Simplification, client structures and horizontal platforms: Sorrell details his plan to improve WPP’s financial success

Sir Martin Sorrell outlines WPP's strategy for growth

The market conditions for the advertising holding groups are tough and almost all are shifting their structures to better serve clients and weather increased technological disruption, WPP included.

The negative impact on WPP’s share price has been swift and significant, with its share price now sitting at the lowest point since around 2013, falling from its highest in February 2017. WPP, and its CEO Sir Martin Sorrell, have detailed the long and short term reasons for this extensively in analyst presentations, and it has already started the process of consolidating its agency brands at the end of last year. He has also discussed the impact of the Facebook and Google duopoly as having subsided.

“I think it really all started this time last year, I think the seminal moment was the Kraft-Heinz bid for Unilever, which basically said nobody is safe,” Sorrell states while speaking to The Drum last month in Hong Kong.

One of the key reasons for the drop in share price had been the group telling the market it didn’t expect growth in the next financial year. He explains; “Our budgets have come in at 1-2% growth and we said, ‘we don’t believe you, cut it back to zero’. We get punished as a result but I think it’s a much more realistic projection. It started off reasonably well this year, particularly in this part of the world [Asia], but I think we have to be cautious, so we said 'keep it flat on the top line and keep it flat on the bottom.'”

Caution isn’t the only strategy WPP is exercising however, as the group is reshaping itself to better weather challenging conditions. Sorrell says this hinges on three elements: a simplification of offerings, global client teams and platforms that underpin horizontal needs.

This simplification has been largely a consolidation across similar types of agencies, most notable in its move to combine media agencies Maxus and MEC into Wavemaker, which now sits alongside remaining GroupM brands, its Mplatform business and Essence. It also merged five of its design consultancies into Superunion and the folded digital shop Possible into Wunderman. It has also merged its PR firms Burson-Marsteller and Cohn & Wolfe to create Burson Cohn & Wolfe. Kantar and its research businesses have been simplified, as well as its healthcare brands into the WPP Health and Wellness offering.

As yet, its creative shops haven’t had the ‘simplification’ treatment but Sorrell says that its efforts so far are “not enough, we have a long way to go and simplifying the verticals is one”, though he did not give any indication as to what would follow.

“The other thing, which we’ve been doing for years, is client structures,” he said “and the final piece is a horizontal underpinning, or what other people called 'platforms'. Hogarth is the obvious example, which is now plugged in across the whole company. But there is more to be done in the digital, data, e-commerce and shopper areas, so effectively they become platforms or 'beds' on which everybody rests for their digital and data needs, beyond what you’d do with a finance, procurement and, most importantly, talent.”

As to how WPP’s strategy compares with other holding groups, Sorrell admits there’s no clear sign who has it right. “In some of our competitors you can see a clear strategy and others none. And who knows, for the people who have none, maybe they are doing it the right way.”

He does, however, see WPP building a differentiator in media and data, and it’s where he sees positive growth in this coming year, while wider industry growth will come from the industry building on its platforms.

“Where I do see significant differentiation in the industry is media and data as a combination of the two, and the digital agencies going in through the digital door but winning everything. Such as VML with New Balance, and you see Wunderman doing it too, and AKQA. And then the platforms, so Dentsu with Merkle and Omnicom’s Hearts and Science, those are good examples. The second thing here is the production platform Hogarth, having everybody literally working off the same page,” he adds.

The interview with Sir Martin Sorrell took place prior to this news that he had been placed under investigation by his board, which WPP confirmed through a brief statement.

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