An agency typically executes a defined scope of work — ads, content, SEO — and reports to whoever is setting strategy internally. A fractional CMO is that internal strategy-setter: they decide what the agency should be doing, hold it accountable, and sit inside the leadership team making trade-off calls an agency isn't positioned to make.
In practice the two aren't competitors — a fractional CMO often manages one or more agencies as part of the role. Kando's fractional CMO service is set up this way by default, working with a client's existing agency roster rather than displacing it.