Each Monday we watch an episode of Mad Men (available on Amazon Prime) and put together notes on what we can learn from it about running agencies. Read an introduction to this blog series explaining more, catch up with epsiode 1, and then follow our notes below for episode 2...

After introducing the main characters last week and setting up the story, the majority of this episode is about deepening our knowledge of those people.

But in amongst that are some fundamentals for any agency: What drives its business?

During their lunch break Paul Kinsey, a copywriter, gives Peggy a tour of the office — and reveals that only 10% of the agency’s revenue comes from the creative work that gets so much attention. The other 90% comes from the unglamorous side of the business — buying the media where those ads are shown. The firm has a team of people who simply do those deals and it makes a 15% markup on each ad booked.

Kinsey says that, effectively, the creative is done pretty much for free — it’s “window dressing”. However, they only get to trade in the ad slots because they have the winning creative.

Therefore it’s the creative that drives the rest of the business, even though it’s only 10% of the revenue.

So what drives the creative part of the business?

In this episode, the creative team assembles in Don’s office to pitch their ideas for Right Guard’s new aerosol spray deodorant. They’ve automatically thought about the technology angle, and futuristic things. They have an ad mocked up with an astronaut saying if he uses it, you can.

Don isn’t impressed. He tells them to go back to ‘brass tacks’ and think about who actually buys mens’ deodorant — women (back then) — and urges them to think about what would make women want to choose this one. But then they, as a group of guys, sit around trying to think about this ‘mysterious wish’ that women might have.

Don is thinking about this problem wherever he is for large parts of this episode.

Roger, one of the firm’s partners, comes into Don’s office at one point to find him sitting thinking, and says “I can never get over the fact that most of the time it looks like you’re doing nothing.”

Don finally recognises the idea while in bed with his lover, based on something she says.

In the previous episode we saw Don struggling to find an idea for cigarette brand Lucky Strike. When it comes to the actual pitch meeting he has nothing, and is literally stumped for words. But then just as the client is leaving they something which triggers an idea for Don. He pitches it at the last minute, and the client likes it. Don later said: “It came out of thin air” and “Fear stimulates my imagination.”

So, what drives the creative part of their business is ideas from the outside (particularly when they lack diversity on the inside), time to think and digest them, and — just as importantly — constraints.

Mad Men is fiction, but anyone who does creative work will recognise this to be true. We get our best ideas anywhere but at a desk, and generally only when the pressure is on. And diversity of thought brings better ideas.

Insights for Agency leaders

  • It’s important to know what portion of your revenues are generated from each part of your business. Often you’ll find that a good steady part of your income comes from the fairly dull day to day stuff. In digital agencies this can be hosting and support, in PR and comms agencies from retainers for run of the mill activities, and so on.
  • But it’s also important to know which part of your firm drives the business. In an ad agency it’s the creative team. What is it in your agency?
  • Keep everyone focused on the whole not just the fun or glamorous part, and not just the money-earning part. Show how it all knits together.
  • Where do you do your best thinking? How often do you get to be there? How could you make more time for it?
  • Do big decisions in your agency get enough diversity of thought? Open up the decision processes more to make better decisions.

Things to try this week

  • When did you last get a chance to look like you're doing nothing — to get some thinking time? Kick back on the sofa and think over the bigger picture for half an hour or so.

NEXT: Mad Men S1E3 — The Marriage of Figaro

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