Holding Company Models And Which One Will Dominate The Future of Advertising
In the wake of Omnicom 's acquisition of Interpublic Group (IPG) and what will likely be a resurgence in acquisition activities by all holding companies in response, there's an argument to be made that bigger isn't always (necessarily) better... but it can be.
The root cause of acquisition trouble begins with a fight over company culture and a belief that individual agency identities matter more than the needs of the larger organization.
It's understandable that agency owners want to protect their legacy and shield their employees post-acquisition. After all, it was those very employees who bought into the founder's vision from the start and contributed to the success of the agency.
After working for the world's biggest holding companies, I've experienced these internal battles over culture, control, and revenue, and there are two competing formation models underpinning these organizations - both with their own unique strengths and weaknesses.
The Agency-First Model:
This model values individual agency contributions and hinges on a belief that talent and office culture should be protected at all cost. This often leads to in-fighting whereas multiple agencies in the same holding company will compete for the same business.
"I don't care which agency wins the business, if I own them all... my horse always wins." - Holding Company CEO (anonymous, but real)
PROS:
CONS:
"Frankly, your complexity should not be our problem, so we want you to make that complexity invisible." - Marc Pritchard, Chief Brand Officer at P&G
The Network-First Model:
This model values the collective contribution of all agencies, often times stripping them of their individual agency brands. While painful at first, this process creates opportunities for deeper integration and an ability to win larger pieces of business by combining forces to create a much larger offering; both in capability alignment and geographic footprint.
They called all of us Monks. We worked together for the common good of the company and as a result, we shared more, collaborated easier, and competed fiercely as a team. - Nick Fuller
PROS:
CONS:
Two Holding Companies Go Into Battle...
A global RFP just came in for $50M. Life changing, right? The whole office is buzzing.
On the left (Blue Battlebot) you have an agency-first holding company that's bringing their client's favorite, iconic agencies into the battle. They are known for delivering award-winning work, celebrity-status creatives, and an office culture that attracts the most talented employees in the industry.
On the right (Red Battlebot) you have a network-first holding company that's global, algile, and moves in unison. Because they are already unified from the top-down, they have an ability to draw the right skills from the right teams and offices around their global network to create a "dream team" for the pitch that's hard for any one office to rival.
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So Which Approach Wins?
One approach aligns itself better and faster around the client's needs, which should always be the North Star. I would argue that the best approach is a network-first model that fairly attributes internal recognition and incentives, while aligning offices around capabilities and regions. I believe that a network-first approach (over time) will yield faster client growth, a unified agency culture, and a more powerful and expansive offering that's easier for clients to procure.
What's Your Take?
I invite you to comment on which approach you believe will win this RFP battle!
Additional Reading:
I have spent 20+ years in revenue and marketing leadership roles for large corporations, start-ups, and agencies. I created this playbook because I noticed that traditional marketing and sales tactics fail to educate and inspire, and cold-contacting prospects does more to harm your company's reputation than to inspire action.
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The opinions in this article are that of the author, and not of King Street Ventures "KSV" or any of the mentioned companies. This post is for informational purposes only and does not imply either implicitly or explicitly an endorsement of referenced companies.