Must you merge?

WPP’s game plan is pretty clear – simplifying the holding company’s ‘holdings’, integrating agencies and driving for greater efficiencies.
In the last few months, it has folded Possible into Wunderman (digital), merged Maxus and MEC into Wavemaker (Media), merged five design agencies into one Superunion (Design), amalgamated Burson Cohn & Wolfe (PR) and two attempts at mixing digital and creative with VMLY&R and Wunderman Thompson.

I hope this strategy works out. And I believe there will be a phase 2 to this consolidation with a layer of AI backed efficiency improvements in the future. But if that was the case, why would WPP have given away some of its stake in Kantar? From an AI strategy point of view, the research agency’s knowledge could be made useful in a specific way.
The sale tells me that they have either,
found no usable database or
have found no way to turn its existing knowledge into usable database or,
have a different AI strategy in place that doesn’t need research data. (which i find implausible, but hey, what do I know? I am a thousand miles from decisions and people who matter.)

Merging People

Coming back to the present, I really hope the objectives of mergers are achieved. The merger is supposed to bring together “award-winning creativity alongside deep expertise in technology, data and commerce.” My first concern is, does it really happen like that? Can creative companies successfully  merge their people, their capabilities? Is the sum greater than its parts? I tried to find answers to these questions in research papers, but couldn’t find any.
Anecdotally, I have witnessed (and know of) more merger failures than merger successes. I guess, data companies (epsilon) and consultancies (Accenture, etc) have been fairly successful in bringing in new capabilities. But agencies aren’t as well positioned to integrate other capabilities as easily.
Let alone integrating capabilities, integrating people with similar capabilities hasn’t always been easy. Look at any of the mergers in Indian advertising industry for instance. More often than not, legacy clients leave the merged agency as soon as founder’s grip on the agency weakens. A merged agency is fundamentally a leaky enterprise – the brand gets absorbed, people leave and so do the clients. There is no intrinsic value enhancement with mergers (apart from providing scale. This proposition was deal maker in the last century. It is hygiene now though.) I don’t want to take agency names here; a cursory look at the history of most of the merged agencies in India will testify.

So if merging is so difficult to pull off for a 100-200 people enterprise, wouldn’t it be exponentially difficult for companies with 10,000 people in employ each?

Scalability

There are specific processes through which say a Oil refinery’s capacity, Google’s computing power or amazon’s warehousing can scale. Before they scale, they would have a roadmap to implement.

I hope WPP has thought about the processes needed to scale successfully. There is much to unpack here.

What would a successful scaling look like for an agency? For physical infrastructure scaling, installation and servicing are easy to monitor and measure. A failure would be apparent soon enough – an oil spill, a data security vulnerability, service outage, etc. However, the results of a failure for creative industry would not be immediate.

What failures do we need to look for?
Our success is measured in Marketing effectiveness, Creative excellence. To make this  a reality, we need capable people working together. So we have four variables to track our success/ failure.

Marketing effectiveness,
Creative excellence,
Talent’s capability &
Ability to work together.

Effectiveness & creativity – essentially a track record. You can put a dashboard ideally. (screw awards. waste of time.) But you will have to wait a year or two to see if this works. 

The second two are interesting. They are about people. Companies merge, people don’t. So upon announcement people won’t acquire each other’s capabilities through osmosis. Nothing is going to change unless there is a systematic plan to help people improve their processes, learn new skills, move across departments fruitfully, and so on.

Publicis potentially can have that capability, if it improves its Marcel attempt.

I hope WPP has such plans afoot. There are two components to it – process improvements to make collaboration and learning easy & training programs. Again, if past is any evidence, I haven’t witnessed any meaningful program to improve my skills, help me collaborate or even to make me aware of new emerging tools. (Well, truthfully, there was one instance in my first year, where i lead efforts to build an in-house Knowledge portal. I wouldn’t say it was a grand success though. We learnt quite a bit with that project.) 

So I am skeptical of holding company’s ability to institutionalize capacity building. Agencies prefer throwing money at recruiting new talent, instead of systematically investing in imparting skills.

I hope WPP institutionalises efforts to plan for and measure improvements in capabilities and co-operation.

The sum total

Successful mergers create value that would have been impossible for the merging companies by themselves. For a commodities & service companies, that value might arise from process & cost efficiencies or competitive ‘moats’. Marketing services/ advertising industry is different though. For Wunderman Thompson to be successful, it needs to change its processes so that its data, strategy, creative people work together meaningfully, resulting in a new experience for clients – where the client shares a marketing problem and agency provides a plug & play solution utilizing mediums and people effectively and efficiently. This will require creation of bespoke tools for collaborative work. But knowing agencies I feel the management will go for off the shelf solutions, creating newer silos. I am hopeful though – after all I certainly don’t know as much as the industry stalwarts do. They perhaps know of a better way to integrate than the ones I am suggesting.

Here’s hoping for the best.

An alternative – decentralize

I believe, there’s a better alternative to this merging mania – improve processes & help distinct companies with distinct core competencies collaborate better in a plug and play manner. I have written about the thinking behind this approach – here and here. I will write a followup about exactly what this translates to in the near future.

Cheers.


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