The latest Inspiring Futures podcast features an interview with Caroline Johnson- Co-Founder of The Business Model Company.

Caroline worked at Grey but then worked at KPMG as a consultant.

The Business Model Company advises agencies on how to evolve their business models to generate value for their clients and increase revenues and profitability for themselves.  She was called in to help with the transformation of IPG's Huge, a process that has been documented in Michael Farmer's book "Madison Avenue Makeover" https://www.amazon.com/Madison-Avenue-Makeover-transformation-redefinition/dp/1911687646

Here are a few of the highlights from my conversation with Caroline.

How Do You Define a Business Model?

"A business model is very simply three parts. If you think about three corners of a triangle, those three points are completely codependent. At the top, you've got how you create value for your customers in the market, for your clients, that is your positioning, your proposition, how you tell the story of your capability. But critically, it's also the neighborhood that you live in."

Why is "Neighborhood" an Important Concept?

 "We're not thinking about the neighborhood that we live in. And we're also not thinking about innovation and applying creativity to the operating model and the commercial model. So as a creative industry, we have creative sophistication and sometimes confidence. But we are really critically underdeveloped and have a lack of sophistication in our ability to adapt our operating systems and also to develop any form of commercial model for the whole industry."

The Advantages of Moving and Upgrading Your Neighborhood

"If you're building your house and investing in your house in the service industry in that neighborhood, which has been commoditized, then you're likely to suffer from bad landlords, declining property prices, noisy neighbors. And from a corporate advisory point of view, the multiple that's applied to those types of commoditized service businesses is sort of between six and nine. But if you repackage those businesses into a program business, a product business, and a more consultative offering or a platform business, then the multiples that are used to value the EBITDA of those businesses start at 12 and go up to 24. So you can double, if not triple."

The Future of the Agency Network

"The classic traditional network agency model of being a one-stop shop. Not only a one-stop shop for all services and capabilities, but also for every market and locality in the world has been a very successful model. But I think it's gone now. The idea that classic advertising and traditional communications are going to take the lion's share of a marketing director's yearly budget is just not going to happen. Its significance and its ROI are rapidly declining. There are much smarter ways of being able to sustain and promote brands and scale brands. So I think the bricks and mortar traditional agency network that you refer to is over."