Jerry Buhlman, CEO, Dentsu Aegis Network
For years, marketers, headline-writers and even agencies have said the agency model is broken. People love to beat up on the agency model, whether it’s because it lacks accountability, or because it’s in danger of being made obsolete by evolving business practices, or any of a dozen other sticking points.
But Jerry Buhlmann — global CEO of the Dentsu Aegis Network, and a man often credited as one of the architects of the 2013 mega-merger between Japan’s Dentsu and the U.K.’s Aegis — doesn’t buy it for a second.
“What’s the rule that says we all have to adhere to an agency model? There isn’t one. Make your own,” he says. “We’ve made ours, we think it’s right, and we’re adding value for clients.”
If any agency has failed to make significant changes to its business plan in the past decade, then yes, it likely has deep problems, he says. But that’s true of any business operating in the digital space — and it doesn’t say much about the general viability of companies that specialize in advertising.
Nor does he put much stock in “scare stories” about threats to global agencies, like the ongoing controversy about agency rebates in the U.S. Buhlmann dismisses analyst Brian Wieser’s recent warning that marketers are beginning to believe kickbacks from media vendors are out of control, saying anyone who picks out a single area as a threat to the agency business doesn’t understand the realities of the industry very well.
He doesn’t see much of a challenge with clients in-sourcing digital marketing activities, either. Clients have always gone through cycles of in-sourcing and outsourcing, he says, and each time they do they create new opportunities for agencies to provide value. The is being able to adapt fast enough to take advantage of those opportunities as they arise. In fact, the main reason he doesn’t think in-house media buying is a long-term threat is that clients won’t be able to keep up with the rapid evolution of the media and technology environment. For that they will always come back to agency specialists, who can concentrate much more on keeping pace with media innovations.
Regardless of whether some business models have proven less effective than others, there will always be an opportunity for specialists to advise and execute ad campaigns on clients’ behalf, he says. “If GDP grows 3.4%, advertising will grow 4.5%, and within that digital will grow 17%. That’s a good business opportunity,” he says. “I still think there’s a load more we can do to help clients in the way we operate, and we will continue to do so.”
FOCUS ON GROWTH
Buhlmann made no secret of how enthusiastic he is about the company’s breakneck revenue growth. Dentsu’s revenue grew organically by 9.8% in the first nine months of its fiscal year (April to December 2014), while Dentsu Aegis Network, which covers all non-Japanese business and makes up about half of the holdco’s total revenues, grew 10.3% in the same period. Asia-Pacific was responsible for much of the growth, posting organic gains of 15.2%, but more mature markets also saw considerable gains, with the Americas posting 7.7% and EMEA 9.3%.
To put that in perspective, IPG and Omnicom both saw organic revenue growth of 5-6% through the full year of 2014, while Publicis and WPP reported more modest gains of 2-4%. Dentsu is still much smaller than the big four global holdcos — which bring in between $7 billion and $18 billion annually, compared to Dentsu’s $4 billion — but Buhlman says growth is the real signal of success, because it’s growth that fuels investment in new technologies.
“If you’re growing at 1-3%, then all that growth is going to the shareholders. If you’re growing between 3-6%, then you might be giving your people a bonus. But if you’re growing at more than 6%, you have genuine funds to invest in the business,” he says. “And given that we have a period of very significant change in our industry, that ability to invest gives you security for the future, because you can make the changes you need to evolve your business and your product for the future environment.”
The way Buhlmann sees it, Dentsu is forging its own path, with growth and reinvestment front-and-centre. It’s put a big focus on fast-growing businesses in emerging markets like APAC, and innovative categories like mobile, social and data-driven marketing. In 2014 it made 25 acquisitions to accelerate its technology and content capabilities, and plans to make as many this year.
The key to sustaining growth is being able to take advantage of new opportunites, and not be tied down by “legacy” products and business models, he says. In the next five years we’ll see more change in the industry than the last 15, he says — and in that environment, businesses that aren’t growing will have to cannibalize themselves to keep up.
SECRETS TO ADAPTABILITY
Dentsu has done several things to eliminate what Buhlmann calls “structural rigidities” that slow down the business’s ability to innovate and adapt.
For one thing, Dentsu Aegis Network has unified each country into a single P&L across all agencies. Each of its individual agencies (such as Carat, Isobar, DentsuBos) operates as a global network with access to global resources and relationships. But for each country, the performance of the business across every agency is handled by a single country lead, and contributes to a single bottom line.
Buhlmann says it allows the network to better integrate its suite of services. “The advertising ecosystem is a combination of technology, media and content, and unless you’re able to bring those skills together seamlessly, you’re creating rigidity in the way you deliver services to your clients,” he says.
The other big differentiator Dentsu Aegis has focused on is culture. Buhlmann believes a network the size of Dentsu Aegis can’t be managed from the top-down.
“You can’t reorganize your business every three months if you’re 30,000 people,” he says. “You can’t run a business by issuing orders. People have to know what they need to do, and that is culture.”
Trying to manage the entire Dentsu Aegis Network by decree would introduce new barriers to agility, he says. So instead the organization has focused on building a performance culture, where every employee feels responsible for the success of the greater business. Rather than try to tell every agency and staffer what to do, Buhlmann wants to empower them to make the right decisions on their own, so the business as a whole can react much faster to the pace of change than any hiearachy.
He also makes it clear that despite Dentsu Aegis’ reputation for being a media-heavy holdco, its culture puts equal focus on engaging content as media and technology.
“However good your media and technology is, in whatever channel, unless you have engaging content, it won’t make any difference. You’ve still got to engage,” he says, for a moment sounding like an old-school ad man. “You need to have engaging content, it just needs to be multiformat, multichannel, and much more addressable.”
