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INTERVIEW: ED MEYER, CHAIRMAN, PRESIDENT, & CEO, GREY GLOBAL GROUP
"We Want To Rekindle The Creative Fires"

At 75, Ed Meyer may be advertising's oldest chief executive; with 31 years at the helm he is probably its longest serving one. Both references to age are apt when you are heading a company called Grey. In India, to meet up with people from a local operation ''that is doing so well'', he just had to find out ''what particular magic was accounting for the progress'', Meyer met with Business Today's R. Sukumar to talk about Grey's philosophy, its plans for India, and his alternative career as a restaurateur.

ED MEYER, CHAIRMAN, PRESIDENT, & CEO, GREY GLOBAL GROUPQ. Mr. Meyer, could you give us a quick history of Grey that could set the context for our readers?

A. Grey is an advertising agency that was started in New York city in 1917. We are one of the older advertising agencies in the world, though I don't like the word old because we are young in every sense of the word.

The agency was started by two young men as an art studio, and it evolved into an advertising agency. There was no reason in the world why these young men should have succeeded, because they had no college degree, no money, and no experience in what they were doing. Yet, somehow, over a period of years they built a large and successful advertising company.

I look back at them with some joy because both of them lived into their nineties, so I take the point of view that anyone who is running Grey will live a long life. They ran the agency for 50 years. I took over this agency in 1971, and I have been running it for 30 years now.

When I took it over, it was a domestic, United States, advertising agency that had just begun to explore the world. In the last 30 years we have exploded into a major global advertising agency. The two most significant transforming events (in these 30 years) were the recognition that there was a wide wide world out there waiting to be served... So, Grey became a truly global agency, in the sixties and seventies, which was the right time to do it because you can't do it anymore. Today, we are in 94 countries.

The second (major transforming experience) was, to recognise, 25 years ago, that the communications needs of a corporation were much larger than just advertising. So, we've added a number of practice areas that go well beyond advertising and account for a major portion, almost 50 per cent, of the company's business today.

Where the story ends up today is that Grey is-if I were to give you the statistics-the largest advertising agency in the United States-looking at just the advertising component of it. We are the fourth largest advertising agency-looking at just advertising-in the world. And if you take the whole thing, as a holding company, we are the eighth largest of the communications holding companies. The reason for this disparity is because several other holding companies own several advertising agencies, and we have taken a point of view that we want to be 'best of breed', and have one only in each business-one advertising agency, one public relations company, one direct response company, one internet company.

Would that explain why, despite aggressively acquiring companies at the regional level, Grey hasn't acquired them at the global level?

Last year we must have done, maybe, 25 acquisitions, but they were all targeted at making each of the companies we have the best in its field in its country. Instead of doing a mega acquisition of a whole global agency we buy individual units, if we need them to make our individual companies better.

Our philosophy has long been that we want one company with units in all these fields that are always working together, as opposed to having a collection of companies...

But if a holding company has three advertising agencies...

(Interrupts) ... and four public relations companies...

Yes. Does it not mean more market share?

It doesn't help the client. It gives the holding company more opportunity, yes, because if there are five agencies pitching the business, and someone owns three of them, they have a better chance. But from my point of view, I think I am building the best in each category-that's number one. And secondly, when I compete with them, I compete on equal terms with each of the agencies.

I don't compete with the holding company; I compete with the agencies. I am as big as each of the agencies. So I am not at a disadvantage. I may be at an advantage because I can throw all my resources at making Grey the very best. I don't have to choose between the three.

The two major transformations you've listed, and the consolidation that the industry has witnessed at a global level have all contributed to the growth of the industry in a big way. So where is the next big push going to come from?

Right now, the marketing services companies are growing faster than classical advertising (companies). So one could say that the growth is coming more and more from the marketing services business. Since some of these businesses are younger and not as global, they can drive the growth for a while.

We are in 94 countries with our advertising company; we are in far less, maybe 25, with our direct response company. Then, there are acquisitions to be made in these marketing services businesses, because they are generally not as consolidated as advertising is.

In the longer term, one of the things that keep regenerating the growth of advertising is new industries that come along and require advertising. One of the great growth factors in the past 10 years has been the rise of technology, which brings with it two major uses for advertising. The product of technology must be advertised and explained to people. And the new companies-the Oracles and the Ciscos-want to let the world know their importance, their mission, and their passion, so you get corporate budgets for these new names.

If you added up-I haven't done it-the amount of money spent by technology companies in the last 15 or 20 years has added a substantial percentage to the growth of advertising. In my career in the business, every 10 years, another industry arises that somehow creates a whole new opportunity for advertising.

Thirdly, you keep looking around for other portions of the marketing services spectrum that you can either go into yourself or buy into. I know some of my competitors are more interested in some of these. I think we are already in some of the best marketing services categories now, and much more focused on building those than finding other ones that we know less about and may not be as promising. But all three represent new opportunities.

You left out the internet, while speaking of transformations...

The internet is transforming our business to some degree internally, in the way we operate. As a source of revenue-as an added service we offer clients-we need to be in the business, but I don't necessarily think it is going to be a high growth business for us. That's because we will not get into the technological or infrastructure side of it; we will be in, essentially, the marketing and design side.

That will be a good business, but as you can see, it is a business that has been over-hyped. People got over-enthusiastic about it; we were among them. But now we see it as just another line of business. One that can grow, but it is not going to have the astronomical rates of growth we though it would. I must confess that we were probably too ambitious with out investments. (Laughs) Hey, I am in great company there...

Grey adopted the holding company structure for its operations fairly late, didn't it?

We did in form, not in substance. For many years, all of these other things were reporting into the advertising business. And then one day I said, that's not a great organisational paradigm. At that point I set up a holding company and said every company, including the agency, must have a president.

In effect, we were organised as a holding company structure except that the agency was the holding company. Now we have a true holding company. The agency is just one of 10 or 11 different companies-the first among equals, if you will, for it is still the largest. By having 10 companies that report to the holding company we have not only clarified the organisational structure, but we have also given much greater dignity to each of these companies.

Have you derived significant benefits in terms of growth after this move?

Well it only happened a year ago (April, 2000), but it has enabled each of these companies be seen much more clearly. They are not hidden behind the size of the advertising agency. Each of them may share 30 or 40 or 50 per cent of their business with the advertising agency, but in every case the majority of their business comes from clients of their own.

Now what's happening here from the point of view of running an enterprise is you have the great advantage that if any one of these companies gets a client, you have the possibility of referring them to the other business. It's a difference in philosophy on how to build businesses.

The mega agencies (with an accumulation of companies) will build larger businesses, but I have long practiced the belief that success is determined by how well you perform for the client. This structure, by always having companies that are working together and therefore learning to do it harmoniously and holistically, is a better structure through which to offer a true integrated service to your client. That's one way in which we differentiate ourselves.

In India, there are several large advertisers who are considering moving from a commission system to a fee based system. They want to link what they pay the agency, or at least part of it, to the brand's performance in the market. What's happening at the global level?

Slowly, clients tend to move away from a strict commission-based business. They do a variety of other (things): some are commission plus incentive; some will prefer an entirely fee-based system. In the newer systems, there is always an incentive. From the point of Grey we're quite comfortable; we can design whatever system is useful to a client as long as we make the profit we are entitled to. I have no compunction about putting part of our compensation at risk.

Grey entered the country through a relationship with Trikaya, which was quite strange. Internationally, probably because of its strengths in packaged goods, Grey has always been considered an agency with tremendous marketing and consumer insight; people weren't exactly flattering about its creative abilities. And Trikaya was very much a creative hot-shop. Now that Grey has made the company a 100 per cent subsidiary, what are your plans for it?

We came to India looking for the best local agency we could associate with; we were very impressed with Ravi Gupta who was then running the agency.

And the idea of an agency that had a creative flair was not only acceptable, but was desirable because we had the marketing capability... Someone once said Grey is the schoolhouse of the industry from the point of view of marketing. So finding a creative agency was perfectly good since we would bring in the other stuff.

As far as Grey's creativity is concerned, because so much of the agency was (doing) packaged goods work-for big companies like Procter & Gamble-it was not able to develop the creative reputation I felt it deserved.

In India, what happened was, in candour, we were a very good combination with Trikaya under Ravi-creative and marketing together. But the financial side of the agency was not as well managed as it might have been.

So, after Ravi died-unfortunately-and we had to find new management for the agency, we had to make sure that it was strengthened financially (first), which it has been. (That done), the mandate to Nirvik (Singh, the new CEO) was, now that the agency has developed its marketing capability, let's rekindle the creative fires. And having spent part of the past few hours going over the creative work of the agency, I am delighted with it. I am very pleased.

We're told you visit department stores in each of the countries you visit to see what's happening...

I spent two-and-half hours this morning doing that. I started my career as a retailer. When I got out of college I went to work for Bloomingdale's, the well-known American departmental store, and I stayed there for three years. It is important to be able to understand the environment in which the products we advertise are being sold. I like the retail industry; I understand its importance; and I like to see how retailing is practiced in different countries.

In much of the world where there are big supermarkets, you can grab, touch, and read (the label on) the product before you buy it. In India, in the smaller stores and a man sitting behind the counter you can't really do that. There is somebody between you and the product. It is a different experience in retail than when I am shopping for myself and can grab the product and read it, even open the top and smell it when nobody is looking.

Tell us about your restaurant business...

I discovered after some years in the advertising business that I spent a disproportionate amount of my time in restaurants, because you take clients to restaurants to do business. Some years later, maybe 25 years ago, somebody I knew decided to open the kind of restaurant you would want to take clients to-an upper class restaurant. I decided that I would invest with him, (thinking that) as long as I spent a lot of time in restaurants, I might as well own a bit of one. Well it went on to become a significant chain of very upscale restaurants and I am an investor in it and it went public just last week. It's called Smith and Wolinsky. It started in New York, and now has local restaurants across the United States-we have about 200 of them now. But I wouldn't advise you to go there unless the company is picking up the bill.

You've spent 31 years in Grey now...

That's a record, and I am going for 40. There's a wonderful story about Warren Buffet, America's most favourite investor who was asked when he would retire, a question he didn't want to answer at all. He said, I think I'll retire about five years after I die. It's not a bad model. I enjoy what I am doing and I want to keep doing it. Grey has had major growth; our stock has probably been the best performing of any agency in the last four years; our company is growing at a strong rate, double digits; the earnings will be under pressure this year-all agencies' will be, because of the recession-but the company is in good shape.

 

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