As short-termism gains traction we’re in danger of dulling down and killing creativity in pursuit of lower price. And every function must take responsibility for this race to the bottom.

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Martin Sorrell is on a mission. His firm, WPP, and its fellow agencies are under pressure from their clients to slash costs and he’s out there talking about the folly of this; encouraging his industry to rise to the challenge. He talks about the need to demonstrate the value of marketing: invest or die, buy quality and deliver great innovation.

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Despite record highs on Wall Street, many in industry are aware that growth is hard and earnings are often being driven through cost cutting. There are obvious exceptions: Google, Amazon, Facebook, and those who focus on their customers and their destinations such as Ulta, Shell and American Tower. The pressure to keep this run going is immense.

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In this climate several large consultancies are selling short term cost cutting solutions: procurement systems, supplier demands and so on. For those who have relied on time honored relationship building these have come as a shock that they are ill equipped to counter. They concede quickly and regret at leisure. Naturally the procurement teams see it working and come back for more.

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What’s next?

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Each group concedes as they ‘can’t afford to damage the relationship’. Then they push the pressure down (and the consultants thrive by selling this group a new procurement system). Creativity is one of the first things to be hit – it’s a luxury to run that new ad campaign, R&D departments are closed or outsourced, costs tumble, products and services reduce in quality. Executives believe that their customers won’t notice…but they do, and unsurprisingly go elsewhere. We all want a spark in our brand.

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It’s a race to the bottom, and we’ve seen many strong companies fail over the last few years.

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Who’s fault is it?

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Is it the clever consultants, who adapt to the market, selling basic cost management software and processes? They set up procurement to own relationships they don’t really understand. Costs fall, but no one wants to work with that company so the best ideas go elsewhere.

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Is it procurement, for gullibly buying this and allowing their ego’s to be massaged as they believe they have a more central role in the business? They feel powerful as they control access to the inner workings of their company.

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Is it business leaders, for targeting procurement with cutting costs at the expense of value creation? While they deliver today’s earnings they’re setting up tomorrow’s failure.

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Is it the supplier, e.g. agency, who allows themselves to be slimmed down? Why aren’t they standing up for the value of their services? Or standing up for their quality?

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So, what to do?

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It may sound shocking, but it’s amazing how many companies we work with don’t have a clear strategy. They just do it, whatever it is that they do: sell things, make things, design campaigns, etc. Get a plan. Decide what you’re going to be, and what you’re not going to pursue. As Mr. Sorrell would say, do some marketing strategy. Understand what your customer needs, and sell it to them: provide value. It doesn’t have to be expensive, price does not equal value; for example, Dollar General provides value and the prices are low, but they are still trying to increase basket size through understanding their customer.

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Resist the pressure from procurement. You decide your price. You decide your business model. And you live or die by this. Once you let others push you to where you aren’t in control you are on a slippery slope. Work with your customers to help them understand the value you bring. We recently heard a great line on selling: “if you’re fighting on price you haven’t sold your value well enough”.

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If you’re in procurement ask yourself if you want to be a cost management person or value creator. There is only so much cost down – on this road you’ll eventually be a system operator. Procurement folks are often some of the most commercially aware in an organization, so ask yourself how you can demonstrate your value. We have worked with those who add immense value to results and the development of others.

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In conclusion

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Delivering the short term is essential, however, we must all be constantly feeding the long term or there won’t be one. It’s everyone’s responsibility to lift our heads and create the future we want to be part of. It’s easy to destroy, to cut costs and save, however, this is the way of the simple, the naive and ultimately the loser.

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The winners will create a vision of the future and go out and make it happen. It’ll be a step by step journey with many learnings along the way. But if you overcome the creativity killers you might just start that spark that ignites the exceptional.