New markets, new media
and consumer insight

WPP CEO Sir Martin Sorrell reports

Change can be viewed as a frienemy or froe – part friend, part enemy, part foe. Treated well, it offers enormous opportunities, but neglect its capricious nature and it becomes a threat.

Nowhere is this truer than in our industry. WPP’s strength has always been our ability to identify the trends that will inform our world and capitalise on them for our clients and ourselves. It’s how we began with two people in a room over 20 years ago. It is how we will weather the current crisis. And it is how we will position WPP for sustained growth in the years ahead – albeit with more than 110,000 people directly with us and access to over 135,000.

This means anticipating geographic, functional and technological shifts, and adjusting our business to make the most of them.

For that reason, we expect the balance of our work to move from Western Europe and other established, slower-growing economies towards dynamic new markets. They include China with its possibly 1.5 billion and rising population, along with India and the other BRICs nations, Brazil and Russia – not to mention the Next 11 identified by Goldman Sachs.

The coming power shift from West to East is about more than cheap labour and low-cost manufacturing. Indeed, the old assumption that China and India will remain mere makers of cheap generic goods could prove life-threatening. Both countries are nurturing their own global brands and service industries; they will be as good as anything the West can muster.

Fortunately, WPP has leadership or near-leadership positions in all these countries (other than Iran). In India, for instance, we have a substantial market-leading share and similarly in Greater China a market-leading share, making the latter WPP’s fourth largest market already. That can only grow as we emerge from the current global crisis.

Other changes are shaping our work. Of these, the most important is the continuing expansion of those parts of our business that sit outside traditional advertising.

More of our work will be in marketing services, the so-called below-the-line areas such as Information, Insight & Consultancy, Public Relations & Public Affairs, Branding & Identity, Healthcare and Specialist Communications – particularly direct, interactive and internet communications.

Public Relations & Public Affairs, too, can expect a prosperous future as its traditional skills – building relationships and influencing opinion-formers – are brought to bear on the new internet frontiers of blogging and social networking.

These shifts in the balance of our business are inevitable as audiences fragment, the costs of television airtime continue to rise, gadgets like the personal video recorder change viewing habits, and – most importantly – as the internet’s reach extends, promising more measurable, predictable results.

Reacting to change also means understanding what will keep our clients awake in the 21st century. Overcapacity in almost all areas of manufacturing – too many cars chasing too few customers, for example – casts a cloud over prospects, forcing discounting and a profitless prosperity on key industries. This was true before the credit crunch; it is all the more so now.

Equally, the dominance of global retailers and the consequent pressure on prices will trouble many of our clients. Some companies rely on sales in Wal-Mart stores for a large part of their turnover. These sales may be crucial to the company, but for Wal-Mart the numbers may be no more than a rounding error. Understanding of distribution and retail is essential for survival.

With global companies reacting to new markets in the East and declining markets in the West, internal alignment is particularly essential. Getting everyone in a company facing the same way, working for the same vision, is key.

As the geography changes, so will old-fashioned management structures. Regional silos can expect a shake-up and local managers, sensitive to their markets, may well come to the fore again.

Consolidation also poses threats and opportunities to our clients – and is changing our industry with the rebirth of superagencies or full-service agencies and changes in the way we structure ourselves to meet companies’ needs. Large clients are increasingly looking to parent or holding companies that draw on the strength of their individual subsidiaries to present integrated solutions to their marketing needs. We are winning such pitches.

All these things dictate that hiring and retaining the right talent will remain crucial for us and our clients. And here is a paradox. It is almost as if the shortage of human capital runs in inverse proportion to excess manufacturing capacity. People and skills are always crucial.

Corporate responsibility is another concern for clients – although in truth a no-brainer. Only those seeking a fast buck and subsequent oblivion would surely think otherwise. The current economic crisis will only underline the importance of corporate responsibility and responsible consumption.

This year will be challenging, possibly the most challenging since the 1970s, but recovery of sorts may come in 2010, if only because of the massive amounts of money – $13 trillion and counting – pumped into the system in one way or another. Globalisation, free trade and scientific advance, within reasonable environmental and social constraints, will still be the most efficient way of enriching the most people in the world in the fastest time.

The big message for our industry, as ever, is that branding or differentiation and innovation – essentially, what we do – are everything. The first requirement is always a brilliant idea. Then you need co-ordination. Without the first, however, the second is pointless. You can’t, after all, co-ordinate a lousy idea. So creativity and imagination win every time. There is a limit to how much you can cut costs; there is no ceiling on innovation.