The Illusion of Control
The holding company model of a WPP, Publicis, Omnicom, Interpublic, and Dentsu cherry picking agencies to fulfill only one purpose — Revenue and Growth is reaching its end. The business model of prioritizing billable work and constantly pitching to new clients is dated and ridiculous. Sure, it fuels growth and keeps executives higher up happy. But it’s holding back any ambitious work agencies set out to do. More importantly, it’s draining any kind of culture the agencies have built over the years.
Build to Connect
Alphabet is taking the approach of a holding company model and building an ecosystem of independent connected companies. An ecosystem where entities feed off of each other’s innovations and capabilities. This is exactly what the agency holding companies need to learn from a model like Alphabet. Build to connect.
The industry is beginning to see some hope in realizing this connected ecosystem model through the Publicis Power of One vision. A business model established to put clients at the center and provide them with access to the right capabilities; irrespective of the agency, brand, or even PNL structure. A model where all the companies under the Publicis umbrella operate as a single entity, working with each other keeping their focus on the most important thing in their business — The Client.
WPP too is making similar strides and exploring the “horizontality” of their organization in order to build their vision of “One Firm”. Bringing together capabilities across many of their entities and taking an industry/sector based approach to servicing clients and geographies.
Leaders like Publicis and WPP are making bigger, bolder bets in order to sustain—balancing models between integrating their portfolio of companies, letting them operate in a decentralized fashion, or forming hybrid models of client engagement. While Publicis has powered their retro thrusters racing towards this vision and demonstrating early signs of this model working, WPP is taking it slow and steady inching closer towards this connected vision. There is no doubt these motivations are beginning to show signs of strategic focus shifting from revenue and margins to client impact and scale. That said, these still are very early days. Integrations, mergers, restructuring all take an incredible amount of time and effort; not to mention politics and ego! The mindset within the holding companies is two-fold right now — build a sustainable strategy for execution, constantly win work while doing so. This, right here, is where the true challenge lies. It is highly unlikely they’re going to scale this mountain, all while retaining focus on fostering and retaining great talent, fueling their passions, and doing breakthrough work — sadly, none of which are the priority right now.
Setting the Right Focus
Holding companies are great at establishing relationships and understanding executive challenges across the Fortune 500. They, better than anyone, understand the needs of the decision makers within these organizations. They’re in the right rooms, with the right people, capable of making game-changing decisions. This is what they’re incredibly good at and this is what they should stick to. They need to use this to their advantage by building a strong future forward vision of what Brands in the Innovation Economy need. They need to do this by keeping some very important things in mind:
- Client Impact: In an industry that’s heavily reliant on clients, their success is imperative. Holding companies need to help clients win by bringing together a meaningful representation of portfolio agencies. One that helps identify an AirBnb well before it starts making a dent in their clients’ business or is either too expensive to buy.
- Talent: People make the company. Not the other way around. In a world where the agencies have lost great talent to the product companies, the holding companies need bigger plans to attract, retain, and foster great talent; empowering them to do breakthrough work.
- Culture of Collaboration: All the “horizontality” and “one company” vision will depend on the culture of collaboration the holding companies build within their portfolio. Setting the right metrics for unified success is going to be crucial moving forward, and incentivizing the agencies to follow suite.
- Differentiation: Two of the biggest holding companies are almost mimicking each other’s one company strategy, with many more to follow. Building a strong differentiation of service offerings and capabilities that resonate with the markets are going to be important and almost decisive.
- Breakthrough Work: It is no longer enough to claim high and lofty accolades that position these companies as leaders. Irrespective of where your agencies lie on a stupid quadrant, if you’re not doing breakthrough work — you’re not doing breakthrough work. And this doesn’t always have to be client specific. It can come from personal investments in amazing ideas; that your own people can bring to life with your support.
Holding companies need to embody “Strategic Ambidexterity” — the ability to explore new practices, products, services, ventures, and business models and infuse them into existing ones. All while retaining focus on people and culture; the core of their business. This is why I’m writing The Agency Innovation Playbook. The agency world is in dire need of a business model revamp, and we need something bold enough to burn the existing ones to the ground and replace them with new ones.
