complexity of creating profit at a wireless agency

The Complexity of Creating Profit at a Wireless Marketing Agency:

How Design Illuminates Solutions The Complexity of Creating Profit at a Wireless Marketing Agency ORGL-690 A1 Gonzaga University Melissa Gena July 7, 2011

introduction:

introduction

Overview of Design:

Team-based approach to solving complex problems (School of Advanced Military Studies, 2010) Work within environmental frame, problem frame, and solution frame to develop a design concept Relies on narrative to describe the circumstances as a story Uses discourse and critical thinking to challenge the status quo, and creative thinking to generate new ideas Ultimate goal is to truly understand the problem in its native environment, to account for context , and to generate solutions that acknowledge the inherent nature of change in complex problem situations Overview of Design

Problem: Agency Profitability:

The Wireless Practice – mobile marketing agency 10 years No profit Why has the company been unable to generate profit? What can be done to position the company to become consistently profitable? Beginning state: Agency that scrapes by, constantly scrambling to break even. Desired end state: Agency that can sustain profitability. Problem: Agency Profitability

Environmental frame:

Environmental frame

Agency History:

Founded in 2001 as “ ipsh !” – one of the first mobile marketing companies Technology was always a few steps behind sales – operated without full-time engineers until January 2005 Acquired in October 2005, grew staff to handle anticipated increase in business Laid off 25% of staff in 2006 when new business didn’t come Ongoing history of difficulty hiring people with mobile experience Ongoing history of significant effort spent educating clients about mobile – results in long sales cycle, high cost of sale Change in executive leadership in 2007 spurred reorganization and major staffing changes – goal was to reposition company as a marketing agency, not a technology company History of high turnover – 32 people have left the company in the past three years Agency History

Environmental map:

Environmental map Communication Channel Occasional Communication Channel

Internal Tension:

A/B – Management places high pressure on sales and production to close and deliver business C – Bus Dev creates tension with PM when proposing technology never before implemented, or when pricing too low to cover production costs D – Engineering feels strained to plan for new technology proposed by Bus Dev , which takes away from time committed to clients . Bus Dev feels tension towards Engineering when pushing for longer timelines E/F – PM and Engineering feel tension when AM fails to convey requirements accurately which results in changes late in the process. AM feels PM and Engineering are too rigid . G – PM is responsible for ensuring delivery of campaigns, and inherently creates tension with Engineering when they have to accept short timelines then ask Engineering to deliver . H – AM feels tension with Creative Services, and R&D when they are unable to get support. They feel tension with Ops because they don’t have time to deliver sales projections. I – Engineering feels tension with R&D when R&D supports cutting edge approaches which require extra work they don’t have time for. Internal Tension BU4 – Wireless Practice Wireless Practice Management Sales Business Development Production Program Management Account Management Engineering Creative Services / R&D / Operations Tension A B C D E F G H I

Problem frame:

Problem frame

Financial analysis:

Revenue is not the problem Single largest expense = labor (~58%) Management labor expense = ~ 48% of all labor expense Ratio of billable to non-billable employees is 1.8 / 1 Company uses blended billing rate designed to account for cost of non-billable resources and build in 25% profit Blended Billing Rate = Avg. salary x 1.16 (16% for benefits) x 2 (doubled to account for non-billable resources) x 1.33 (increased by 1/3 to build in 25% profit margin) Financial analysis

Labor Expenditures:

Labor Expense by Category Labor Expense by Dept Labor Expenditures

Capacity:

Capacity Hours Required to meet 2010 Revenue = 2010 Revenue / Blended Billing Rate

Capacity:

Capacity Hours Required to meet 2010 Revenue = 2010 Revenue / Blended Billing Rate Hours available = # billable staff x 2000 x .8.

Capacity:

Capacity Hours Required = 2010 Revenue / Blended Billing Rate Hours available = # billable staff x 2000 x .8 . Hours spent = # jobs required to meet 2010 revenue x avg. hours spent per 2010 job.

Capacity/Pricing Conclusions:

Discrepancy between actual and perceived capacity Heavy workload increases burnout and the likelihood of human error and inefficiency. Production employees are already doing as much as they can, yet there is no profit, no additional capacity in the workforce, and high levels of turnover. Based on figures used in capacity calculations, average pricing for 2010 projects only covered 79% of actual effort expended by staff Capacity/Pricing Conclusions

Other Contributing Factors:

Technology – company operates it’s own software platform to deliver campaigns, but expensive customization is required for most campaigns and customization is often only useful for one client Workload – overworked employees suffer from low morale and are more prone to making errors or taking shortcuts that reduce quality of work High turnover – very high levels of turnover create a hidden cost for the agency – ramp-up time is lengthy due to nature of emerging technologies Communication breakdowns – non-technical account managers own communication channel with clients and can miss or mistranslate technical requirements to production Other Contributing Factors

Solution frame:

Solution frame

minimize in-house technology:

Managing proprietary technology platform that is not advanced enough to support configuration-based implementation of programs is too expensive Licensing of a software platform built by a company whose core competency is developing software for mobile marketing will save money in 4 ways: Reduce costs of maintaining physical infrastructure Eliminate two engineering positions Eliminate SVP Operations position Increase capacity of remaining resources Accounting for the cost of licensing a messaging platform, net savings for the company based on elimination of positions would result in approximately 12% reduction in labor costs minimize in-house technology

Consolidate functional teams:

Account Management and Program Management teams are currently split, and both have individual managers. Each client project has both an account manager and a program manager assigned to it. Consolidating these teams under one manager would create a more cohesive team . Elimination of one management position would reduce labor costs by approximately 5%. Consolidate functional teams

consolidate functional teams:

consolidate functional teams Client Service Goals Program Mgmt Goals Technology Goals Client 1 Goals Client 2 Goals Client 3 Goals BEFORE AFTER

Design concept:

Design concept

Design Concept:

EMBRACE IDENTITY AS MARKETING AGENCY Allows agency to maintain focus on core competency Minimizes spending Reduces effort Reduces stress CONSOLIDATE TEAMS TO REFOCUS EMPLOYEES Minimizes some management expense Removes redundancy in authority Streamlines communication Design Concept Net effect of quantifiable changes would result in approximately 10 %+ profit based on 2010 figures

Objections to Design Concept:

LOSS OF FLEXIBILITY Eliminates possibility of customization Replacement should be robust enough to account for most programs the company implements The worst case is that the company may have to turn away certain business TRANSITION MAY BE EXPENSIVE Technology platforms will have to be evaluated The process of moving campaigns will bring some cost The evaluation may result in new feature requests the company can pass on to the vendor Process of moving can be thought of as training Objections to Design Concept

Objections to Design Concept:

REORGANIZATION IS DISRUPTIVE The Client Service and Program Management teams have operated for years as separate units Single manager of the group is forced to view the big picture The end result will be a management structure and supporting systems that bring the team together ELIMINATION OF POSITIONS IS A SENSITIVE SUBJECT Management positions proposed for elimination in have already been recently made vacant The technology positions are those that will be the most sensitive for the staff to deal with It is possible that the company can help place employees with partner agencies. Objections to Design Concept

references:

references

References:

Camillus, J. C. (May 2008). Strategy as a wicked problem. Harvard Business Review, 99-106. Cilliers , P. (1998). Complexity and postmodernism: Understanding complex systems .  New York: Routledge . Collender , M., & Deller , M., Lt. Col. (Fall 2008) Scoping complex systems for the joint force commander. Campaigning: The Journal of the Joint and Combined Warfighting School , 35-79. Combined Arms Doctrine Directorate. (2008). Field manual 3-0: Operations . Washington, D.C. : U.S. Army. School of Advanced Military Studies. (2010). Art of design, student text, second edition . TRADOC . References