How A Brief Innovation Process Affects Business Growth

How A Brief Innovation Process Affects Business Growth: A Case Study of BEE Advertising Agency

Raeda Fakriyya Luthfilhadi^1*

1 School of Business Management, Bandung Institute of Technology, Bandung, Indonesia

*Corresponding Author: raeda_luthfilhadi@sbm-itb.ac.id Accepted: 15 February 2023 | Published: 1 March 2023

DOI:https://doi.org/10.55057/ajrbm.2023.5.1.6

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Abstract: This research explores the understanding of the innovation process that leads to a competitive advantage in the advertising agency, covering the process of developing advertisements projects, and how advertising agencies interact with clients & its role in the process of creating advertisements. Based on the theoretical framework, the research was conducted on a case study in a fast-growing start-up advertising agency and used qualitative analysis in the case study and compared the implementation of the innovation process with other advertising agencies. Data were processed using a qualitative method approach. An interview was conducted for all participants on the agencies’ founders or directors in Jakarta with sufficient knowledge of the innovation process implemented in their advertising agency, as well as exploring the agency's efforts to recoup its business growth in order to obtain a competitive advantage in the current market. The outcome shows two different approaches that are linear and non-linear processes for each project, and several types of client involvement together with the role of the client in the innovation process.

Keywords: Innovation Process, Client Role, Client Involvement, Competitive Advantages ___________________________________________________________________________

1. Introduction

Advertising is the impersonal communication of information about products, services, or ideas through various media, and it is usually persuasive by nature and paid by identified sponsors (Bovee, 1992 cited in Frolova, S., 2014). Companies produce advertising content and distribute it through a variety of media, including radio, television, newspapers, magazines, the internet (mobile and desktop), and outdoor displays (First Research, 2021). Such advertising has moved to digital environments, with clear advantages in cost, speed, focus, and coverage, these have triggered a substantial degree of innovation in the advertising industry (Miles & Green, 2008).

Meanwhile, advertising agencies have to be innovative and creative to prosper within the climate of creative destruction characterizing the advertising industry (Zinkhan, and Watson 1996). Furthermore, in order to understand how to innovate more effectively, it is necessary to consider where part of the innovation process must change to achieve this sought-for innovation. The innovation process which is the process of idea to value, in the long term will drive the business forward (Burnett, 2011).

In measuring the innovation process, the management must understand how to create value for customers, as innovation must bring a significant impact on the company’s performance

A major point of difference in innovation activity between product development and service development is the involvement of clients in the development process. Services tend to involve clients in their delivery, and the purchase of services tends to involve a longer commitment and therefore a more intimate relationship with clients (Alam & Perry, 2002). Ercsey (2017) disclosed that by involving the clients in the production phase, providers in the service industry can capture clients’ needs and maintain their competitiveness. The clients’ roles may lead to higher productivity and competitive quality for agencies.

BEE Advertising Agency, the case study of this research, is a local advertising agency based in Jakarta, Indonesia. The agency works with a wide range of clients, including national bank companies, consumer goods companies, and commercial start-ups, and has completed projects in a variety of sectors, including logistics, finance, and FMCG. As a start-up agency, BEE Advertising Agency has a goal to grow bigger throughout the year, from the year 2021 up until now, the growth of the agency seems stagnant.

Another business issue that can be highlighted by BEE Advertising Agency, is the total number of client retention which is reflected in the Client – Agency relationships tied in a business contract. There are four types of contracts, the one-time purchase project that lasted less than a month; focusing on 1 main task; the short project that lasts less than 3 months; focus on several objective and goals; the medium project that lasts around 6 months; focusing on a broader task, objective and goals; and the long project that lasted with a minimum of 1 year; tend to have full coverage of the advertising service to achieve a yearly goal of the brand/clients. BEE Advertising Agency work contracts tend to be dominated by one-time purchases with a project period of less than 1 month, which is around 81% of the total work done at the agency, while project contracts with longer tenors of around 1 to 3 months reach 4.8 %, whereas for a medium project with a period of 6 months only reach 9.5%, while a long project is at 4.8%. This occurs as a result of the client's limited interest mostly in projects for one-time purchases.

The awareness of clients at BEE Advertising Agency will be explored. There is little evidence of much use of outside client participation during the innovation process. Employees at BEE Advertising Agency generate ideas based on internal creative assumptions, which are then followed by the internal development and testing of concepts. However, the reliability of their assumptions is seldom examined.

The aim of this research has two objectives, to understand the innovation process in the advertising agency, and to explore the involvement of clients in development phases that will create a brief innovation process.

2. Literature Review

Innovation Process

Innovation is a strategy implemented in advertising agencies to set their advertising products apart from the competition (Miles & Green, 2008). The innovation process is characterized by close cooperation with the consumer, networking, and partnerships with other entities and requires considerable skills for cooperation, team building, conflict, and problem resolution (Majdúchová & Barteková, 2020). Sanches (2017) has analyzed of the innovation process which is visualized as a series of non-linear tasks from idea generation to diffusion.

Furthermore, he stated that the innovation process, or how innovations are developed and implemented over time has tended to be and still largely is a ‘black box’, whose complex internal workings are poorly understood. The effectiveness of the innovation process is a need

for lowering the uncertainty and risk of service innovation because the success of innovation is strongly dependent on the innovation process (Zhang & Tao, 2007).

Innovation becomes a collaborative process where clients collaborate with agency team members since internal knowledge-based innovation is no longer sufficient to retain or develop a competitive advantage (Papadopoulou, 2020). In their ten-stage model, Alam and Perry (2002) highlighted a development process for a new service that included client-agency contacts. They develop two models that are the linear model of the development process and the parallel model of the development process, which means that service providers can conduct different development tasks at the same time. Their models identify what role of client plays in each stage.

Client Involvement and Client Role

Involving customers in the service process can boost service innovation (Alam & Perry, 2002).

Their ideas and feedback will enrich the agency’s innovation process, moreover, the agency will gain insight into what they find most important. Client involvement is the role of clients as a resource, co-creator, and user in an innovation process (Sandén, 2007) the client as an innovator(Prahalad & Ramaswamy, 2000), clients as co-producers who contribute to the development of service specifications, quality control, and marketing; client as part of the employees who perform tasks in the production of services (Ercsey, 2017). Sandén (2007) further describes the possibility of engaging the client as a resource, co-creator, and user in various development activities is utilized to various degrees. Alam and Perry (2002) cited in Sandén (2007) emphasizes the role of the client in the innovation process. They explore the various stages of the innovation process and how client involvement may be obtained in the various stages of the development process. Their research reveals that there are ten stages in the development process and client involvement was obtained in each stage of the process.

They also describe that the intensity of client involvement can vary widely across the stages of the development process. In particular, the highest frequency of client involvement was reported in the three stages: 1) idea generation, 2) service design, and 3) service testing and pilot run. According to the authors, this might indicate that detailed client involvement might be critical and more important at these three development stages.

In the advertising industry, the key effect on client involvement is the increased pool of information that can be used to make decisions throughout the innovation process, which in turn increases the chances of successful innovation (Piller & Ihl, 2009).

Competitive Advantage

It is advantageous for a business to stand out from the competition in the marketplace and to thrive, especially in a challenging economic climate (Joseph Chris, 2017). This type of market is marked by the regular launch of new services, therefore a firm must stay up with the sector's innovation efforts. (Alam and Perry, 2002) Utilizing advertising is one way to achieve it (Joseph Chris, 2017). According to Kindstrom (2010), in McManus, J., and Ardley, B. (2019), competitive advantage is frequently connected to the innovation process and the chance to capitalize on a specific market. The agency's capacity to foster internal alignment is largely responsible for the accomplishment of competitive advantage through services. Since an advertising agency serves as a middleman between its clients and customers, advertising firms must innovate not simply in the services they offer to clients but also in their internal procedures (Poveda-Bautista et al., 2013).

A development phase is necessary for successful services in an advertising agency. Value creation in the context of service innovation during this stage may be seen as an effective way for agencies to gain a competitive edge. The more inventive companies will typically expand and become more lucrative, with profitability being a result of greater innovative capability (McManus, & Ardley, 2019).

An advertising agency's services enable a business and potential client to develop a campaign that can help build name and brand recognition (Joseph Chris, 2017). According to Porter (1997), a company's ability to systematically retain the distinctive advantages that enable it to achieve, maintain, and improve a specific socioeconomic position is what is meant by that company's competitiveness. Porter's strategy makes the assumption that every business engaged in an industrial sector has a competitive strategy. (Porter, 1997 cited in Poveda- Bautista et al., 2013). Competitive Advantage is concerned with either the practices of cost leadership, or of differentiation in order to gain advantages in the marketplace (Ardley, B., &

Naikar, S., 2021). There are four key indicators of measuring competitive advantage at advertising agencies to improve performance in the context of continuous improvement: (1) customers, (2) learning and development, and (3). internal operations, (4) Money. The indicator of clients shows the percentage of clients from the previous year who are still clients this year in terms of maintaining clients; learning and growth correlate with the innovation capability within the advertising agency; the third indicator, internal process, refers to the identified critical processes relative to competitiveness thus should innovate not only in products but also in services to clients as this will enable them to maintain their client portfolio and to increase revenue; and finally, the indicator of internal process refers to the identified critical processes relative to competitiveness (Poveda Bautista et al. 2012, 2013).

SCAMPER Technique

The SCAMPER technique identified the key stages in its progress. For example, the SCAMPER technique uses a series of pointed, idea-spurring questions to suggest some addition to or change of something that already exists in every situation to invite a solution. (Serrat, 2017). There are 7 changes that SCAMPER stand for, those are Substitute, Combine, Adapt, Magnify/Modify, put to other use, Eliminate, and Rearrange/Reverse (Pitchai & Mark, 2009).

These changes could be applied by businesses to create innovative solutions to the issues brought on by different applications.

3. Method

Data Collection

The interviews with advertising professionals served as the main strategy. The interview was conducted in a one-on-one semi-structured approach. Interviewers can have in-depth discussions with interviewees about the topics addressed with the use of semi-structured interviews (Arksey & Knight, 1999).

Data Analysis

The approach used to analyze the research data will depend on the conceptual framework as well as the research questions. The analysis of this research is divided into three main sections that are innovation process, client involvement and client role, and competitive advantage.

4. Result and Discussion

Advertising Agency Innovation Process

The participants in this research were asked to describe the traits of innovative advertising or the forms of innovative advertising in order to illustrate the innovation process's organizational structure in an advertising agency. The author noted standout concepts and recorded how often these crucial ideas appeared. Their responses have seven main points, which are as follows:

1) The organizational architecture of advertising organizations influences how participants in their innovation processes differ.

2) Advertising agencies typically do not follow the steps in a straight line. The stages could advance or regress. Advertising agencies may repeatedly go through the same stage or they may skip some stages and jump straight to the designated step. Depending on the project, the advertising agency may employ linear stages.

3) During the innovation phase, it is important to properly apply difficult insights;

implement a difficult notion into action, bring different creative ideas to the realization stage through client involvement, find new external solutions, and where necessary collaborate with various other vendors.

4) Participants' agencies will use both outdated and cutting-edge technology during the innovation process' creation phase in order to maximize results and produce unique advertising campaigns. The capacity of creative processes has increased with the adoption of advanced technologies, which have replaced conventional intuitive approaches.

5) Advertising agencies will improve the attractiveness, entertainment value, and adherence to current advertising trends in their advertisements. Good client engagement will increase when the latest trend and advertising results are combined.

6) The medium used to spread the advertising message should be different, creative, or unique in how it is employed by various means.

7) Digital media advertising is becoming more effective, and the innovation process would fit the trend by developing the campaign's final results.

All the interviewed participants agreed that to create a new innovation, high collaboration from external and internal organizations is needed in the process of working on a project. The internal collaboration is not limited to the creative team, but rather integration between divisions such as the creative division, strategic division, and accounts division. While the external collaboration could come from clients, and vendors but on the side of BEE Advertising Agency only involving its client in the first stage of the process, employees at BEE have great confidence in their own ability to innovate and create successful solutions.

Three other participants immediately stated the idea that new advertising was about putting various elements in diverse combinations. One participant emphasizes the result of innovation as "innovation that works is an innovation that sells", which means that the entire process that is carried out to create an innovation must be realized and executed properly to be able to call it an innovation. They emphasize the need for an innovation process in their advertising campaign.

Figure 1: BEE Advertising Agency Innovation Process

As shown in Figure 1, adopted by Alam and Perry (2002), the innovation process in BEE Advertising Agency follows a linear approach from start to finish. The first phase is where the planning and account departments are primarily responsible for carrying out the work during the problem definition phase. Where the account director will handle the information collection of the project, and the strategic director is responsible for creating the strategic direction and creative brief. In the creative direction phase, the creative director is in charge of the process, including those in the creative teams who are the ones who are most heavily involved at this point. The creative director is responsible for making sure everything runs efficiently and making the final decision on the internal review. In the third phase, the media director and creative director should all consult with the client teams by account division before choosing the media channels. In the stage of implementation, the creative director and account director will handle any post-production testing that is required by the business and pass along the results to other divisions. Learning and evaluation are the final steps. Another stage that values strong collaboration is this one. In this phase, almost the whole project team must be present for the meeting. In short, each employee works collaboratively throughout every phase. Their responsibilities at work make a difference to determine the success of each project.

Figure 2: C, D, and E Advertising Agency Stages in Innovation Process

In comparison with C, D, and E Advertising agencies, as seen in Figure 2, adopted from Alam, and Perry (2002), these advertising agencies do not follow the steps in a straight line.

Advertising companies’ innovation process patterns are tied to their organizational structures.

The stages could advance or regress. Every stage of innovation includes the first kind of situation. The innovation process does not end with turning creative ideas into advertisements because innovation also involves implementation. The advertising agency has several development phases in the innovation process, using the approach by Alam and Perry (2002), the phases and explanations were further developed to suit the innovation process within each advertising agency in Jakarta. Each phase has a different purpose in the process.

BEE Advertising agency has a significant difference in how they execute its innovation process. This difference can lead to repetition of the process if there is a change in each phase, making this process inefficient in maximizing the limited workforce that exists within the advertising agency.

Client Involvement

The case study analysis shows different types of Client involvement in innovation processes.

The Advertising agency C, D, and E, actually involve their clients according to a planned co- innovation strategy during the development phase in the innovation process from the problem exploration phase, creative direction phase, production phase, implementation phase, and review phase. All of these could have a big impact on improving the result and boosting project effectiveness. In spite of that, BEE Advertising Agency involved its client in the first stage of the process as an idea stimulator in the idea generation stage rather than as co-innovation. The client did not involve very much in the new advertisement development process, instead, the agency made thorough research on their client’s market, client’s customers, and client’s rivalry.

The majority of the creative ideas during the innovation process are generated by internal employees. The BEE relies heavily on the final output in the implementation phase for the effectiveness of the advertisement which might harm the project, with a low level of accuracy due to communication limitations with the client.

Client Role in Innovation Process

All agreed on the important role of clients in the new advertisement development process however the intensity and what clients do are not the same applied to all participants. According to the descriptions of the participants, there are more methods of connecting with clients and involving them in the innovation process as a result of the rapidly developing technology. This not only improves the quality of the information sources but also increases the effectiveness of advertisements.

Most participants describe the client role in more than one main phase, yet BEE Advertising agency focuses on the client role in the information collection phase only, not inviting the client to be involved in the process of making each project. This can end poorly if the information received at the beginning of the client's wishes is not properly understood by the agency.

Advertising Agency Competitive Advantages

In comparison between BEE Advertising Agency and other agencies, the author concludes that there's a significant difference in the perception of competitive advantage from advertising agencies respectively, whereas C, D, and E Advertising Agency’s perception for Long-term improvement of differentiation is necessary to have a competitive advantage. While BEE Advertising Agency places a lot of emphasis on the output of the personalization touch and attempts to enter new markets with a big cost leadership over competitors.

Figure 3: Advertising Agency Participants Comparations

As seen in Figure 3 above, the client involvement in BEE Advertising Agency is limited to the first phase of the innovation process with a narrow role of the informant. In comparison with C Advertising Agency which involved the client in four different phases and the client's role of partner in executing extraordinary ideas for each project, the D Advertising Agency involved its client in two phases and the client's role as a partner in exchange ideas and expectation throughout the process, and the E Advertising Agency involve its client in four phases and client role as a guide of direction for the agency through the innovation process. These involvement and role determine the result of client retention from these advertising agencies.

5. Conclusion

The research's findings highlighted the need for BEE Advertising Agency to innovate in new ways. It is anticipated that this research has shed light on the manner in which new innovation processes may be produced with the help of clients in order to contribute to the agency’s competitive advantage in the market and give an understanding of some of the crucial steps in the development procedure, as pictured in Figure 4.

Figure 4: Proposed Solution for BEE Advertising Agency

The BEE Advertising Agency could adapt to the dynamic innovation process and increase the client's involvement in the process. As the new innovation process decreases the level of error for each project by dividing the process into two different stages; the development stage and the implementation stage. Each stage is overviewed by the account, creative, and strategic directors. With a more dynamic framework than the liner method, this procedure reduces the

repetition of the process if there is a change in each phase and makes working on a project within an advertising agency more efficient.

After staging the process, there is a need to increase client involvement. In this case, the BEE Advertising Agency could extend the client participation into each stage, starting with the development stage; where the client can ensure that the direction of communication and ideas produced by the agency are in accordance with the expectations and plans of the client's company; and the implementation stage; where agency and client can mutually understand market results and have an open discussion to develop or improve the project performance.

This could have a big impact on improving the result and boosting project effectiveness. With the increasing involvement of clients in the innovation process, changes in client roles also need to be carried out by the BEE Advertising Agency. This role change can affect the process of cooperation between the agency and the client, as well as increase the current level of communication.

The BEE Advertising Agency focuses heavily on the personalization output with substantial cost leadership among rivalry, it needed a more sustainable competitive advantage than its cost leadership to differentiate from other competitors in the industry. This is in line with Kumar and Reinartz's (2016) discovery that using a personalized approach helps agencies differentiate themselves from the competition. This method supports businesses in tailoring tactics to the needs of customers as well as their potential for future profitability. They continued by saying that using an individual approach also enables companies to supply services to customers reasonably affordably while correctly assessing their needs. Additionally, it can raise the client's perception of the advertisement's value (Darnéus Ekeroth & Jonsson, 2021). However, in a market where there is competition, cost leadership will not be sufficient to maintain a competitive edge. BEE should be combined with distinction and more attention to the value of the client. These could be achieved when the innovation process, client involvement, and client role are done properly. As the agency have a strong point of ATL services, the new innovation process will help to strengthen the operational process and reduce overwork for each employee, creating a more efficient working environment and increasing productivity. While client involvement and role change will help BEE Advertising Agency maintain its existing clients with more intimate relations in every project to secure more long-term projects from all clients.

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