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This blog post comes to you live from ad:tech Chicago 2009.  On September 1, Dave Friedman, president of the Americas for Razorfish (my employer) joins a panel of agency executives to discuss the role of modern agencies with their clients.  Participants include David Hernandez of Tribal DDB; Drew Ianni chairperson of ad:tech; and Chris Miller of DraftFCB.  The conversation is moderated by Tim Hanlon, VivaKi Ventures.

Tim Hanlon leads off the discussion by asking if the modern agency is an oxymoron.

Dave Friedman answers: we are very quick to talk about the death of the agency.  But 10 years from now agencies will continue to provide services to clients, just like they do today.  Clients will continue to look for smart people who can bring ideas, great creative, and insights about consumers.  The way the work is executed will be different.

Next question from Tim Hanlon: are agencies understanding digital?

According to David Hernandez, the big agencies are getting digital; Dave Friedman indicates that although pockets of digital brilliance exist, big agencies have a long way to go.

Tim Hanlon: if agencies are going to be around 10 years from now, how will they deal with the innovation exploding around us?  The agency business as a whole looks slow to Tim.

Chris Miller replies: agencies need to accept that it is OK to fail, which is tough because many agencies have emerged from a world (e.g., TV) where failure is not tolerated.

Drew Ianni: so much of the challenge comes down to holding company economics.   The big agency holding companies must work through economic models that do not reward risk taking.  That said, any large organization (not just agencies) has this challenge.

Chris Miller: a big shift is occurring because young people who grew up digital are assuming positions of authority inside agencies.  This shift is having a positive impact on agencies’ willingness to innovate.

Next question from Tim Hanlon: is the holding company model compatible with agency innovation?

Drew Ianni: at companies like Publicis Groupe, digital is clearly important based on the investments they’ve made.

Dave Friedman: the split between media and creative inside many holding companies is flawed.  Holding companies that can marry those two worlds will succeed.

Chris Miller: Amen to that!  I’m seeing that convergence of media and creative at DraftFCB to drive better ideas.  We are seeing a shift back to the bundling of services needed to make an idea succeed.  I do see it happening now, not just talked about.

Tim Hanlon: agencies need to do a better job dealing with transparent technologies like open source, too.  Agencies cannot afford to treat digital as a mysterious black box.

David Hernandez: well, we are going to change because clients have demanded we change.

Drew Ianni: great point.  Clients are just as scared of digital change as agencies are.  Agencies should do a better job asking clients what they are thinking.

Tim Hanlon: let’s talk about social media.  I think agencies have struggled to prove their value in social.

David Hernandez: too many agencies have sat on the sidelines figuring out their approach to social while their clients have taken social in-house.

Dave Friedman: so many agencies are looking at social as an ad vehicle, not a marketing vehicle.  They look at social as a place to plant a message.  More agencies need to look at social as a different way of marketing, not advertising.

Drew Ianni: I think it’s the PR firms like Edelmen who are geting social more than the ad agencies.  Look at Eldemen Digital, for instance.

Chris Miller: social means something different to everyone.  There are no IAB standards for social media.  It’s hard for agencies to deal with social because agencies want to put social in a box.

Tim Hanlon: why should a CMO hire you?

David Hernandez: the answer differs from one CMO to a next.  I try to simplify who we are and what we do.  You have brands on one hand and customers on the other.  Tribal DDB bulds the strategies and tactics to connect the two.  I also think people who own the relationship with the agency all the more are not coming from the top of the funnel but those inside it who study analytics and ROI.

Chris Miller: DraftFCB is about the 6.5 seconds that matter.  According to our research, you have about 6.5 seconds to capture the attention of a consumer.  We’re about creating marketing that is relevant to the consumer in that context.  We also deliver a balance between creativity and accountability.

Dave Friedman: first, I do agree that fundamentally marketers need to connect brands to consumers.  But how this happens has changed.  Brands in the future will be defined by what they do, not just on what they say.  Brands need to have a personality and interact with consumers, not just talk to them.  Razorfish helps brands do things, not just say things.

Drew Ianni: I think agencies need to show how they can blow up a brand once a year and make it better.  It’s like zero-based marketing.

Tim Hanlon: how do you make your ideas work for the chief procurement officer of a client?  How do you make what you say affordable?

Dave Friedman: we have made what we do a commodity.  That’s why agencies are even viewed as a “procurable service.”  When agencies do a better job differentiating ourselves, we can escape the “agency procurement mentality.”

Tim Hanlon: what models are you all experimenting with to gain business?

David Hernandez: there is no one-size-fits-all solution.

Chris Miller: seldom do agency people walk into work vowing to raise the share price for anyone.  Having some skin in the game, like performance-based compensation, could change the value equation for agencies and their clients.   It’s something we are pursuing.

Tim Hanlon: are CMOs getting smarter?  What are you hearing about their needs?

David Hernandez: we are seeing a lot of excitement.  CMOs have new weapons to use and some new technologies to use.  They don’t have the answer, but they are working with companies like ours to find them.

Chris Miller: CMOS are excited.  The challenge is getting the organization and the culture to get in line.  If your organization is operating as a silo, you have a challenge.

Dave Friedman: the CMO is looking for a partner.  The traditional agency does not have a lock on that role.

Tim Hanlon: who needs to change?  Agency or the marketer?

Dave Friedman: agencies, based on their experiences, need to lead clients.  If agencies don’t change before their clients do, someone else will step in.

Chris Miller: it’s already happening.  Companies like Boston Consulting Group are getting a seat at the table that used to belong to the agency.

Note: this post captures the Q&A partially but not completely.  To follow up with Razorfish about the role of hte modern agency, please contact @dave_friedman on Twitter.