Even as its Rs1,000 crore ($250 million) business here is booming, one of the key challenges that a large conglomerate such as WPP Group Plc. faces, globally but particularly in India, is that various operations don’t cooperate enough to bring economies of scale, says CEO Sir Martin Sorrell.
“If there is one thing I would say about our Indian operations, which are absolutely superb, is they are so violently competitive,” said Sir Martin in an exclusive interview with Mint. “They sometimes are too competitive, I think.”
The London-based WPP, the world’s most valuable advertising and marketing services firm, is the holding company for agency networks such as JWT India, Ogilvy & Mather India, Young & Rubicam and Contract Advertising. It also owns Grey Worldwide India, which created the Incredible India ad campaign, media buying powerhouses GroupM and MindShare, and public relations firm Genesis Burson-Marsteller. WPP group companies employ about 6,000 in India out of a worldwide workforce of about 80,000.
Sir Martin, who recently spent four days in India as part of an Asian operations review, says that some of the internal competition stems from WPP’s expansion, which saw a lot of companies being acquired to create the global giant with a market capitalization of around $18 billion.
“Traditionally, they have been competing with one another,” he noted. “It is very difficult to get their minds around that as there are instances where they should cooperate.”
“We do have tribes (within WPP) and I often feel like they are too tribal,” he said. “But when they become too competitive and don’t cooperate enough, then we have diseconomies of scale.”
But Sir Martin concedes that in the Indian rapid-growth environment, it is possible that cooperation could also slow individual businesses. He says one Indian executive even asked him whether people in his company should run holding hands. Indeed, “if an economy is growing at 10% and our industry, as a result, is growing at 20-25% (and in this case, his company is growing even faster), if they hold hands they will probably prevent themselves from doing everything they can,” he says. However, in slow-growth markets such as the UK or the US, “holding hands is probably more important because any mistakes you make have a disproportionate impact.” But, he cautions, ultimately “clients want solutions and they want the best resources, and they don’t really care where they come from.”
Citing a specific Indian example, Sir Martin says that if you unite a “very professionally run business, such as Genesis (public relations), with an ad resource or a media resource to provide a team of people that can provide solutions, I don’t think clients worry about where it all came from.”
Sir Martin also said that given India’s soaring real estate costs which “have gone through the roof, WPP, which has traditionally not bought real estate, is looking at buying real estate in India as we think it is a good way of protecting ourselves.” That could potentially also bring some offices together in one location.
Strategically, Sir Martin says WPP is betting its own growth plan on the continued rise of Asia, including India and China, as well West Asia, Africa and Latin America “being unstoppable.”
Still, he says, the biggest risk, especially in India, is that “everybody thinks there isn’t any risk,” he says.
“I am not an expert on India so take everything I say with a truckload of salt. But there is an incredible view that nothing can stop the Indian juggernaut and we all know that whenever everybody is of the same view, psychology of crowds I guess, something pops up to disturb it. These things can’t carry on without blips or bumps.”
Sir Martin says he would “actually like there to be a blip in India or China. Hopefully, our competition will be scared off and they will leave, leaving us on our own.”
Despite managing a company spread across 2,000 offices in 106 countries, Sir Martin says he isn’t worried about managing growing operations in places such as India. As long as “great Indian nationals are running your business in India, WPP is going to be in a very healthy position,” he says. “People in India are superb. I wish you could re-pot them in various parts of the world.”
The challenge for WPP at a corporate level is to address the fact that WPP is “still too Anglo-American,” he says, noting that just over 50% of the company’s business is now in the US and UK.
“But the distribution of benefits, salaries, incentives, bonuses, cars, offices and rewards is still skewed disproportionately toward (executives in) slow-growth markets,” he admits.
Turning to the media in India, Sir Martin says non-disclosure of news blending with advertising “is bad news in all its senses.”
“If the reader is being duped into thinking that paid content is actually editorial content, it is wrong,” he says. “There is a fine line there and if it is kept hidden, it is a problem.”
The art of advertising and PR (public relations) is to try and present companies and people in the most effective way, he notes, adding: “I think you have to keep a clear distinction and I think the consumer has to know. The damage you can do to yourself if the consumer gets confused is very high. As long as it says at the top that this is a paid-for supplement or it is an advertorial, that is fine. If it gets blurred and if there are hidden interests at work, that is bad news.”