Tim Andree explains Dentsu's approach to international growth

Now EVP of Dentsu and executive chairman of Dentsu Aegis Network (DAN), Andree is the first non-Japanese employee to make it onto the agency’s board. That happened in 2013, after he had made Dentsu the fastest growing network in the US and helped grow overseas revenue from just 4 per cent to 15 per cent. Since the acquisition of Aegis, the figure has risen to 54 per cent (as of Q1 2015).

He remains responsible for Dentsu’s international business segment as well as for DAN as a whole. ‘Internationalising’ remains a priority for the company. Despite widespread scepticism from industry observers at the time of the Aegis acquisition, the move has largely been a success, with 90 per cent of management remaining in place on both sides.

The Dentsu philosophy to acquiring

Andree admitted the process has not been easy, but said Aegis and Dentsu had “a very complementary set of circumstances” to begin with. “Dentsu was strong in Asia, Aegis was strong in Europe, and both were fast growing in the Americas,” he said. “Aegis had been implementing an integrated model of one P&L, and it was the same for Dentsu. We had eliminated silos.”

He added that instead of focusing on cost, the emphasis had been on “creating synergies and cross-selling opportunities”. That resulted in new net billings of US$6 billion for the fiscal year 2014 “with little defections”.

The former pro-basketball player used a sporting analogy to express what he thinks is most important: “Scale matters, but what matters more is momentum. We created new momentum. When people are winning, you create that spirit that really gets people engaged.”

Dentsu's 2015 performance in brief

• Q1 revenue stands at 172,027 million yen, up 14.9 per cent on 2014
• 15.4 per cent profit growth for Dentsu Group
• 8.1 per cent organic gross profit growth in Q1
• 2.3 per cent gross profit in Japan, 29.7% gross profit from Dentsu Aegis Network
• Seven acquisitions/investments in Q1 and 10 in Q2

Not every acquisition has been a resounding success, of course. Observers in India have suggested that the creative product resulting from the high-profile acquisition of Taproot has so far not lived up to expectations. But in most cases, the management teams of the acquired companies remain in place, as does the identity of the company itself. This year, Dentsu has made a total of 17 acquisitions globally.

Andree said Dentsu’s aim is to support acquired companies to move up to another level, rather than to strip out their assets. Citing smaller-scale acquisitions such as that of Mcgarrybowen and the Mitchells (a media agency in Australia and a PR agency in North America), Andree said they have helped Dentsu create “a more complete offering in core geographies”.

“Most of our acquisitions have their best years after joining [Dentsu],” he said. That might sound a bold claim, but he noted that Mcgarrybowen has grown to four times its original size since selling.

Andree noted that several acquisitions were on the cards in China, where DAN has taken control of Verawom, OMP and Isobar, but did not disclose details. The market is often seen as difficult for acquisitions due to mismatched expectations and cultural differences.

“If you’re thinking short-term in China, it’s not going to work,” said Andree. “You have to move deliberately, know how they will place and have clear communication of a common vision in advance. If you have a common vision, you can have success. But if they’re separated, you’re going to have trouble post-acquisition. Buying a company is an easy thing to do. But an acquisition is very similar to the difference between having a wedding and creating a marriage. We look for shared values, expectations and a long-term view, and it doesn’t always work out perfectly, but we have a strong track record.”

Cross-border lessons

Given Dentsu’s unique operating model in Japan, where it dominates media buying in the market, Aegis is arguably in a position to deliver the bulk of learnings to the network following its acquisition, rather than vice-versa.

“On the Dentsu side, we’ve adopted many global systems and functional enablers,” Andree said. “Even though Dentsu has been operating overseas since the 1960s, most of our functional capabilities were built to run the business in Japan. The acquisition of Aegis wasn’t only to get into media; I wanted to use the infrastructure so we could commonise and professionalise across the global organisation. We’ve picked up a lot of theories and systems and applied them across Dentsu operations. Programmatic is something we’ve focused on understanding in Japan, where it’s at a much more nascent stage.”

There has been a valuable transfer of information the other way too though. Andree said Aegis stands to learn from Dentsu’s creative acumen, and its strong position in the field of sports marketing also looks set to be an asset to the broader network. Andree admitted there is much more to unravel. “We haven’t scratched the surface of being able to leverage the capabilities of both organisations,” he said.

A vision of reinvention

Andree’s stated vision for Dentsu—“to be a company that innovates the ways brands are built and to do that by being an organisation that can offer every capability”—might not differ drastically from that of most major networks. But he said an absence of “legacy systems” gives DAN a distinct advantage. Such systems don’t work in a world that prioritises agility, he said.

“Just being big isn’t the value any more. When I came to Dentsu, I thought that was its biggest advantage. Now I see that it’s that we had not had all these legacy systems that we were going to have to reformat. DAN is two years old and doesn’t have the baggage of two years of operating where people get used to other parts of the organisation being someone they’re competing with. Great talent wants to work in organisations where they’re encouraged to collaborate, rather than [take part in] the political in-fighting that our industry is famous for. So really what we’re doing is trying to reinvent the industry through our model.”

Tim Andree's career highlights

• 2006 Joined Dentsu America as CEO
• 2010 Appointed CEO of Dentsu Network West, overseeing the Americas, Europe and Australia
• 2012 Named SVP of Dentsu Inc and president & CEO of Dentsu Network; led acquisitions of Mcgarrybowen, Taproot and Mitchell Communications Group among others
• 2013 Appointed to the Dentsu board as the company's first non-Japanese director after playing key role in acquisition of Aegis Group

Dentsu’s vision of change extends far beyond advertising and media. Earlier this year, the company established Dentsu Ventures, a unit that operates completely separately from Dentsu’s immediate strategy. Recent investments have covered the fields of robotics and healthcare.

“The reason we decided to pursue a modest venture-capital organisation is to look five, 10, 15 years out and investigate what’s next; not necessarily to add value to our existing strategy but to do R&D for our future strategy. It’s a long-term seed. While we have rigorous financial expectations, it’s not a typical VC fund where we’re looking for X return. Even [ventures] that don’t perform well from a financial standpoint might do well from a research standpoint.”

"Empowerment and transparency"

A new kind of network requires new kinds of people, and as all agency leaders know, enticing top talent from the fields of technology can prove extremely difficult. Andree agreed the challenge was acute in mature markets like the US and UK, but said advertising was an industry that appeals to “the best and brightest” in countries like China and Brazil. He said he believed Dentsu had positioned itself well for talent by building a reputation as a sensitive acquirer of companies and risen dramatically in terms of awareness.

“10 years ago, I called a lot of people and sometimes people didn’t return my calls,” Andree said. “I’d call and say I was from Dentsu and the response would be, ‘Dents-who?’. But now… Not everyone’s right for us but I believe we’ve put ourselves in a position where we’re a talent magnet because we’re doing something new and different.”

Japanese companies have a reputation for failing to empower non-Japanese staff. That is sometimes deserved and sometimes not, but from Dentsu’s perspective, Andree said cultivating local management outside Japan is “extremely important”.

“By and large we are locally led,” he said. “As long as a system allows transparency, local empowerment is possible. I remember when I started at Dentsu, everyone said ‘It’s a Japanese company; it will move so slowly; you won’t be able to do anything’—but that’s not been my experience. We’ve doubled in size and grown our overseas revenues to 54 per cent. You can’t do that from Japan. You have to do that with local management and local empowerment.”