Investing in digital is an important part of most businesses’ marketing, but are you better off hiring internally or outsourcing to an agency? Sina Kresse talks us through the decision.

The term ‘digital strategy’ has not been around very long, but over its relatively short lifespan the concept has not only proven to be a game changer, but also a significant mind changer for businesses.

Business owners or managers understand that the digital space offers immense growth opportunities for those who are ready to embrace it. However, diving in head first without understanding where digital sits within a wider business strategy and whether it is best to implement it in-house or with the help of an external party, will more often than not result in unsuccessful endeavours in the digital realm.

Digital marketing is a prime example of an area that has the potential to deliver great results for businesses, but often fails to do so due to flawed implementation that does not tie the various marketing tactics to business goals.

This common shortcoming can be witnessed in the operation of the flood of new online businesses that launch each day. These businesses are knowledgeable enough to be able to create an online store within a day using out-of-the-box design templates, technologies and plugins. But this is where the digital revolution often ends; there is rarely a robust plan in place or the required skillset to digitally market the new website, thus leaving the business undercooked and potential unrealised.

At this point there are two viable options for a business that has acknowledged the need for a digital roadmap past the website build; either hire an internal resource to manage the digital journey or engage an external agency.

Regardless of whether a business chooses to rely on their internal capabilities when setting sail for the digital horizons or whether they choose to engage an external partner, the lack of a fundamental business and marketing strategy to achieve the digital goals, and subsequently not being able to spot the real reasons behind the all-too-common failure, makes it all too easy to point the finger at others. Worse still, after failing, a business can lose faith in digital altogether, preferring to recede and stick to traditional methods only.

Why does the implementation of a digital strategy within an overall business strategy seem so complex? This can be attributed to two factors that come into play when the digital strategy is managed in-house or outsourced: environmental turbulences and the cost of coordination.

The Australian economy now consists of larger and more intricate business structures than ever before, with the speed of innovation and professional capabilities having increased radically in the past decade. Consequently, this rapid evolution has left a large group of businesses in the dust, with many in dire need of a more sophisticated strategy that would drive a much-needed reform in their often rigid organisational structures and give more visibility to internal digital capabilities.

This is problematic, as these businesses have a core set of traditional, non-digital strategic competences that have allowed them to reach the current point of their business cycle. However, in order to utilise the digital space to maintain, enhance or even skyrocket the present state of the business, business owners would need to ensure they uncover any undiscovered digital competences and determine how to gain access to those.

It is not just about uncovering internal digital competence; digital capabilities in the wider digital space are constantly evolving, which poses its own challenges for the digitally eager businesses. For instance, the vast sea of digital tools, digital marketing techniques and elaborate digital strategies are in a constant state of flux, not to mention the ongoing policy changes among the influential big players, such as Google, Facebook and governmental regulatory bodies.

All of these factors add further hurdles for a business to jump through on their digital journey and navigating through these may prove to be overwhelming if the internal digital know-how is not there. Even business owners who are ready to spend time to tackle these topics will realise that learning and keeping up with the latest in digital consumes a significant amount of time, which often leads them to look for outside help.

Where businesses may struggle internally with keeping up with the continuous changes in the digital industry, in the digital agency services industry this is not the major problem. Rather, the dominant issue lies in transforming a digital strategy into an actionable plan and consequently executing it seamlessly for the client business.

Businesses have always been outsourcing, collaborating and even acquiring in all business areas to secure a comprehensive pool of resources required for profitable business operations. Ideally, the outsourced agency should act as a strategic partner that understands the business and its unique needs, but due to the digital environment currently going through its ‘wild west’ period, businesses get burnt, regrettably often when the expectations of the business and the deliverables of the agency misalign.

For example, just by looking at the current agency landscape it is possible to see various creative set-ups; agencies working with other agencies, white label reseller programs, freelancers hired on demand and so forth. Add to this the amount of ‘churn and burn’ digital marketing packages that promise fantastic results for little investment, finding the perfect agency turns into a game of Minesweeper.

Furthermore, transaction costs become an issue, especially when dealing with multiple agencies. The coordination needs increase when liaising with partners from outside the business, which can often lead to frustrated business owners and marketing managers. Still, this does not mean that there are no reputable agencies out there or that the risks of partnering with an incompetent agency would outweigh the benefits of finding the perfect match.

The quadrant graph below shows one way of determining whether to keep operations in-house or whether to outsource, with each solution having their advantages and disadvantages.

Established agencies with strong digital capabilities benefit from economies of scale and they are not only familiar with the various strategies in digital, having executed strategies for a multitude of businesses, but they also understand what strategies work in what industries. This means that a business does not need to reinvent the wheel if they want to invest in digital, and that they can rely on the agency’s existing competences.
Nevertheless, prior to being able to determine whether insourcing, outsourcing or a hybrid model is appropriate for a business, a thought-out strategy should be devised that answers the following three questions:

• Is digital a part of my key success factors?
• Do I create a unique selling proposition through digital?
• Do I use digital as a prime marketing channel?

If the business plan includes digital services as a core component, it should always be backed up with proper investment. Merely sending the marketing manager to a one-day workshop or hiring a low-budget agency on a cheap retainer is not enough to master the digital space and provide return on investment.

Regardless of the path chosen, the key to success is the internal buy-in in the business. This requires a solid understanding of the opportunities that digital can provide to a business, making an informed strategic decision on the best way forward and avoiding any half-hearted digital implementations.

Sina Kresse is a senior digital consultant at Yoke.