Thought Leader Interview: Sir Martin Sorrell

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ISSUE 84 AUTUMN 2016 Thought Leader Interview: Sir Martin Sorrell WPP’s CEO explains how the global agency is deploying its resources to connect effectively with clients and consumers across industry and geographic borders.

BY DEBORAH BOTHUN AND

DANIEL GROSS

REPRINT 16315 THOUGHT LEADER Thought Leader Interview: Sir Martin Sorrell

WPP’s CEO explains how the global agency is deploying its resources to connect effectively with clients and consumers across industry and geographic borders.

BY DEBORAH BOTHUN AND DANIEL GROSS

(US$67.5 billion) and revenue of £12.2 billion ($17.4 billion). The company employs 190,000 people spread across 3,000 offices in 112 countries. As was said of the old British Empire, the sun never sets on WPP. Its operations touch every part of the global media industry, and, increasingly, other industries as well: technology, software, retail. And, unlike many others in the media business, WPP has managed to post steady growth in profits. Its earnings per share were up more than 10 percent in 2015. The consistent growth and so- lidity of this company belie the churning waters in which it operates. The term disruption has been so ir Martin Sorrell is one of MediaCom, Mindshare, and MEC; overused as to have almost become a thought leader the most enduring leaders its data management arm Kantar cliché. But it is difficult to think of S in an industry that is (which includes Millward Brown industries that are being disrupted famously transitory and focused and TNS); digital firms Wunder- more than advertising, marketing, on the shrinking human attention man, VML, Possible, and AKQA; branding, and communications, the span: advertising and public relations titans sandboxes in which WPP plays. marketing services. As Burston-Marstellar and Consider the ability of DVRs and CEO of WPP, he pre- H+K Strategies; and other technologies to block and sides over a parent com- public affairs outfits such screen ads; the growth of time shift- pany stocked with more than 160 as the Glover Park Group and Penn ing; the introduction of new mea- operating companies. WPP’s assets Schoen Berland — not to mention surement tools; and the headlong include iconic advertising agencies many other wholly owned operating rush of consumers to access media such as J. Walter Thompson, Ogilvy businesses, associates, and invest- on tiny mobile screens (and then & Mather, Grey, and Young & ments. WPP is a global empire with make purchases there). Native con-

1 Rubicam; media agencies such as 2015 billings of £47.6 billion tent — a phrase unheard of ﬁve years Photograph by Phil Adams thought leader 2

------It’s a bit troubling as bit a to It’s There’s a limit, though. IThere’s

Let’s talk about segments.about talk Let’s We buy $73 billion buy in media a We find it veryfindit difficult believe to that clients can program in-house do matic advertising, example, for over term.the When low long got they’ve growth, verylittle pricing power, inflation,low and a focus costs, on I see clients spending of can’t lot a buildingtime money or their in- house programmaticadvertising ca pabilities.And the of most good want to in that people area don’t they client, just one want on to work clients. a multiplicity of on work also keep with to have up theYou technology. andyear, the largest single we client doeshave $6.5 billion. So we’re times bigger than 11 about our larg est And client. can we get thebene it’s scale. economies of fits of Now, truethat our digital billings are only, $23 the about of billion out say, can$73 we billion. But get very, very great scale, economies of par ticularly in the highly fragmented online space. There’s a big focus on reaching on reaching a big focus There’s today. youth BOTHUN: BOTHUN: SORRELL: SORRELL: SORRELL: why, given the fact that segwhy, the older

- - - - - of our Already, half our busi

You’ve got your clients got your You’ve Will you still be an be still Will you “Three-quarters of our business “Three-quarters business our of Draper Don stuff from that comes recognized.” have wouldn’t markets are as not fast as they used to be. 30 years ago. We probably wouldn’t wouldn’t probably 30 years ago. We recognized yearshave ourselves it 15 always very difficultago. It’s fig to gine WPP of is the $73 billion of media that each buy we year. Our billings are bigger than If Google’s. especially up, add it you the data and the media, three-quarters business comes from stuff that Don recognized have Draper wouldn’t whature will out happen going for ward because the nature our com of petition is changing. any massive changes in direction been the going for we’ve from where years. Digitalwill 15 or last five, 10, inevitable. percent; that’s be 40 45 to Data will be the same, probably the en big But greater. maybe a bit ness is media and data. And we’ll be digitala more business and a more see data-driven business. I don’t But flirting with trying to do some offlirting with trying to content. with native work, their own advertising agency? Because you you agency? Because advertising said WPP isn’t in the recently business. advertising BOTHUN: BOTHUN: SORRELL: BOTHUN: BOTHUN: ------

In a sense there’s violent violent In a sense there’s At the PwC Global At the PwC Global Sorrell this the of at sits center the media industry revenue trends trends revenue the media industry period, a five-year over like will look which is difficult. What will your years? in five like look business Entertainment and Media Outlook, and Media Outlook, Entertainment see what ahead to look try to we change, and in a sense there isn’t. The direction remains the same. integrated be business. a more We’ll fast-growth-market be a more We’ll business, although those fast-growth SORRELL: SORRELL: BOTHUN: BOTHUN: house in the Mayfair area Lon of whose reception area don, more closely resembles an economics de partment a university at than a multinational. 21st-century glitzy (A shelf displays the many Cannes Lionsawards the company has won inyears.) recent In an unadorned Sorrellconference room, sat down with Deborah Bothun and Daniel Grossand discussed the necessity of coming effectively. together more maelstrom. An air calm of pervades headquarters, WPP’s in a town ago — has become rigueur. de Sand HillRoad in Alto, Palo ground zero of the venture-backed technology rivaling is now revolution, Madison as the geographic of Avenue center the advertisingAs industry. publish ers give platforms, way to technology thecompanies ad into busi move ness, clients their develop own con and grows audiencetent, attention elusive,more advertising companies invest, ways mustdevelop work, to and think collaboratively. Deborah Bothun Daniel Gross [email protected] gross_daniel@ leads PwC’s global strategy-business.com entertainment and media is executive editor practice. She is a principal of strategy+business. with PwC US based in New York.

ments are growing faster and they’re at the behavior of the centennials Ogilvy’s big idea or Stanley Reese’s wealthy. But that’s a subject that’s (people born in 1997 or later) or the big idea or Ray Rubicam’s big idea been with us for 20 or 30 years. millennials. So, Snapchat versus doesn’t matter. But what it means Facebook. We do the analysis on is the other aspects have become BOTHUN: In the 54 countries them and the older demographics, very much more important. It’s not where the Global Entertainment and then we come up with an idea. just the 30-second, 60-second TV and Media Outlook measures It could be a single big idea or one spot. So we need a creative who is media, there is a pretty direct that is segmented by media. And prepared to employ data, to use correlation between growth in in a way, the medium has become technology. entertainment and media spending more important than the message, and the proportion of the popula- in the sense that the nature of the GROSS: What type of stresses and tion under 35. medium determines what the mes- pressures does that put on an SORRELL: A direct correlation? I sage is. We may do one thing for organization and on senior execu- think that’s understandable. I think a small screen like this [points to tives who are not data scientists? younger people are more interested his iPhone], and, for a big screen SORRELL: It means the skills need- in music and entertainment and so like that [pointing to a colleague’s ed are very different from the ones on. But these are very fragmented tablet], we may have to do some- Don Draper had. There are also audiences. thing different creatively or contex- skills that you probably still need to- tually. So when I’m playing a video day. People in our business get very BOTHUN: So if you were giving game, instead of seeing an ad that irritated when I say this, but it’s a bit thought leader advice to a 22-year-old who wants is completely irrelevant to me, I see like King Canute and the waves, to be in the advertising, media, an offer for the latest edition of isn’t it? You can’t stop the tides. Peo- and marketing business, what the Ford F-150 because they know ple are looking back with rose-tinted would you tell her to do? Get a I’ve recently done a search for pick- spectacles to a different era. degree in data analytics? Become up trucks. But to your question, you have an IT specialist? Creative is still obviously very to change the engines while the SORRELL: The answer to that ques- important. But the nature of the plane is ﬂying. And that’s difﬁcult tion is really linked to the change in creative has changed. That’s why for anybody who has a legacy busi- how we present. We used to present we’re not in the advertising business. The disruptors have it very a strategic plan, and then out of that ness anymore; we’re in the media, easy, because they’re revolutionaries issue 84 came a big creative idea, and then data, and digital business, predomi- and can tear things down. And be- came the media plan. Today, we’d nantly. That’s 75 percent of our cause the world economy isn’t grow- probably start with a strategic plan business. ing quickly, you have to focus on

3 based on heavy data input. We look That doesn’t mean that David costs. And you have CEOs who last strategy+business thought leader 4 ] WPP Specialty Specialty communications Communications See exhibit. WPP media Digital Digital Yes. I’ll show you how. I’ll how. you Yes. show How do you incentivize incentivize do you How GroupH Healthcare The matrix is brands and function: advertising, digital, data, branding relations, and public andidentity, under advertising But so on. we’ve four brands:got Ogilvy, JWT, pull out I can’t Y&R, and Grey. them in put to from here somebody charge all of these things, because icts immediately come client confl that. of leadersout So client have we and manage work who horizontally, drawing from different units. We also country have and regional managers. Everybody looks this at image a mess, and says, gosh, that’s deliberately be-which is. so, But it just getting causeeconomies we’re scale.of people who are in fi or six different ve in fi who are people one client? for working groups, BOTHUN: BOTHUN: SORRELL: SORRELL: We’ve got verticals got that areWe’ve sectors as well as being brands. [ and BtoD Group identity Branding Specialty companies Data Kantar investment management Client Leaders Not far Not enough. The ul- Does horizontality alsoDoes horizontality One of the big points you One of the big points you H+K Public Strategies Country/Regional Managers public affairs relations and mean that you go to market by market go to mean that you sector? industry emphasize is that fi yours rms like emphasize is that fi with clients in new work to have for known become ways. You’ve in the“horizontality” about talking in meaning that people ad business, units and with different different together should work competencies and country teams client through gone You’ve managers. and regional in client teams 10 cross-group from you can far How year. 45 last 2010 to that? take BOTHUN: BOTHUN: SORRELL: SORRELL: BOTHUN: BOTHUN: timate get horizontality to way you brand. That one is have to be would because view, inimpossible, my the parent company get would confused with How- the operating company. we areever, increasingly organized and client country. by by Media GroupM investment management Grey Young & Rubicam Three things. you One, Ogilvy & Mather Given that tough environ- that tough Given Traditional ad agencies J. Walter Thompson ment, what do you do? ment, what do you need to move your traditional move need to business quickly the digital into space. The second is get to your digital six or ve big brands fi have — we digital brands like Wunderman and and and VML AKQA Possible — to even fastermove within the digital space. The third is address] [to can- eat your nibalization.don’t If you own children, else somebody will. in the those people But traditional businesses, irrespective of whether digitally going on theyknow what’s beta-wise or media-wise,or are emo- tionally tied the to business. So it’s cult change. to very diffi GROSS: SORRELL: for six or seven years, CFOs for fi ve ve six sevenfor or years, fi CFOs for sixor years, and only two for CMOs thosethree put years. things You to- a very and thatgether, means it’s tough environment. By working together across vertically organized businesses, WPP can bring all its WPP can businesses, organized vertically across together By working market. geographic a single client or addressing a single bear on serving to capabilities Horizontal Approach Exhibit: Horizontal Source: WPP Source: SORRELL: If they’re working for the find more flexibility and willingness and 25 in good times. That’s too client, we’re increasingly incentiviz- among municipalities or institu- high. (At the senior levels, among ing them on the results of that cli- tions to invest in Shanghai and the top 2,000 of our people, it might ent. That could be the client’s reve- Mumbai and Cape Town than we be 3 to 5 percent.) And in some mar- nue growth, or the client’s profit, or do in London or New York or Paris, kets, it can be as high as a third. the client’s happiness and satisfac- which is a shame. What our leaders have to understand tion. The biggest issue for us is how is that managing a strong growth do you get everybody to think about BOTHUN: One of the things business in a strong growth market the group as a whole? So all these companies are struggling with is means you’re going to get high turn- people in that vertical have to think the fact that the talent in the two over. You can’t stop that. The young about that. And at the top of that generations that are currently from Chinese men and women want to organization it’s even worse, because age 21 to, say, 35 is becoming move fast, and compensation is im- they are prouder. There’s a sort of so fragmented. It seems like many portant. And if you have a competi- law of cooperation: The deeper you sectors, especially technology, tor.… One of the problems in our go down inside a company, the more are looking for the same types of industry is that some companies cooperative people are. Also, the people that you would look for. grow by stealing people. better the people, the more difficult SORRELL: The investment banks they are. Average people are easy to probably have lost ground — and the BOTHUN: At some point, do you say deal with; good people are difficult tech companies have gained ground. that this turnover is too expensive, to deal with. The consultancy companies, your- and you have got to change your thought leader selves included, probably remain the talent model? BOTHUN: What are you doing at same. I think because we’re seen as SORRELL: At the moment, I think WPP to develop your people? being technology-related, WPP has the cost of trying to change is so SORRELL: We’ve got the WPP Fel- a relative advantage. The fact that great that it’s not worth it. Our lowship, which is awarded to select- digital is 40 percent of our business turnover rate should probably be 10 ed new hires at various points — en- has given us an advantage. It’s more to 15 percent overall. So, could we try, first degree, second degree, art sexy for youngsters. solve that issue, if it is an issue, by school degree, and everything else. increasing our salaries by 10 per- We have developed MBA-type BOTHUN: But you still have quite cent? No. Could we solve it by in- training programs. Interestingly, a bit of turnover. In fact, the turn- creasing our incentive pools by X issue 84 the three countries where we’ve over has been increasing in the last amount? No. founded schools are China, in few years. Shanghai; India, in Mumbai; and SORRELL: Our turnover is 20 to 25 BOTHUN: Over the last few years in

5 South Africa, in Cape Town. We percent — 20 percent in bad times particular, you have bought a lot of strategy+business thought leader 6

- - - - Well, you know I’m a know I’m you Well, One of the things you’ve talked about is the fragility about is the fragility talked you’ve of that isn’t growing an economy begin with. Between to rapidly that the immigration terrorism, the economic and challenges, most you are what challenges, about? concerned ragingbull forget China. on People that even is if growing it only 3 or at China per year, 4 percent is the biggest incremental sourceworld’s growth.of I mean, 4 percent 3 or trillion is equivalent a little to $11 of tril than more $16 on bit percent 2 the [about lion size the econ of U.S. If Chinaomy]. go south? to were BrazilThat be would a problem. is asnot is critical, still it but impor tant. The Brexit is a big, big, serious threat. And within Brexit, Grexit, because forgotten have about people Greece. When we were in Greece Stream,last for our big November BOTHUN: BOTHUN: SORRELL: They will drive incremental growth markets.in theworld In the euro will it zone, Kingdom. be the United In India, [prime minister Narendra] Modi has challenges. some got But a brilliant just like done job, he’s Mauricio] Macri [president has with Argentina.

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This the year, growth Where are those growth those growth are Where The advertising and marketing buckets are still going be the to G2 China— States. and the United buckets? SORRELL: SORRELL: GROSS: them. What be is should doing you creating in your own or innovation grow in to thecontinued 30 years been in existence.we’ve So try we to keep trying our head by water above growing find,to in a world 3.5 at in 4 percent nominalto terms, the growth buckets. vestingIf been in have we success it. ful, which have, in we keeping alive (becauseeverybody said go were we ing get to killed Google, by and we been killed is because it yet), haven’t that. done have we services market a trillion is over dol lars, $500 stuff billion old and $500 billion new stuff, and the market has - Most of the of acquisitions,Most source of growth.” of source world’s biggestworld’s incremental People forget that China is the the is China that forget People “I’m a raging bull on China. China. on bull a raging “I’m SORRELL: SORRELL: companies that are responding to responding that are companies the big disruptions in the industry. use these acquisitions do you How strategy? support your to clients and which the people, is suf ficient in our mind makeficient to sure that everything of is Some hunky-dory. those acquisitions get grafted onto the legacy businesses. Some get grafted thedigital onto businesses. And are some pure cannibalization businesses. The fact that somebody competes with competes or you, with a service that have, or you threatens disintermediate to you, mean that ignore should you doesn’t if not all,if not grafted we our of one onto verticals. the remember 11 I can’t last acquisition that was what I call would increasing a free-floater, the usually horizontal span. We have five-year earn-outs.a five- So over yearperiod, learn the we about lot a digital conference, we said that in ruptor of traditional business mod- lion, in 2013 we invested about $80 six months’ time, Greece will come els and business approaches. And million in Globant [an Argentina- back as an issue. every legacy business and even the based company that specializes in new businesses are going to be software for digital marketing]. It GROSS: You spoke before about disintermediated. Who would have has now gone public, and we own how some industries have it easier, thought that the automobile busi- about 20 percent of it, worth about in the sense that they know exactly ness would have Uber, which has a $250 million. There are lots of ways who their competitors are. So you value of $60 billion, as a competitor? to skin a cat. see a startup over here, it’s got a Or that 3D printing could challenge huge valuation. How do you assess manufacturing? I saw a 3D-printed BOTHUN: I want to finish up with whether this company is going to car, full size. Two-seater. Really mobile, which certainly looks like compete with you; is it a company pretty, for $12,000, and it was pro- the next frontier in which people in you want to cooperate with or invest duced in 10 hours (without the en- the ad industry have to learn how in, or is it someone you can ignore? gine, bucket seats, and wheels). to work together in new ways. SORRELL: You have to assess wheth- Facebook now gets 80 percent of its er you think they’re going to be a BOTHUN: So do you have proactive ad revenue from mobile. How do frenemy: a friend and an enemy. You discussions with other CEOs in you manage your clients’ explosive can ignore them, but sometimes you these frenemy organizations where growth in that area? ignore them at your peril. I think you say, “Let’s just face reality, SORRELL: If you look at the indus- the answer is, you just have to accept we’re your customer, and we’re try stats, mobile advertising has not thought leader that this is going to be a contradic- your competitor”? penetrated as rapidly as it should be. tory world, that in some aspects of SORRELL: Yes. Absolutely. All the So there’s more to do there. The in- your operation, you might be having time. There then may be grounds dustry hasn’t figured out how to a constructive relationship, and in for cooperation. So take Sapient, deal with the small screen yet. + some aspects of your operation, you which was acquired by Publicis in Reprint No. 16315 have a destructive one. 2015. When you buy a company outright, you take the risk of buying BOTHUN: Like the relationship the business, which has on it, ex- between WPP and Google in some cluded from its P&L, the stock respects. option costs of keeping the people. issue 84 SORRELL: Oh, Google’s a frenemy. And the moment you buy it out, the The world is not segmented any- people fly with it. So it makes no more. I mean, what is the Internet, sense [to choose that transaction].

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