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Perception and Reality in Publicis Groupe’s “Transformation”

My analyst colleague Tiffany Elliot has done a great job summarizing Maurice Levy’s recent YouTube announcement of a major reorganization for the holding company Publicis Groupe and its many subsidiary brands. She locates and analyzes the significant cultural and processes changes that will be necessary — and perhaps impossible.

On the basis of the announcement and follow-up pieces (here and here), other commentators have highlighted what it could mean for the pending end of Levy’s reign (Rob Armstrong, in a video);  the Publicis stock price and P/E ratio (ditto); and the pressure the holding companies (WPP and Omnicom included) are feeling from legacy consulting firms such as Accenture, which are arguably better positioned to offer the holistic, comprehensive, and unified services clients need. (Boz Hristov, in a LinkedIn post.) Meanwhile, Cindy Gallop has rightly criticized the male-dominated executive leadership announced by Levy.

However, I want to tarry with a remarkable statement in the first half of Levy’s video, as he addresses the core question: What does it mean for Publicis to “reverse” their business model? Here is the verbatim transcript, from about 7:15 to 8:20 in the YouTube video. [Note: Accuracy to the best of my abilities at transcribing the video.]

What does reverse our business model mean? Like for all of our industry peers, we have underpinned our growth strategies over the last decades through brands and networks — or, we could say, through silos. [Levy then names a number of the Publicis brands.] And the coordination of all of our entities has been paramount to best serve our clients. This model proved remarkably effective and efficient. However, some might today be under the impression that it has become too complex. That it generates useless delays. That it [creates?] multiple points of contact — despite all our effort to keep this at bay. Yet, as we all know, perception is reality. And in our business, we must change reality and not perception.

parsed

At first, it’s the conclusion that confuses. If we all know that perception is reality, then changing the perception already changes reality — and why should Levy then insist on changing reality instead of perception?

The answer lies in looking at the passage as a whole, in which Levy seems to be channeling a bizarre combination of Hegelian dialectics and French surrealism. There are four key movements.

  1. For decades, our business model, based on brands and silos, was “A” (effective and efficient). [If a cynic were to ask “for whom?,” the answer would/could be effective in serving clients and efficient in serving Publicis and its shareholders.]
  2. But, some perceive that model to be “not-A” (complex, slow, fragmented).
  3. If “A” is perceived as “not-A,” then it is “not-A.” [Perception is reality.]
  4. Therefore, Publicis must change the reality of “A” (a business model based on brand silos) into “B” (a model based on four service hubs) — and thus disrupt and dissolve the perception that “A” is “not-A.”

When “A” no longer exists, it cannot be perceived to be “not-A.” The announced transformation is thus a disturbance in the force of perception that has recently bedeviled Publicis and its market performance.

Still, obvious questions remain for both Publicis and the market.

First, as noted in the passage above, Levy specifically refers to the agency brands as “silos.” Yet, while Levy’s campaign motto for this transformation is “no silos, no solos, no bozo,” he also stresses (“and that is extremely important”) that these brands (silos) “will keep expanding [their] own culture and specific approach . . . [and] protect and nurture their true identities.”

The obvious problem is that Levy wants to have his tarte tatin and eat it too. How can he reconcile his campaign to eradicate silos with his insistence on the brand identity of said silos? Logically, the position is inescapably incoherent, but I think Publicis, equally inescapably, has to embrace it for practical reasons. In short, the agency silos harbor most of the value. That is, they represent value (to clients, who seek them out and engage them), they produce value (by virtue of the work that they, not Publicis, perform), and they are valuable (but only so long as their “true” and differentiating identities are expressed as a brand).

The latter is crucial when — inevitably — Publicis wants to sell off some parts of the Groupe in the future. Razorfish, for example, commands a premium as a brand. “The part of Publicis.Sapient that was, more or less, formerly Razorfish” commands only the value of its resources. No matter how effective the hub strategy turns out to be, or how often Levy repeats “No silos!”, Publicis has to continue to nurture the agency silos — or literally write off a significant amount of brand value from their portfolio.

The second, and far more important question is, will the hub strategy be successful? Of course, it’s far too early to tell — key elements remain unknown, even within Publicis. However, it does seem that the incentives are not aligned to effectively deliver Levy’s proclaimed focus on client service. For example:

  • The newly designated Chief Client Officers (about 20, for the most important existing clients) are incentivized to compete for the best resources in order to serve their clients.
  • Employees are incentivized to compete for the best assignments, which will simultaneously create a Publicis talent pool but also make it virtually impossible for brand executives to manage “their” resources.
  • Agency brands (which will continue to be the main source of new business) are still incentivized to compete for business within the Publicis Groupe, based precisely on what Levy calls their “unique” and differentiating approaches.
  • Lauren Desmond, the new Chief Revenue Officer to whom the CCOs report, is incentivized to maximize overall Groupe bottom line, with secondary consideration for clients. (You note she’s not the Chief Client Satisfaction Officer.)

Publicis clients are trapped within their own hall of (rear-view) mirrors.

As AdAge points out, the reality behind Levy’s dance of perception and reality is that “clients want better costs” and “far more integration” of agency services. But those same clients are trapped within their own hall of (rear view) mirrors. Like Levy, most marketers cling to the practices they have developed “over the last decades” — e.g., distinct and siloed marketing practices and teams. They continue to review and engage agency partners to support these silos (or worse, for one off campaigns). They continue to invest in intrusive digital advertising — even though over 60% confess they don’t understand how programmatic advertising works, and consumers are racing to adopt ad- and tracking-blockers. And they generally ignore the newer practices that consumers do appreciate and embrace, such as content marketing and other forms of audience-based marketing.

As long as marketers, like Levy, perceive the established practices as “incredibly efficient and effective,” it makes perfect sense for them to try to squeeze better costs out of agencies with frequent account reviews. But behind the perceived reality of what clients want is the genuine reality of what they need in order to survive, let alone thrive, in a world of digitally empowered and prodigiously fickle consumers — namely, comprehensive, strategic, on-going — and more, not less, expensive — assistance with understanding, designing, offering, and optimizing the coherent, integrated, and holistic experiences consumers crave and demand.

While it remains to be seen whether a transformed Publicis Groupe can offer such systems-level services, you can be sure that the clients won’t get there by reducing agency budgets and purview.

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