Simplify or Scale: It’s Not the Binary You Think It Is
The digital agency industry is at a crossroads. Most leaders think they have two options. I think there’s a third.
My husband and I used to go to Blockbuster every Friday night. We’d wander the aisles, show each other the new titles we discovered, debate whether we were in the mood for comedy or action, and leave with two DVDs and a plan for the weekend. It wasn’t just about the movies. It was a ritual.
And then one week, Netflix showed up to the party. And within what felt like a few months, Blockbuster was gone. Not slowly. Not gracefully. Just… gone. And if I’m being honest, I barely noticed because I was one of the many people who ditched my ritual for convenience.
I think about that a lot right now when I talk with agency leaders. Because the agency industry is in the middle of its own Blockbuster moment, and most people are still browsing the aisles.
The Inflection Point Nobody Wants to Name
AI has fundamentally changed what it costs to do the work that agencies sell. If your business model still depends on billing for hours of effort, your revenue is shrinking every time your tools get faster. The math is working against you, and it’s accelerating.
If you’re too large to move quickly but too generalist to command premium pricing, you’re in a dangerous spot. Not because the work has disappeared, but because the margin has. And margin is how you stay alive. The agencies that used to survive comfortably in the middle, doing decent work for decent clients at decent rates, are the ones feeling this the most. Decent doesn’t cut it when your clients can get decent faster and cheaper than they used to.
Most of the advice out there presents this as a fork in the road. You either chase growth or chase efficiency. Door A or Door B. Pick one.
I think the framing itself is the problem.
The Two Doors Everyone’s Talking About
Door A is the growth play. You move away from hourly billing and toward pricing based on the value of the outcome. You specialize deeply enough that clients come to you because nobody else does what you do. Promethean Research found that specialist agencies grew 43% faster than the industry average in 2024. The reason isn’t complicated: when you focus on a defined niche, your messaging gets sharper, your credibility goes up, and you win more competitive pitches. And when you’re not trying to be everything to everyone, your operations get simpler too — which helps your margins.
Door B is the efficiency play. You go lean. You replace manual processes with AI-driven workflows, you productize your services so you’re selling a defined result instead of open-ended hours, and you protect your margins by reducing the cost of delivery.
Both of these strategies have worked well for as long as agencies have been around. But in 2026, each one has a fatal flaw.
If you’ve gone the specialist route, you’re still not insulated. Your clients are getting AI-savvy, and they know that the work you’re doing can be done faster now. Even sought-after experts in narrow domains are facing downward pressure as clients expect more for less. Specialization earns you a seat at the table, but it doesn’t protect your margins the way it used to.
And if you’ve gone the efficiency route, you’ve got a different problem. The more defined and repeatable your service is, the easier it is for AI to replace. You’ve packaged your offering so neatly that a machine can do it too. You’ve optimized yourself into a race to the bottom.
Neither strategy is enough on its own anymore. The only viable path forward is doing both simultaneously.
What the Third Path Actually Looks Like
The agencies I’m watching do this best right now aren’t scaling up or stripping down. They’re keeping their teams small and focused, making those people ridiculously capable with AI, and then taking on work that would have been out of reach two years ago.
They haven’t added headcount. But their revenue is climbing because the work they’re doing is more valuable. They’re landing better clients. They’re retaining them longer. And their overhead hasn’t moved because they’re automating the operational drag that used to require coordination roles and manual process management.
A five-person team doing the work that used to take twelve isn’t a fantasy anymore. It’s happening right now at agencies that figured out the enablement piece early. And the operative word there is “early.” The ones who invested in their people’s ability to work with AI aren’t the ones who taught them to do their existing tasks faster. They’re the ones whose teams learned to do things that weren’t possible before. Not speeding up the assembly line. Thinking critically about what problems are worth solving in the first place.
That’s the real differentiator. Not the tools. Not the process. The ability to think clearly about what’s worth doing.
It used to be true that staying lean meant capping your growth. If you wanted to stay small, you accepted that you weren’t going to increase revenue quickly. That was the trade-off, and for a lot of people, it was worth making. But AI broke that equation. You can stay lean and increase revenue at the same time now, if you’re intentional about how you do it.
That said, this isn’t easy. A recent PwC survey found that only about 12% of CEOs have actually managed to both decrease costs and grow revenue using AI. So if you’ve been trying and feeling like you haven’t cracked it yet, you’re in very good company. But the ones who are pulling it off share a common thread: they’re applying AI broadly across the business, not just bolting it onto one or two processes.
The agency that wins this moment is the one that’s a sought-after expert in a narrow domain, who also happens to run a lean, AI-enabled operation delivering a highly repeatable product or service.
This isn’t Door C. It’s what happens when you stop staring at the doors altogether and ask a better question: what would my agency look like if I stopped assuming the old constraints still applied?
What Your Instinct Is Already Telling You
I spent seven years as an engineer before I ever set foot in an agency. A massive part of that job was risk analysis, and when you do it long enough, you develop an instinct for the scenarios that are both highly likely and high-impact. That’s where we are right now. The disruption of the traditional agency model isn’t a maybe anymore. It’s happening. And the agencies that don’t adapt are going to struggle in a way that feels sudden, even though the signs have been there for years.
Remember how surprised I was at how quickly I gave up Friday night Blockbuster runs for the convenience of streaming? That’s how fast behavioral change moves once it tips.
I don’t say that to scare anyone. I say it because making a decision, even an imperfect one, is so much better than waiting. The Blockbuster lesson isn’t that streaming was inevitable. It’s that the companies that saw it for the threat it was and moved early had options. The ones who waited didn’t.
So stop asking “simplify or scale?” It’s the wrong question. The right one is: what does your agency look like when you stop assuming the old rules still apply? Because the answer might be exactly the thing that keeps you off the endangered list.
I'm Katie Bedford. I spent a decade helping agencies run better. Now I help agency leaders think better — about their business, their role, and what it all actually means. If something in this piece hit a nerve, I'd love to hear about it.