Integration is key for agency groups in turnaround mode

Dentsu International and M&C Saatchi are very different yet there are similarities in how they plan to reinvigorate their businesses.

At first glance, Dentsu International and M&C Saatchi don’t have much in common, yet these two very different agency businesses are at similar points in their turnaround.

Each has a new chief executive – Wendy Clark at Dentsu International and Moray MacLennan at M&C Saatchi – and both are on a mission to integrate, simplify and better connect their agencies internally to service their clients.

And, in each case, the pandemic may have given the new leaders leverage to drive more radical change.

Dentsu International is a much bigger business, with close to 45,000 staff, and has grown largely through acquisition.

Clark joined from Omnicom’s DDB to be CEO of Dentsu’s international operation in September 2020 and the Japanese parent company announced in December that it would slash the number of global agency brands from 160 to six by 2022.

By the end of the consolidation, Dentsu International should be “the most integrated agency group in the world” and “in front of our peers”, Clark said on the recent Q1 earnings call, adding that it has already cut – or, as she put it, “optimised” – 56 agency brands.

Clients have broadly welcomed the rationalisation. In the case of iProspect swallowing Vizeum, the biggest merger, there have been no client losses, she pointed out.

“I cannot underscore enough the number of clients that I talk to” who say that integration of capabilities is “exactly what they want”, Clark said. 

“They most need these new and incremental sources of growth, which they know don’t come from singular or finite thinking – it comes from expansive and integrated capabilities. They need agility and speed in their business more than ever. So, having a patchwork of agencies, it just slows everything down.”

What’s more, Clark said she has seen evidence of how integration is working: “I have the benefit of seeing it up close in our clients’ work – we just see the unlocks come very quickly now.”

Her vision is that Dentsu International “will be seismically different and differentiated in the marketplace” after the internal restructuring, although others, notably WPP, which has already carried out a similar simplification process, might disagree.

MacLennan faces a different challenge at M&C Saatchi, a group that has grown largely organically (and has a world-famous brand name that is already used by most of its subsidiaries).

A Saatchi insider for nearly four decades, MacLennan finally took charge in January 2021 after the founders of M&C Saatchi stepped down, following accounting problems in the UK.

The group, which has 2,500 staff globally, has talked about integrating disciplines and cross-selling those capabilities for years.

Yet the reality is that M&C Saatchi looked more like a patchwork with 140 subsidiaries and a large number of entrepreneur-led, local agencies, rather than a cohesive network.

MacLennan signalled change at a capital markets day in January, announcing a new strategy that he has called “Connected Growth” and a focus on five divisions.

“M&C Saatchi's belief in the power of communications and creativity to change the world is as relevant and important as ever, but we also need to evolve,” he said. 

“We will be a simpler, better-connected global company, with technology working hand in hand with creativity, led by a clear mission: to navigate, create and lead meaningful change.”

Richard Thompson, whom MacLennan promoted to UK chairman in March, put it more candidly: “We’ve got a lot of clients within the group that probably buy only one or two services from us, yet there are 14 agencies within the UK business. So why are we not cross-selling more? Why are we not creating more opportunities with the existing clients who are known to us and trust us?”

Liberum Capital, which is M&C Saatchi’s broker, believes the strategy and greater focus make sense from an investment point of view.

“M&C Saatchi has taken steps to adopt a multidiscipline service offering across the digital marketing spectrum in order to build as much monetisable contact with customers as possible,” Liberum said.

“This will exist in the form of the marketing funnel to manage and optimise marketing functions at all stages in a typical campaign, beginning with demand creation and ultimately mapping down into demand conversion.

“Therefore, we should continue to see higher-margin work driven off of monetising a relationship with an existing client across multiple disciplines off a relatively fixed cost base.”

While Dentsu International and M&C Saatchi are different beasts, their new leaders have the advantage of taking charge as the market is recovering. 

It is easier to make changes and take people with you when revenues are rising.

And is there a client in the world that would complain about an agency partner that promises greater simplicity and efficiency combined with brilliant expertise and integration?

Gideon Spanier is UK editor-in-chief at Campaign 

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