Michael Maedel, president, JWT Worldwide, spoke to Campaign India about the impact of a slowdown in the west on India, their acquisition plans in the country and the creative changes taking place at JWT India recently.
With oil touching $ 140, there are clearly signs of a slowdown in Europe and North America. Does that suggest more pressure on BRIC countries to shore up revenues?
Outside of the US and beginning in UK, we have not seen a direct impact. Personally though, I don’t think it’s just the oil prices; if you see the soaring inflation rate, the increase in food prices and commodity prices for our clients, we are moving into an economic period that’s not going to be easy. Any time like that will have an impact on agencies as it would on our clients. I don’t think that necessarily has much to with margins as it does with spending levels. The big question is: How long do we expect this slowdown to last? Because history has shown time and again that if you cut down too much during a recession, it is even more costly to catch up afterwards. While I am quite concerned about the overall economic development, I don’t see our business being dramatically affected. There will be some impact, but it won’t be dramatic.
While India is still significantly far behind Brazil, North America and the Far East in digital, it is obvious that JWT is seeing this as an area that they will be ramping up in India, what can we expect in the year to come?
We have just completed a study which we will release in the near future, which compares the internet usage, behaviour and attitude between the US, China and India. There are a couple of very interesting findings. Internet penetration is significantly lagging behind in India. People here seem more focused on mobile as a vehicle to communicate. There are some key areas that matter.
The first is language. China has Mandarin as a unifying language and in India, if you look at the penetration and usage of English, I was quite amazed as I thought the number would be higher than it is. So one of the prerequisites for the Internet to really take off in India will be to find translations into the various local languages.
There are some comparable elements between China and India. Young people, in both countries use the Internet like a parallel life. Chinese youth use it to escape political pressure. In India, as per the study, the Internet serves as the vehicle to escape social and parental pressure. They find it useful as a forum where they communicate with like-minded people, without the influence of parents. That’s something that I expect will grow. Coming back to us, our whole business will be digital. This is not some siloed expertise, which we can outsource to a company: it will be us as we go forward. Meera (Sharath Chandra) is heading RMG Connect and we are building the team. But we need it on all levels, especially in the creative area. We can’t have an idea defined as a TV commercial, first and foremost, and everything else as an afterthought. The search for that talent is ongoing. But it is only one of our primary areas, where we are focusing our development.
There have been two significant experiments at WPP, namely Enfatico and the global hub for Lenovo in India: Do you see opportunities of high quality communication solutions being outsourced to JWT India, going forward?
Let me answer that slightly differently. We are living in what I believe is the most exciting period in the history of communication because everything is in a state of flux. There is no blueprint for the future, there is no recipe book. What we see is a high level of experimentation. Dell is a very interesting experiment where you have clients approaching the holding companies as their entry point into this world of growth, that’s an experiment. Is that the last one? Definitely not. Can that be based out of India? Yes, because geography is playing less and less of an important role. It is much more talent centric so if someone has the feeling that he has the best possible talent and knowledge in a country like India, it can be based here.
JWT India has improved its hard working creative solutions in the last few years. This has been manifested in more awards being won. What according to you has been singularly responsible for that?
Three and a half years ago, we decided on a deliberate effort at improving the quality of our creative output, not just a piece of execution. We asked Craig Davis to join us, we created the Worldwide Creative Council, which is quite an achievement because we have the most senior creative directors coming together once a quarter, looking at all the work which is happening in various offices.
We have an evaluation system which rates work based on 1 to 10. Each of the work gets rated, with comments to the agency and feedback for improvement.
We have a similar system in Asia which we call the Passion Group, it has the same objectives where the people come together and take a look at the work. And that’s beginning to show. Cannes was just the most obvious achievement but if you go back, whether it’s Goafest, Media Spikes, Lynx awards in Dubai or Adfest, we are really doing well this year. After three years, we are really putting the money where the mouth is. So we have lived up to the claim, it wasn’t just a t-shirt slogan. We moved on, it’s a journey. This year has been a good year, we hope next year will be a better one. You never reach a level where you say you have ‘done it’. What I described are processes. The most significant change was that people have become passionate about what they are doing, that’s great and that’s pointing the train in the right direction.
There is a high cost to hiring people in India, an issue that has affected some of the largest agencies recently, with India fast hurtling towards a talent crunch. How do you see JWT handling this problem in India?
To attract and retain talent is, I believe, the single biggest issue that the industry faces worldwide. India’s case is not an exception. There are so many alternatives on one hand; on the other, we have not answered the challenge being put up from our clients: to demonstrate to them the real value of what we do so that they are prepared to pay what I would call a fair and adequate compensation. Unless we can convince the clients that they pay us fairly and unless we can come up with a compensation model which will dramatically be differently from what we currently have, we will have this enormous pressure on costs.
When agencies moved from the commission system to fees, we all believed that’s the Holy Grail. We felt that now we have found it, we don’t have the ups and downs any longer and there is a computable flow of money coming to agencies. And I think we were all blindsighted. Artists are not paid on the basis of time, they are paid on the basis of the value they create via their work. If you take that as an equivalent, we are paid on the basis of time. So we have to move from this cost based input model to a value based output model. Once we get measured on the value that we create, then I think we will get the money and the compensation we need to be competitive in the marketplace.
There is a real war for talent going on. Young talented people have the choice and they have it globally. Today, if you are coming out of a business school, you can choose to work in any country, USA, Brazil, India. The competition has truly become global for top talent.
As part of the WPP system, you cannot poach from other sister agencies. When Campaign India spoke to Sir Martin Sorrell at Cannes this year, he was of the view that the tradeoff to changing the anti-poaching policy was not worth the resulting chaos that would take place. From the point of view of your own P&L, the policy must be rather limiting…
The rule in itself is right otherwise, we just move from the right pocket to the left pocket and it doesn’t help the group as such. Now, it’s more difficult in a market like India where if you look at the stable of WPP companies, everything taken together, that’s a pretty high market share. Now where does that leave me to go? In a market like this, while we are certainly not actively encouraging a poaching policy, there are a higher number of people moving between sister agencies, than in other markets. But, is it difficult at times? Yes. On the other hand, each agency has a distinctive culture so there are people who will feel more at home in the JWT culture or the Ogilvy culture. If that’s the case, we will always have someone who leaves us to move onto a sister agency. There will be a certain move back and forth and flexibility on a case by case basis, but clearly, it’s not open season.
Have you decided on a CEO for Contract, after Jagdip Bakshi’s elevation?
MM: At Contract, Ravi (Deshpande) will become the chairman and chief creative officer in his role which is, I think, an important signal about the positioning of the company. But like in any successful company, there has to be a CEO, because only with this partnership at the top along with Planning, can it be a successful triumvirate. So the question is- who will be third partner here? I hope we will soon be ready to make an announcement.
You have made a significant investment with Encompass. Can we expect to see more acquisitions going forward?
I am very keen on acquisitions in specific areas. We are not making acquisitions, just to add revenue to our balance sheet, we don’t need that. What I am looking at, is specific knowledge that I think is important to address client needs as the market changes. There are two areas that I am very interested in. One is the area of field marketing and within that specifically shopper marketing. Also mobile.
The reason we are looking at field marketing is not only because we have an immensely successful company (specialising in field marketing) in China which we acquired three years ago, but because I think the market and clients will require that. There has been the entrance of modern retail brands into India. They operate differently. You also have a huge rural area in India, where it really takes measures on POP to engage with customers. It doesn’t happen through mass media or digital yet. So how do I create this connectivity with consumers on the ground?
Part of Field marketing, but within itself a very specialized niche is shopper marketing. How do I communicate with the customer within the retail environment? Mobile will play a very important role here because there is a high degree of convergence between retail and mobile. There is going to be a lot of experimentation in these spaces going forward. So we need to learn quickly and manage that space for our clients.