April 20, 2018
Creative Opinions: Sir Martin Sorrell and the end of an era

Creative Opinions: Sir Martin Sorrell and the end of an era

This week, Sir Martin Sorrell, CEO and Founder of the world’s largest advertising agency network, WPP, resigned from his post amidst circling ‘personal misconduct’ allegations that remain (at the time of writing) unresolved, much to the understandable chagrin of the WPP shareholders. Earlier this month it was disclosed that WPP had appointed a law firm to “investigate claims of financial impropriety,” but the company has claimed that those internal investigations have concluded. They state that the allegations did “not involve amounts that are material.” Sorrell decided to step down “for the good of the business” just days after the investigation concluded.

Last Saturday evening (April 14), Sorrell and WPP released a joint statement to announce the decision, alongside news that Wunderman/WPP digital chief executive officer Mark Read and WPP Europe chief operating officer Andrew Scott, were to be named as joint chief operating officers. WPP chairman Roberto Quarta will act as executive chairman until Sorrell’s full-time successor is named.

Sorrell built up WPP from a small shopping baskets manufacturer into the world’s biggest advertising company in just over 30 years, with revenues of over £15 billion. Along the way he became the highest paid boss of an FTSE 100 company and amassed a personal fortune, getting paid £70 million last year alone. But he also made a lot of other people rich along the way when he bought their businesses. He consumed hundreds of firms and the global reach of WPP’s interests made Sir Martin a “go to” guy when the media wanted a take on the world of marketing – often seen as a leading indicator of global consumer trends. He was happy to oblige and journalists valued his willingness to comment and his unapologetic stance on issues that other chief executives would have avoided.

Following the announcement of his resignation, tributes flooded in from all corners of the industry, but for every bigwig and co-worker hailing the man as the poster child of the industry and the “Alex Ferguson of advertising,” there is one or more sneering “good riddance” waiting in the wings. Indeed, there have been reports that even within the ranks of WPP itself that the departure has left a feeling of “liberation” in its wake, with many of the holding company’s 200,000 employees feeling that Sorrell maintained an “owner’s mentality” that felt at odds with a modern, evolving industry.

He is, and always will be, a polarising figure, whose legacy is yet to be written in stone, and will likely hinge on the true nature of these allegations as and when they are finally divulged. Before that time, we ask adland what they really thought of the man himself, how his shock exit will affect WPP and their competitors, and whether or not his departure relates to a potentially much larger, seismic shift in the advertising industry.

 

Peter Reid, CEO of MSQ Partners, feels Sorrell’s departure will result in a serious restructuring and simplification of WPP as a whole.

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I think it is inevitable there will be some form of restructuring and simplification of the Group. It seems that Kantar (data/ research division) will be first on the block, but I think ultimately, there will be a wider restructuring. It is very difficult to deliver the ‘horizontality strategy’ at a WPP level. It would be much more credible within an existing agency network – if for instance Ogilvy was combined with one of WPP’s media brands and possibly other parts of the Group.

I don’t see Sorrell setting up in competition in any way. WPP is far too much his life’s work and he is nothing if not ‘economically rationale’ and hence would not look to do any harm to his 2% shareholding (and he is 73!). That said, there is already a growing amount of competition for WPP, not only from tech giants (e.g., Facebook) or consultants (Accenture) but also from the more medium sized, more entrepreneurial groups who appear better placed to deliver a digitally-led multi-channel experience.

In terms of succession, Mark Read is the strongest internal candidate and, as such, has a chance but I think they will go with an external choice but someone with industry experience (not a city grandee with restructuring skills). I wouldn’t rule out Jerry Buhlmann, currently running Dentsu Aegis.

 

Steve Hastings, planning director at isobel, feels the departure of Sorrell could potentially be beneficial for the group in the long term, but he feels there might have been a better way.

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The impact of Sir Martin Sorrell leaving is estimated at around £22billion. Hard to believe. For that reason, I think of the removal of Sorrell from his post is WPP’s ‘Brexit moment’. People determined to see him go created enough noise about some alleged bad behaviour that WPP had to react. The conspirators seemed utterly determined to oust him and now, like hard-Brexiteers, must contend with an unexpectedly costly exit. Will it be better for WPP in the long term? Hard to tell, but £22billion is a huge mountain to climb.

What we don’t know about are the discussions in WPP about Sorrell’s succession. Were they amicable? Was he intransigent? Why were people keen for him to go? After all, an older leader is not without precedent. Warren Buffett, of Berkshire Hathaway, is 85, and Sumner Redstone, chairman of Viacom and CBS, is 92. Why could he not have stayed on? Sorrell appeared to me a bundle of energy, completely on top of his brief and amazingly able to quote the latest figures from WPP around the world. Which he would do, at length. Far better than this ejection would have been a negotiated decrease in his time and the careful cultivation of his replacement.

Now Sorrell has gone, it is hard to name a CEO with a public profile. While this is important, arguably, for shareholders and the market, Sorrell was the first high-profile leader who came through the accountant’s door. Previous leaders have been creative pioneers, not spread-sheet obsessed businessmen. While our business has to be focused on making money, being efficient and effective (and it is), the real focus has to be the work.

 

Julie Langley, partner at Results International on Sorrell’s potential replacement, the problems posed by a prolonged changeover and the challenged in restructuring a behemoth with the weight of WPP.

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Any external candidate to succeed Sir Martin Sorrell as CEO is unlikely to be available to start straight away – at this level, many are working to around six months plus notice. That’s a significant hiatus at such a challenging time in the industry. But saying that, the interim leaders are unlikely to want to make fundamental changes to the business unless there is restructuring already underway that the markets are not aware of. Sorrell was at the helm of WPP for over 30 years, the longest-serving CEO of any FTSE 100 company. No incoming CEO is going to want to keep the status quo and will be under very real pressure to make WPP fit for purpose to tackle the challenges facing it and the ad industry as a whole.

While it’s only natural to be speculating as to the future of WPP, it’s no easy feat to restructure a holding company that big and that complex. Those currently doing well in adland are the nimble, independent agencies. Yet WPP can’t behave like an independent overnight. It’s an incredibly complex structure with a significant number of acquired companies that are working through their earn out at any given time. Trying to restructure a business like WPP when you are still managing post-merger integrations and earn outs would be difficult and expensive.

What also makes a restructure tricky is having to find buyers for the businesses that you want to sell who are willing to pay a sensible price. And because of the competition between the different holding companies (WPP, Publicis, Omnicom, IPG etc), WPP is probably not going to want to sell to any of them. In which case, private equity buyers look like being the most likely candidates.

 

Daniel Deeks-Osburn, strategy director at Impero, certainly won’t be lamenting Sorrell’s departure. Indeed, he’ll be happy to see the back of his ‘dark era’.

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Sorrell is the villain of advertising, not some dead hero. And I, for one, am delighted to see the end of his dark era. Let’s be totally clear on one fact – Sir Martin Sorrell is not an advertising or branding guru, he’s nothing but an accountant. And through his prowess buying and consolidating agencies around the world, he turned our beloved industry into an account’s game instead of a creative’s – which served few, other than the man himself. It’s no surprise to me, that during his reign, creative agencies found themselves devalued at the expense of management consultancies, tech companies, and media companies – because Sorrell took his eyes off the prize.

Creative agencies have little business talking big data. We should be utterly disgusted by programmatic placement, and the sort of dystopian hyper-targeting that Facebook peddles. But Sorrell put data and tech at the heart of vision, so we all had to follow suit. Sorrell valued data, I believe, because he understood numbers and not the creativity or people – you can’t just make ads based on numbers.

Advertising has traditionally been the sector where bold thinkers and weirdo outcasts have been able to use their aspirational intelligence and creative wherewithal to impact lives, and the fortunes of businesses globally. Now that Sorrell is disgraced and gone, I hope we can rise from the ashes of the giant agency conglomerate and remember who we are and what we’re meant to offer the world. I am hoping that the post-Sorrell world agencies realise that their only value comes from the strategic thinking and creative prowess.

 

Giles Peddy, group MD at Lewis PR Group, also feels that Sorrell’s departure will herald in a bold new era for the industry.

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The departure of Sir Martin Sorrell is an epoch moment for the industry. In the last 10 years, WPP has trebled in value. It built a house of brands and drove significant shareholder value. However, this was based on an advertising-driven model that, in the last few years, has seen new technology, the proliferation of channels and changing consumer behaviour result in the disintermediation of advertising. This is echoed in the massive budget reductions and simplification of spend at the biggest advertisers including P&G, Unilever and Coca-Cola. So the ‘butterfly’ collection of hundreds of brands that holding companies have was fine when marketing was more siloed, but as clients sought more integration, agencies started to drink from the same pool. Ultimately, they began to cannibalise.

At LEWIS, we think it’s a mistake to treat creative agencies as an investment portfolio. Indeed, look at any other professional services sector and they are large unitary brands. Think PwC, KPMG and Deloitte in accountancy. Accenture, Capgemini, and McKinsey in consulting. Or Linklaters, Clifford Chance or Allen & Overy in legal. Only in marketing services do we have ‘holding groups’ made up of a collective. The problem with this model is investment. How can a holding company like WPP sustain the investment needs of 360+ agencies? We should remember that finance is a good servant but an evil master.

So, we think we will see the holding groups sell off divisions in order to keep shareholders happy and deliver the returns. It presents big opportunities for other models and independent agencies. It’s likely we will see disruptive thinking and agencies willing to do what the competition is unwilling and unable to do. In a world accelerating by technology and globalisation, and an era of where ‘urgency’ matters, we will see clients look for ‘big small’, where they get global scale but from smaller, faster, more nimble agencies. Sorrell’s departure will herald in a new era for the industry. And we cannot wait!

 

Chris Friend, managing director at Iris Amsterdam on how the news reflects on the governance of companies that are so closely linked and identified with their ‘big personality’ founders or leaders and what it will mean for both WPP and the industry at large.

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Sir Martin Sorrell is one of a handful of British business leaders with a voice and an opinion, one that he has never been afraid to share. I have admired his ability to grow an empire, to beat the best, to out-think and out-manoeuvre the competition. I’m sure he’s cut-throat and smart. I suspect he takes no prisoners. And I wish I’d been half as brave and half as confident. He has done something that few people have achieved. Yet others are lauded, while he is decried. WPP and its shareholders have enjoyed the benefits of having the most formidable force in the industry, in fact in the industry at large, as their figurehead leader. We’re now seeing the dark side of this. It’s fascinating that the stepping down of the CEO of an advertising business gets so much coverage in the likes of BBC News and The New York Times. Last year CEOs of Uber, Yahoo, Equifax, Samsung, Chipotle, Tumblr, Kellogg’s, American Express, Starbucks, Papa John’s and Sony all stepped down. Few of them caused the kind of stir that we see around Sir Martin. Perhaps it’s the fact that he was a founder? More likely I think it’s because the City and the commentators all understand that Sir Martin was the driving force behind WPP in a way that few CEOs really are.

What will his departure mean for WPP and the industry at large though? Sir Martin had a key ability to get ‘upstream’ of many of his competitors. I suspect that many a WPP client was brought on-board in the boardroom, via the CEO and CFO even before the CMO had met an agency. And we shouldn’t discount WPP’s ability to lock clients in contractually to the holding group even if the individual agencies were expendable in a relationship. It will be interesting to see how clients react to the departure of the strongman of advertising. I suspect there will be some contracts being redrafted as I write this.

As for the wider industry? I wish I could say that it means the renaissance of creativity. I wish I could say that it will mean that the scales will fall from clients’ eyes. I wish I could say that it will mean better work for more adventurous clients. Sadly, I don’t think this is the case. Sure, there are bound to be a few surprise pitches. Yes, there will be a few more CVs and books floating around. I hear there’s even an experienced CEO knocking about. I think it probably means business as usual for 80% of WPPs clients and agencies. There will doubtless be some clearing out of dead wood. Some CMOs who use this as a reason to put their business up for pitch. But ultimately, we’ll live in a world where there are a few holding companies with the weight, power and connections to lock-out the smaller guys.

 

Graeme Douglas, co-founder & CSO at Bountiful Cow, who also serves as a D&AD judge, on how the parallels between Sorrell and Sir Alex Ferguson actually make a lot of sense.

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There have been parallels drawn between Sir Martin’s exit and the retirement of Sir Alex Ferguson. I think that’s a good call because when a business is so formed in the image of its leader it triggers a wider question of what that business stands for, and what it wants to become – that’s the first question to answer. Because the shift is certainly seismic. It’s been said Sir Martin is responsible for the industry as it exists today. Whether you view that as a good or a bad thing probably depends on your paymaster.

WPP was built for an era where scale and power really mattered. Sir Martin built a powerhouse from a once fragmented sector and created the silos of creative, media and technology that still, to a large extent frame the business today. Having talked a good game on integration in recent years it would appear that WPP are considering throwing in the towel – simply put I think this has proven to be too hard in practice and many big clients are looking at taking a more modular approach.”

WPP is not so much the 500lb gorilla of marketing services, but a troop. That troop has a very large stash of bananas, and in the immediate term will be focused on keeping hold of as much of it as possible. Now the alpha male has left, all eyes will be on what the troop does next, but whatever it does, rivals will sense a short-term opportunity. There’s speculation that Omnicom/ Publicis may be back on the cards. It’s possible the smaller two networks Havas & Dentsu may be swallowed up. Perhaps the consultancies, emboldened by the instability, will continue to invest in agencies with execution capabilities. Or perhaps it’s an opportunity for already-integrated independents like ourselves, and far more efficient smaller networks like Engine, Unlimited and Be Heard to start stealing bananas while the gorilla’s attention is elsewhere.

 

Nick Welch, VP of sales and business development, UK and North EU at ADmantX, on how Sorrell’s departure is just one part of a much bigger picture.

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Martin Sorrell’s departure is a just one of a multitude of dramatic changes the ad industry is experiencing. The impending GDPR is already having an impact as many companies pull back from their EU operations, while Marc Pritchard and others look to reimagine the ecosystem by updating processes and reviewing agency partnerships.

All this transformation represents an important opportunity for existing players to embrace Sorrell’s philosophy of disruption and make significant changes, to better prepare what feels like an Industry ‘re-set’. We need to take a look at what needs fixing, as Albert Einstein said the definition of insanity is doing exactly the same over and over again expecting different results.

Brand safety is a case in point – a lack of collaboration between agencies, advertisers, and publishers is holding progress back. Additionally, companies are holding onto familiar but unsuitable tech solutions that have potential to damage relationships both within the industry and with consumers, who are savvier than ever to the role advertising plays in their day-to-day lives.

 

Kerrie Finch, founder and CEO at FinchFactor, has a number of thoughts on Sorrell’s surprise exit.

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The most obvious thought on everyone’s mind is who will replace the big man. We know the short-term solution; the long-term solution will depend on the performance of the team that is replacing him, but likely the board and the shareholders won’t be giving them very much rope. There’s also the question of how his departure will affect the industry in general in the immediate future and whether its indicative of a wide scale sea change. This is all about stock market and shareholder perception. Holding companies, and particularly WPP because of their recent performance, are perceived as vulnerable, which is a big change, which will weaken holding companies in general, since financial markets are all about perception. 

The news also reflects on the governance of companies that are so closely linked and identified with their ‘big personality’ founders or leaders. Once there is a perception problem, the perceived power/invincibility of the “big personality” leader is eroded. Depending on what Sir Martin’s actual “offences” are, it’s likely that he wouldn’t be stepping down if his position wasn’t weakened by his perception problem with the shareholders/markets. 

It’s amazing that the specifics of the whole thing have not gotten out in the trades. Usually, stories like this are immediately followed by all sorts of information and rumour, which is generally pretty accurate. They have done an amazing job of keeping the information under wraps. Either way, however, I imagine WPP’s competitors may be enjoying the Schadenfreude, but mostly, they all have their own problems to worry about. 

 

Martin Woolley, CEO at media agency The Specialist Works, feels the breakup of WPP will result in a domino effect on the other big holding companies.

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The way the majority of the ad industry (as represented by the large holding group model that Martin Sorrell began in the 80’s) is shaped mirrors the needs of the large traditional advertisers of the manufacturing age. But the fast-growing companies of today – including the likes of Uber, Tencent and boohoo.com – were born leaner and digital-native. For example, you don’t have to look far to see e-commerce companies putting massive pressure on traditional retail models. Compare ASOS and boohoo.com with New Look – the former are reaping the benefits of valuing agility, transparency and detailed management information. The plc agency groups have built their structures top-to-bottom around volume and central control – the exact opposite of today’s exponential business models. They are simply too big to pivot, even if they wanted to. The only conceivable outcome looks like a breakup of WPP which will have a domino effect on others such as Omnicom.

The news will have a huge impact on WPP’s competitors. Agencies such as Omnicom and Publicis will try to distance themselves from WPP’s structural limitations. However, the reality is they have many more similarities than differences, so have the same fundamental challenges. High growth clients need a service these sizes of agencies cannot offer and are either in-housing creative and/or media, or using nimbler, more modern suppliers. Technology is only going to make speed and transparency more possible, so something has to give!

Coming after massive issues with transparency and lack of impartiality of advice, the impact of Sorrell’s departure will only create more reasons for advertisers to assess other options. WPP is reacting like an inward-looking organisation and without Sorrell’s massive presence to hold the empire together, the board will struggle. It was always his empire, there was no planned succession in place, making it an impossible task to manage this situation elegantly.

 

Rob Bennett (far left), CEO at rehab, wonders if there’s still a place for people like Martin Sorrell in the advertising industry of today.

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It’s symbolic that at the same time ad land is dying, failing and needs to change, their leader has fallen too.  Sorrell’s departure is significant because he was symbolic. A figurehead of the industry. He struck fear into suppliers, from the tech sector, through to his clients. Is there space for people like him? There is a place for lots of versions of him. But this time, we need fresh innovative thinking that is challenging the status quo. A space without these dominant networks which are strangle-holding the client’s budgets. This creates new opportunities for business models as brands are now able to connect with consumers and create a meaningful role in their lives. 

The space is now open for individual, entrepreneurs. Before, Sorrell would buy these companies and swallow them up. He wasn’t working on the ground, meaning he only saw the big top line brand business problems. He would say “what’s your business problem?” but he didn’t see the day-to-day workings of UX or devs, he just saw the top-line. This means that the people seeing these things behind the scenes are at an advantage because they understand the business and the workings of the talent. His response to business problems was him monetising a solution, but this stifled creative. He created a way to monetise brand problems, rather than making the best thing for the user.

Personality for leaders is a massive thing. The product a company sell has to be good but the personality is so much more important.  The future is user first, entrepreneurial leadership. They will be advising the clients on stuff that is relevant to the user. WPP was only giving advice about how to make money for their media plan. The role of marketing is going to change beyond advertising and this is a moment where it can accelerate now that he’s left to catch back up with what consumers want. They don’t want to be sold to. It’s not about being sold stuff. People say marketing and advertising are about being sold to. It’s not! It’s about being more considerate in what you’re doing. This is a big shift.

 

Tom Jarvis, founder and CEO at Wilderness Agency, wonders whether there’s still a place even for WPP itself!

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The departure is a seismic event for adland. I don’t think it is an understatement to say it’s the end of an era given Sorrell’s 33-year reign as CEO and WPP position at the top of advertising and media world, with over 200,000 employees, operating in over 100 markets and with reported annual billings of over £50bn. Though his departure is linked to an independent investigation into ‘personal misconduct’ the fall of a once great ad boss is without a doubt does part of a wider shift happening today across the advertising and marketing world.

Rather than thinking about WHO would be fit to replace Sorrell as a figurehead at WPP we need to question whether there is a place at all for big network agencies that are now under pressure to justify their high costs, particularly across digital and social. The power of self-serve ad platforms such as Facebook and Google and network agencies inability to adapt quickly to the pace of change has meant the lure of a media agency is no longer what it was.

Digital is now playing an ever more important role in media planning, used as a tool to amplify and extend traditional media such as TV and OOH. This is seen most clearly in how Superbowl ads are now posted online in the week leading up to the event in order to drive pre-awareness and social conversation ahead of the broadcast. Working directly with platforms, with agile teams, who can respond in real-time is helping drive massive efficiencies in client digital ad spend (which increased market-wide by 9.9% in 2017). With a growing number of specialist digital agencies moving into the ad space, and with consultancy giants moving quickly to acquire and recruit digital talent and agency teams it remains to be seen whether WPP and the other mammoth agency networks can respond. 

 

Dino Myers-Lamptey, MD at MullenLowe Mediahub, feels it’s a major blow for the industry.

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It’s a big blow for the industry, though in particular WPP. While his salary and benefits were always the subject of rightful debate, Sorrell’s impact on the company he founded cannot be questioned. He was one of the few that lead from the front in opinion and was always present at the events and around the subjects that mattered most for the industry.

In particular from a UK stance, the industry has taken a blow. Whichever agency you worked within, Sorrell’s leadership on the global business was localised by his very real presence in the UK, and he was always able to offer a version of the UK perspective on this global advertising stage. In a creative industry that is largely grown off the back of people, personalities and a great deal of passion, managing WPP will be a gargantuan task for anyone without the benefit of having put this group of personalities, egos, misfits, and genuinely talented and creative individuals together.

The ad industry as a whole will see this as an opportunity for those in competition with WPP, and I suspect their shares will rally. Whatever WPP does regarding succession will take a while to settle. For Sorrell, I suspect this isn’t the end for him and advertising, and his moves should be eagerly watched, anticipated, and for some, feared.

 

Fergus Hay, CEO at Leagas Delaney, feels that Sorrell was a visionary whose departure will leave a massive void in his wake.

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To identify Sir Martin’s departure from WPP as a seismic shift in the advertising industry is misplaced. He isn’t a victim of an industry moving beyond him. He was the visionary who saw beyond the bygone cottage advertising era, and focused on consumer behaviour, client marketing requirements and the premium strategic and creative skills of agencies that build brands in a digitally enabled world. The great achievement of Sir Martin was having this vision and realising it at scale before anyone else. His departure represents not a seismic shift but a seismic void: in a doggedly competitive and fragmented marketing services market which leader or which organisation has a similarly progressive vision and forceful will to drive forwards? Why is the innovation coming from corporate consultancies and cloud marketing service providers rather than visionary leaders?

What this industry needs, and what Martin represents, is leadership. The attraction to “Big Personalities” belies a focus on sparkle over substance. Great leaders like Sir Martin, David Ogilvy, Miles Young, Nigel Bogle all had incredible substance. This is what drives companies forwards, sees paths, realizes futures. Showman are a dime a dozen.

When referring to leadership the Italians believe “The fish rots from the head first”. Clearly Sir Martin’s departure has had a tangible impact on WPP’s share price and client confidence. Instability provides opportunity for competitors and with the likes of Publicis, Havas and Interpublic gathering pace there will no doubt be opportunity for growth at WPP’s expense. However, I’d be more interested in WPP’s vision for the future rather than the streetfight for declining market share. If the head of the fish has gone, can the fish swim? The answer lies in the futures of both WPP and the industry.

 

Matt Donegan, CEO at Social Circle, believes Sorrell defined the last era of advertising and represents the last of the old guard, and feels that his retirement will allow the industry to effectively reset itself.

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The industry has never known one holding company or group of businesses that has been so closely associated with one person. Whilst they are currently in succession planning talks, I can’t imagine anyone taking on the baton of leadership will be able to fill his shoes easily. Sir Martin Sorrell hasn’t just been the CEO of WPP, his name is also synonymous with advertising and marketing itself. He has acted as a passionate voice and advocate of the industry across the wider business community for many years. 

He defined an era of advertising, and his aggressive acquisitions of various comms businesses enabled him to build an advertising powerhouse that moved the industry on from the ‘Mad Men’ of old days to one focussed on tangible business results. We have often worked with WPP and agencies within the group. We find them to be incredibly results driven, and are often the ones leading the charge for data and analytics. However, we’re now entering a new age of tech disruptors and specialists – an age perhaps less suited to Sir Martin Sorrell or, indeed the WPP group as it exists in its current form.

As creativity is taken increasingly in-house and platforms like Google, Amazon and Facebook allow brands to buy ad-space directly, there’s perhaps less demand for enormous consultancies. Although it’s compelling to offer multiple specialist services under one roof, clients already often like to work with multiple holdings companies so they are able to have people from different businesses collaborating and challenging each other – with the loss of Sir Martin Sorrell, the need for WPP to adapt and change will become more apparent. With that context, I do believe Sorrell’s departure will allow the industry to go back to one of traditional competition and when necessary, collaboration. While Sorrell was a true innovator, I think he will be the last of the old guard.

 

From: Creativepool