The 3 biggest takeaways from WPP's 'radical evolution' turnaround plan
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- WPP CEO Mark Read outlined a turnaround plan Tuesday to simplify the company's organization, revive growth, and further integrate creative, digital, and media functions.
- The plan involves cutting about 3,500 jobs, or more than 2.6% of WPP's global workforce over the next three years, and delivering 15% margins by 2021.
- WPP seems to be bracing itself for competition with consulting firms and some of its new client approaches seem to be working.
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 Tuesday in London, while outlining a turnaround plan for the company seeking to revive growth.
- Cutting about 3,500 jobs, or 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 potential mergers on the heels of Wunderman Thompson and VMLY&R, WPP insisted there were no more mergers 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 (VMLY&R and Wunderman Thompson). I don't know that this goes far enough," Forrester analyst Jay Pattisall told Business Insider. "Integrating Essence 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."
In a note by investment bank Liberum, analysts said 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," read the note. "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 claim that their expertise in tech and business strategy, data, and logistics helps them meet the needs of modern CEOs and CMOs far better than ad agencies.
WPP seems be well aware of this threat, with Read and WPP CTO Stephan Pretorius underscoring how the company was preparing itself for the competition by prioritizing tech.
Pretorius said WPP was organizing itself as a data business by investing in an open data platform and AI, 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," said Pretorius.
By taking a page out of consulting firms' playbook, WPP is ensuring that it's better prepared for the future, said analysts.
"This is absolutely necessary because it's quickly becoming table stakes in the agency category," said Pattisall. "Publicis, Omnicom and Dentsu Aegis have all implemented similar strategies and their platforms appear to have a substantial headstart."
Meanwhile Pivotal's Brian Wieser said that WPP was "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
WPP leadership also gave examples of how its new positioning and approaches such as co-locating agency talent inside clients' offices as marketers seek to take more work in-house is working out well, said its chief client officer Lindsay Pattison.
Such efforts are improving collaboration and helping WPP win new business, said Read, pointing at 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, said Pattison. WPP worked with Unilever, for example, to co-create products like a "Day2" dry-wash spray for clothes - an idea that came out of an insight from WPP's Kantar.
