Sunday, May 9, 2010

WPP is 25 years young today. Professor Joe Bower of Harvard Business School assesses the story so far ..

REVIEWING the history of WPP, I am struck by three recurring themes: it has been guided by a consistent vision of how the marketing services industry would evolve to serve the changing needs of clients; it has paid careful attention to the importance of financial as well as creative performance; and its brilliant creative and financial success has been driven by a number of truly outstanding leaders, not least its founder and CEO, Sir Martin Sorrell.

Sorrell had left the job of Saatchi & Saatchi CFO in 1985 in order to pursue the idea of assembling a stable of “below the line” marketing service firms that would somehow develop the ability to provide a relatively full line of marketing services economically delivered to multinational clients. The strategy exploited two basic trends: non-media marketing services are growing faster than media advertising, and marketing services are growing faster outside the US than inside.The opportunity existed to use acquisitions to consolidate a fragmented industry. Hundreds of acquisitions followed. And as the Group was assembled, heavy investments were made in Asia where markets were growing fastest. WPP had its first main Board meeting in China in 1989.

Those two basic ideas were played out repeatedly over the next two-and-a-half decades with two important modifications to the strategy. The opportunity arose to buy J. Walter Thompson, the icon of the media marketing industry. Its acquisition and turn around were a wonderful success, providing the confidence and financial support for the next move, the acquisition of Ogilvy & Mather which nearly took down the young firm. Neither of these moves fit the original strategy in that they were “above the line” businesses, but it quickly became apparent that with the financial markets’ appreciation of WPP’s performance reflected in the stock price, there would be opportunities to use stock as currency to acquire the wonderful resources of a series of major advertising groups. Young & Rubicam, Grey, Cordiant, 24/7 Real Media and TNS followed the first two into the fold along with hundreds of leading marketing services companies.The second modification came with the digital revolution. WPP was early to recognize the challenge to conventional marketing communication and invested heavily in the firms that would provide the new means for reaching web-based consumers.

Over the 1990s and the 2000s the small Group strategy unit led by Eric Salama, and then by Mark Read, worked to grow by leveraging the power of WPP’s diverse disciplines at the same time that the individual pieces were encouraged to expand. By the opening of the new century, WPP found itself pitching and winning multi-billion dollar mandates for global marketers such as Vodafone, HSBC and BP. Achieving collaboration across cultures, geographies, disciplines and brands is rare.
"WPP was early to recognize the challenge to conventional marketing communication and invested heavily in the firms that would provide thenew means for reaching web-based consumers"

But if the strategy was a consistent part of the vision, so also was the organizational philosophy. The Group ensured that back-of-the-house disciplines were strong and transparent. Treasury was strengthened. Budgeting was robust. Real estate and purchasing were centralized. The HR group was strengthened so that recruiting, training and performance evaluation were professionalized. These services were made available to the smaller groups. But except where it made sense for local specialists to join those in other countries to form regional or global firms, a central tenet was that companies based on creative talent worked best when independent-minded, creative spirits are left to “breathe freely”. The flags of the great brands remained flying high over the headquarters of each tribe.

And this is the third theme. Burt Manning did a truly remarkable job turning around J. Walter Thompson. Charlotte Beers saved Ogilvy from the brink and Shelly Lazarus drove two decades of growth including award-winning work on a global mandate from IBM. Howard Paster built a public relations powerhouse from an assemblage of great names. And then there is Jeremy Bullmore, sage of Farm Street, whose insight, vision and superb understanding of marketing communications has shaped the Group’s thinking for two decades.

The financial success of WPP is remarkable. But what impresses me most is the reputation of its leaders. When I am outside Harvard, I am mostly in the world of the Group’s clients. There it is clear that these individuals and their colleagues have earned the respect of business leaders who think of them as highly professional and creative advisors. WPP

Joseph L. Bower is Baker Foundation Professor of Business Administration at Harvard Business School

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