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Anthony Hilton: WPP talks the talk but its new strategy lacks ambition

Mark Read is chief executive of WPP
Mark Read is chief executive of WPP

One of the strategies for advertising is to centralise and then to decentralise. For three or so years agencies will be merged so that duplication is removed and the client can understand what is on offer.

Then for another three years agencies will be demerged because small firms, not big firms, encourage creativity, and clients like to see a range of ideas. Then, after another three years, centralisation beckons again, and so it goes on.

The point is not to make the business more efficient, though of course chief executives say it is, because both strategies have advantages and disadvantages, costs and benefits, so one is not better than the other. Rather it is to make the people in the agency feel something is happening, because this gets them fired up and looking for their bonuses. It is the movement which gets results. Or that is what you hope.

Mark Read, chief executive of WPP, ought to know this because the strategic review he unveiled on Tuesday switched a few chairs around, and a few firms were no longer wanted on the voyage, but there was nothing much else to stir investors. True, there will be a new executive board because he wants the company to be collegiate. But given that the members are likely to be spread all over the world it sounds more like a talking shop or a way of keeping the group out of the operating companies’ hair. And if instead the people are all in one place taking decisions, then the committee will hardly be representative.

The fact is the shares have fallen from £11 to £8 since Sir Martin Sorrell was ousted in April. They were £19 in March 2017. This is a torrid time for companies like WPP, and the analysts listening to the presentation by the company were, to say the least, underwhelmed.

Read, however, said his strategy “reflects a new vision for WPP as a leader in creativity and technology”, although in fact it has been rabbiting on about technology in its annual reports for at least 10 years, so it is hardly new.

The question rather is whether WPP can make as much money out of the social media and technology space as it used to do in print and TV advertising. It is a bit slow and fragmented though it has not done badly, in market share terms anyway. But how it will actually pan out over time nobody knows, and that includes Read.

It used to be said that half of advertising is wasted, but companies did not know which half. They still don’t. But these days clients want to work with social media rather than traditional advertising, so some of them are getting rid of the conventional stuff, hoping new technologies will work better.

Chances are, of course, that the new forms of advertising will be just as wasteful, but clients have not worked this out yet.

The lesson for WPP, however, is clear — it has to be part of the new wave, but then again, it was already aware of this. Sorrell used to talk of “frenemies”, companies like Google which are a friend and an enemy, because they are the new competitors for advertising.

So when Read says he is “fundamentally repositioning WPP as a creative transformation company”, he actually has been following this strategy for some years. The question is whether clients want the old agency in its smart new clothes, or whether they want something completely different, in which case WPP is in trouble. WPP has a lot of expertise, but how does it make it count?

Read said he will do this by simplifying WPP and focusing on four areas — communications, experience, commerce and technology— but again this is largely hype.

WPP is a media company, and it and its clients are being disrupted by technology. Experience and commerce are hardly game changing; they simply add to or detract from communication.

The clients have not really helped. “They want creativity, and they want us to help them transform their business in a world reshaped by technology,” says Read, adding “this is the heart of what we do”.

The clients might as well have said they wanted motherhood and apple pie. They are right but only because what they want is what everyone wants. But virtually no company ever achieves its goal and neither does WPP.

In the old days, however, WPP did catch up and beat its competitors, whereas now it hopes only to be on a par with them.

That is not what most people think of as growth, so Read has a lot of work to do.