Q&A: Dentsu China CEO on DAN's ambitions, being 'seed-oriented' and innovation

There is word on the grapevine that the possibility of you becoming the Dentsu Aegis Network China CEO is very high [Phil Teeman is the current Aegis Media China CEO]. What will your vision and strategy be for the entire network if so?

First of all, I'm not sure if I will become network CEO, that is not for me to decide [laughs]. If I do get the honour to hold that role, my ambition is to be number one in China. If we look at the current state of advertising agencies, there is not one that dominates the scene or wields a lot of market-share (or client-share). It is still a complicated environment in China.

We are aiming for a different business model, different from GroupM and Starcom for example, otherwise it is just a change of name to Dentsu Aegis, which is meaningless. Our offerings to clients must be distinctive and better as integrated marketing solutions. After the acquisition, we now have 18 subsidiaries [McGarryBowen, Dentsu Rihai Communications, Beijing Dentsu Advertising, Clarity, Carat, Charm, Posterscope, Vizeum, DBF, Brandmax, &c, Dentsu Top, Catchstone, Isobar, OMP, Trio Isobar, iProspect and Sinomonitor] servicing more than 100 clients with more than 4000 staff from 36 offices in 16 cities [the main hubs being Beijing, Shanghai, Guangzhou and Wuhan].

But these agency-brands won't stand alone. The whole China market is under one P&L operation, as with other markets such as Singapore. We order it by country. The norm in the market is to have independent P&Ls for each agency-brand under a large holding company. Our advantage is that different specialisations from agency-brands can be utilised more closely together to provide a better service for clients under a common target. This is especially useful since client fees have changed from a fixed amount to varying amounts according to geographies, such as inland cities and coastal areas of China.

There are a lot of ways to play around with e-commerce, social media, and mobile, and a lot of cross-border room to grow, M&As in this space included. Within the next three to five years, I would like business revenue to double. I know this sounds really ambitious but this is my goal.

In theory, I do agree that a single P&L is the holy grail, but in reality, true integration and cooperation between so many subsidiaries can be tough as hell?

We have gotten the agreement of Aegis Media to set this in motion, and we have confidence we can carry it out well. Even though there may be difficulties, I would like to take on the challenge.

Financially, we are still in the process of integration, but for network-wide CSR activities we are already participating together, involving both Dentsu and Aegis Media employees. Through these, we hope to break down any walls to foster a strong sense of unity. In fact, it is precisely because each agency brand has a different specialisation that makes a one-P&L model possible. Even that is not the hardest thing; what's topmost in my mind is how to make Dentsu Aegis a fun company.

As management, yes, we are concerned about pushing up profit numbers, but being an advertising agency, we have to create an easier environment for employees to showcase their creativity and shape a freer corporate culture.

Do you have anything concrete to back your words, such as getting younger staff to pitch to clients, or creative staff to be business leaders, or investing actual monies into innovation incubators, for example?

Taking a leaf from Dentsu Tokyo's book, with regards to innovation, we have spared no expense at encouraging employees to develop innovative ideas, and this happens on a daily basis. The system, say in our Future Communications department [Dentsu's innovation arm], has been in place in Tokyo for many years, and it is not difficult to replicate it in China. I have noticed in some western companies, performance is the focus and the only focus, but we try to allow latitude for creative ideas to develop business potential.

When we look at international advertising awards, we find that there is a lack of top-in-class creative professionals making their mark there. We hope to see in future the rise of such top-in-class creatives from within Dentsu Aegis China. There are a few reasons why China won so little at Cannes: The education system doesn't allow for grooming of creative talent, the lack of opportunities doesn't allow for individual talent to be highlighted.

We are trying out a new job rotation system internally: to allow our younger employees to experience what it's like at different departments to enrich their working experience in this way. In the past, it used to be a matter of poaching talent from elsewhere, but this isn't enough. All these means a shift in organisational thinking and company structure. The perception that Japanese firms are entrenched in bureaucracy is a misconception. Dentsu Inc in Japan actually has a pretty flat organisational structure.

Dentsu has entered China for 20 years now, but until five years ago around 2008, the chase after metal wasn't particularly active, as we always felt that advertising is meant to service clients instead of winning awards. If we were too focused on awards, the ad loses its purpose. Ever since I came on board in April 2013, I have started to place more value in awards so as to build a better reputation for Dentsu, as well as to strengthen our creative credentials and to groom more creators. Innovation has been synonymous with Japan and at Dentsu, the incubation of advertising innovation is considered a normal, natural routine as a matter of course. It is a usual part of the way in which things are done and we didn't feel it was special or needed shouting about.

It seems to me that you are saying we shouldn't make the concept of innovation such a fussy and alien operation, but as a regular part of daily work.

Now, things are different after acquiring Aegis Media. Having someone from the 'outside' point out to us that the things we do in innovation, in sports and entertainment marketing, are very interesting made us realise that certain parts of our business are valuable and are our strengths.

Dentsu is especially strong in sports and entertainment marketing, but the cultural barrier to entry is high when it comes to China. Even AKB48 has to be localised. How do you overcome this?

[Editor's note: AKB48 is an entertainment product that Dentsu co-created with producer Yasushi Akimoto, with the rationale below: In Japan, an idol is someone you see only on TV. In the world of virtual communication, Dentsu and Akimoto wanted to create a real idol you can actually meet, like a next-door neighbour. When idols go on stage, they are a perfect, 'finished product'. In the case of AKB48, they are 'incomplete' when presented to fans, so that shows their 'roughness' and gives fans more reason to root for them. AKB48 is not considered a permanent group of celebrities, but an entertainment marketing platform. It doesn't work in the West, and will work in other parts of Asia, thus SNH48 (the Shanghainese version of the group).]

Yes, we acknowledge that, and have been making effort in China, but we have noticed in terms of the methods to do this, there are many similarities, such as in celebrity casting, product placement, broadcasting rights, sponsorship, so what is more difficult is the monetisation of such methods. We are certainly making profits in China, but the proportion of profit from our sports and entertainment division is small, but there is a lot of room to increase this proportion now that we have acquired Aegis Media. In China, the entertainment industry is unusual with its own restrictions, so we are trying to hammer out a style that will suit China.

Dentsu's 'Sound of Senna' campaign for Honda won the Cannes Titanium Grand Prix based on reviving decades-old data in a modern context. What is your policy on putting data and technology to better use in advertising?

This is a good question. It depends on whether it's need-oriented or seed-oriented. What do I mean? Being need-oriented is considering what the client needs, so we develop a solution for that. Being seed-oriented may be the opposite; we tackle whatever latest technology first and then see if it fits client requirements. Of course, there have been instances where it doesn't fit. These two lines of thought have to take place concurrently. Yes, we have to take care of clients' immediate needs, but if we don't think ahead on behalf of them, then we are not being truly innovative.

I once had a conversation with the head of a gaming company in Japan. He was asking himself: should we give gamers what they like nowadays, or should we develop something that comes out of the minds of the game developers? He was firm that the popularity of a game is not derived from mere market research. That is not to say we should not be close to the consumers, but consider that a creator is also himself a consumer, and to combine that consumption mindset with the gut-feel or creative intuition of a creator is the most valuable.

Wow, it sounds to me that a creator is a more evolved version of a consumer.

Yes, creators have to be sharper in instinct.

How is Dentsu's relationship with China's internet giants, the BAT [Baidu/Alibaba/Tencent]?

Close. Just recently, our Jerry Buhlmann met Tencent's SY Lau in a high-level meeting. BAT has given acknowledgement of Dentsu's ability to use data from BAT users for synergy in marketing. If BAT cannot put their massive data pool to good use, it is a pity in terms of monetisation possibilities, thus they need a non-conflicting, middleman like Dentsu to connect brands with BAT. Our agreement last October between Dentsu &c and Alimama is paving the way.