For over a century, it was a symbol of Japan’s heavily guarded economy, seemingly impenetrable like the glass structure of its headquarters that towers the skyline of Tokyo. Dentsu Inc — so firmly entrenched as the dominant force in Japanese advertising that second-placed Hakuhodo is nothing more than a challenger to its force — controls nearly a quarter of the market in Japan. Yet for years, the Japanese giant has battled to make an impact in international markets. Then, in 2012, it stunned the advertising world with its acquisition of Aegis — a highly complementary business that gave it digital and geographic muscle outside of Japan. With the integration of Aegis well under way, Tadashi Ishii, the president and chief executive of Dentsu Inc, shares for the first time the story of Dentsu’s journey, its struggles, and the evolution of its culture.
Atifa Silk: What is the state of the Japanese market and your outlook?
Tadashi Ishii: The Japanese economy was in a state of deflation for about a decade. But after Prime Minister Shinzo Abe took to office (in December 2012) and thanks to ‘Abenomics’, his package of economic policies, the Japanese economy has improved. We began to see that uplift in mid-2013 and that, of course, had a positive impact on advertising and our industry. In fiscal 2014, we expect almost 2 per cent growth, which is quite good given the maturity of the Japanese market.
Having said that the domestic market is mature, the IOC’s decision to appoint Japan as the host country for the 2020 Olympic and Paralympic Games is having a positive impact on Japan and we expect that to continue over the next six years. Beyond 2020, there will continue to be positive signs in the economy due to the urban and infrastructure development that the country will invest in for the Games. As the official and exclusive marketing partner for the Games, we expect Dentsu will also see uplift and opportunities for growth.
We are also seeing Japanese companies across industries — including automotive, electronics and white goods, and more recently communications, drinks, retail and pharmaceutical — become more active in overseas markets through acquisitions and other means.
Silk: What challenges have you faced in expanding your footprint globally?
Ishii: For a long time, Dentsu has been the leading company in Japan, with market share of about a quarter of the domestic market. We are firmly established. But as more Japanese brands began to expand internationally, we saw an opportunity for growth. However, in order to tap into that opportunity and support these Japanese companies, we had to go overseas first. We began by supporting a certain automobile brand with communications services in Asia. But that was a dot here and a dot there. It wasn’t a connected network, and we unable to provide Japanese companies with truly global services.
One of the problems we faced was recruiting good talent, including managers and creators. Talent, as you know, is the most important asset in our business and key to what we do. Without the right talent, we were unable to provide the high quality services clients required outside of Japan.
To overcome that challenge, in 2006 we recruited Tim Andree, our executive vice-president, to lead recruitment, HR and M&A related matters in the US. He was successful in acquiring companies like 360i and McGarry Bowen, and importantly all the talented people working in these organisations became part of Dentsu.
Yet that wasn’t enough. By then, the globalisation of Japanese companies had accelerated. At the same time, media was converging and digitalisation of marketing was evolving the industry. If we wanted to provide the same high-level quality of service to clients globally we needed a plan.
- Dentsu previously owned a minority stake in Publicis (until 2012). The relationship yielded little value. What lessons did you learn from that experience?
- What made Aegis the right partner for Dentsu?
- What is Dentsu’s ambition and strategic plan?
- How will you continue to drive profitability?
- How would you describe Dentsu’s culture?
- How are you addressing the cultural differences between Dentsu and Aegis as you integrate the two businesses?
- What are your thoughts on industry consolidation and the failed POG merger?
- What is your appetite for acquisitions, and is IPG a potential suitor?