Ogilvy CEO Michael Frohlich on the agency model: 'It will thrive, it just needs to change'

Ogilvy chief executive Michael Frohlich talking with The Drum's associate editor, Sonoo Singh

With the rise of in-housing and managing consultancies offering clients a new breed of agency, 2018 was a turbulent year for agencies fighting to maintain the upper hand. As part of The Drum’s Breakfast Predictions 2019, associate editor Sonoo Singh sat down with Ogilvy’s chief executive, Michael Frohlich, to discuss the future of creativity, futureproofing the advertising agency model and the inescapable B word – Brexit.

Consultancies are 'not' a threat

Time was when WPP was on an acquisition path for the likes of Ogilvy, Grey and the now-buried JWT. But the new world order is seeing management consultancies like Accenture and Deloitte start their conquest to remake the industry.

In fact, with its revenue increasing by more than 20% year-on-year, Accenture Interactive was the talk of the town. It also became the first management consultancy to ever win The Dadi (The Drum Awards for the Digital Industries) Agency of the Year award in 2018 - a reflection of the advertising landscape evolution.

According to Frohlich: “I’ve never really bought into the idea that consultancies are an absolute threat, I think we’re as much a threat to them as they are to us. Although agencies still dominate creativity, they perhaps fall behind the capability of consultancies to identify business problems.

“The one thing we have learned from consultancies is that they are traditionally really good at diagnosing a problem. I think agencies have understood a specific problem, but not necessarily the broader context of the business problem.”

Frohlich, however, believes that the agencies that will survive are the ones with creative prowess, and explained: “As an industry, we should have and are going to have a good year creatively. We have to be in control of what we’re good at, and that is being creative.”

The future agency model

With consultancies disrupting the ad landscape, and increasing number of brands in-housing larger proportions of their marketing operations, the question on a lot of marketers’ lips is: what does the future of agency models actually look like?

When Frohlich, a former PR man, joined Ogilvy last year, he had a mandate to transform the business. The radical restructure - involved dismantling its sub-brands and unifying its teams into a single agency - placed Ogilvy under a spotlight.

In response to those who question the longevity of the agency model, Frohlich said: “To anyone who says the agency model is dead… it will thrive, it just needs to change.”

He said agencies need to think more about partnerships and being more open to opportunities, “from having technology partners to partnering more closely with our clients, and allow our talent to be much more flexible in the way they work.”

With more brands taking advertising work in-house, Frohlich feels agencies need to: “confront it, embrace it and partner with it.”

“I think there are loads of opportunities, as long as we as agency leaders change the models to embrace what our clients need, and what our people need.”

Talent – and leadership

Hailing from a career in PR, Frohlich said he is a perfect example that ad people don’t just run ad agencies any more.

According to him, as agencies continue to navigate a disruptive period of change, and widen their offerings, the space is open for the next generation of business leaders to take the lead.

“The skill of leadership is becoming more important,” explained Frohlich, adding, “It is about the skill of being able to run a business and having the foresight and the courage is going to become more and more important.”

As business models change, Frohlich sees the role of flexible talent becoming increasingly important, and a further example of why agencies need to be open in the way they operate.

Brexit uncertainty

As Brexit continues to cast a shadow over the future of the UK’s trading with the rest of the world, Frohlich raised concerns over the detrimental effect it may have on the UK talent pool.

“The UK is a melting pot of multicultural and diverse talent, which we get from over the world. I think as an industry, there are some big watch outs,” he said.

A recent report from IPA Bellwether highlighted the reality of Brexit uncertainty on the industry. The report documented that “uncertain political and economic” conditions have caused UK marketing budget growth to stall, ending a six-year spell of growth as marketers cast a downbeat look on their businesses’ future financial prospects.

Frohlich said the recent report was quite telling and raised concerns about how “the flow of data around the world and talent will also be affected”

He did add that ultimately “no one really knows what is going to happen. It could be a monumental moment in time for this country, however, it is not the first monumental time.”

Get The Drum Newsletter

Build your marketing knowledge by choosing from daily news bulletins or a weekly special.