appendices that define signature practices of the most profitable client/agency relationships from a financial, workflow, relationship, and value perspective and profitable performance characteristics. All in all, it’s a great read – and I’m not going to give away the ending here to encourage you to add it to your reading list (and maybe take a copy with you on your next flight).