Three years ago, former Omnicom vice chairman Michael Birkin was tasked with building Kyu, a New York-based division of Japan’s Hakuhodo DY Holdings that has since become a “collective” of seven firms that spans consulting, creativity and design.
Earlier this year, Kyu acquired BEworks, a Toronto-based firm that uses behavioral economics to solve business and governmental challenges. Since it was founded in 2014, Kyu has also taken a minority stake in renowned design firm Ideo and acquired creative agency Sid Lee. The collective’s other firms include branding agency Red Peak Group, events organizer C2, consultancy SYPartners and digital shop Digital Kitchen.
At C2 Montreal, The Drum caught up with Birkin to find out more about Kyu’s ambitions and what his future plans are for the company in terms of acquisitions and growth. Find out what he had to say below.
Why did you decide to take on the role of Kyu’s chief executive?
I was approached about three and a half years ago by Hakuhodo DY Holdings in Tokyo to see whether I would be interested in working with them to build an international group. They are a Japanese-focused advertising and marketing group that has done very well for many, many years in Japan, but felt that it was time to broaden. That was a big decision for them. They approached me because they had gotten to know me from my Omnicom days. I was very intrigued to do it. It appealed because the opportunities that digitalization has presented offer new opportunities, and also because I have very deep respect for Hakuhodo DY.
Earlier this year, Kyu acquired behavioral economics firm BEworks. Why did it make sense to add them to the Kyu mix?
Kyu’s mission is to be a source of creativity that propels society and the economy forward. And we've set that purpose because we have a bold ambition. We actually want to create services to have a seat at the top table of fixing some of the biggest issues that are taking place in our world, whether they be health, education, or the environment. We are flying the flag for creativity.
As part of that, we've got to make sure that we are basing our creativity on the best insights we can possibly find, and there is always this debate about whether research is really a good foundation for creativity or not. We could talk all day on that topic alone. But one thing that I think is irrefutable is that if you actually understand human behavior better, you understand what stimulates people to choose "X" rather than "Y." Then you can target your creativity in a much, much more effective way. And if we aspire to want to compete against the McKinseys and the Accentures of this world, then having that understanding is going to help deepen our capability and make our creativity more effective. And so that is exactly why BEworks is a fit for us.
Why do you call Kyu a “collective” rather than a holding company?
The world doesn't need another abstract collection of marketing services groups. By moving away from the word holding company, I'm not trying to make a statement that I think the holding companies have a problem, or the holding companies are something that we don't respect. Being big for big's sake isn't necessarily what we want to be. So the idea of using a label that I think has become synonymous with scale didn't seem to be the right way to describe it. Doesn't mean to say that we ignore all the things that holding companies are doing or even adopt some of the things that holding companies do. But I think that the way that we're set up needs to be not hierarchical. It needs to be de-layered. And there are disadvantages about being small, but there are certain advantages about being small, and I want to use the advantages and not label ourselves with something that could only mean that we're a smaller version of something else.
Three of Kyu's seven companies are headquartered in Canada. Why is the Canadian market appealing to Kyu?
Well, there's two answers to that question. We believe Canada is a very important market, and we love coming here. We're sitting here in Montreal and it's one of the most creative environments in the world. Since we're a creative organization, we want to embrace the pockets of creativity around the world that really are going to enhance what we do, and Montreal is absolutely one of those places.
There's also a degree of accident in it. To be absolutely honest, I've been in love with Sid Lee for many, many years. Sid Lee first came in to my psyche at least six or seven years ago, and I've been following them, and frankly, competing against them, for a long time. When Kyu was created, Sid Lee was the number one experiential advertising group that I wanted to try and entice into our system. It happens to be based in Canada. I knew Sid Lee first and foremost as Sid Lee, not as a Canadian company. So it's a combination of the fact that we are very supportive of Canada and really want to embrace all the good that Canada can do, but part of it is also the fact that the company happens to be in Canada but is a global presence, and we want to become more global.
What will Kyu’s next acquisition be?
I think we've made a very good start in certain areas of our business. I think we have the world-leading cultural management firm in SY Partners. We have the world-leading systemic design firm in Ideo. I think we've got, maybe not the biggest, but certainly one of the most creative, advertising experiential groups with Sid Lee. We have a number of design and brand capabilities. So we have, I think, a very good foothold in those.
There are other areas that are important to us, and I think we have opportunities to invest. I would say what you might call communications, the field of public affairs, public relations, is an area that you might see us looking at. I think digital media is another area where we believe very much in some of the new thinking that's going on in that particular space. So those would be two areas I think I could say with a fair degree of likelihood that we will make some moves.
Three years in, what would you say is the overarching purpose of Kyu? Where do you hope to take it?
First of all, it's a long-term project. So that's point number one. Our purpose is to be a source of creativity that propels society and the economy forward. We believe in the 21st century that all institutions, however defined, need to have a much stronger social purpose than perhaps they might have 20 or 30 years ago. That comes in different shapes and sizes and different forms. But we believe that the most talented people want to be inspired, and therefore we want to create a group that inspires people. In other words, if you're working for Red Peak, or you're working for Sid Lee, or you're working for Ideo, that the organization of which you are a part actually is looking to change the way things are done and actually has a genuine wish to see creativity change the world.
That sounds incredibly ambitious, but we do believe in flying the flag for creativity in solving those particular problems. And by having that purpose, I do think we have a chance of enticing more than our fair share of the best people to come and work for us.
Can you give an example of how Kyu and its agencies have worked to solve some of these problems?
We decided to look at the whole issue of aging, and we came up with a project called The Powerful Now where we brought our various companies together, and a number of our stakeholders, some of our bigger clients, to look at how we could change attitudes towards aging away from the idea that you're born, you grow up, you get married or not, you have a job or not, or you retire, and you die, to the idea that you create seven or eight decades of adventure. It doesn't mean you have to take over the world at the age of 80, but it does mean that whatever you're trying to do in your life, you're trying to stay healthy, or you try and look at growth as opposed to decline.
We did a ton of work around issues such as architecture, the design of cities, moving away from retirement ghettos to the idea of multi-generational. Looking at money and investing, inheritance, entrepreneurship for older people, and health issues, with a view to actually helping our strategists and our planners in our various business when they're looking at the design of financial services products, or the design of a cruising experience for a holiday company. Looking at how you tap into, and redefine, what the market is in terms of creating that hope and aspiration, which hopefully creates a virtuous circle involved around wealth creation, improving health, and reducing the tax burden on the millennial generation. And so that's still, like everything at Kyu, in its early stages, but it's something. We created an exhibit, a physical space, where our firms could come and actually witness it. It's a working prototype of the way that we want to come together to tackle big things that inform individual projects that take place at company level. And I hope that we're going to replicate that across different things.
How have initiatives like this helped Kyu as a business in terms of attracting clients?
I think it shows that we're trying to not just take a brief and answer the brief. We’re trying to say to our clients and our friends and our other stakeholders, ‘look, we're trying to expand our own thinking here. We're trying to look at different ways we can approach this thing.’ If somebody says to us, ‘we want this amazing piece of communication because we've got to get people to want to buy our product because we're in a downward price spiral. People are just buying on price and it just keeps going down.’ If we can say, well hang on a minute, is there a way we can, through a change of aspiration, change the mindset to wanting people to want more out of the experience rather than just getting a better deal? Then we can actually fix a bigger problem.
We can't always succeed in that, but it's not a bad idea to ask the question. Occasionally you might get an amazing breakthrough, but even by changing the day-to-day thinking of folks, you can bit by bit start to change attitudes, and ultimately, create the confidence in creative people and make more people themselves creative.
You’ve said before that you want to keep Kyu small. Is that still true?
We are incredibly ambitious in terms of what influence we want to have. So yes, it's true, I want to keep it carefully curated. I want our influence to become very significant. I don't know how that means it's going to grow. Nothing is ordained insofar as how big we can be. We have a decent capital base. We have a great partner in Hakuhodo DY Holdings, who are very supportive. So you never say never to things.
But I think the most important thing is we continue to bring the best possible partners in, and we try through all the activities which I referred to, to grow our influence. We are very much open for business for firms that want to become a part of Kyu. I think we're pretty selective about who comes in. We can't do everything. I think we're very ambitious on influence. We need to grow the business, but in terms of becoming multi-billion, I suspect that's going to be somebody beyond me that will get it to that level. But you don't know in life. It's a funny old world.
This interview has been edited and condensed for clarity.