Steve O’Farrell is co-founder and Managing Director of The Royals, one of Australia’s most recognised independent agencies. David Angell and Steve talk about the importance of agency branding, client-agency dynamics in the post-COVID world, the industry’s attractiveness to new talent, what Steve would say to his 2010 self and the best advice for anyone else thinking about hanging their name above an agency door.
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This industry is too taxing, full of those peaks and troughs, to have anything but unwavering belief in terms of the potential of you and your partners to create the type of business that you dream about.
Transcription:
David:
It’s a good thing this isn’t a visual recording because I …
Steve:
Yeah, there you go.
David:
Just doing that. Okay, let’s do it.
Welcome to Managing Marketing, a podcast where we discuss the issues and opportunities facing marketing, media, and advertising with industry thought leaders and practitioners. My name is David Angell, and today I’m joined by Steve O’Farrell, founder and managing partner of The Royals.
I think is fair to say, Steve, your agency ranks as probably one of the most successful independent agencies in Australia, certainly in Melbourne over the last, what, more than 10 years now? So, I’m happy to have you on. Welcome, Steve. Thanks, and it’s great to be talking with you.
Steve:
Nice of you to say so; good to see you again, David.
David:
Let’s kick off with a discussion about branding, but not client branding. We spend a lot of time talking about our clients and brand strategy for our clients, but I want to talk about agency branding.
As an independent agency, you are the owner; you aren’t encumbered by some global parent sort of imposing a brand on you, which I guess is both liberating and challenging because it means you’ve got to come up with it yourself.
When you started the agency, The Royals were the most interesting agency in the world, which I thought became quite established. And then I think it was about two years (correct me if I’m wrong) ago now you’ve pivoted to being the agency that creates unnatural change to propel brands and culture forward.
I’m interested in that. Talk to me about the thinking behind the current proposition and why you decided to make the change.
Steve:
Yeah, there are a couple of things there. First of all, I’m not the owner, I’m one of four owners, which makes it …
David:
I look at you as the guy, Steve, what I can tell you.
Steve:
Which makes it even more challenging, David.
David:
Yes, fair enough.
Steve:
But you can imagine when we started the business back in 2010, 2011, getting four longtime agency partners together in a room trying to figure out exactly what they wanted to own in the marketplace. And particularly, in a marketplace like ours, which is so shouty, trying to come up with something genuinely distinctive is really, really difficult.
So, we spent a stack of time on it, and the only other point I’d make, and I can elaborate on this further, is that we didn’t so much pivot from most interested agency to an agency that’s all about creating unnatural change, it was more a shift in terms of emphasis. And let me break that down a little bit for you.
So, when we first started … we absolutely still live by the ethos of wanting to be the most interested agency in the world. And the thinking behind that is that it’s an inherently humble starting point.
Our industry’s one of the few industries other than music, where you actually get paid to listen. And the idea is that the more interested you are, the more interesting and ultimately, effective the work that you produce should be.
But we discovered after talking about that as the focus that we probably also, at the same time, needed to talk about what was in it for the clients. And a natural change, therefore, came about based on the idea that we take what is expected of brands, and we work with ambitious clients to exceed those expectations.
Now, we use creativity to do that; we use data-related insights and a solid understanding of marketing science. But really, it’s still all very much driven by this most interesting philosophy, this kind of organizational perspective that we come to work with every day, and still imbues everything from our employee value proposition to how we go about building relationships with clients.
And at the day is ultimately focused on delivering that unnatural change by way of benefit to clients and culture and brands.
David:
I was going to ask you about your people. You mentioned just there, but of course, your people need to buy into that positioning and that brand and that ethos. How much did you talk to them through that process, and then have they got a mouse mat with it written on?
Steve:
There weren’t that many of them. Like when we came up with Most Interested, I think there’s probably five of us anyway, us and one employee. But the employee value proposition that we talk about a lot that builds from the most interesting ethos is that we’ll cultivate your curiosity.
And that really resonates with people, and that is ingrained in our hiring process through our DE&I and inclusion program, through things like our agency adventure, once-a-year getaway that we are doing at South by Southwest this year in Sydney.
For the first time, we traditionally send a lot of people to get interested in what’s going on in Austin, but this year it’s going to be in Sydney, which is awesome. So, it’s definitely something that is properly ingrained in our employee value proposition. It’s represented through our values and something that we talk about constantly and continue to be known for, which is fantastic.
David:
It’s so important. It seems obvious, but certainly in agencies, and I know, having worked in agencies myself, you can tell when a proposition or a positioning of an agency is just written on bits of paper and not really followed through or lived and briefed by the people in the agency and in consultancy land, I can tell it in pitches all the time.
You see it coming through in the way people present themselves and their enthusiasm and their conviction. And I think it’s a really important factor, not just of day-to-day, but of winning new business as well to make it real in a world full of agencies all saying that they’re the unicorn agency for you the client, making that proposition live and breathe and be real is just massively important.
Steve:
It’s super important and it starts with employees and the way that we recruit people. I try as much as possible to find out what people are interested in outside of our industry because I think that’s where you get parallels to make what we do every day that much better.
So, we spend a lot of time, from a recruitment point of view, talking about it. We spend a lot of time being proactive with our clients in trying to highlight opportunities that we haven’t necessarily been briefed on, trying to focus on what’s happening next by way of most interested opportunities is what we talk about a lot.
And then one thing we pride ourselves on, regardless of whether we win or lose, is I can almost guarantee that one key outcome from every pitch we go through is that clients will say that “You certainly lent well and truly in and listened and worked hard to learn about drivers in our category, learn about drivers for our customer base, learn about competitive sets, the influence of technology …” all of the things that we should be okay with in order to make the most interesting and ultimately compelling solutions that deliver against the required business objectives is what Most Interested is all intended to achieve.
Ultimately, it should be about that unnatural change, which is so hard to deliver, but it all starts with our most interesting ethos, that’s for sure.
David:
Well, let’s talk a bit about unnatural change anyway. In a broader context, obviously, having your people live and breathe what the agency’s about, it’s also important to motivate them. And motivation in the last two or three years, we’ve been living in a period of unnatural change.
COVID, I mean, we’ve talked COVID to death. Still, I am interested post-COVID now, about the motivation of your people and your clients and the dynamics that you’ve seen shift following this pandemic between your people, the way they’re operating and the way they’re operating with clients, and the clients as well, of course.
Steve:
Yeah, it has been a really interesting period of unnatural change, that’s for sure, and one that we are not necessarily better for yet. But one that’s certainly helped us shape and improve the way that we work. Because remote work is good for a lot of things, but what it’s not great for is collaboration, building relationships or creativity. Let’s be honest, it’s pretty fundamental the success of our business, our industry, and our relationship with clients.
So, we spent a lot of time working on that through the pandemic. And now, really delighted to say that in our experience, I’ve never seen clients be so keen to get together as now, and work through those opportunities in real time. And most importantly, also be willing to have those really difficult conversations, which we need to have if we’re going to ultimately deliver the unnatural change that is our end objective as well.
I think one observation I would make as it relates to the post-COVID environment is while current clients leading into the importance of meeting in person to work through them, their most challenging problems, I still do see too much … still to see too many chemistry meetings happening virtually in a new business context, or worse, still pitch meetings happening over Zoom or over Teams.
Personally, maybe it’s just my personality type, but I just don’t know how you can make a really informed decision on an advertising agency partner for the long term based on predominantly interacting with that partner in the virtual world.
So, that’s one thing that I would love to change, and I’d encourage any client looking to pitch their business to make sure that they address it as part of the process. Because as tempting as it is for efficiencies reasons, like most things, that efficiency isn’t realized in terms of the quality of the relationship or them being able to make an informed decision on the back end of the process unless you are sitting in a room in real life working through those challenges together.
So, that’s one thing that I still would love to see some improvement on, on the back end of COVID, is how we engage from a new business perspective, that’s for sure.
David:
I agree; I’ve got to be objective here. We have during COVID conducted some pitches that had to be online and there was a period where there was uncertainty just sort of coming out the back end: are we in lockdown? Are we not going to be in lockdown? And that also dictated — but having run many of these things, I certainly agree that there’s no substitute.
And we’re starting to see that now. Some of what you just said about the novelty of working from home wearing off a bit and people realizing they have to come back, I’m seeing that too. And certainly, I’d never be recommending that a client does a pitch online anymore. There’s no need for it; there’s just no need for it.
I think with some organizations, you can tell the level of the relationship they want with an agency by an insistence on running a pitch virtually, you can tell the value that they place on the relationship, and that is a marker for any agency who wants to compete in the pitch.
Steve:
Yeah, I think so.
David:
It might not be the right organization for you, with all due respect to both parties.
Steve:
I think so. So, when it comes to kind of key strategic decision-making processes where there are high stakes involved, large investments in a certain degree of risk, we talk about the need to take calculated risks a lot. And the best way to do that is to work through problems, in detail, in-depth in real life as often and as deeply as possible.
So, that’s certainly our default; that’s not to say that virtual won’t continue to have a role for perhaps some ongoing BAU-type activity, but certainly for those higher stakes pitches and strategic planning processes that we do so much of, it’s all happening in real life, which is great.
David:
And have you seen any … I mean, aside from the actual practices of working, have you seen any change in thinking strategically speaking, creatively speaking, courage and bravery about advertising and marketing? I guess it’s varied, but …
Steve:
I think the bravest clients are probably being rewarded for it now. Like we’re having a little brief chat off-air earlier about clients that paid attention to the science and continued to invest through the COVID period.
I think there were some really interesting lessons to be learned in that regard. I remember reading recently, and I think it was Mi3 where Suzuki spent 80% less and generated 30% of sales because they were very fortunate from a category perspective they could do that.
Mondelez was another example that did very well off the back of investing through COVID when everyone else was down. Other categories dare I say, at food delivery. We got caught up a bit in this with Deliveroo didn’t continue to invest and, as a result, probably got overtaken by the likes of Menulog and Uber Eats as a result.
So, I think that, once again, science has proven to be largely correct in that regard. And I think there’s probably been some tough lessons that have been learned, and people are playing catch up as a result.
David:
So, you’re saying that marketing works. Is that a quote?
Steve:
Yeah, well, dare I say that science is based on facts.
David:
Well, yes, indeed.
Steve:
Facts, David.
David:
Years and years of robust analysis.
Steve:
Yes, which we try and spend a lot of … paying attention to, as I said, to start. So, it’s nice to see some of those truths also playing out for better or worse.
David:
Indeed. Well, we touched on a couple of points there about your agency and also about pitching and how agencies and clients are interacting a bit about cultural dynamics and within the agency industry, broadening out a bit from The Royals and thinking about the industry.
Like many industries, I think the agency category for one of the better terms; often, it’s in its own bubble in terms of what we all think is important, and it has its own culture. Some elements of that are changing, and some have remained constant for decades.
What’s your perspective? How would you describe the culture of the industry today and what are the main drivers of it, and how healthy do you think agency culture is right now?
Steve:
Yeah, gosh, having done this, coming on 25 years, I think, far longer than I care to remember, to be honest, though it has been an amazing ride.
There have been some extraordinary changes. I think the talk about the cold realities of the opportunity and challenges that the internet has presented to the industry and also knowing that the core driver of the industry is creativity for competitive advantage in business, fundamentally, hasn’t changed since the advent of the industry, what is it, 80 odd years ago.
But perhaps, the way and what constitutes healthy agencies within that industry certainly has, I think. The other observation I’d make is that I don’t think the creative renegades in our industry that perhaps there once was, if I’m really honest either — maybe as a result of the internet, they’ve become kind of present-day thought leaders.
And you see that bearing out in everyone from influencers online pushing other people’s brands to brand owners like Liquid Death, who out of the states started by, I think, a bunch of Crispin Porter creatives. And there is no way that that would’ve been possible going back to the days of Mad Men in the fifties, sixties, and seventies. So, whether or not our industry is better off for that, I guess, is the question.
Then to your point about what constitutes or how healthy is the industry? I think what’s required to be healthy in the industry has definitely changed. To be a commercial partner of value, you have to be working with marketing very closely to push marketing up closer to the revenue line, and your agency partner has to be walking side by side with those marketing clients to be able to do that in ways that extend well beyond just advertising, right?
So, taking ourselves as an example, the work that we do, starting with really rigorous strategic planning processes, certainly with our more established clients, the work that we do is so varied beyond just the advertising that we once used to be responsible for, and that keeps me well and truly invested in the business and also, makes us much more significant commercial partners as a result as well.
Examples could be product innovation strategies with the likes of Spotify, which we did for their student premium store a couple of years ago. It could be rewards and recognition programs for large superannuation clients. We could be developing programs in partnership with universities, which we are heavily involved with from an industry endorsement perspective.
And all of those things allow us to add a stack of commercial value that makes us hopefully that much more closely attached to the client as a result, but also, helps provide a stack more value for marketing within organizations.
The only other observation I’d make is that the industry’s health has or is still so dependent on getting the right talent in the door to start with. And I think universities have done a pretty average job of doing that as a general rule.
We were involved in developing the advanced marketing practice course at Melbourne University several years ago now, which was an attempt to get university educators more closely aligned with the needs of industry, and that’s been a success from Melbourne University’s standpoint, which is fantastic.
But Mark Ritson has done what he’s done with the Marketing MBA because he felt like there was a massive gap in the marketplace.
Julian Cole is someone similar, and they are killing it, those guys as a result of the need that exists to have evidence-based marketers who understand the fundamentals of it all, which ultimately still wasn’t being taught all that well by universities.
And also, being taught in an appropriate context with the demands and influence of technology to produce far more capable evidence-based marketers at the end of the day, and for that matter, agency people.
So, I think creatively, we’re still about using creativity for competitive advantage. It’s all about adding value well above and beyond comms and then making sure that we’ve got a solid pipeline of talent coming through to ensure that the industry’s growth and health continue for the longer term.
David:
Focusing on the agency side, you talked a lot about marketers there, but you also mentioned that agency at the end.
What was running through my head is you were talking about the need to add value in basically different ways that require more diverse brain power, that requires different people with different skills. We are currently in an environment where churn is particularly a big issue in agencies. How attractive is the agency industry right now?
Steve:
It is in most agencies, David. I think we’re doing …
David:
Okay, talk to me about your churn.
Steve:
We’re doing pretty well. I mean, I’m really-
David:
I’m talking industry-wide here, right?
Steve:
Yeah, that’s okay; I think you’re right. Not only within agencies but also within marketers, I think the average CMO tenure is, what, a couple of years? 18 months. And that provides an opportunity for agencies who can hang on to their staff, and this is us included; where we’ve seen clients go through four, five, and six reorganizations over our tenure with them.
And again, if you can do a good job in creating the type of culture that people want to be a part of, the user’s creativity and reward and diversity and inclusion in the right ways, you’ll ultimately be rewarded for it.
In our case, the gratuitous plug is probably the most awarded, I think, agency in Australia over the last 10 years for people and culture, which is born out in the tenure of our people. And I think that only bodes well for clients, particularly in this high churn environment where you’re looking to maintain IP at every possible opportunity, as the inevitable churn does happen, as you mentioned.
David:
Well, gratuitous plug aside, we are still talking about the industry as a whole. I do want to pick up on DE&I because lot of noise in the industry, all positive noise in the industry about DE&I. At the industry level, how much do you think that has translated into action? How far have we got to go to make this a truly inclusive and diverse industry in which to work?
Steve:
Yeah, it has got so far to go, I think it’s fair to say. And even just on a superficial level, seeing access to international talent dry up is one superficial, I guess, representation of that. But look, where we are based in Cremorne, you go for a walk — I often say if a bomb went off in Cremorne, you’d kill 80% of the advertising population.
David:
That’s right. It’s what Austin Kilda Road used to be like 20 years ago.
Steve:
And the lack of diversity is so apparent. We are all trying hard to do the right thing for the benefit of our businesses and for the benefit of our clients as well, but it’s really difficult. And that’s because I think the industry continues to have a bit of a reputation problem which is slowly being worked on.
It’s also a consequence of the environments we work in and the nature of the required skill sets. And it starts at that education level that I mentioned to start with, that we need more diverse groups of people to be able to tap in the first place for us to be able to make the most of that opportunity.
But it is that diversity of thought that’s going to be so important, ultimately, to generate that unnatural change. And we’ve made some pretty good inroads on those DE&I measures over the last several years, but hell-bent on improving because there is still a long way to go.
David:
Which is great to hear. Aside from diversity and inclusion, the other marker on this is work-life balance. Agencies have never been well-known for promoting great work-life balance. There have been long hours done in the past, probably in the present as well. Where is that moving to? I think COVID has done quite a bit to readdress the work-life balance in general.
Steve:
I think you’re right. I mean, one of the interesting things about our business is one of my business partners and I, Andrew Sikwa, have had, I think it’s six kids between us in 11 years that the business has been going.
So, that’s been a bit of a trial by fire to ensure that our working environment was sustainable for people with families. And COVID has probably compounded that even further, particularly through the challenges that we had for those of us who had young kids at home to we were trying to give an education to, while also contributing to our respective businesses.
Standard kind of flexible working hours and all those things obviously, apply. There are benefits that we have in terms of paternity and maternity leave, which, again, for all the right reasons, is something that we are mindful of as an organization to ensure that that’s as sustainable as possible.
And then it’s our hiring practices as well, so that we’re being as objective as possible, but hiring for the right reasons and the right people where those opportunities exist to address some of those objectives that we do have from a DE&I and workplace point of view.
So, all those factors, I hope, are coming together to make sure that the work environment we do have is as sustainable and as flexible as possible, ultimately, to have happier employees that produce better work at the end of the day.
David:
Yeah, and if your churn rate is ahead of the curve, then that talks to the success you’re having, I guess, which is great.
Steve:
Look, if our long service leave balance is any indication, then we do it pretty well.
David:
Let me speak to a man with his eye on the spreadsheet.
Steve:
Not all eyes on the spreadsheet.
David:
Take your long service leave, please, take it.
Steve:
I’m going to do that in a couple of months, David.
David:
Oh, good.
Steve:
I’m looking forward to it.
David:
How long?
Steve:
A couple of months with the kids overseas before one of them goes to high school, so looking forward to it, June and July.
David:
Well, we’re going way off-piece, but congratulations on that.
Steve:
Thanks, it’ll be great.
David:
That’s fantastic. And I mean, that is a bit of a segue because you have been doing this, and I’m talking about since leaping over your own shop. So, running your shop, albeit with three other owners. You’ve “survived” a good long while.
And you’re smiling, but I don’t mean that lightly because by industry standards, this agency’s been around and grown for a long time. You must have learned a massive amount since, what was it, 2010, 2011 when you were founded. What would you say now, and I mean, your answer might be-
Steve:
Do you mean to my 2010 self?
David:
To your 2010 self, your answer might be don’t do it, but hey, what would you say now to your 2010 self?
Steve:
My honest response to that would be to do it earlier.
David:
Yeah, okay.
Steve:
Because I quit my previous job, bought a house, started a business, and had a family all in the space of six months, which was a pretty good incentive, I guess, not to stuff it up. Still, if I’d started five years earlier, we would’ve gotten off potentially to an even stronger start.
Maybe I wouldn’t have known as much; maybe I wouldn’t quite have been as incentivized as much, I’m not sure. But I genuinely wish I’d started earlier, if for no other reason than to learn from the mistakes we inevitably took in those first few years.
David:
I’m guessing that your own work-life balance wasn’t great in 2010, based on what you just said. You had to work on yourself before you worked on your people.
Steve:
Yeah, and then we had two more kids. We had twins shortly after that, so it was compounded even further, and that’s before you get to Andrew, my business partner in Melbourne at the time. So, yeah, I think we start earlier because it is a challenging and very taxing industry.
I’m not sure we would’ve had as healthy a start based on the existing relationships that we did have been kind of in our more sort of formative years. But I had been thinking about it for a long while, and it took me a while with my business partners to jump. And honestly, the only regret I now have is that we didn’t do it five or even seven or eight years earlier, and I’d hope we would’ve had similar results.
I may also have been in a position where I could take some long service leave a bit younger; I’m not sure. But ultimately, I’m super delighted with where it’s all worked out. And now, as we transition into our almost fifties, looking forward to what the future holds as well.
David:
Well, you’re still a young man; there’s no doubt that. Be my mentor for a minute, then. If I’m starting my agency tomorrow — I’m not by the way, but if I was, what would your advice be? What would be the burning platform advice you’d give me?
Steve:
A bit like when you asked that question of — I don’t know if you asked that question of Mark Ritson. He talks about marketing fundamentals, I think the agency fundamentals would be that you’ve got to take care of the people and take care of the work as being the most significant challenges that you’ll face with unwavering optimism. You need to establish the business right from the get-go with a view to who you want to be in the future, not who you might be at the start.
Let me give you a couple of examples of that. We’ve been super rigorous on how we manage our finances. The systems that we use, the time sheeting and estimating processes that we run so that our financials are watertight, and we’ve run the financials the same way from day one, regardless of whether we’ve been three, four people sitting around a table hoping for the phone to ring when we first started up to when we peaked a year or two ago at 70 odd staff.
So, manage those fundamentals through a lens of the agency you want to be as opposed to the agency you are to begin with. That also extends to things like the space that we moved into. We moved into a thousand square meter space in Cremorne as an additional incentive to fill it. And we were fantastically rewarded through that process as we grew.
I think the tenacity and trusting and firmly believing that things are going to work out, having that belief as much belief as I do now to start with, would’ve been really beneficial as well because this industry is too taxing, full of those peaks and troughs to have anything but unwavering belief in terms of the potential of you and your partners to create the type of business that you dream about.
And I think that’s probably the single most fundamental thing that’s got us here, in addition to some hard work and some unwavering belief, is that resilience and talent along the way as well. So, I guess a fairly rambling answer to your question, but they’d be the factors I’d think about if I was starting this business today.
David:
I think that’s really good advice, honestly. There may be people listening to this thinking about putting their name above the door, and I think your comments about unwavering optimism are possibly the hardest thing to maintain. You can be optimistic about what you do and what the industry is, but wow, it’s hard to build something up from scratch, which is a hugely important quality.
Steve:
And make sure you’re very tapped into what you need to sustain yourself as well because you’ll get challenged in ways you never anticipated.
And I have now got in ways that didn’t exist before we started The Royals — I’ve now got a full kind of quiver of resetting strategies that I know I’m dependent on for us to be as sustainable as possible for the long-term. So, tapping into those early on would also be my advice to set yourself up for that long challenging time ahead.
David:
And well, let’s talk about the future. Let’s talk about the long challenge and the time ahead because it will always be challenging. What are the big plays for you? What excites you about the next few years for your agency and the industry in general?
Steve:
That’s a really good question. I was surprised and delighted at the start of this week when the Global Campaign Agency the Year awards were announced. And I reflected on when we started as an agency in 2010 2011.
There’s no way that the independent agencies that existed today or that the quality of the independent agency offerings was anything like they are today. And the fact that in the Global Agency of the Year Awards this week, three independent agencies were listed at the top Australian agencies at that. I think is unprecedented.
And that’s hugely motivating for us as being one of those three agencies, along with Huawei and Thinkerbell, gives us something to shoot after, like we love a good contest. I think that’s fantastic for the industry here, and I think it’s fantastic for the industry or the Australian advertising industry on the global stage as well, so I hope that that continues.
I also think it’s fantastic for us in terms of recruiting the most interested people into our business as well. Because I can’t think of too many other professional services in Australia that operate at that level on the global stage, that’s got to be a great thing for us, our clients and our people as well.
David:
I agree, I mean, we talked earlier about challenges with international talent coming back into Australia and with awards in general, I do think there’s too much focus on awards as a tool for new business and not enough on awards as a motivational factor for the best people to join your agency, that’s a huge thing.
Steve:
I think that’s the most important thing, to be honest. I don’t know too many clients who buy agencies purely because of their award portfolio, but I sure as heck know a lot of prospective agency employees who use award lists as key reasons, and culture obviously, to choose to go with a selected agency. So, that’s exactly why we do it.
David:
Well, here’s to more awards in the future and the success of awards.
Steve:
Thank you, David, I appreciate it.
David:
There are at least three gratuitous plugs in there. I’ll let you have them because ah, man, I mean …
Steve:
Geez, I was shooting for 10.
David:
You deserve it, it’s been great to talk to you, and all the best for the next, well, however many years, but also your long service leave, that will be fantastic. So, all the best for that too.
Steve:
Thank you, it’s eight weeks, it’s not that long, but I am looking forward to it. As you say now, I can’t even talk about it without smiling.
David:
Fair enough, okay, thanks again.
Steve:
Thanks so much, mate.