SEO for sevice industries

I was talking SEO this morning with the new Director of Marketing at Catalyst Studios, the infamous Christina Jackson. I was conveying to her what feels like to me a frustrating or at least confusing point about SEO for companies like Catalyst Studios. I would really like to know what others out there think, what your observations are.

If search engines (like Google, yes there are others, sort of..) are going to continue to prioritize the creation of original content in our sites and quality external links to our sites I see a couple pitfalls for service industries. I start to feel like it's not going to be enough to just do great work for my clients and have a thoughtful website that reflects my work and philosophies to the general public.

Reason #1:
I will be beat out by anyone who is blogging about the industry I work in. Which sort of makes me think that's a real bummer... Google will serve up a competitor who spends their time writing about what they do regardless of what they do, or how well they do it.

Reason #2:
Other than pro-bono work or awards shows, I can't think of a heck of a lot of good reasons anyone would like to my agency. This creates (IMHO) another time wasting ritual of me spending my time trying to figure out how to get links, or even taking on pro-bono work JUST to get them. How sad is that?

So, the agency I work for does some damn fine work. All our pages do their best to have the right keywords and whatnot, but to gain in the world of SEM I have to spend time and money writing stupid blogs like this exact one, hoping it's relevant to someone else, and having it point back to my agency subtly, and praying for a link that counts.

How do other medium sized agencies (or any service based company) feel about this SEM posturing practice? Waste of time, or cost of doing business simply because search engines can't find a better way to view us? Or maybe it's completely valid to say that if people aren't linking to me and talking about me I am not as important.

I really want to know how you feel about this!