WPP CEO Martin Sorrell sums up the challenges and opportunities for the WPP Group (Hill+Knowlton’s parent company) in the year ahead:
The outlook for the year ahead can best be summed up as “tough, but manageable.” There will be growth, but it is hardly going to be a vintage year; the world’s economy is forecast to grow by 4 per cent in real terms, and if advertising retains its existing share of GDP globally, with the under-advertised fast-growth markets balancing the slow-growth markets, then advertising and marketing services spending should rise accordingly. The Sochi Winter Olympics, the football World Cup in Brazil and US mid-term congressional elections will all help.
In the current climate, clients are very cautious, with procurement and finance functions in the ascendancy over marketing; but on the positive side we continue to expand our global reach. Last year we opened for business in Myanmar, taking us to 110 countries, and given recent developments I expect we’ll see some more countries added in fairly short order.
Here are some of the key issues for WPP in 2014:
We have talked in the past about a number of ‘grey swans’ – foreseeable events that could have a significant impact on the world’s economy. Of these, a number have improved: the Eurozone seems to be less of a problem; there have been some positive developments in the Middle East; and the slowdown in the BRICs has resulted in mostly soft landings so far. The biggest grey swan, or potential black swan if you want, is the possibility of a default in the US. All eyes are on Washington DC.
On the functional side, media investment management, and our offerings in data and in digital, continue to be the strongest parts of our business. Almost half our revenues now come from media and data, and if I added in digital, it would be well over two thirds of our business coming from media, data and digital. For that reason I don’t think we can adequately be described as an advertising business anymore.
Our strategy has evolved but remains highly focused around four things: The first is new markets – the BRICS and Next 11, Africa, Asia, Latin America, Middle East, and Central and Eastern Europe. These are already a third of our business and over the next five years will be 40-45 per cent. Digital or new media is already 34 per cent of our business, and we also want that to be 40-45 per cent within five years. Data investment management, what we used to call market research or consumer insight, is 25 per cent of our business and that is roughly where it should stay. And last but not least is horizontality, which is the need to leverage the knowledge possessed by 170,000 people in 110 countries across the world, for the benefit of our clients.
The consolidation moves in our industry are to some extent counter intuitive in terms of strategy, structure, regulation, and the interests of clients or people. They will only succeed if they deliver a benefit to clients, and it will take three or four years to see whether they end in success or failure. That’s why we’ve really upped our own strategic focus – we’re focusing more and moving faster.
To benefit our clients, we need to construct and implement new structures. That includes appointing client leaders who manage our top 40 accounts, which account for a very significant proportion of our revenue, and have some 35,000 people working on them. And at a country level, we’ve already appointed 12 country or regional managers to try and make our businesses work more effectively; most recently we’ve done this in Turkey and Israel.
There are many issues our clients are concerned about – and see as opportunities. These range from the shortage of human capital – the war for talent – to over-capacity in many categories. There’s also a growing trend for companies to become more global and more local, at the expense of the regions. That is something we will have to reflect.
The relative power of finance and procurement is something that is here to stay. We can’t complain about it, but clients are in danger of losing sight of the fact that focus on the top line is critically important. There’s a finite limit to what you can do on the cost side, and if you invest in the brand, that’s where you’ll see the top-line growth. In an age when companies have become too conservative, too cautiously run, it’s something we should take the opportunity to remind them of.