The Transformation of Saatchi & Saatchi 1970-2006 (C) Navigating in a Shifting Landscape
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- Exhibit 13: Landscape of marketing services providers 28
- Exhibit 15: Hotshops
- Digital agencies
- Exhibit 17: Saatchi Saatchi and Groupe Publicis organisation charts
Source: Willott Kingston SmithExhibit 10: Operating margins as a % of gross income for the principal UK marketing services sectors; 1990-200526 Source: Willott Kingston Smith Exhibit 11: Sales27 by region and function of the world’s five largest marketing services conglomerates; 2005$bn at prevailing exchange rates
Sources: WPP Annual Results Presentation 2/06; Corporate websites Exhibit 12: Worldwide communications services expenditure 2005 $ Billion
Source: Voronis Suhler Stevenson/ZenithOptimedia/ESO/MAR/WPP estimates Exhibit 13: Landscape of marketing services providers28
E  xhibit 14: Total shareholder returns29 for the world’s principal advertising groups, plus M&C Saatchi Source: DataStream Exhibit 15: HotshopsMotherMother Advertising was started in late 1996 by four founding partners from larger established agencies. The founders’ vision was to ‘produce great work’ but in a simpler and more direct way than the traditional larger agencies. From the start, Mother had pursued flexible working methods based on an absence of hierarchy and an open-plan ‘hot desk’ office arrangement: ‘one week you’ll be sat next to someone from accounts, the following week you’ll be sat next to a junior creative team’ according to one employee30. Critically, the agency abolished the account handling function (‘the suits’ in agency jargon) in favour of letting creative people and strategists deal with the client. As one of Mother’s founders observed: ‘When you get strategy producers who think in conjunction with creative people and the client, the roles cross-pollinate and you get magic31.’ Mother immediately won the launch brief for Channel 5, the UK’s fifth broadcast TV channel and quickly established a leading-edge reputation for creative work based on quirky, witty and ‘truth-rooted’ campaigns. The agency then started to win business from major national and multi-national companies including Coca-Cola, Unilever, Diageo, Virgin and the UK Government. But despite rapid growth, Mother continued to emphasise that ‘better is better than bigger’ and declined work with new clients when it was unclear that there was scope for great advertising. Mother eschewed the charms of London’s traditional Soho ad land and in 2005 moved to a former fire station in newly trendy Shoreditch. Despite its overt focus on quality of work, Mother was also highly profitable, posting an operating margin on gross income of close to 20% in 2003 – significantly above industry norms.
NakedNaked was founded in 2000 by three founding partners, all of whom had previously worked for large media-buying agencies. Naked prided itself on being hard to categorise, but its core activity was best described as ‘communications planning’ – devising strategies to find new and more effective ways to reach consumers through communications, based on ‘innovation, strategy and insight.’ Naked represented a further unbundling of the agency value chain in the sense that it was trying to carve a niche in communications strategy that sat in between the creative ideas of the traditional advertising agencies and the media planning and buying performed by the large media agencies. Despite its background in media buying, Naked chose not to deliver this function for clients, instead working off a fee-based consulting model. Naked grew rapidly from its inception and picked up clients including Sony, Reebok and the UK Government. As the business grew, it experimented with new, targeted offerings in brand strategy (Naked Flame), ‘activation marketing’ (Lunch Communications) and a joint venture with UK creative agency Clemmow Hornby Inge (Naked Inside.) By 2006 it was building an international network of offices in London, New York, Paris, Amsterdam, Oslo, Sydney and Melbourne32. Digital agenciesWith the advent of ‘Web 2.0’ and the rapid growth of internet advertising, a new breed of digital or ‘interactive media’ agencies started to develop. The distinctive challenges posed by the digital medium and its audience meant that the digital sector developed differently from mainstream media advertising, with a partial re-invention of the old ‘full service’, integrated concept, re-tooled and re-defined for the new world. Nascent players in the digital space were starting to define full service either in the traditional way, as a combination of digital advertising creation and media planning or, given the nature of the new medium, as a combination of online communications and website build. The digital sector was moreover developing talent that defied traditional creative or execution categories. Ideas and execution had to be seamless. Success in the digital space also meant becoming more consumer-centric: identifying how to reach a teenager, for instance, throughout the day across a range of different media touch points. By 2006, an exotic sub-culture of digital agencies was beginning to prosper, including companies such as Glue, Wheel and Farfar. Bigger agencies and media buyers were also looking to play. Many were re-investing in the dot com subsidiaries they had wound down in 2001–2, as seen in the acquisition of Glue by Aegis and Oyster by Framfab33. Exhibit 16: Revenues per employee and cost: revenue ratio for leading global marketing services groups and relevant benchmarks; 2004-2005
Sources: Willott Kingston Smith; Company reports & accounts; Casewriter’s estimates Exhibit 17: Saatchi & Saatchi and Groupe Publicis organisation chartsSAATCHI & SAATCHI WORLDWIDE EXECUTIVE BOARD 
1 Quoted by Hytner, R.: Transforming Saatchi & Saatchi, EMBA presentation at London Business School, March 2006. 2 For a detailed study of CompaSS with quotes from those involved in it, see the case study of Saatchi & Saatchi in the first chapter of Building a Strategic Balanced Scorecard (research report by Optima Publishing available at http://www.researchandmarkets.com) 3 Source: Saatchi & Saatchi Globalisation Analysis, Villanova 2004 4 ‘The Economist’ 24 June 2006 5 This figure is based on the number of agreements rather than their value, so almost certainly under-estimates the real significance of global agreements 6 All data in this paragraph is from the Veronis Suhler Stevenson Communications Industry Forecast 2005 7 Veronis Suhler Stevenson, op cit 8 ‘The Economist’ 8 July 2006 9 As quoted in Muir, ‘The Real Case for Brand-based Investment’, Admap, March 2005 10 Source: Casewriter’s estimates 11 Spencer Stuart: ‘The Changing Role of the Chief Marketing Officer’ 2006 12 Veronis Suhler Stevenson, op cit 14 Source: WPP Annual Report 2006 15 As described in “Saatchi & Saatchi Company plc: Corporate Strategy”, Harvard Business School case study 9-792-056, 1992 16 Source: Zenith Optimedia & WPP. Zenith’s estimate of global advertising expenditure in 2005 is $406bn. The top 5 Groups have aggregate gross income of $34 bn in 2005. Applying a 4.5x gross-up factor to transform income into billings (derived from WPP’s ratio) yields estimated billings of c. $152m and a resultant five-firm concentration ratio of 37% 17 London had been described as ‘The Athens of Advertising’ during the 1980s 18 Source: WPP Results Presentation 2/06 19 Sir Martin Sorrell: ‘Why should you appoint a global agency group?’ Admap 10/04 20 Source: WPP Annual Report 2006 21 ‘M&C Saatchi sticks to what it knows’ Financial Times 10/7/06 22 Gilson, C. et al, Peak Performance (HarperCollins Publishers, 2001), p. 368 23 Edited quotes from Kevin Roberts taken from video interview used in Richard Hytner’s presentation to London Business School’s EMBA programme, March 17 2006 24 Roberts, K: Lovemarks (Powerhouse Books, New York, 2004): p21 25 Roberts, K: Sisomo (Powerhouse Books, New York, 2006) 26 1 Year of data refers to year of publication of the WKS survey. Underlying financial data is from latest company year ends, which generally fall in the year prior to publication 27 ‘Sales’ refers to gross income (payments for services), rather than gross billings to clients 28 Case writers’ analysis 29 All dividends reinvested. Base date 24/7/01 30 Creative Review Peer Poll 2004 1/10/04 32 Source: Naked Corporate website 33 Source: New Media Age: ‘Full Service vs. Specialist: The Best Tools for the Job’ 19/1/06 34 Local currencies translated at the following rates: $1.83 = £1, €1.47 = £1. Figures for agency groups are for latest financial year end as at 10/05 35 Before Partner bonuses Download 294.55 Kb. Share with your friends:
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