Japan’s Advertising Giants: Yutaka Narita - In the first of a three-part series, Jade Garrett meets the head of Japan’s most formidable agency group

The timing couldn’t have been better. On 5 November 1999, Campaign breaks the news that the Leo Group and the MacManus Group are merging to create advertising’s fourth-largest holding company, BDM, backed by an estimated dollars 400 million investment from Dentsu - Japan’s number-one agency. Two weeks later, I am on my way to interview the man who drove the deal for Dentsu, its 71-year-old president, Yutaka Narita.

The timing couldn’t have been better. On 5 November 1999, Campaign

breaks the news that the Leo Group and the MacManus Group are merging to

create advertising’s fourth-largest holding company, BDM, backed by an

estimated dollars 400 million investment from Dentsu - Japan’s

number-one agency. Two weeks later, I am on my way to interview the man

who drove the deal for Dentsu, its 71-year-old president, Yutaka

Narita.



But I’m warned that I can forget interviewing Narita and should settle

for an audience with him. If he doesn’t like my questions, he’ll simply

refuse to answer them - pleasant enough but not forthcoming. His

contemporaries describe him as ’an intellect, shrewd and able to spot

bullshit as well as anyone’. Eliciting industry opinion on Narita’s

agency throws up similarly formidable sentiments: terms such as

’almighty power’, ’conservative’, ’hierarchical’ and ’master of its own

destiny’ freely abound.



At Dentsu’s headquarters in Ginza, these qualities are tangible. As a

mass of business-suited salarymen pour into the building for the

official 9.30am start, they are handed that morning’s agency newsletter,

while the agency’s own TV channel broadcasts Dentsu news around the

building.



There is plenty to keep these in-house news services busy. After leading

Dentsu into the BDM deal, Narita now faces perhaps his biggest challenge

of all. After 100 years of operating as a private company, he has to

prepare the agency for its planned flotation in the autumn of 2001

Dentsu will have two listings on the Tokyo and US stock exchanges as BDM

plans to float this year. What are his priorities?



’Stock price is a value directly related to the evaluation of a company,

particularly anticipation of its future potential for growth, so I would

like to strengthen and augment this wherever possible. To do so, the

most important thing remains to provide excellent service to our clients

and raise their evaluation of the company.’



The stature Dentsu enjoys in its home territory would suggest that such

ambitions are well rehearsed. In Japan, Dentsu is an institution. It

counts 3,000 companies as its clients and handles nearly a quarter of

Japan’s total media market. Fumio Oshima, the managing director of

Dentsu’s international business headquarters, hands me his business card

and says: ’You can take this card into a hotel or restaurant in this

city and it acts like a credit card.’



His assertion seems to be confirmed later that night when we arrive at

Sumiya, a restaurant in Roppongi, Tokyo’s answer to Soho. There is no

table available but, within seconds, another group, which has not

finished its meal, give up its table for us. Someone behind me jokes

that they must have known we were from Dentsu, and you have to

wonder.



As a prospective employer, Dentsu has consistently ranked within the top

ten of Japanese corporations. The agency has more than 100 creative

directors, a total creative staff of 850 and has more than 100

affiliated companies, bringing its total staff to 14,000. Of the 4,000

or so candidates that apply for positions every year, the agency will

hire just 150. Staff typically join at 22 and retire at 60. They face

almost continual assessment with new targets set every six months. An

employee can expect to reach account director status by the age of

38.



Narita’s own career followed a classic path for top managers. He joined

Dentsu from Tokyo University of Law in 1953 and rose steadily through

the media department to become director of the newspaper and magazine

division in 1971. Six years later, he was appointed director of ’account

services division number seven’, looking after Nestle. He joined the

board as an executive director in 1981, became a managing director in

1983 and senior managing director in 1989.



He has charted Dentsu’s success first hand through Japan’s best and

worst times.



The agency’s vision is founded on a ’total communications’ approach,

which extends well beyond the concept of integration. It has separate

divisions dealing with market research, sales promotion, sports

marketing, event promotion and corporate communications. Dentsu played a

key role in Tokyo’s hosting of the 1991 Athletics World Championships,

the 1998 Nagano Winter Olympic Games and helped secure the World Cup

2002. Through its internet business division, it has developed software

that enables it to have car ads on air before the models are even off

the production line.



On the media side, Japan is gearing up for the arrival of digital

terrestrial TV in 2003 and the agency’s flotation will provide the

capital for Dentsu to increase its digital and new-media offering. As

media becomes more fragmented, Dentsu faces the challenge of building

more innovative media strategies.



Dentsu has been accused of running a media cartel in Japan, where

clients gain access to media by virtue of their relationship with the

agency. Its two biggest shareholders are media owners, Jiji Press and

Kyodo News. When Dentsu goes public, it will face greater transparency.

Accountability is becoming a big issue in Japan.



And, with the increasing number of media independents with a presence in

Japan, agencies are living in fear of domestic clients shifting their

business. This wouldn’t destroy Dentsu, but it would be a big loss of

face. In tackling such local issues, Dentsu may well find new solutions

through BDM, which will now provide the agency with a direct access to

Western models.



While Roger Haupt, the president and chief executive officer of the Leo

Group, has been described as the ’designer’ of BDM, others have referred

to Narita as the ’locomotive’. Haupt visited Dentsu in September last

year to present his ideas to the board. Ninety minutes later a deal had

been struck. This is unprecedented for an agency that, by its own

admission, used to spend closer to a year deciding whether or not to

make an investment.



So why Leo Burnett and MacManus? The partners share key clients,

including Procter & Gamble and Coca-Cola, but Narita admits there were

other interested parties. What was the deciding factor?



’I believed that it would be a good marriage because it began as a

natural convergence. In one of the Chinese classics, there is a proverb

that roughly translates as ’Time from heaven, fortune on earth, harmony

among men’.



It means that for success in all things, one must have time, good

conditions and above all, harmony among people.



’Roger Haupt and Roy Bostock spoke in friendly terms during the

negotiating process and I felt that they were trustworthy leaders with

whom we could build the best partnership.’



Both Narita and Oshima were anxious that Young & Rubicam, with whom

Dentsu has had a partnership since 1981, would consent to the deal.

Focused on Asia, D/Y&R ranks fourth in the region and now has operations

in 13 countries and 22 cities.



I’m told that if Peter Georgescu, Y&R’s former chief executive, had

displayed any objections, the BDM deal would have been off.



The final percentage of Dentsu’s stake is yet to be determined, although

it now stands at about 20 per cent. Will this be enough or is an

increase likely if Dentsu is to build on its global offering?



Narita returns to the subject of Y&R. ’We are hoping for greater results

from the D/Y&R network. We also want to fully utilise our global

multi-network system, which includes Dentsu’s own facilities.’



Oshima is more forthcoming. ’If we take a 30 or 40 per cent stake then

people will take the money and leave the company and nothing will be

left, so it doesn’t make sense. Our clients expect that BDM was made as

an American company and we don’t want to do the things of an American

company, but we would like to offer something extra.’



That said, the fact remains that this new ’partnership’ does not entail

a cross share holding. So why wasn’t Leo Burnett offered the option of

acquiring an equity stake in Dentsu?



’We felt that objectives could be amply satisfied in the framework of

the current tie-up plan without such a measure,’ is the only explanation

Narita offers.



By investing at the holding company level, Narita is playing the long

game.



After all, Dentsu could have bought a network outright - MacManus or

Cordiant were up for grabs. This way, he can alter the level of

investment as he charts the success of the partnership.



But what evidence does Narita have that Japanese clients want Dentsu to

handle their business worldwide? ’I believe that Japanese clients will

select an agency based on how well it is able to provide superior

service. I don’t think Japanese agencies have the upper hand just

because they are Japanese.’



For most Western agencies, profit is the driving force, but for a

Japanese agency the size of Dentsu, it’s different. The agency makes so

much money in Japan, having nearly 25 per cent of the local market, that

the emphasis is on its relationships with its clients and using that as

a piggy-back into other relationships outside of Japan.



The problem is that this approach has become increasingly

irrelevant.



At Toyota in the US, most of the management is American, and Japanese

personnel is token. The top Japanese agency people can be as close as

they like with the top Toyota people in Japan but how effective is this

in reality?



’The system that Dentsu has in Japan for providing service of recognised

high standards is not in place for the global market,’ Narita says.



’The new partnership is intended to meet those client demands, so that

Dentsu can provide its clients overseas with the same level of service

we provide in Japan.’



HDM, a European partnership with Y&R and the French agency, Eurocom,

struck in 1987, briefly gave Dentsu a European network, but the alliance

dissolved in 1990 when the French moved to build Euro RSCG

Worldwide.



At this stage, Dentsu joined with CDP to retain its interest in Europe -

a partnership Narita says remains at the core of its European

strategy.



I’m later told that Dentsu is keen to play a part in making BDM bigger

and is considering putting an operation under the BDM umbrella to make

its own overseas operations more international. Is it likely that

operation could be CDP?



When I ask Oshima for his assessment of CDP’s performance, he is frank:

’Just so-so. If we were satisfied with what we were doing, we wouldn’t

be doing BDM - we are in the process of an evolution.’



And the feeling at Dentsu is that Narita is the man to galvanise that

evolution. Everyone I speak to is in awe of him. The account executives

laugh when I enquire if they have ever met him. What would be their

reaction if he walked into the room at that very moment - ’that would

never happen’ is the unanimous response.



Next week: Hakuhodo’s president and chief executive officer, Takashi

Shoji.



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