How a 20th Century Organizational Boundary Framework Will Solve a 21st Century Dilemma.
Caption: Daniel LaRusso demonstrates that ad agencies must learn new skills like the "Crane Kick" to survive in today's business world.
An interesting article came up in my daily Forrester research email, entitled, "Agencies Must Build Digital Skills to Survive." It is written by the super Peter Kim. The article is Kim's position on how traditional ad agencies should build new interactive competencies in order to succeed in today's business climate. I have yet to read the full text though the boilerplate summarizes the three-tiered approach as the following:
- Establish digital commitment at the executive level
- Retraining existing staffers
- Building a pipeline of future talent
It's hard to disagree. This is a tried-and-true approach for any change agent team. So, I'm not going to beat a dead horse here. However, this did pique my interest, intellect (and this subsequent blog post) since what immediately comes to mind when Peter Kim asks "how will ad agencies build interactive competencies?" is that this is a timeless question of "Make, Buy or Ally?" merely repurposed for 21st century use.
Back to School
History Lesson: In 1937, British economist Ronald H. Coase drafted an essay titled, "The Nature of Firms" where the concept of transaction costs were introduced to explain the size of firms. This is widely considered the birth of organizational boundary decisions which has been simplified to a question of "make, buy, or ally?"
Professor Oliver Williamson's seminal book Markets and Hierarchies: A Study in the Economics of Internal Organization further investigated the tenets of transaction cost theory (Williamson was a student of Coase). Essentially, Williamson demonstrated that testable hypotheses could be developed by associating the relative efficiency of alternative governance structures with observable dimensions of transactions, namely asset specificity, uncertainty and transaction frequency. Ever since the publication of Markets and Hierarchies, the studies of relational governance modes and the normative implications of transaction cost theory have been produced, including meta-analysis of organizational forms. However, nothing has provided the depth of insight as the original text.
It is this text that supplies the methodology for ad agencies to survive in today's marketplace.
Find out how tomorrow on BoostStrapping.