An acquisition is not like buying a factory: Tim Andree

Tim Andree, Executive Chairman, Dentsu Aegis Network & Executive Vice President, Member of The Board, Dentsu Inc, has made over 60 acquisitions at Dentsu in his eight- year tenure with the Japanese legacy network. In high spirits he talks about the strategic thought process behind an acquisition, critiques the building of specialist units to service clients by competition networks and more. Excerpts.

Of late there has been a development of independent units to service clients - as in the case of WPP’s Redfuse for Colgate, JWT’s Power of One for Pepsi. How effective is this in your opinion, how difficult does integration become in such a scenario? Will DAN also take a similar route?

Absolutely not. These types of devices that traditional holding companies are using to pull talent in and create bespoke teams for clients is, I think, in some ways a reaction to our operating models. What we’re trying to do is get really great agencies that are specialised agencies to collaborate and provide integrated holistic solutions to clients. The problem with cherry-picking talent out of your agencies and putting them together for one client is two-fold: One you weaken your agencies, and the reason you’re doing it is because you’ve set up an infrastructure where your agencies won’t work with each other so you got to pull your people out. That’s a bad structure. Secondly, talent tends to be demotivated and lose their skill set when they get pulled away from their specialization. So if you take great people out of digital and search agency and a creative unit and put them all together only working on one client, I don’t think they keep their skills and stay motivated. Plus you’re taking a risk with them leaving the business.

I don’t know any talent that really only wants to work on one client. I understand why that’s become a phenomenon… it’s the output of traditional holding company models which cannot get their agencies to collaborate with each other across geographies, or across disciplines. So the client is asking for holistic solutions more than ever and when the agency network can’t deliver it, they’re trying to respond with a specialised solution. I know it was tried in the US with Dell and others, but it doesn’t seem to be the optimal solution for clients.

So you don’t think this model would work?

I haven’t seen it work in the past. It’s not the best way to keep your talent on the cutting-edge,or service the client. It’s a short term response to something. You can’t create an agency that way. They become like a service shop for one client. It really hurts the creativity.

What are your growth targets for APAC? Are there any more acquisitions in the pipeline?

We’re expecting between now and 2017 to average about 5 per cent organic growth. By 2017 we will have more than 55 per cent of our total revenues as a global company being outside of Japan, and that’s changed a great deal since I joined the company. I think when I joined the company in 2006 we had only 4 per cent of our revenues outside of Japan. So we will have 55 per cent of our revenues outside of Japan. We’ll have 35 per cent of our revenues coming from the digital domain. And that’s critically important for how you service a client’s going forward. And we expect to lead the industry in operating margin at 20 per cent. So our goal of being the fastest growing agency with the best margin in the business, with a diversified portfolio of both clients as well as geographies and have the highest percentage of our business coming from the digital domain.

What has been the experience of being the first non- Japanese board member?

I’m not only the first non-Japanese, I’m also the tallest (laughing out aloud).  I’m not retiring so I haven’t been that retrospective. I have to say probably the most touching things for me has been how much support I’ve gotten from our Board in Japan and for the leadership I’ve worked for during my tenure here. We have kind of broken a lot of long traditions and the fact that Dentsu has so quickly changed its business and is swiftly breaking out of what has been arguably the most successful home-based market business in the industry, no group in the world has such a scaled position in their home market as Dentsu does in Japan. I’ve been very gratified by the support I’ve got from the Board. I try to just keep looking forward. But now we’ve got a really deep bench with a really fantastic global management team and real strength and momentum in most markets around the world and certainly in the top 20 markets around the world.  I’m proud of where the business is but I’d like to reemphasize we’re still not where we’re going to be.  And the biggest difference between us and the other holding company groups is I think most of the other big holding company groups are what they’re going to be. Dentsu and Dentsu Aegis Network is a very new company operating in a new way, much more of a start-up mentality and that’s making it a lot more fun.

In hindsight, if you had to change the way you did things at Dentsu what would you change?

I don’t spend a lot of time looking into the rear view mirror; it’s kind of hard to drive forward that way. I’m sure that we’ve made thousands of mistakes, but ultimately in the macro position I’m very satisfied with how the business has developed. If there’s anything that I continue to push forward, is how to be even more nimble, how to be quick as we scale our business, and as we get bigger and yet more far flung. The real winners (organisations) are going to be ones that are agile and quick not just big. There was a lot of debate earlier because of the competitive dynamics in the industry about how important scale is and I think scale matters to a certain extent but for us what I’d like to see us continue to improve on is our scalability, how quickly we can be nimble and agile in providing new services or working across disciplines or across geographic borders to solve clients’ problems. I think that will grow our business and it gets more complicated as you get bigger. But if you look at the KPI of what we want to do better is to be able to continue to move at speed and great agility in delivering solutions. What we’re hoping to do is improve our agility and speed in delivering solutions to our global clients.
 

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