Customers Demand More as Digital Changes the Customer ExperienceMay 26, 2017
Digital Tools are Not EnoughSeptember 11, 2017
The following interview and video gives a remarkably concise and interesting perspective about how advertising has changed. Very entertaining and yet it boggles the mind on how best to marry the world of story telling with the brave new world of digital marketing.
“He’s a handsome, hard drinking, chain smoking ad man with a shadowy past, that charms his clients and cheats on his wife. If this is your image of advertising executives then you must be a fan of the show Mad Men, whose lead character, Don Draper, leads an ad firm on Madison Avenue during what some would claim was the Golden Age of advertising.”
Advertising in the digital age bears little resemblance to the Mad Mendepiction—the Don Drapers of advertising have been replaced by big data and the people who work with it. Professor John Deighton, the author of the case “WPP: From Mad Men to Math Men (and Women),” and Sir Martin Sorrell, founder and group chief executive of WPP and the protagonist in the case, discuss how WPP has been successful in the new advertising world order, where algorithms and robots rule.
TRANSCRIPT: Edited for length and clarity. Conversation recorded in March 2017
Brian Kenny: He’s a handsome, hard drinking, chain smoking ad man with a shadowy past, that charms his clients and cheats on his wife. If this is your image of advertising executives then you must be a fan of the show Mad Men, whose lead character, Don Draper, leads an ad firm on Madison Avenue during what some would claim was the Golden Age of advertising.
Advertising in the digital age bears little resemblance to the Mad Mendepiction, but those who are in the business today might argue that we are in the midst of the next Golden Age, one marked by the delicate balance of art and science, creativity, and analytics. Today we will hear from Professor John Deighton, the author, and Sir Martin Sorrell, the protagonist, in the case study, entitled, “WPP: From ‘Mad Men’ to Math Men (and Women).” I’m your host, Brian Kenny, and you’re listening to Cold Call.
Sir Martin Sorrell is the founder and group chief executive of WPP, the world’s largest communication services group. Professor John Deighton is an authority on consumer behavior and marketing, with a focus on digital and direct marketing and big data in marketing. Thank you both for joining me today. This is a new thing for Cold Call. We typically only interview the author of the case, but we were very happy today to have the protagonist join us as well.
Sir Martin Sorrell: You’ll get the other side of the story.
Kenny: We’ll get the truth today. John, can you begin just by setting up the case for us?
Deighton: I think the title does the best job of setting up the case. I had been working for several years on the topic of big data in marketing. Marketing is changing fundamentally from the era of broadcast to the era of one-to-one. I was reading the WPP year-end report and saw the phrase, “From Mad Men to Math Men.” This is the revolution that is taking place. It is a revolution from the Don Drapers of the world to people who work with data. I said, “I just have to have a case with that title.” It tells the whole story.
Of course, Sir Martin is the embodiment of the last 30 years. The transformation from the celebrity, star, creative agency–the Ogilvy or the Leo Burnett–into the agency holding company. It’s truly astonishing how well it’s been performed. Now comes another radical transformation. So we’ll see how that one goes.
Kenny: Sir Martin, can you give us the back story to WPP, starting with the origins of the name?
Sorrell: Wire and Plastic Products. A wire basket manufacturer. Some people said we made supermarket trolleys, we couldn’t figure out how to get one basket on top of the other. It was actually shopping baskets. I wanted to start my own business so I bought with a stockbroker 29.9 percent — which means we didn’t have to make a takeover offer — of a small shell company worth 1 million pounds. Today we’re worth 23 billion, 24 billion pounds. But we’ve had our ups and our downs. There have been some faults along the way. It’s been cyclical, everything is cyclical. In fact, one of the problems is when you believe your business is not cyclical.
We’ve gone through two revolutions, evolutions. The first was at Saatchi, the second was at WPP. The strategy was very much built around four pillars, or four principles. The first is horizontality, which is a terrible word, but really is about trying to create one firm. That’s one of the big differences because we are multi-branded, largely to deal with conflicts between clients, whether they’re in package goods, autos, pharmaceuticals or wherever it happens to be. So, horizontality is the first. Creating one firm rather than 12, 13, 14 verticals.
Second is fast-growth markets, which is a third of our business. Asia, Latin America, Africa, Middle East, Central and Eastern Europe because that’s where the next billion consumers are going to come.
Third is digital, which is almost 40 percent of our business. You go back four years or so ago, fast-growth markets were 10 percent. They’re now a third. Digital was virtually zero and is now, I would say, approaching 40 percent of our business.
Last but not least, akin to digital, is data. Which is 25 percent of our business. Five billion out of $20 billion of our revenues come from first-party data. This is not stuff we buy from other people. This is stuff that we work on with our clients. It could be panel data, it could be custom data, semi-syndicated data, syndicated data that we develop with our clients.
Those four principle pillars are the strategy that we’re operating currently.
Kenny: I want to read a quote from the case, from you: “Average people are cooperative. The better the people the harder it is to get them to work together.” I would imagine it’s a huge challenge given all the firms that are now under the brand, the umbrella. How do you get them all to work together? How much do you want them to work together?
Sorrell: With difficulty, is the answer to that. What clients want are the best people working on their business. We have 200,000 people in one way or another in 113 markets.
Let me give you a good example, because it happened about 24, 48 hours ago. We signed an agreement with Walgreen Boots Alliance, which is a large health and wellness…chain of retail and wholesale [stores] throughout the United States. With Walgreens, Duane Reade, Boots in the UK…And Stefano Pessina and Ornella Barra are the two principles at the company who are driving the growth of that retail and wholesale operation around the world. They’ll expand in other parts of the world.
What we did there was an agreement between WPP and WBA, which stands for Walgreens Boots Alliance, to consolidate all of their marketing activities. That’s media, creative, digital, everything, into our organization. The basic premise is we would provide them with the best access not just to one vertical–to J. Walter Thompson, Ogilvy and Mather, Young and Rubicam–but to the organization as a whole.
That is happening more and more. Whether it’s Ford Motor Company, which is our largest client, or Colgate, which is in our top ten, where they have consolidated similarly like WBA. I would say 85, 90 percent of their marketing activity is with us. We can do two things better. One is we can ensure that we have the best people working on the business… We can provide more effective, better work, at a lower cost.
Kenny: Let’s talk about that a little bit because the case goes into some of the bespoke firms. You mentioned Ford. You take it to the next level. You actually assemble the right group of people and then you give them an identity of their own.
Sorrell: Yes. [The Ford team] is called GTB. Finally we’ve got one name. We used to have BlueHive, Team Blue, and it used to drive me nuts. But nobody listens to me and it took about seven or eight years to get one, but we now call it GTB. Ford is rolling out that integrated model on a worldwide basis.
What happens is, we co-locate our people from the different verticals. If you went back to when we first did GTB in Detroit, seven or eight years ago when we had 14 agencies I think working on it, we took a Ford building from Ford Land and we co-located all the people — despite the fact that they came from J. Walter Thompson, they came from Ogilvy, they came from Wunderman, the came from Landor. We co-located in one. Effectively you create an agency within the agency.
The irony about all this is that what we call a horizontal … the danger is that it becomes a vertical itself. The stronger those units become the more they move from the horizontal plane to the vertical. We create our own nightmare.
Kenny: Do you ever run into issues where the agencies you’re pulling people from are protective of their resources?
Sorrell: Very. I had a conversation last night about exactly that. We have a client working with three of our operations. A very strong media operation, very strong traditional creative, and very strong digital. The client asked for a complete consolidation. Of course, you’ve got three people scrapping for their market share.
The fundamental issue is … go back to 2008, 2009: The world has been growing slowly. In fact, I would argue it’s slower and slower growth. Basically, growth is under pressure. Nominal growth and real growth. There’s very little inflation. We may see more inflation in the US than in the UK because of sterling devaluation but broadly pricing power is limited because inflation is not there. There’s a focus on costs.
We are a supplier. We like to think of ourselves as being a junior partner, but we are often called a vendor or supplier and we’re in the process, like many others, of being squeezed. People are looking for cost efficiencies. That’s the bad reason for a lot of the consolidation, the creation of these teams. Part of it is cost.
My view is that you do better work when you bring people of varying disciplines and cultures and nationalities together–and they love it. But the people who lead the verticals, the Don Drapers if you like, are more protective of their turf… The other thing is, as you move up the pyramid, you get more resistance to coordination because there’s more to protect. Our leaders of our verticals have changed enormously. Ten or 15 years ago, they were much more protective of their turf. Today, they understand. They see that if you don’t work together, if you don’t get creative to work with media and data, the offer that you make is more difficult to differentiate and more difficult to implement as a result.
Kenny: John, I want to come back to you. Just feeding off that comment. You work a lot in this space. You’ve come into the big data space. Aren’t these oil and water when you bring marketing creative people together with data people? How is that working in this new collision?
Deighton: You hear it a lot in what Sir Martin has just been saying. You’ve got prima donnas who are known for creative skills. You’ve got tech people who put their heads down and do the work. But they’ve got to work together. It’s all really well to say, “I’m creative.” But if you say, “Are you creative at designing a data architecture? Is that something like building a physical architecture? Here’s a CIO. Have a conversation with him.” Those are skills that have to be present in the creative of today.
Sorrell: The definition of creative has changed. The tendency is that a Don Draper would think the definition of creativity is very narrow. Financial people can be creative, sometimes they can be too creative. The creativity is not just the preserve of those creative directors like a David Ogilvy or Raymond Rubicam or whatever it happened to be, or Don Draper, to take the Mad Men example.
Deighton: That’s exactly the challenge that I contend you overcame. At least at the top line, the numbers have never faltered and grew for 30 years. When Ogilvy learned that his prized lifetime achievement had been sold, he said, “To someone who’s never written an ad in their life.” That to him was the …
Sorrell: He said a lot of other things.
Deighton: But he does mark the moment at which that big transition occurred. Advertising became a matter of coordination, not a matter of a big pencil and a white sheet of paper.
Kenny: So why is data so important? And today, much more so than even when you made that move 30 years ago?
Deighton: It’s not that data’s important. Data has always been important… What has changed is the capacity to store it and to move it. That’s what’s making data so central to marketing today.
Kenny: Is there too much data? Is there such a thing?
Deighton: No. I believe that we started getting stuff in our mailboxes in the 1870s. We’ve kind of gotten used to it. We’re not freaked out if the clothing catalog is uniquely appropriate to our taste in clothing. What surprises us is when we’re on the internet and it happens. The internet is a little newer than the mailbox.
I think it’ll take us 10 years. I tend to the view that a lot of what currently feels creepy will start to feel like life as it is. There are certainly areas where that’s not true. Health is a big issue. Financial services are big issues. Spam. But the tide is moving in that direction.
Kenny: Let’s talk about the landscape of the space that you’re in Martin, because the case starts to explain … some of the different players that are coming into it. These are players that control a lot of the data and the access to the data.
Sorrell: It’s very complicated because there are the traditional direct competitors which would be Omnicom, second largest; Publicis, third; IPG, fourth; Dentsu Japan, fifth; and then Havas sixth. Those are the top six holding companies, which together account for about two-thirds of the industry. Those are the direct competitors.
Then you have another level. Is Facebook or Google friend or foe? We call them frenemies. But our media portfolio is about $75 billion. Last year we invested about, on behalf of our clients, with our clients, just under $5 billion. Google, Murdoch, Fox and News Corp will be second at about two and a quarter, two and a half billion. Then Facebook would be third at $1.7 billion. Although they’re frenemies, people say they might disintermediate. I’m talking about Facebook and Google. Then we have a third force maybe arriving in the form of Snapchat. That’s a second level.
Then there’s a third level, which are the software companies, an Adobe, a Salesforce.com. These companies are on the periphery. I should have also mentioned direct competitors in the research space like a Nielsen, Ipsos, or GFK. More in the direct category.
There’s even another level. Consulting companies: IBM, Accenture, Deloitte, Digital McKinsey. These are all competitors at different levels. So, it’s a very complex landscape. I haven’t mentioned Amazon and Alibaba and Flipkart, who have these walled gardens just like Facebook and Google. Walled gardens are built around John’s love of life, which is big data and data. They want to control that data. The worst thing would be if there was one walled garden. It’s good that there are multiple walled gardens. Navigating these walled gardens is very difficult.
Clients … it’s a really interesting situation. Our second largest client is Unilever, which just bought a company called Dollar Shave Club. Dollar Shave Club is an attempt to establish that direct relationship at a time when Amazon and Facebook and Google are encroaching on that direct relationship and becoming the Walmarts of the future.
Kenny: So how is WPP better positioned, let’s say, than some of these other players that you’ve just mentioned to help clients meet their needs?
Sorrell: I think it comes back to our strategy. If the strategy is right, it’s simple. I can explain it in one sentence. It’s about getting our people to work together. It’s about focus on fast-growth markets. It’s about focus on digital and focus on data. My basic job is to try and differentiate WPP from the competition. Go back to Mad Men and Don Draper. Don Draper walks into the room. He has his white board. He has his flip chart. He has his animation or whatever it is. The power of personality and the power of presentation … determines whether he wins the business or not.
Increasingly, it’s not about that. It’s about how can you demonstrate real capability and differentiation. It’s very different from what it used to be. Thirty years ago you’d start with a planner, and then you’d have a big creative idea, and if you hadn’t run out of time in the presentation you’d have a media planning buy.
In Mad Men, I remember three vignettes: One is the media guy who complained he wasn’t a director. The second thing was when the creative department’s … lounge got displaced by an IBM mainframe. Then there’s a third one. When they got taken over by McCann, McCann had six data and media analysts; Sterling Draper had none.
Kenny: Right. A little foreshadowing there.
Sorrell: They’re absolutely foreshadowing. The world has changed. Today we go in and we say, “Here are some consumer insights from the data. Here is the media plan and here is the media execution.” Sometimes you tailor the creative execution to the media.
Sorrell: It’s this old thing about, is the medium more important than the message or vice versa? I think, and this is very upsetting to some of our people, that the medium has become more important than the message. The medium determines the message but it comes from insight, data. Coming back to political campaigns, whether it be the success of Obama or the success of Trump at an electoral level. It’s use of data. At the end of the day, intelligent use of data has been probably the biggest factor.
Kenny: It’s great to have the protagonist in the room because now we know exactly what’s in his head. John, back to you for the last question. You wrote this case as part of a collection of cases that you’re doing on the topic of big data. Just describe that quickly. Is this part of a class?
Deighton: We have a course that is focused on essentially the chief marketing officer of the future. Or, in the case of a few enlightened companies, of the present. We’re particularly interested in how a CMO thinks and what services does a CMO buy. We’re interested in the ecosystem of vendors that makes this data utilization possible. The world of marketing technology is vastly more complex than the world of traditional vendor relationships with CMOs. You simply have to be able to navigate that space to be able to buy.
We have some cases on elements of the ecosystem. We have some CMOs coming into the room. Some best-practice companies that market one-to-one. One of my favorites is Legendary Pictures because this is an industry that has traditionally been all about mass marketing. The single trailer. The exposure of the stars through the media. Legendary markets with thousands of trailers customized to the needs of millions of customers and delivered one-to-one. It’s revolutionizing radically the way that movies are marketed.
Sorrell: What are called DCOs, or dynamic creative organizations. Algorithmically determined creative products. David [Ogilvy] must be looking down and saying, “My God, what are they doing?” You almost have stock creative and you look at the demographics of the target and you tailor and alter the creative. You know if he or she is married, with kids. They like fishing or they like NFL or NBA or whatever it happens to be. You start to play algorithmically and robots rule.
Deighton: There was a time right here in Boston, we had BlueKai providing analysis of Twitter. They would tell people who were writing reality programming who to vote off the island. Next week that person would go because the Twitter feed was not positive.
Kenny: Sir Martin Sorrell, Professor John Deighton. Thank you for joining me. I should know better, by the way, than to do a podcast with two guys with British accents. Anything I say doesn’t sound quite as good. Thank you so much for joining me today.
You can find this case, along with thousands of others, in the case collection at HBR.org. I’m your host Brian Kenny, and you’ve been listening to Cold Call, the official podcast of Harvard Business School.