What's up with Dell and LG consolidating agencies?

You may have read in the December 3^rd issue of the Wall Street Journal that on the same day, two global brands with mega budgets separately announced that they were consolidating advertising agencies – each moving from numerous agencies to one.  At both Dell and LG, the moves come fairly soon after bringing on board new Chief Marketing Officers.  Is this the expected “new CMO makes mark by quickly changing agencies?”  I don’t think so – I believe that in each case, it is a brilliant move (although, I would suggest that the need was so logical, that rocket science was not required to get there).  Nonetheless, I salute both companies for doing the right thing, something that surely required overcoming significant obstacles –with many more to be encountered going forward.

This is far from unprecedented.  In the mid-nineties, it took a new CEO at IBM (Lou Gerstner) and the CMO he brought in and empowered (Abby Konstahm) to make a dramatic, sweeping change.  In the case of IBM, they moved from roughly 400 global agencies, to one (Ogilvy).  How much sense did this make for IBM?  Think about it.  They had a single, iconic brand that was being managed, by and large, by IBM marketing staffs around the world along with these 400 agencies.  Great brands are built by rigorous consistency in every possible customer/prospect interaction.  How consistent can the image of one company be when messaging is being developed by thousands of IBM marketing and agency professionals?  The simple answer is “not very.” 

But moving from numerous agencies to one takes great courage and a fair amount of patience.  By the time you get to the situation where there are 400 agencies working on one brand, there is tremendous inertia to overcome.  Inevitably, senior executives running business units around the world treasure their independence (after all, they are accountable for producing revenue).  Significant cultural differences in large, global companies like IBM, Dell and LG make the challenge so much  greater. 

In the case of IBM, it took a marketing-savvy new CEO who intuitively realized that a marketing makeover was necessary.  He reached out to Abby Kohnstamm who had worked for him previously, believing she could pull this off.  Additionally, he had the insight to know that he needed to give her great, visibly supported latitude to get the job done. 

This winning formula worked and, in my opinion, a dozen years later, the benefits of this bold move continue to accrue.  This once stumbling brand has regained its former exalted status.

During my time at Compaq in the mid-nineties, my official marketing responsibilities involved direct control over the North America region, with “oversight responsibility for the Compaq brand, globally” (the company was barely ten years old and very lean in hierarchy and bureaucracy e.g. no corporate marketing organization existed).   This proved to be an impossible role.  I hosted quarterly Global Brand Council meetings involving marketing and agency teams from each region.  These meetings were very polite and collegial, and many strong relationships were formed over the years.  Inevitably, a combination of my lack of global line authority , coupled with cultural differences and regional desires to retain autonomous control over the Compaq brand in their respective regions were problematic.  We agonized for many months just to agree on a single, global brand positioning and we finally got there.  When it came time for the regions to execute campaigns reflecting this positioning, however, it was almost comical how far from the agreed-to positioning so many of the campaigns had drifted. 

The situation with Dell consolidating with the holding company, WPP, will be interesting to watch.  Giving a holding company all of your business has been tried before, usually with a distinctive lack of success.  Bank of America, notably, tried this a few years ago, handing all of their business to the holding company, Interpublic.  Cultural and internal political issues within each of these very large companies inevitably resulted in this bold attempt failing.  A more recent attempt at moving BofA’s business to Omnicom, with BBDO as the lead, appears to be experiencing a similar outcome.

WPP, on the other hand, has committed to literally build a new company to work on the Dell business.   I would liken this to what we experienced with the First Union/Wachovia merger which we literally treated as a true merger of equals.   If WPP can create a new company with a new culture and no internecine baggage to deal with, it just might work.  If Dell and the new WPP company can work together in true partnership from the outset, I believe it will work.  With Sir Martin deeply involved in this venture and determined to make it work, odds are it will.  It certainly will be interesting to follow. 

=  Jim Garrity