Dentsu:
The Big Picture
by
David Kilburn
Dentsu president Yutaka Narita’s agenda can
be summed up in two words: global reach.
Addressing his legions in January, Narita
predicted: “If we miss the opportunity to
globalize our business, we will have to be
content with being the No. 1 Japanese local
agency. We then run the risk of losing our
advantage in the domestic market.” The irony
is clear: While Japan is brilliant at exporting
goods to the West; it’s been less masterful
at marketing and media. Narita hopes to change
that. He sees the digital revolution as key. It
will usher in a new information-based society and
hasten the convergence of broadcasting,
communications and computing. This media triple
play will pave the way for an advertising
explosion. Narita envisages a time when global
rules and massive competition will reshape the
marketing communications industry in Japan and
the world.
That era may be here.
Consider: In 1996, on a nonconsolidated basis and
including Dentsu Young & Rubicam, a shared
joint venture, only 13 percent of Dentsu’s
billings came from outside Japan. According to
Nobuo Momose, the executive vice president
charged with orchestrating Dentsu’s rise as
an international player, a minimum target of 30
percent is now envisioned. Indeed, Momose sees
that figure as essential if Dentsu is to compete
with WPP, IPG, Omnicom and Young &Rubicam as
one of the global agencies destined to dominate
the ad industry’s future.
How will it be done? To begin, Dentsu has said
it’s going public in 2001. Fresh capital is
now be raised to fund international growth. A
second strategy is to export Dentsu’s
European success to U.S. soil. After all,
Dentsu’s European agencies have improved
markedly in recent years. CDP, the British hub of
Dentsu’s European network, has been
transformed from the faded star Dentsu bought in
1990. A 1997 independent survey of U.K. marketing
directors for 'Marketing Week, 'a leading UK
trade magazine showed radically changed
perceptions of CDP by key client executives.
“The most dramatic mover in the reputations
league table this year is CDP. . . . it has
regained top ten status on three criteria,
entered the top ten for the first time in four
more and leaped up the rank-ings by 20 places or
more in every category,” the survey claimed.
Further, “Its rise from 43rd in the overall
table to ninth is the most comprehensive
improvement by an established agency in the
history of survey.”
Mark Lepere, group development director of Dentsu
Europe and agency deputy chairman, is quick to
note: “This would not have been possible
without investment by Dentsu.”
To understand why its U.S. counterpart
didn’t fare as well, a brief history lesson
is in order. Account conflicts in the U.S.
hindered the growth of Dentsu Y&R ventures
there. In addition, HDM (Havas, Dentsu,
Marsteller), a European partnership with Y&R
and Eurocom, briefly gave Dentsu a major European
network in 19 countries in 1988. The partnership
dissolved at the end of 1990, when the French
opted out, deciding HDM was the wrong vehicle for
their own global expansion.
Can Dentsu’s global aspirations be taken
seriously now? “We should be frank in
admitting that Dentsu made mistakes
overseas,” says Momose.
For example, there were errors in personnel and
training. Second, Dentsu possessed a flawed
belief that the strength of its brand name in
Japan, rather than the quality of service, would
win and retain business overseas. Third, the
company failed to understand the real needs of
Japanese clients abroad. Finally, Dentsu adopted
an outmoded management model that encouraged
direct day-to-day control from Tokyo instead of
relying on local empowerment and entrepreneurial
leadership. Ironically, Dentsu became the
negative mirror of its Japanese self
overseas—which taxed the tolerance of the
U.S. market. The pain threshold rose each year as
staff defected, clients deserted and agencies
imploded. One dark day, in 1990, a group of
staffers dismissed from Dentsu Corp. of America
took their grievances to the EEOC and sued. Out
poured tales of cultural insensitivity,
alienation and misunderstanding.
Little wonder that when Narita became president
in 1993, international operations were a sea of
red ink. Soon, worldwide management was replaced
and Momose took the helm.
“In the last few years, we’ve been
working very hard in the U.S. and Europe to find
out why some companies were losing so much money.
We’ve worked to stop this. And with few
exceptions, we’ve done reasonably
well,” Momose adds. “We are now at the
second stage of re-engineering.” This effort
entails building the resources each agency can
provide, as well as engaging in extensive
networking.
Momose adds that Dentsu's U.S. infrastructure is
solid; once their US agencies equal or surpass
domestic rivals, Dentsu believes it will match
U.S. competition. “It is networking that
helps create critical mass as people from
different agencies pool their skills to work to
work on projects,” admits Lepere.
Yet despite its overseas improvement, Momose sees
Asia as Dentsu’s top priority. After all,
fortune has smiled on Dentsu here. A partnership
with Y&R, a small joint venture begun in
1981, has blossomed. Despite four name changes,
Dentsu Y&R has grown to become the
second-largest multinational agency network in
Asia, billing $1.2 billion in 1996 from an equal
mix of Japanese, Western multinational, and local
clients.
“[The Dentsu relationship] is very important
to Y&R. We are totally committed to it.
[Dentsu’s] understanding of Western business
and our growing understanding of Asia has lifted
the level of communication and cooperation
between us,” says Tim Pollak, Y&R
Advertising’s vice chairman, worldwide
director, client services. “It’s been
very successful in meeting our needs in Asia, and
we attribute a great deal of that to
Dentsu.”
While Dentsu is quick to second those sentiments,
Momose adds that “it’s not possible to
isolate Asia from developments in Europe or the
U.S. We must consider issues from a global as
well as a regional point of view. Overall, Asia
is growing. Some major clients have plans for
Asia and there are many opportunities. Also, the
level of competition is rising,” he says.
Thailand, Korea, China, India, Vietnam are all
seen as key markets in Dentsu’s future.
Dentsu also depends on parallel networks,
DY&R and its own, to resolve conflict issues
in the region. For example, Matsushita, Hitachi,
Toshiba, and Sony are among Dentsu’s
electronics clients. Balancing their competing
needs demands a diplomatic touch.
In addition to its partnership with DY&R,
there are other seats at the table. Bozell helps
Dentsu market Toshiba in the U.S. In turn, Dentsu
provides a media-buying service for Bozell in
Japan.
One sign that Dentsu is adding international
luster is the growing roster of major clients
served outside Japan. In the U.S., Dentsu’s
agencies on both coasts have Canon assignments.
So do outposts in Germany, Italy, Canada,
Singapore the U.K. and Australia. Toyota is now a
client in Canada, Turkey, Thailand and Taiwan,
while Nestlé has awarded business in the U.S.,
the Middle East, South Korea, Taiwan and China.
Philip Morris uses DY&R in China, India and
Taiwan, as well as Dentsu in Japan. In fact
Dentsu reported an impressive 13% rise in
international business growth in '96.
Another boost is the small group of major
Japanese clients willing to give Dentsu more
overseas business as its individual agencies
prove they can deliver. These include Kao, Sony,
Matsushita, Honda and Shiseido. More business
from Toyota, particularly in the U.S., would be
sweet, given its history with Dentsu. Though
Saatchi & Saatchi enjoys some of
Toyota’s U.S. business, the automaker has
always maintained a multi-agency policy.
It’s worth remembering that when Toyota
embarked on its own international drive in 1957,
their first export models flopped badly in the
U.S. Clearly, Toyota was not ready to ride in the
fast-lane. The automaker learned its lesson; it
slowly became a global force in its own
industry—then re-entered the U.S. market.
Dentsu is capable of learning from its clients,
as well as its international competitors. And
it’s equally determined to succeed. |
Originally published in ADWEEK,
March 16th 1998, page 18
|
