Deutsch split is about culture and client opportunity

Leaders say two Deutsches means less client overlap and more leeway to lean into regional cultures -- and proves clients still care a lot about conflicts.

When IPG firm Deutsch announced it would be splitting its New York and Los Angeles offices into separate agencies on Thursday, it was a change of pace.

Most firms -- especially holding company-owned shops -- have been collapsing silos, creating interagency teams and even merging into massive global entities, such as VMLY&R, Wunderman Thompson and Dentsumcgarrybowen.

But for Deutsch, formally separating two offices that were operating independently anyway made a lot of sense.

“We don’t share clients, people or talent,” said Kim Getty, CEO of Deutsch LA. “We have strong, well-tenured leadership on both coasts. So, in many ways, it was a natural next step to create two separate brands for what were two separate agencies.”

The impetus for the split came last year, when Deutsch North America CEO Mike Sheldon left the company. Rather than vying for that job, Getty and Deutsch New York CEO Val DiFebo realized there really was no need to have an overarching North America structure.

In fact, sharing a brand between two offices with completely different sets of clients and processes created a lot of unnecessary conflict when pitching for new business, DiFebo said.

“It created an emotional conflict for clients,” she explained. “We weren't allowed to pitch car brands because LA had Saturn and Volkswagen. When they had Target, we weren't allowed to pitch Home Depot because it was seen as a conflict.”

Clients have eased some of their anxiety around perceived conflicts as they consolidate their work across holding companies. But there is still a strong resistance on the creative front to work for an agency that also works with a direct competitor.

“A lot of them still have language written into our contracts about conflicts,” DiFebo said.

But the Deutsch split is not just about winning new business. Separating the two shops also allows each coast to invest in the areas in which they are most interested.

Deutsch LA invested heavily in its production studio, Steelhead, and picked up a lot of film industry talent because of its location. And Deutsch New York has expertise in B2B, its own in-house media buying capability and a focus on data and analytics.

“We're both rooted in different cultures that have emerged from the people who are driving the offices,” Getty said. “We're also rooted in different strengths and areas of focus.”

Distinguishing the offices as two separate businesses also gives both the opportunity to be smaller, more nimble and invest in the areas they want to pursue.

While the split is just taking place now, the coastal offices have been operating independently since the late 1990s. Deutsch launched in New York in 1969 as David Deutsch Associates and opened up the LA office in 1995. It was acquired by holding company Interpublic Group in 2000.

The split also had nothing to do with COVID-19. In fact, the plans were laid in Q1 of this year, and put on pause once the pandemic hit.

“When COVID hit, the focus was all on our employees and clients and serving immediate needs, so it took us time to introduce our brand,” Getty said.

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