Close-up: Is it time to redraw the regional map?

campaignlive.co.uk, Friday, 08 April 2011 12:00AM

Will regrouping businesses based on business similarity rather than location work, Ian Darby asks.

Recent weeks have seen a rebound in the fortunes of the major holding companies, attributed in the main to an upsurge in revenue growth from markets such as Brazil and China, rather than the more established economies in North America and Western Europe.

The WPP chief executive, Sir Martin Sorrell, as usual, had a neat analogy to reflect this economic performance. He grouped key markets in relation to the four divisions in English professional football. So, while Sorrell has the UK languishing in the third tier of League One, Brazil, China, South Korea and Pakistan populated the top league. Established markets such as the US and Germany were just behind them in the Championship.

Sorrell is not the only ad chief to reimagine the shape of the industry. Last week, Interpublic announced it will restructure leadership of its media arm, Mediabrands (which includes the Initiative and Universal McCann networks), into clusters of countries based on their "business similarity, rather than location".

There will now be three "clusters" of markets with each media network having a leader of each cluster. The groupings are North America, G14 (the most "strategically important" markets outside the US - including Brazil, China, Japan, Australia, the UK and Germany) and World Markets. Jim Hytner, the EMEA president of UM, becomes the president of UM's G14 cluster, while Eric Bader takes the same job at Initiative.

That said, IPG is at pains to point out that regional structures beneath the leadership teams will remain in place with, for instance, client teams on major EMEA clients continuing to operate in the same way. It argues, however, that Mediabrands, under its global chief executive, Matt Seiler, will be better placed to innovate and invest in key markets where required.

Is this is a sign that the old regional structures are now too rigid and increasingly irrelevant to 21st century client needs? At a time when advertising networks are looking for greater flexibility of structure and new ways of innovating in areas such as data and analytics that extend beyond traditional geographical regions, the old industrial empires are no longer the most appropriate focal points.

In fact, several rival networks say they've already switched their structural focus to the G14 markets and IPG is playing catch-up. Mind you, they also suggest that it's often better to create bespoke individual structures between key markets - India, for instance - and global management rather than yet another grouping of markets.

Still, each network appears to have its newer international initiatives layered on top of the traditional regional structures that have been in play for decades, and it seems that there is little desire or need to dismantle these.

As Paul O'Donnell, the vice-chairman of Ogilvy Group in the EMEA region, says: "Each of our senior executives has a principal responsibility for a client, a discipline, or possibly a market cluster across the region, as well as forming the overall leadership team. We review and flex this model constantly."

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REGIONAL MEDIA HEAD - Jim Hytner, president G14, Universal McCann

"Nothing operationally changes with the new Mediabrands struucture - there will continue to be regional clients and an EMEA team and an APAC team and regional specialist teams.

"The question we asked was: 'How do we better serve our clients, as well as leapfrogging the competition?' We talk to clients such as Burberry, Coca-Cola and BMW and, while they operate regionally, they also think in terms of strategically important markets.

"So if you continue to operate regionally, and bring the focus markets together (G14) under one leader, then you potentially get a double-whammy: investment in better people and tools for local and global clients, and an ability to add value to global clients on an entirely different level."

REGIONAL HEAD - Paul O'Donnell, vice-chairman, Ogilvy Group EMEA

"One of my favourite aphorisms from Sir Martin Sorrell is that 'the 21st century is no place for tidy minds'.

"This is certainly the case when it comes to trying to determine the best way to organise an international marketing services business. The shifting sands of the economic and geopolitical backdrop, market growth, discipline share of wallet, and major client priorities all make settling on a 'perfect' organisational structure almost impossible.

"In many ways, I applaud Mediabrands' new global structure, if only because of its bold and radical nature. That said, it also smacks a little of a rather too direct an interpretation of an idea floated at a weekend retreat at the Harvard Business School."

NETWORK HEAD - Chris Pinnington, global chief operating officer, Euro RSCG Worldwide

"It's an interesting move, but I'm not convinced it's that beneficial. Most clients stick to traditional geographical structures with regional hubs and few have adopted a G14 structure as it's simply not that efficient to operate.

"It makes sense that the regional CEO responsible for Brazil also manages Argentina and Chile as clients frequently want their business handled regionally and expect to deal with experts who really understand the regions and can constantly visit the countries.

"Remove Brazil to a G14 CEO and you lose that efficiency/knowledge. Also, global structures tend to be focused on the G14 anyway. I have a global job and I naturally spend more time on key markets such as Brazil, Russia and China."

MEDIA NETWORK HEAD - Nick Emery, global chief strategy officer, Mindshare

"The Mediabrands move is a catch-up, not a leap ahead. We successfully manage more business for more clients in the BRIICS (Brazil, Russia, India, Indonesia, China, South Africa) and next 11 than any other network.

"Everyone is looking at BRIICS and the next 11 as core growth markets. On the surface, the Mediabrands move grabs a headline. In reality, it's divorced from IPG and client financial structures and adds an unnecessary extra layer of management.

"It creates unwieldy regions for any kind of hands-on leadership and creates a disconnect from client structures. You have to link structure with the ability to manage the numbers."

This article was first published on campaignlive.co.uk

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