Have you ever been in a pub and overheard a couple of old men arguing? Often, they're arguing about something that has no relevance to today. It might be which 1960's defunct cars was better, an MG or a Rover. The arguments are usually passionate but quite obtuse, both men using cultural references that no longer exist today. The argument usually turns into a power struggle over egos. Much ado about nothing.
With the announcement of the collapse of the advertising megadeal between Publicis and Omnicom, it feels as if Maurice Levy and John Wren are engaged in such a battle.
The news reports over the past week have contained lots of quotes have emerged for the reasons behind the collapse. In a joint statement, Levy and Wren told the Wall Street Journal, "The challenges that still remained to be overcome, in addition to the slow pace of progress, created a level of uncertainty detrimental to the interests of both groups."
Soon after the initial statement, the stories started to differ with Levy saying on a conference call:
"We are divorcing before getting married … we were not totally in agreement, to put it mildly, on how to share the responsibility. I have not been able to convince John that balance is balance. Omnicom wanted their people to fill the CEO, CFO and general counsel jobs … I was not ready to cede on this point."
So basically, it all came down to egos of the 1%.
For many, this merger was necessary to prolong the existence step of two companies that were built on a quickly shrinking legacy portion of the marketing marketplace.
It's as if two makers of horsewhips couldn't figure out how to combine to stay relevant as cars began to rule the road.
While there is currently a lot of finger pointing and retrenching, the merger seems irrelevant in the context of the revolution that's happening in marketing. First, technology is extracting more and more fat out of the marketing process, disintermediating anyone that stands in the way of a brand and it's customer. As marketing goes from analogue dollars to digital dimes to mobile pennies, there is no room for legacy companies built on analogue systems.
Second, advertising technologies, especially on the media side of the business are additionally commoditising online media radically as digital trading desks replace consulting based businesses that are compensated for their peoples' time.
Third, creativity is democratised. Those companies built to power this new era of creativity, including YouTube (Google) and Facebook, have a big advantage. They are essentially massive crowdsource platforms that are allowing anyone from anywhere to monetise their creativity.
To make matters worse, with the differences in the way public markets value tech companies versus holding companies the cost of capital makes it virtually impossible for Publicis, Omnicom or any other holding company to compete with the tech giants for hot properties and acquire their way to the future.
With such pressures, holding companies can only follow one of two paths in order to avoid irrelevance. They could reinvent themselves. While there is a lot of talk about it in the industry, it's difficult to see it happening. Kodak is a perfect example of a company that invented the future in its industry, digital photography, but wasn't able to get to the future.
The digital innovation was pushed to the side at Kodak as every fiber of Kodak's corporate culture, from the capital investments to employee incentives, was based on efficiently putting chemicals on plastic. Anything that distracted Kodak from doing that, including digital photography, was as a distraction. It's a chapter right out of Clay Christiansen's work on disruptive innovation.
Similarly, it's doubtful that Publicis, Omnicom or any other holding company can muster the vision and the will to change their corporate cultures.
The only alternative is to scale and do what their cultures were built to do.
All companies are not only caught by their own legacies but the legacy and the mythology of their industries. Martin Sorrell, chief executive of WPP and the arch rival of both Levy and Wren, explained the collapse elegantly in a widely reported statement that referred to the television show "Mad Men." He said: "Don Draper is not dead. Ego and power are still important in our industry."
In this context, its not hard to see Levy and Wren as the two grumpy old men in the coffee shop, arguing about an irrelevant business model all the while the world has long since moved on.
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