It’s been three months since Bain Capital completed its bid to buy ADK, following a contentious dispute with WPP. While Bain has outlined the areas it sees as having potential in ADK’s business, ADK has so far explained little about what it expects to gain from the deal—beyond freedom from its unhappy marriage to WPP.
In February, senior ADK executives spoke to Campaign about the deal for the first time, giving a picture of how things look for an agency that could be about to change dramatically. Here is a breakdown of the situation from their perspective ahead of the planned unveiling of a new strategy in April.
The deal sets ADK up to make the cuts it needs to move forward.
Private equity companies are known for ruthless streamlining, which is an obvious source of concern for staff. But Noriyuki Nakai, executive director and senior operating officer, said cuts are long overdue. “We should have done that three years ago but it was difficult, so we are not worried about what Bain will do now,” he said. “We need to speed up the streamlining. In every company there is organisational slack. We need to clean up that slack, shut down declining business and reinvest in growing sectors.”
Good internal communications will be essential in driving change.
Nakai envisages structural change in order to become more agile. He admitted that he would feel “more comfortable” to leave things as they are, but that is not an option. He said people who resist change will need convincing, and possibly enticed to change their business goals. Unsurprisingly, he said younger employees are generally more excited about change than their older colleagues, but that the latter group also feels “a sense of crisis”. Nakai acknowledged that a generation gap exists in the company. “Changing is a difficult challenge,” Nakai said. “It involves risk or even pain so naturally people have inertia. Our challenge is how to break that inertia. Communication is the only solution.”
ADK may finally become the ‘consumer activation company’ it wants to be.
For Nakai, this oft-touted but vague term means focusing on changing consumer behaviour rather than just on creating communications. He thinks this will become easier given that ADK is now free to work with a variety of partners, which was not possible under the WPP alliance. ADK plans to become more of an “open network”, which should help energise its non-traditional business. According to the company’s 2017 financial results, its non-media-related business lacks dynamism. It will need to give special attention to proving the effectiveness of its work (traditional or non-traditional) to clients, which could help achieve differentiation from bigger competitors.
“Digital-first” actually means “data-first”.
In its official statements while Bain’s takeover bid was underway last year, ADK emphasised its desire to become “digital-first”. Nakai said the term was misleading and that the goal should be to become data-driven. “This is the first priority in order to realise the consumer activation business,” he said, noting that ADK lacks the ability to analyse retail data. He hopes that will now change. “When we can connect retail data, consumer data and media data, we will be able to create the perfect triangle to identify the consumer as an individual.” Whatever ADK does in this field will need to be ahead of what Dentsu already offers through its joint-venture with Rakuten, Rakuten Data Marketing, which launched in October.
It’s now or never for international business, but how remains unclear.
In December, ADK changed the structure of its international leadership, hiring Yasuyuki Katagi as CEO and making Rob Sherlock chairman. The reasoning was that with up to 70% of overseas revenue coming from Japanese clients, Katagi, being Japanese but having over 10 years’ worth of international experience, is best placed to take things to a new level. The appointment of Katagi, who has spent his career at international agencies, was in itself unusual. Nakai described Katagi as “a different species” and sees the hire as a step to creating a more “multicultural organisation”. It is to be assumed that Bain will play a key role in making ADK more competitive internationally, but Nakai and Katagi were still not able to provide any clarity as to what the strategy might be.
ADK’s content business and client work will move closer together.
WPP may have hated ADK’s investments in content, but they were an important draw for Bain. High profile properties that ADK holds a stake in include Doraemon and Crayon Shin Chan, and Nakai said these will help expand the agency’s content marketing business. “We need to enhance content marketing which means we need to enhance the utilisation of the characters for client business,” he said. “So far the content business and ad agency business are relatively divided. We need to bring them together for the expansion of the agency business in Japan and overseas too.”