Four Reasons Why The Droga 5/Accenture Merger (And Others) May Not Work

This post is a result of the announcement last week that Accenture is purchasing Droga 5, one of the most successful agencies of the last decade or so.  From what I have read, the management of Droga 5 has attempted to insure the maintenance of its culture and its product. Accenture says it has agreed.  I hope so because most mergers and take-overs fail.  I thought I would chime in on why ad agency mergers rarely work, I hope that is not the case with Droga 5.  

   

Generally, it takes a year or two (but not always) for the dominant company to make unnecessary changes which cause the merger to fail.  So much of what happens depends on who is calling the shots

          Most mergers are made for financial reasons

Often, agency management gets older and wants to or needs to sell.  In and of itself that is fine, but in most cases, money drives the transaction.  The selling party rarely insures that key people and culture are protected.   Consequently,many of the reasons why the acquired agency was successful are forgotten. If an agency is in financial trouble, eliminating debt and selling become the primary force behind the merger and culture and people be damned. 

The Droga5 purchase may have been made to enable Accenture to gain a foothold into creativity.  Droga 5 apparently felt that the future of the business lies in consulting.  Time will tell if they are right.  But in any case, to be successful both companies have to continue the model already in place.  The Accenture financial people should not monkey with the formula that made Droga5’s successful.

2     Culture be damned

Before the purchase or merger, rarely is the compatibility of the two companies and their cultures considered by the legal and financial people who run the merger.    I can think of many mergers which have been made for seemingly strategic reasons – a strategic agency or company (Accenture) wanting to have better creative (Droga 5).

The irony is that the acquiring agency then often “knows better:” and believes that the creative agency has too much invested in talent or, worse, they don't value that talent and therefore do not want to listen to the creative or account people.  Within months of the merger, those people start to leave.  There are dozens of examples of this.  The result is that clients also start to bail. And consequently, the merger, rather than being complimentary, ends up one-sided and often one plus one equals considerably less than two. 

3      People be damned

As part of culture, few acquiring companies value the new people they are buying.  Even at the smallest agencies, the guiding force is most often the founder.  If the lead person retires or leaves, it is very hard to keep or regain their vision (Jay Chiat leaving Chiat\Day after TBWA [Omnicom] bought them is a perfect example).

All too often, the new owners believe that they know better than the old.  Wells, Rich, Greene fell apart when Mary Wells retired and her agency was bought by a French company; they brought in all new American leadership who failed to understand the culture that Mary Wells created.  This scenario has happened so often that there is no room here to write about it here. But not understanding the culture of the subservient agency and allowing or forcing key people and clients to leave may destroy the very soul of the acquired shop.

4     Human nature creates change where none is necessary

Instead of studying and learning a new business and understanding why things are the way they are, many companies decide to put their own people in place almost immediately.  New people feel it necessary to put their own stamp on things, even when change is not necessary. The result is to throw the baby out with the bath water.  Replacing key people who run a business or an account just for the sake of change is insane, but a new broom sweeps clean, often causing the agency to loose key accounts and people.

There are many cases where lead account people or head creative executives do not see eye-to-eye with new management.  Rather than letting it play out and figuring out how to live with each other, new senior management either allows these people to leave or forces them out.  Then they are surprised that their accounts often leave immediately afterwards.

Let’s hope none of this happens with Droga 5 and Accenture. Time will tell.

Adventures In Advertising: The Account Guy Who Drank Too Much

This is one of my favorite advertising stories because of its highs and lows and its surprise ending.

It goes back to 1968.  I was a very young account executive at Delehanty, Kurnit & Geller (DKG).  It was one of the great creative agencies of the sixties.  They had just won the campaign to re-elect Senator Jacob Javits. It was a major account with big spending and very high visibility in New York.  While the agency pitched the account on great creative and strategy, political advertising required expertise the agency didn’t have in terms of day-to-day messaging and local media. Consequently, the agency hired a professional political account person to handle the account for the duration of the campaign.  (Until then, I had no idea there were executives who specialized in political advertising.  They worked from April through the election, but earned a year’s salary during that time.)   

The person who DKG hired was named was Chuck; I have no idea what his title was, but he was considerably older and more experienced than I was and he understood the ins and outs of  political  advertising.  I was delighted when the agency asked me to be his assistant; I was to guide him through the agency and make sure what needed to be done, got done.  I admired the Senator and thought working on a political campaign, would be fun despite being a lot of work.  It was in addition to my regular accounts.

On his first day, probably in May or early June, I was introduced to Chuck and he graciously asked me to have lunch with him.  We went to The Press Box on 45^th Street, which was a major advertising hangout in those days.  It was also the days of the two martini lunch.  I ordered one.   Chuck ordered a double.  I was a little surprised, but not too much so (it actually was not that uncommon in those days).  I probably ordered a second, while he ordered another double, which did surprise me. I stopped at two singles, but he ordered a third double.  I was astounded.

After a few weeks it became obvious that Chuck had a serious drinking problem.  All business with him had to be done before noon.  He was actually a nice guy and I liked him and he certainly knew his stuff.  He was always well dressed, and since it was the summer, I remember him wearing seersucker suits and a straw hat every day.

One day in late summer, as the campaign was in full swing, we had an afternoon meeting with the Senator at his headquarters in the Commodore Hotel (The Hyatt today).  At the meeting there was the Senator, his campaign staff and several people from the agency, including the president, Larry Spector, Chuck and myself.  After a few minutes, one of Javits’ aides came and whispered something in Larry Spector’s ear; they left the room for a couple of minutes.  When Larry returned, ashen faced, he whispered something in Chuck’s ear and then they left the meeting together.  Larry returned to the meeting alone.

On the way back to the office, which was only a few blocks away, Larry explained to me that the campaign manager asked for Chuck to be removed from the room because he was drunk.  Larry explained to me that the campaign never wanted to see Chuck again. This was a big problem for the agency since it was too late in the election season to screen and hire a competent new person to run the business. The solution was that Chuck remained employed, but was confined to the office.  I was asked to actually to hang out at the senator's campaign office and, when necessary, follow the senator around the state and report back to Chuck, who knew what to do.  It was a thrill for me. The agency’s campaign was, “Re-elect the Senator.”

Jacob Javits, who was immensely popular, was re-elected; Chuck left the agency as planned and was never seen again. 

Maybe five years later, I was working in the the Pan Am building (now Met Life) and taking the escalator down into Grand Central to take the train home to Westchester.  As I was going down I looked over the station and saw Chuck wandering around aimlessly.  He was disheveled, unshaven and dirty. I approached him and he was barely coherent.  I took him into a men’s room, washed him up, straightened him up as best I could and bought him some coffee.  I gave him ten dollars and then took the next train home. 

 

Sometime in the early 1980’s I was having lunch in the Oak Room of the Plaza Hotel.  Chuck walked in with several gentlemen. He looked great, was still wearing seersucker and looked just as I had remembered him from the 1960’s.  We made eye contact as he entered and he acknowledged me with a nod and a smile..  About twenty minutes later, he came to my table, introduced himself to the people I was having lunch with and asked if I could be excused for a few minutes. 

He and I walked out of the restaurant into the Plaza Hotel lobby.  He told me had been sober for over ten years.  He thanked profusely for my previous kindness, which he obviously remembered. He then handed me a ten dollar bill.   I was very taken aback.

I never saw him or heard of him again.  The story has always stayed with me.

Why More Advertising People Should Consider Going Into Pharma Or DTC

It is amazing how many advertising account people at all levels tell me that they are not interested in pharma. Their reasons are that the advertising is too dull, too restricted and it lacks creativity.  I think many of these people have merely heard this from others in the business, but have no idea what pharma advertising is or could be. It is one of those things that get passed from one person to another  with minimal basis in fact.

Among other positive things, pharma advertising is one area of the business which has shown consistent growth over the last several decades.  There is no indication that this growth will slow down.  This means that there is constant hiring.  My observation has been that the pharma agencies and the general agencies handling direct to consumer advertising are actually more stable than many other aspects of the business.  I believe that these accounts are less apt to go into review, meaning that there may be more job security. 

Beyond that, the DTC accounts and pharmaceutical companies are more apt to talk to and hire people with no category experience than other general advertising accounts. (This may not be true of direct to physician accounts which might require considerable technical knowledge.)

What should motivate advertising people, especially those in account management or planners is the strategic challenge on any account.  There are plenty of those challenges in pharma and DTC.  

In terms of creativity, well, as they say, “Beauty is in the eyes of the beholder”.  While pharma advertising is highly regulated, there is room for creativity. It merely requires a willing client and an agency with an innovative creative team.  There are many examples of successful and excellent creative work.  And the truth is, when a product fulfills a true consumer need – treating heart disease, alleviating pain, etc. – the product doesn’t require a lot of clever executions to communicate its benefits.  As the great Ned Viseltear put it, “Cure for cancer found” does not require a large type face or a complicated headline. 

And, besides, what could be better than selling a product that fulfills a true consumer need and has a real benefit?

There is another great irony.  For the most part, people who join pharma agencies or work on DTC accounts mostly enjoy the work and the challenges their brands present. One of my favorite accomplishments while I was in advertising was winning an Effie for handling a product for head lice, Rid (at the time made by Pfizer).  It was not only a difficult marketing issue, but creating a commercial and executing it was actually fun.

I am not advocating that everyone go into pharma advertising, but I do think that people shouldn’t deny themselves an opportunity to find out what the challenges are if the opportunity it is presented to them.  Too many account people turn down the chance to talk to agencies about these kinds of accounts.  They are doing themselves a disservice.

What Happened To The Ad Agency Star System

Once upon an advertising time, from the nineteen twenties through the nineteen eighties and into the nineties, there were creative (and account, media and even research) stars.  Everyone in the business knew them.  In fact, many in the general public knew them as well. They produced well known work.  Then the holding companies (along with budget cutting clients) dismantled the star system beginning in the 90's.  They apparently no longer pay for (or want) creative stars to stand out. It is as if, somehow, having well known people would somehow diminish the anonymous owners of their agencies.

Way back when, if a client hired an agency, they knew what they were getting.  The reasons agency names contained the names of their founders or stars was because they were the attractions for clients.  Mary Wells, Sam Scali, Lester Wunderman, Fairfax Cone, Carl Ally and Bill Bernbach are good examples.  If a client hired Doyle, Dane, Bernbach it knew what it was getting. As those founders aged or retired, new names were added to the marquee but if the founders names remained, it was a reminder to clients of the heritage and philosophy of the agency.  But today, if one hires most of the network-owned ad agencies, well, who knows. 

Some stars did not have their names on the door – Al Hampel (Benton & Bowles/DMBB) or Lee Clow (Chiat/Day) – are good examples, but everyone knew them. (I remember one pitch where David McCall (McCaffrey & McCall) could not make a final pitch and the client told the agency that that is the reason they did not get the account. 

Unfortunately, the creative stars have either retired (Lee Clow among others), started their own agencies (David Angelo – David and Goliath; Mark DiMassimo - Dimassimo Goldstein) or just disappeared. Donny Deutsch is a perfect example of someone who simply moved on after selling his agency for a fortune. But his name remains on the door, which is a beacon to clients as to what the agency is about.

The holding companies have sucked their agencies dry, putting all their money into the mother lode.  The salaries to attract (and keep) super stars are just not there anymore, so the leaders or would-be leaders have gone elsewhere.  The great commercial directors have moved on to Hollywood (Ridley Scott, David Lynch).  Clients have significantly contributed by continuously decreasing the blended staff rates they are willing to pay their ad agencies.

Merging agencies is mostly a disaster.  The choices have become limited and, as a result, one plus one generally equals one point four.  As agencies have become merged they have become homogenized.  I am sure that with the merger of VML and Y&R or Wunderman into JWT, those agencies will continue to shrink; mergers don't necessarily solve their pre-merger problems.

Every creative business has stars.  Hollywood, literature, architecture, theater. There are stars in every creative endeavor including the law. It is what feeds the success of those businesses and attracts talent to them.  Advertising should be no different.

The advertising business needs super-stars. It needs people who can attract clients. It needs outstanding people.  Advertising needs people who have a point of view that clients want to hear. It needs people who have a point of view about both their work and the work.  It needs people who are excellent conceptually so that they can work in both traditional and digital. We need people who understand the business well enough to stand up for their work.  I have written about George Lois threatening to jump out of the window if a client didn’t buy his work (while this may be extreme, it makes a point).  We need more like him who believe in and stand up for their own work.   

We need people who are not afraid to say no to clients and, if they do say no, will not be punished for it.  (I know one story of a holding company which chastised one of its agency presidents for resigning an unprofitable and unhappy account because it needed the revenue.)

And, of course, we need clients who demand excellence and will pay for it.