7 months ago| article
New Dentsu International CEO talks to Campaign
Feb 19, 2021 04:18:00 AM | Article | Gideon Spanier Share -
Wendy Clark has laid out a four-year growth plan to generate half of Dentsu International’s revenues from customer experience and to “transform” its creative offer while “evolving” its media capabilities.
“Creative will be the place that undergoes the most change” by 2024, she vowed, giving her first interview since starting as global chief executive in September.
Clark, speaking from her home in Atlanta, Georgia, said her twin priorities have been the company’s people and clients in her first 150 days, which have included a restructuring, a move from 160 agency brands to six globally and the loss of 6,000 jobs.
“We must make ourselves easier and more agile to do business with,” Clark told Campaign, recalling the words of Marc Pritchard, chief brand officer of Procter & Gamble and a Dentsu International client, who told the ad industry in 2016: “Your complexity should not be my problem.”
She revealed the company’s restructure involves cutting more than a quarter of its top 1,000 leaders.
“Having been so acquisitive over the last five or six years, we just had too many executives,” she said, noting the company had 250 people with the title of chief executive.
Clark was “confident” about a return to growth, after Dentsu International reported a 13% organic revenue decline in 2020 because of Covid-19.
She said the new business pipeline is about 30% bigger than a year ago – with 80% offensive, rather than defensive, in terms of pitches.
She admitted Japanese-owned Dentsu International lagged agency peers during the pandemic and cited two factors: a bias towards local clients, who suffered more than global clients, and exposure to some hard-hit categories such as automotive and under-exposure to more resilient sectors such as healthcare.
But she pointed out the international operation outside Japan “delivered on our margin” for the first time in six quarters in Q4.
The parent company reported a 140.6bn Yen (£960m) operating loss for the year, including a big impairment for the international operation.
Clark, who was previously global chief executive of DDB and a marketer at Coca-Cola, said Dentsu International has “a huge opportunity to grow our existing client relationships” because it already looks after 95 of the world’s top 100 advertisers.
“I am myopically focused on our clients – both for the benefit of our own business and for their business,” she said, taking a folder she keeps beside her desk at home and showing colour-coded A4 briefing notes for a number of top clients including Microsoft, Mastercard, Intel and Subway.
Clark is in the final stages of recruiting a global chief client officer as part of the drive to win big, integrated clients.
She shrugged off the threat of clients in-housing and said Dentsu International must be a flexible partner.
“I want to be here as this massive resource of capabilities that you need, you draw on, as and when you need them, and I will catch anything for you,” she said.
“That is probably the crux of my message when I talk to clients: We’re here. I have 45,000 people. Anything you need, we can catch.”
Clark stressed the need for financial “discipline” and, speaking at an investor presentation this week, said Dentsu International is pressing ahead with plans to move more jobs offshore, especially in customer experience management, which aims to move from around 30% to 50% of jobs in cheaper locations, including in India.
“We’re seeking to do that same thing across the media and creative service lines as well as across our business functions,” Nick Priday, the long-serving chief financial officer, who worked with her predecessor, Jerry Buhlmann, told investors.
Clark, who turned 50 in January, also talked to Campaign about the importance of employee engagement, mental wellbeing, environmental sustainability and diversity, equity and inclusion.
As the most senior female leader in the global agency sector, she acknowledged she is a role model and has an ethos of “lift as you climb” in support of other women.
“If I don’t use my position to change the face of the industry, shame on me,” Clark said.
What will Dentsu International look like by 2024?
When Dentsu hired Clark last year, it talked about her client and creative agency skills and, following the restructure, it is a simpler business with three service lines: creative, media and customer experience management (CXM).
The move to six agency brands by the end of 2022 will see Dentsumcgarrybowen and Isobar operate in creative, Carat, iProspect and Dentsu X in media and Merkle in CXM. It is up to local leaders to decide whether to retain other brands.
The 2020 revenue mix was 47% media, 30% CXM and 23% creative and all three regions took a hit. The Americas was down 11.3%, EMEA 12.4% and APAC 18%.
However, when it comes to service lines, the revenue performance was more varied. CXM was down only 3.2% (and Merkle just 1.3%) while media dropped 15.6% and creative plunged 18%.
So what will the Dentsu International look like by the end of the parent company’s four-year “mid-term management plan”?
“Dentsu International will look like a company that is driven off a base of customer experience capabilities, customer technology, martech, media investment and delivery, and creativity pulsing through those capabilities,” she said.
“In concrete language, we will see the acceleration of that customer experience management service line. By 2025, that will represent half of our revenue. Media investment and handling – we’re the fourth largest media buyer in the world – will continue to be an important component of our offering.
“Creative is going through perhaps the greatest transformation right now, especially coming off the pandemic, where we saw pretty much every one of the [digital] trends accelerate, so how we deliver creativity is transforming.”
On that basis, media is likely to shrink significantly in the overall mix.
The first 150 days
Clark spent April to August on gardening leave during the worst of the pandemic and “it was hard” – “sitting on my hands” – although “to be forced to sit out and be really reflective about the business” was useful thinking time and helped her to move fast when she started, she said.
“It has actually changed how I would on-board and will on-board executives into the company,” she said.
Since September, she has been listening to her people and clients and reorganising and has given no media interviews.
Key to engaging staff has been two monthly Q&As – one with all staff and another for the top 1,000 leaders – where any questions can be raised.
“We saw an 18% jump in leadership visibility and that in turn led to the highest employee engagement in the last three years,” she said, adding that research shows engaged employees are up to 12 times less likely to leave.
She shared her vision with the 1,000 leaders in September and then the company changed its name from Dentsu Aegis Network – a legacy of the 2012 acquisition of Britain’s Aegis Group – to Dentsu International.
“It was a really important moment. Aegis anchored us in being a media business. We are much, much more than a media business,” she said.
Despite dropping the Aegis brand, London will “absolutely” remain the headquarters for Dentsu International, Clark added.
The plan to move from 160 agency brands to six globally followed.
At the same time as the restructuring was announced in December, Clark distilled the company’s vision for the future on a single sheet of paper with six key areas of focus, which she shared with all staff and which she showed to Campaign.
They include people, clients, work, financials, social impact and company transformation – with goals, priorities and metrics.
“This is part of being disciplined business people,” she explained, adding she was inspired by a similar plan that Coca-Cola made when she was there a decade ago.
“If you’re trying to align 45,000 people in 145 countries, you gotta have a touchstone. If you’re working on something [at Dentsu International] that you can’t find on this piece of paper, you should question if you’re working on the right thing. That kind of focus and alignment is crucial to delivering this year.”
On the hunt for $100 million clients
Tim Andree, the global chairman of Dentsu International, told Campaign in 2019 that it had no clients worth $100m in annual revenue and that’s still the case, Clark confirmed, which may explain the group’s relative under-performance during Covid-19.
By contrast, the top 10 clients at WPP were worth an average of about $170m each in 2019, according to a WPP company filing.
That means winning some big pitches such as Coca-Cola, which is reviewing both creative and media globally this year, is essential. Dentsu International, which holds creative in Asia-Pacific and media in several parts of the world, is participating.
The fact that Dentsu International already has relationships with 95 of the top 100 global advertisers – and that number rose last year – means the job is to convert more of them, she said.
Clark has already participated in several pitches. “I love pitching. I love getting in and under the challenges that our clients are coming to us with and getting dirt under my own nails,” she said.
“The mentality I would love our team to have is: listen, hear what clients are saying, talk about the challenges, and then make suggestions around ways we can be helpful – if it’s things we’re not working on.
“I want us to have a constant, perpetual motion of ‘What else can we do? How else can we be helpful? What resource [do you need]?’”
The company has a library of case studies that it can show to clients, for example. “That’s the benefit of doing business with Dentsu,” she said. “I want our clients to feel they’re part of this community.”
The ambition is to win clients across creative, media and CXM – what the company describes internally as “integrated growth solutions”, although she admitted that’s not always the best way to talk about it to marketers.
“For clients, it’s, ‘Solve my business problems, bring me capabilities that I need to do that, don’t make it difficult,’” she said, referring again to Pritchard’s line about avoiding complexity.
Clients need to know that “it’s going to be agile, it’s going to be at speed, it’s going to be efficient and, ultimately, it’s going to be anchored in your growth, and if we can’t say that, then we’re not organised to make any of these global clients successful”.
Investing in Merkle and creative
Customer experience and data management matter to clients because of the “death of the third-party cookie” and the move to first-party data, according to Clark.
Millennials and Gen Z, in particular, “want experiences” and “have an expectation that brands and companies know them”.
For Clark, “it’s about using that information wisely to engage and build a relationship with a consumer – with a human. I think we should always say human instead of consumer. That’s what Merkle does.”
Dentsu International already has close relationships with martech platforms such as Salesforce, Adobe and Amazon Web Services which clients increasingly use.
That means “we are then the ones who partner with the tech stack and the tech investment that a client has made” and “interpret that data and make it useful for marketing programmes”, Clark said.
“We make that big investment they’ve made on technology work.”
Dentsu has told investors it expects to make M&A acquisitions in CXM and, in a hint that it wants to avoid the complexity that came with a lot of small purchases in the past, it expects to do fewer, bigger deals.
Industry watchers are most interested in what Clark does with creative – given her record and the fact that it has not been a strength of Dentsu International.
Dentsumcgarrybowen has lacked a global network and the slump in revenues in the creative service line last year underlines the challenge.
“We’re not set up for where we need to be,” Clark admitted, but she is making changes.
Getting involved in pitches “allows me to see where we are working well and where we’re not”.
In addition, Dentsu International has been building a “technological spine that needs to exist now in creative” to cater for clients’ more flexible needs.
“We call it agency on demand – AOR on demand”, she said, explaining how it connects both staff and freelance talent who can “throttle up and down” at speed in line with a client’s business.
She said American Express’ decision to consolidate all of its international creative with Dentsumcgarrybowen in November was proof that clients are convinced that the agency can handle work in multiple local markets – with 22 studios connected under an internal banner called “content symphony”.
Clark added “there is much more to come” in terms of shaking up the creative operation: “It has a lot of my focus.”
Moving Dentsu International from adolescent into adulthood
Clark has been taking two lessons in Japanese a week, although she cannot manage whole sentences yet.
“My ambition was to show reverence and respect and show interest and intrigue with a company that existed for 120 years before I showed up,” she said.
By contrast to the Japanese business, the international operation only “truly came onto the map” when Dentsu bought Aegis Group and then Merkle in 2016.
“So here in 2021, we’re not even 10 years old yet. I say we’re this adolescent and coming into adulthood.”
There is no “constraint” on her from the Japanese parent company. “I’m really not trying to sound Pollyanna to you. Look at what we’ve put in front of the Dentsu Group board and they have backed us,” Clark said.
The restructure has been part of this move into adulthood. “Simplifying our organisation will reduce duplication and cost but also create a better working experience for our people and our clients,” she said.
Dentsu International was already under pressure before Covid-19 and revenues declined in 2019, resulting in job cuts in a number of markets, including Australia, China and the United Kingdom.
Clark has had to make deeper cuts a year later. Asked where the job losses are falling, she said in all three regions: the Americas, EMEA and Asia-Pacific.
The reduction in agency brands has led to a cull in management, not just the lower ranks.
“We have roughly 1,000 people in the C-suite, upper leadership level. That will go down by 25% or more in the first iteration and then we’ll probably have some more to do,” she said.
Having 250 people with the title of CEO hampered the smooth running of the business – “you can’t run an organisation like this”.
Leaders want a “span of control and responsibility” to drive changes and deliver growth, she said.
“We had such a density of population [with so many agencies and CEOs] that your span of control and your ability to make change and your ability to do what we want leaders to do was really limited because we had too many.
“If you talk to our leaders, there’s not a dispiriting outcome from that [restructuring]. It’s actually: ‘Thank you, I’ve got the empowerment, I will deliver the results.’ That’s been a very positive conversation.”
Dentsu International has been looking to save costs and has “exited or materially restructured” 110 property leases around the world, Clark said.
“We simply don’t need the physical space. There will never be a time again that we have 100% of our workforce physically in our offices.”
The company is estimating a 60-40 split between people working in the office and remotely at any given time in future.
“Place, location and time now become completely optional,” Clark said, adding that giving people more flexibility can help employees in their home life – for example, if someone is sharing childcare needs with a spouse and each of them works at a different time of the day.
Given how some people have “truly struggled through this pandemic”, she said employers need to be more understanding. “Organisations have to be ready for that,” she said.
Moving resource to cheaper locations “off-shore” is another part of the cost-cutting drive.
Dentsu International wants to make annual savings of JPY54.7 billion ($520m) by 2022.
Mental wellness, equity and supporting women
Clark’s determination to bring a “human” touch to Dentsu International extends to mental wellness.
“I think this is an industry call,” she said. “I worry so much about our people.”
The onus is on leaders to talk about how “it’s OK not to be OK and that we ourselves have experienced those moments” and “it is highly usual, not unusual”, Clark said. “There were moments in my career that I needed to seek resource and I needed counselling.”
Dentsu International is offering access to counsellors and app-based tools for a workforce where the median age is 27.
“When we say bring your whole self to work, we mean total wellness,” she said.
The need to show greater responsibility includes environmental sustainability and diversity, equity and inclusion.
Clark, who has advised Hillary Clinton and has strong ties to the US Democrats, said brands already recognise that there is a “commercial opportunity” in doing good such as Procter & Gamble’s recent "Lead with love" campaign.
Companies will need to do more. “All brands are going to be expected to earn their social licence to operate, it’s not just enough to have a business licence to operate,” she predicted.
Dentsu has committed that its carbon emissions will be net zero by 2030 and has appointed Clark to lead its sustainable business board.
That’s good for clients which audit their supply chain, including their agencies, she pointed out.
“Business is going to be expected to be regenerative,” she said. “It will not be enough to simply operate your business and do no harm. You’re going to be expected to operate your business and actually contribute – regenerate the world’s resources.”
Clark is also hiring chief equity officers for each region – with an EMEA appointment in London imminent – and will make a company gender commitment for International Women’s Day in March.
The key to driving change is measurement, she said, citing a former boss, Ed Whitacre of AT&T, who liked to say: “You gotta inspect what you expect.” Clark added: “What gets measured gets done.”
Commitments around sustainability and equity are important. “We’re putting these stakes in the ground publicly, which drives accountability both internally and externally,” she said.
When it comes to supporting women, in particular, she said: “There’s no question it’s part of my narrative, it’s part of my journey. You’re talking to a kid who was raised by a single mother with not a lot of prospects.
“My entire orientation is ‘Lift as you climb – how are you bringing people with you?’. I’ve made it a focus for 30 years of working – bringing other women with me.
“It’s not that I think I am only here because I am a woman. I feel confident in what we’re doing – well outside my gender.”
Dentsu International already has some senior women, including Jacki Kelley, CEO of the Americas, and Jean Lin, global CEO of creative, Clark pointed out, but there is more to do.
Hence her declaration that “if I don’t use my position to change the face of the industry, shame on me”.
'Candid and open'
Clark appears to have made a good, early impression in conversations with staff and other industry figures.
“Wendy is very passionate and is winning the people over,” one Dentsu International executive in the UK said, “although I feel the power shifting to the USA.”
Another industry figure from outside Dentsu who has spoken to her said: “She was very candid and open about the challenges.”
Rob Foster, a senior consultant at The Observatory International, which advises global advertisers, said: “What is clear is that Wendy has her work cut out to turn things around. Much more than a cost-cutting exercise, getting the right new structure, and the correct balance of roles within that, will be pivotal to any potential success Wendy delivers.”
Foster added simplification and integration carry risks as well as benefits. “The retirement of the Vizeum brand by merging it into iProspect risks over-emphasising digital performance at the expense of skilled strategic planning,” he suggested.
“Wendy will need a strong leadership team who all buy into a ‘one Dentsu team’ ethos and who can ensure that they have the right balance of roles in a simplified structure to offer clients tailored solutions to their business challenges.”
The enduring role of advertising
A lot of stock market analysts remain bearish on the growth prospects of the big agency groups because of multiple threats, including in-housing, management consultants such as Accenture and Deloitte Digital and smaller, agile players such as S4 Capital, You & Mr Jones and Dept.
“We absolutely can grow,” Clark responded, adding agencies will always have a role because brands need partners to help them – something she knows from her time at Coca-Cola when she in-housed some capabilities.
“I don’t see a threat from in-housing,” she said, noting Dentsu International works with P&G’s in-house team. “We partner exceptionally well with in-house capabilities because – guess what? – much like our business there’s volatility in it.”
There is a bigger question about the role of advertising in a world of marketing technology.
Does she agree with Mark Read, the WPP chief executive, who said advertising is slipping down the hierarchy?
“I think we get really spun up about nomenclature on this,” Clark said. “The definition of advertising is taking a set of actions and activities that compel a consumer/human to do something as an outcome. We’re trying to change behaviour and create an outcome.
“So, all of what I just said” – in terms of Dentsu International’s capabilities across CXM, media and creative – “falls into the definition of advertising. We can call it customer experience and say that’s not advertising or it is. I just don’t get plussed by this.
“I think of us as an integrated communications company. We have end-to-end capabilities across the spectrum of anything and everything you [as a client] would want to do in marketing and communications and you use us in the way that you want to – to drive your business plan.
“Within that, I think people would say that they work in advertising. Again, the nomenclature is not going to hold us back from growth. You can label it what you want to. We’re going to grow.”
Clark in quotes
On leadership: “I’m the CEO but you can trade out that ‘E’ for whatever you want. Because if I’m talking to you about our employees, I’m the chief engagement officer. If I’m talking to you about our clients, I’m the chief expectations officer – they have massive expectations. If I’m talking to investors, I’m probably the chief efficiency officer – they want us to run an efficient enterprise.”
On people: “You cannot get confused in the agency business about what it is that is your IP, your innovation, your advantage – and it’s people. It is the simplest P&L. There is nothing else. We’ve got rent and lease and we’ve got people.”
On Dentsu: “They take the long view. I am abundantly clear: a company called Dentsu will be around 120 years from now. I am just one of the stewards of one of the components of that company for how ever long I am here and I take that with great responsibility.”
(This article first appeared on CampaignLive.co.uk)