Big Brains, Small Machine

Senior fellow Tim Williams specializes in strategy and branding in the advertising world at his firm, Ignition Consulting Group. His book, Take A Stand For Your Brand is a brilliant work.

It’s very hard for a Professional Knowledge Firm to implement Value Pricing without first establishing a core purpose and strategy. Most of strategy consists of deciding what your firm is NOT going to do.

A lot of firms fail at this, as they try to be everything to everyone.

We at VeraSage adamantly believe there is no such thing as a commodity—anything can be differentiated. There are examples of throughout our blog of this, from a $1,000 pizza to a $100 hamburger.

In the September 2008 edition of Ignition’s Propulsion newsletter, Tim has written an excellent article on what to do about those services your firm offers that are viewed as “commodities” by your customers.

Here is Tim’s article in full:

One of the greatest challenges to agency profitability is the perception on the part of customers that some agency services are commodities. Because customers feel they can get these services down the street—or across the ocean—for less, there is intense pricing pressure on agencies in areas such as print production, website programming, and media buying.

Unless you do something to add value and turn these perceived “commodities” into something customers can’t get down the street, you’ll be in a downward spiral of competition for work that doesn’t have much of a margin. Not a very attractive business to be in.

Deciding What Is Core

If you step back and look at your services and capabilities, there are certain core competencies that are central to the positioning and focus of your agency. For most agencies, these services will be in the area of strategy and ideation (vs. tactics and execution). For the services that define your value proposition you should be charging a premium for two reasons:

  1. Because they’re worth more, and
  2. To help offset the smaller margins you make on execution.

Another, more radical approach is to decide that you won’t offer “commodity” services at all. This is the philosophy adopted by many (if not most) of the successful new agency start ups in recent years. Strawberry Frog, Toy, Brew, Brooklyn Brothers, Fort Franklin, Wexley School for Girls, and others have all adopted the philosophy of what Ignition calls “big brains, small machine.” Their business model is to assemble a group of talented people who provide primarily strategy and ideation and outsource virtually everything else.

When asked how Strawberry Frog handles global brands with a relatively small staff, one of the partners explained, “We outsource everything the customer views as a commodity.” In other words, they follow the precept “Either add value and charge accordingly or don’t do it at all.”

The Hollywood Model

Some agencies refer to this as the Hollywood model; staff the agency with a core group of very smart people, then assemble teams around them for each project as needed. Boston’s Partners+Simons has been following this model for years.

How do you decide what services to handle in-house and which to outsource? Spend a morning with your leadership team and take them through an exercise of listing all the services and capabilities needed by your customers, then rating these services on a scale of 1 to 10 based on the following:*

  • Value: How valuable is this to our customers?
  • Differentiation: To what degree does this service help us truly differentiate our firm?
  • Performance: How would we rate our performance in this area?
  • Investment: If we’re not already excellent in this area, how much of an investment (time, money, resources) would be required to achieve excellence?
  • Repeatability: Are the outcomes of this activity or capability inherently repeatable and predictable (in terms of time, cost, quality, etc.)?

Based on your analysis of the above, each of these services and capabilities can be assigned to one of four groups:

  1. Core: Done in-house as a core competency of the firm
  2. Partnered: Performed in partnership with another firm
  3. Outsourced: Assigned to an outside resource with little supervision from you
  4. Automated: Turned into an automated service using technology

If you choose to simply do “everything” for your customers yourself, you will continue to dig yourself deeper into a “high-volume, low-margin” business. And that violates the first rule of holes, which is “When you’re in one, stop digging.”

Tim Williams is founder of Ignition, a consultancy devoted to helping marketing communications firms create and capture more value. He welcomes your comments at

*This model adapted from the work of Ric Merrifield, Jack Calhoun, and Dennis Stevens as published in the Harvard Business Review, June 2008 under the title “The Next Revolution in Productivity.”


  1. I agree with the Big Brain, Small Machine paradigm. One way to get the Big Machine to complement your in-house small machine is to partner with a outsourced service provider like Indevia Accounting Inc. Using the “Big Brain, Small Machine” paradigm, we provide the “Big Machine” to complement the “Small Machine”.

    To succeed we must perform the service better than anyone else – quality, turnaround, and cost. It is the Dell model. Dell does the final assembly but all the heavy lifting is done by outsourced vendors. The CPA does the brain work, we do the gruntwork.

    When repetitive accounting services are broken down into the component steps, and each step is carefully examined to see if it adds value, and then non-value added steps are eliminated, the process becomes faster, cheaper, and higher quality. We focus on the process of doing the routine work. We train our staff to a high level to execute these steps, and improve them further.

    Japanese call the first step Kaikaku, where you examine the process and streamline it. Kaikaku usually pays a big dividend immediately. The next step is to prepare the organization for Kaizen, which is a process of continuous improvement. In my albeit limited experience, Kaikaku can give you 3 times the productivity. With Kaizen you can get to 5 times. But the process of improvement never stops.

    Another way to look at it is the cycle efficiency. If a job takes 12 hours to do, and we turn it in a day (which is 16 hours for us) we have 75% cycle efficiency. Today we can do it, and do do it every day. What is the cycle efficiency in a CPA office?

    We consider cycle efficiency below 33% unacceptable, and we strive for 67% which is what Toyota runs on. Please note that cycle efficiency is independent of the process efficiency.

    I disagree with Ron Baker on the value of idea versus execution. Ideas are necessary but not sufficient. Great execution will refine and polish a so-so idea like Dell, and poor execution will take a great idea like IBM PC and snatch defeat from the jaws of victory.

    I would rather have great execution of a so-so idea than a mediocre execution of a great idea.

  2. Hi Dev,

    Thank you for your comment.

    As for your disagreement with me regarding ideas vs. execution, I understand your argument. Indeed, I used to hold the same belief.

    But then empirical evidence got in the way, especially after reading Thomas Sowell and Paul Romer. Countries that try more ideas have higher standards of living, period. This is undeniable.

    As Paul Romer says: “Human history teaches us, however, that economic growth springs from better recipes, not just from more cooking.”

    Was socialism or communism a good (or mediocre) idea just poorly executed? Can you apply Kaizen to Cuba or North Korea?

    I strongly suggest you read Thomas Sowell’s Basic Economics for a more in-depth look at this topic. Facts are stubborn things.

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