WPP is no longer an ad-holding company; instead, it's a "creative transformation company."
That's how CEO Mark Read positioned the ad-network giant at the company's investor day on Tuesday in London, while outlining a turnaround plan for the company seeking to revive growth.
Among the key pillars of WPP's plan:
- Cutting about 3,500 jobs — more than 2.6% of WPP's global workforce — over the next three years
- Streamlining its global structure and delivering 15% margins by 2021
- Spending an additional £15 million ($18.7 million) a year in tech assets and creative talent — especially in the US
- Organizing WPP as a tech platform and consolidating its technical capabilities into WPP Technical Services
"We describe our approach as 'radical evolution': radical because we are taking decisive action and implementing major change; evolution because we will achieve this while respecting the things that make WPP the great company it is today," Read said in a statement.
At first glance, the steps may seem to be aimed at simplifying the organization, improving efficiencies, and reviving growth, but here are some bigger takeaways:
WPP is done consolidating — and that's not necessarily a good thing
While speculation was rife about more mergers on the heels of Wunderman Thompson and VMLY&R, WPP insisted there were none in the foreseeable future.
Read said WPP's biggest changes have already happened in the form of the aforementioned mergers, which he described as tough choices. "We can't be nostalgic about brands that have been around, and we have not been," he said.
But for some industry analysts, the changes — as well as the broader strategy — while welcome, are not enough.
"I am surprised and was anticipating more moves like that [the Wunderman Thompson-VMLY&R merger]. I don't know that this goes far enough," Forrester analyst Jay Pattisall told Business Insider. "Integrating Essence [a WPP-owned media agency] with a digital creative agency like AKQA, for example, would be a strong move to provide their clients more value through data-driven strategy, solutions, and activations."
Analysts from investment bank Liberum said in a note that WPP could have targeted more cost savings.
"We give a cautious welcome to the new strategy announced this morning but feel it could have been more ambitious and wide-ranging," the note read. "Our view is they could have done more here — we thought £500m [per year] was a reasonable figure (with £500m of restructuring costs) based on a 5% reduction in the staff numbers and property savings."
WPP is getting serious about competing with consultancies
Giant consulting firms like Accenture and Deloitte have been increasingly encroaching on agencies' turf, with several even buying their way into advertising through creative acquisitions.
Consulting firms say their expertise in tech and business strategy, data, and logistics helps them meet the needs of modern CEOs and chief marketing officers far better than ad agencies.
WPP seems be well aware of this threat, with Read and WPP Chief Technology Officer Stephan Pretorius underscoring how the company is preparing itself for the competition by prioritizing tech.
Pretorius said WPP is organizing itself as a data business by investing in an open-data platform and artificial intelligence and by consolidating its tech stack and creating a network-wide platform to power its agencies.
"Here's where we compete with the Accentures, Deloittes, and Capgeminis — and can show that we're not laggards, but clear leaders in the area," Pretorius said.
By taking a page out of consulting firms' playbook, WPP is ensuring that it's better prepared for the future, analysts said.
"This is absolutely necessary because it's quickly becoming table stakes in the agency category," Pattisall said. "Publicis, Omnicom, and Dentsu Aegis have all implemented similar strategies, and their platforms appear to have a substantial head start."
Meanwhile, Pivotal's Brian Wieser said WPP is "straddling the line between what an agency is and what an IT-services firm is" — which is an important sphere for the holding company to be in.
Parts of WPP's plan are apparently already working
Chief Client Officer Lindsay Pattison said WPP's new positioning and approaches such as colocating agency talent inside clients' offices as marketers seek to take more work in-house are working out well.
Such efforts are improving collaboration and helping WPP win new business, Read said, pointing to WPP winning Volkswagen's creative account in North America. WPP plans to continue to strengthen its offerings in the areas of communications, experience, commerce, and technology.
WPP agencies are also deepening their relationships with clients beyond traditional communications, developing products as well, Pattison said. WPP worked with Unilever, for example, to cocreate products like a "Day2" dry-wash spray for clothes — an idea that came out of an insight from WPP market-research unit Kantar.
