Martin Sorrell, CEO of WPP. Photgraphy by Dudley Reed

The restless innovator

Martin Sorrell, CEO of marketing giant WPP, believes 2006 will see the rise of different types of global company.

by Morice Mendoza, World Business Magazine
Last Updated: 23 Jul 2013

The hyperactive Sir Martin Sorrell is ubiquitous. Having created one of the world's largest media enterprises - comprising global brands from J Walter Thompson to Ogilvy & Mather - Sorrell has to be one of the world's most respected CEOs. Even the widely publicised case of alleged fraud in WPP's Italian office has not tarnished the great man.

In fact, Sorrell's decision to be open and upfront about the problems has won him admiration among the press.

In between being one of the main organisers of this year's World Economic Forum in Davos and holding together a multi-branded organisation employing 100,000 people in more than 100 countries (not to mention sorting out his local difficulties in Italy), this hugely impressive businessman found the time to talk to World Business.

World Business: What are the big opportunities you foresee for business in the year ahead?

Martin Sorrell: I think 2006 will be another good year, like 2005 - there are the big events such as the Winter Olympics in Turin, the football World Cup in Germany in the summer, the Congressional elections in the US, and there will be continued economic growth in Asia. The Middle East is very strong, bolstered by the high price of oil. Nigeria is expanding very rapidly too. There are three speeds in the world economy: the fastest growing markets are Asia, Latin America, Africa and the Middle East, followed by the US. The slowest region is western Europe, especially the UK, France, Germany and Italy. Spain is showing more pace and is a different case.

Where are the main risks going to come from?

The principle risks relate to oil and commodity prices, the threat of terrorism, tensions with Iran over its nuclear development programme, the emergence of Hamas as the dominant party in Gaza and the problem of US consumer indebtedness and fiscal deficits. There is some risk in places such as Latin America with the political changes, as some of the new leaders may take a more negative attitude towards global free trade.

How is the world economy changing?

There are a number of factors affecting the competitive environment.

For instance, in a low-inflation economy, as we have seen for the past 10 years, companies cannot use an inflationary environment to pass on increased costs to their consumers through prices.

Technology continues to change the competitive scene through enabling new products and services to be created by new competitors at a faster rate than before and disintermediation (in which technology has taken away the need for a middleman) gives rise to new service companies and products in the marketplace. The growing power of large retailers such as Wal-Mart - with its expansion into the UK and Germany - and Tesco and Carrefour raises tough new challenges.

How can companies succeed in these conditions?

In all of this, companies have to achieve top-line growth in a low-inflation and low-cost world economy. There is a way to do it, though, and that is quite simply through innovation and branding. You need to focus on developing your thoughts and ideas on products or services that the consumer will find attractive, such as iPod, Nano, Pebble and ROKR.

How is the world business environment changing?

We are entering a new era of globalisation. It is not about Americanisation any more, in which the Anglo-Saxon multinational is dominant. A number of faster-growing markets are now starting to develop major multinational companies. There are the South Korean chaebol (conglomerates such as Samsung, LG and Hyundai), Chinese companies (Haier, Lenovo, Konka, Cenoc and TCL) and Indian companies (the two Reliances, Wypro, Tata and Infosys).

How would you describe this process?

It is not globalisation in the sense put forward by Theodore Levitt in his Harvard Business Review article 'The Globalisation of Markets' in 1983, in which he argued that the world was becoming more uniform and bound together as a result of international trade and the standardisation of consumer products. The phenomenon I have seen in the last year or so, and again at Davos, is the rise of the truly global company. This is no longer the age of the US-style multinational. There will be many different models of global company.

Are we seeing a new style of leadership then?

Yes, I think we are. The Asian business leaders were very interesting at Davos this year. The Chinese seemed to be very attentive.

Their biggest strength is that they listen. They are extremely focused and learn very efficiently.

The negotiations in the Doha Round have faltered over issues such as the reduction of US and European agricultural subsidies. Do you think this might result in the slowing down of globalisation?

World free trade is terribly important. What I do worry about is the rise of protectionism. I think it is wrong to argue, as some do in the developed world, that the Chinese, for example, have an unfair advantage because they have a low-cost manufacturing base. It's not the reason for the country's great success. They provide excellent value. And in India, it's not about the fact that they appear to be offering cheap outsourcing services; it's that they are providing needed services. Again, at the right price.

How do you foresee these two economies developing in the future?

Interestingly, I think China will become more of a service economy in the future and India will develop as a manufacturing nation. Recently, I attended the annual International Business Leaders' Advisory Council (IBLAC) in Shanghai during which the mayor, Han Zheng, talked about his plans to transform the city into a financial, trade and shipping hub. Through the development of finance and logistics industries, he wants to see Shanghai become the service centre of the world.

What are the challenges for the developed nations in terms of talent and human capital?

This is one of the biggest challenges for international business. There are demographic factors working against the older economies. These are all well known - declining and ageing populations. The issue of recruiting and retaining talent is going to remain critically important and desperately tough to manage. The population of China and India is about 2.5 billion, and Asia will soon make up two-thirds of the world. The big differentiator for corporations is going to be its people - how it builds and manages and retains its talent base.

Have the older nations lost the work ethic?

Yes, I think this is a big issue. I heard the results of one survey on attitudes to work at Davos, in which parents were asked if they thought their children should be asked to work hard: 86% in China said yes, compared with only 2% in Denmark. Mature countries are really very much like mature companies: they become sclerotic and slow.

How can these old economies transform themselves?

They can obviously improve their performance. The principal issue is how they can improve mobility of labour, how they can reduce the structural and social costs of change, while at the same time providing incentives to retrain and move people into faster parts of the economy.

Is there a management theory that has worked well?

Not really. These things are an amalgam of factors. You have to get the balance right between global, regional and local. In fact, now I think the local is becoming much more important. Maintaining a balance between local, regional and global is very difficult - as we are finding out - and you can go too far one way or the other. But the local aspect is becoming more and more important. So companies must try hard not to lose their local knowledge as they move inexorably to a global basis.

How difficult is it for a company like WPP to maintain this balance?

Most companies have centralised structures and need to work out how they can become more responsive. I like to think of WPP as having the mentality of a small company while also having the resources of a large one. Within this, how you lead global corporations, how you ensure everyone understands the strategy and is pointing in the same direction - this is one of the big management challenges.

How do you get internal communications right?

It's very hard. You have to take the time and trouble to work out the right way to communicate the company's goals and strategies to a globally dispersed workforce. The strongest model for internal communications would be a global, unibranded organisation where you will try to get all your tens of thousands of staff to point in the same direction. The most challenging model is the multibranded organisation such as WPP, which has grown through acquisitions. Organic growth is always the strongest.

So, have you found the answer to managing internal communications at WPP?

No. If I had, I would not need to come into the office any more. I could stay at home and twiddle my thumbs.

Are corporate leaders doing enough to demonstrate that business is a force for good?

You'd have to say probably not, given the evidence of the lack of trust that exists. The problem with corporate social responsibility and the ethical issue is that it is an oxymoron. Anyone who runs a business for the long term must consider all the factors and all the stakeholders, from consumers to governments. WPP is number four in the Guardian's FTSE 100 Giver's List and this is for practical reasons. If you want to build brands and businesses long term, investing in the environment, society and good causes will benefit your company and your people. Those who are out for a quick buck and moved by short-term considerations are not going to be motivated to do this.

MARTIN SORRELL

... ON WINNING: Companies must develop excellent branding and innovation strategies to create services and products that the consumer will find attractive, such as iPod, Nano, Pebble and ROKR

... ON THE FUTURE OF THE INDIAN AND CHINESE ECONOMIES: Interestingly, I think China will become more of a service economy in the future and India will develop as a manufacturing nation

... ON NEW STYLES OF LEADERSHIP: The biggest strength of the Chinese business leaders and officials (displayed at Davos) is that they listen. They are extremely focused and learn very efficiently

... ON PROTECTIONISM: It is wrong to argue that the Chinese, for example, have an unfair advantage because they have a low-cost manufacturing base. It's not the reason for the country's great success

... ON GLOBALISATION: We are seeing the rise of the truly global company. This is no longer the age of the US-style multinational

... ON HOW THE DEVELOPED ECONOMIES CAN WIN: The principal issue is how they can improve mobility of labour and, at the same time, reduce social and structural costs of change

NO SLOWING DOWN

Inside the 40-year-old Martin Sorrell burned the fire of an entrepreneur; and it was the experience of reaching the magic mid-life marker in 1985 that saw him unleash his prodigious energy and ambition. Twenty years later, the holding company Wire & Plastic Products - otherwise known as WPP - contains more than 100 marketing services brands, including the global advertising networks J Walter Thompson (JWT), Ogilvy & Mather, Young Rubicam & Grey; media-buying giants MindShare, Mediaedge and MediaCom; PR agency Hill & Knowlton; and a host of specialist operations covering everything from internet marketing to pre-testing of TV commercials.

WPP's 100,000-plus staff, dispersed across the world in more than 100 countries, generated £5,374 million ($9,433 million) revenue in 2005 compared with $4,300 million ($7,549 million) the year before.

Sorrell's great strengths - drive, focus and a ferocious competitive spirit (not to mention luck) - came together in his audacious bid for JWT in 1987, a company that was then five times bigger than its predator.

And after the $566m purchase, Sorrell sold off one of JWT's properties in Tokyo, which turned out to be worth a staggering $200m (netting $100m after tax).

In 1989, Sorrell turned his eyes next to the giant advertising firm Ogilvy & Mather, then run by its charismatic founder David Ogilvy. It is fair to say they did not see eye to eye (Ogilvy's by now famous reaction is said to have been: 'God, the idea of being taken over by that odious little shit really gives me the creeps. He's never written an advertisement in his life.') However, Sorrell clinched the deal by offering the chairmanship to Ogilvy, who later softened his earlier comments. In his eagerness, however, Sorrell paid too much ($864m), a problem that was compounded by the onset of a full-blown recession.

Following a profit warning in 1990, WPP's share price plummeted from 650 pence to 115 pence. This was one of the most testing times for Sorrell - during which he even considered stepping down. Only his deep-rooted understanding of how banks worked, a major financial restructure and a redoubling of his already prodigious commitment, kept the group together.

The recovery, led in part by his inspired appointment of US adwoman Charlotte Beers to head up a resurgent Ogilvy Group, has been followed in the 12 years or so since by a massive buying spree in which, at times, Sorrell looked like a man who just couldn't say no. Yet in the rapid consolidation of the marketing services industry, Sorrell has been one of three key figures - the others being his arch-competitors Maurice Levy of Publicis and John Wren of Omnicom - to shape the business. More often than not, in competitive situations, it is Sorrell who has come out on top.

However, it is not just as the controller of the WPP purse-strings that Sorrell derives his authority and reputation. Over the years, he has been quick to spot and capitalise on market trends in, for example, media buying, research, internet advertising and China, areas where WPP is generally considered to be ahead of its competitors. And he has personally led WPP's efforts to harness its collective strengths to win global mandates from global clients across the entire gamut of services. HSBC and Vodafone represent showpiece accounts in this respect.

On a personal level, he can be extraordinarily good fun, with a mischievous sense of humour and a love of gossip. Journalists, whose calls he invariably returns within 24 hours, almost without exception admire him. But neither is he a man to cross, and there are more than a few ex-WPP executives whose careers have not been the same since they made that mistake.

Today, Sorrell sits in an enviable position, hailed for his extraordinary deal-making abilities and at the same time regarded as a business seer, his regular pronouncements about the state of the advertising and media markets pored over by colleagues, commentators and competitors alike.

Although the apparent lack of a succession plan has drawn criticism, the man shows no sign of slowing down or giving up. His knowledge of his sprawling empire is so deep and his grip so tight, you'd think WPP was a small, family company rather than a massive multinational concern, and his appetite remains undimmed.

"I see myself having a heart attack while doing this. I would be dreadfully bored without it," he said in an interview in Campaign last year.

WPP'S FINANCIAL DATA 2003 2004 2005 pounds pounds pounds Turnover (billings) 18,621m 19,598m 26,674m Revenue 4,106m 4,300m 5,374m Operating profit* 415m 475.5m 652.8m REVENUE 2005 BY GEOGRAPHIC REGION (%) North America 39 UK 15.3 Continental Europe 26.6 Asia Pacific, Latin America, Africa, Middle East 19.1 Source: WPP

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