Consolidation, consultancies, and creativity: Saatchi & Saatchi Australia’s new CEO on the future of agencies

Saatchi & Saatchi Australia CEO Anthony Gregorio

Anthony Gregorio, the newly installed chief executive of Saatchi & Saatchi Australia, says heavy consolidation is on the cards for agencies in the post-Sorrell future but believes creative agencies’ strengths in building brands will keep them safe.

The highly respected advertising executive, whose previous roles include CEO of Havas Worldwide Group where he worked for 15 years, spoke to The Drum to share his thoughts on the future of holding companies, the threat of consultancies and why he believes creative agencies will survive the turmoil.

Gregorio is fresh into his new role, replacing Michael Rebelo, who was promoted to Publicis Communications Group CEO last year. Rebelo is credited with driving a renaissance at Saatchi & Saatchi during his six-year stint at the helm, helping to return the once iconic agency to its award-winning status and bolstering its client list, most notably the recent Campbell Arnott’s win through the group's Power of One model.

Gregorio’s appointment sends a strong message to the industry. His track record in growing agencies and his experience in driving inter-agency integration makes him a savvy hire for Saatchi’s and nods towards the agency brand’s more connected future within Publicis.

He knows a thing or two about consolidation of agency groups. In his time at Havas, Gregorio ran The Furnace and The Moult Agency, both agency brands which no longer exist and he left his role with the group last year when the local operation merged with Host, creating Host/Havas. While he is a firm believer in the holding company model, he believes the groups are set to experience some heavy consolidation.

“There is going to be a shakeout at a holding company level and as always there will be winners and losers,” Gregorio tells The Drum.

“I don’t think the holding company model is going away, but consolidation is something that is happening across categories all over the world. When you look at what some of the big clients are wanting from their agencies, it has to be done at a holding company level. But, some agencies are better at doing it than others.”

Like most, Gregorio believes that WPP is facing some tough times as it navigates the post-Sorrell future, as evidenced already by Ford’s account review.

“WPP started the game, and the team approach is something that Martin Sorrell put into place and has been doing well for many years. But, my personal point of view is that Sir Martin held on too long and he should have put some generational change in earlier and the reality is WPP will pay the price for not doing that.

“When you look at Omnicom and IPG, arguably those groups don’t have as successful a track record of playing the holding company group play very well. I think Publicis is well placed. They have a leader who is very future-focused, whereas the other holding companies are holding onto the legacy ways of doing things.”

Gregorio points to the departure of Maurice Levy and Publicis Groupe’s appointment of new, young blood in chairman and chief executive Arthur Sadoun, as a sign of the changing fortunes for holding companies.

“Up until very recently everyone who ran a top holding company, or at least the top 4, the average age certainly wasn’t below 70, with the exception of Publicis. Publicis has taken a generational step change in leadership and Arthur is someone who intimately understands where the business is moving and is doing drastic things to change the way the holding company is focused, which is an exciting thing. The WPPs, Omnicoms and IPGs are not doing that.”

Gregorio continues, “I wasn’t with Publicis when they made that change and obviously Maurice Levy was an icon and had built the group and been there for a long time. The reality is he knew when to step down rather than getting to the unfortunate situation that Martin Sorrell has found himself in.

“As with all businesses – global holding company or 100 person agency – leadership change and succession is hugely important and if you do it badly it creates disruption and issues. If you do it well, you can keep your momentum going and you can use that momentum to change tact and direction if you need to but it doesn’t cause that much disruption.”

Clearly, maintaining momentum is top of mind for Gregorio as he settles into life in Saatchi & Saatchi's Sydney office. The agency is in "great shape" having "grown considerably" under Rebelo's leadership in terms of topline and revenue growth. The agency counts Toyota, Caltex and St George among its client list and has picked up Cannes awards for three years running for work such as OPSM's Penny The Pirate, Toyota Landcruiser Emergency Network and Westpac Rescue Rashie.

Despite this, Gregorio says the lure to Saatchi's was ultimately the brand. "Saatchi & Saatchi has always been this amazing brand in advertising, it's probably got the highest brand awareness of any agency and I'm delighted to have the opportunity to be part of that."

The Australian advertising landscape is not without its challenges. Not only does it face the major disruption the industry is feeling globally, it is also notoriously over-supplied by advertising agencies and now faces increased competition as management consultancies step into the ring. However, Gregorio is dismissive of the threat of consultancies, which he does not believe have the skills to compete with creative agencies.

“I genuinely don’t think consultants understand creative agencies and how they work. They are very good at high-level business strategy but when it comes to delivering at an operational level, where the rubber hits the road, traditionally they are not very good at that, whereas agencies are. It will be interesting to see how that plays out, but I don’t see them as a threat to our business.”

Accenture, however, is playing a more threatening game than PwC and Deloitte through its strategy to acquire independent agencies such as The Monkeys in Australia and Karmarama in the UK.

“Accenture is clearly going after agencies. Their flag is out and its quite clear they are going for the same business we are. I think the rest of them, the Deloittes, the PwCs are a little less antagonistic on that front and I don’t think they are quite sure how to integrate creative into their business," says Gregorio.

“They are trying to drive marketing automation systems, so once they have sold the business strategy they try and sell on the technology and that generates massive pipelines of ongoing revenues. They all have strong digital businesses within their structures, but actual brand strategy and brand creative is not something they have the skills to own.

“Consultancies are full of very smart analytical people, but they are not necessarily capable of that left brain thinking. My view is that marketing automation is much easier to learn as a component to what we do, than it is the other way round.

“As the world moves to greater automation, clearly we’re all fishing in the same pond. Agencies have always been very, very good at is understanding the emotional connection that is required to be creative in the ways you connect brands and consumers. That’s what agencies get, always have and always will," he says.

Gregorio says that while the huge levels of disruption in all areas of the business are presenting major challenges, it is also providing huge opportunities to agencies.

“The market is very challenging. Every category is facing disruption and everyone is trying to find a new solution. Out of that confusion comes opportunity and if you are smart, nimble and flexible in your approach I think you can win. Not everyone is going to, of course. Do I expect some agency brands to go under? Yeah, I expect so. If I’m WPP, do you need as many agency brands as they have? Do you need that many management structures, probably not. I would suggest there will be consolidation of brands and people," he adds.

While the potential impact of technologies, such as artificial intelligence, on advertising agencies is yet to be seen, Gregorio is confident agencies skills in creative brand building will ensure it survives the carnage.

“Clearly there will be less people in the industry moving forward and you have to overlay how artificial intelligence is going to effect the business. Clearly it is going to affect every category globally in some way shape or form, but how that plays out, no one really knows.”

“I’m young enough to still be idealistic but old enough to have seen a lot of changes in the business,” says Gregorio. “The one thing that doesn’t change is that great ideas and great creative thinking still offer businesses an opportunity to create an advantage over their competitors. And that, is at the core of what agencies have always been good at historically.

Gregorio continues, “If we get to this nirvana around data and knowing exactly what the consumer wants and can serve up the right message and the right time, that’s all good and well. But at the end of the day, what makes a customer choose one company over another? Ultimately it comes down to price and brand, and building brands is what agencies understand.

“Creating ideas that build brands is still at the core of what we do and that is what differentiates us from all of the others out there trying to encroach on our territory. I think that is what we do better than consultants or anyone else.

“The business is challenging and making money is challenging, and that’s not just for agencies it is challenging for everyone. I am not as doom and gloom about the industry as other people because I believe that no one is better at building brands than agencies. I know that we do that better than anyone. As long as we are thinking about that, I feel very positive about the future," says Gregorio.

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