The past year has been a tough one for Publicis Groupe chief Maurice Lévy, a well-regarded executive known for his adept management of the industry's third-largest marketing communications company. More recently, the Paris-based company he built has struggled with major account losses, slowing organic growth and lingering doubts about his logic in pursuing a failed merger with rival Omnicom. Lévy recently spoke with Adweek about why he believes his $3.7 billion acquisition of digital specialist Sapient in 2015 is a bolder move than the ill-fated Omnicom merger and what it means for Publicis in what he calls this "year of transition" at the company. Here, Lévy reflects on what Publicis must do to achieve that change.
Adweek: You're speaking at the 4A's Transformation conference this week. How good a job is the industry doing in embracing change?
Maurice Lévy: We have to look at how the world is changing. We are still well behind all the new things that can have a huge impact on our business. Every day things are changed by new technology, new approaches, new business models. Look at Accenture, Deloitte or IBM and their acquisitions in the digital agency space. It is clear these very respectable companies will also play a role in the transformation of our clients and business. This is why we have decided to transform our business, why we made the Sapient acquisition and why we changed the way we are currently operating.
How big a challenge is making that transformation?
Our industry is fighting on many fronts, as are our clients. One of the problems we face today is this mantra of more for less from clients. This is extremely difficult because our very existence is to serve our clients' interests. We need to think about the future and help clients be first to that future and to tackle its real issues. Thinking and investing in that future is hampered by the fact that not only do we have to defend business [in reviews], we also have to work with more-for-less conditions, which are not allowing the kind of investment we should be doing.
You've never been afraid of taking risks. What did you learn from the failed Publicis Groupe-Omnicom merger?
The dream was extremely interesting and could have transformed not only our business but the entire industry. The acquisition of Sapient is proof that not only do we have to take risks to transform our business, we have to take on daring projects. Sapient is even more ambitious than the Publicis-Omnicom merger. If you look at the comparison between the two, Publicis Omnicom was a merger of scale. The Sapient acquisition is something leading to a transformation—it's not about scale. It adds technology, consulting, digital capabilities in a world where advertisers need the combination of what we call the alchemy of technology and creativity.
Do you think the era of large-scale consolidation in the marketing communications industry is over?
When you look at the advertising landscape with the current players, I don't see how things can change dramatically. I see consolidation coming from relatively small operations. The biggest consolidation trend will be in the digital space.
Will Publicis Groupe be making any more large acquisitions?
Short term, we are focusing on niche. We've had to digest Sapient. Then we'll look within two or three years at what could be the best new steps, but currently we'll continue our transformation in streamlining our businesses, in delivering integrated solutions and the transformation of our client service business.
Are there any circumstances under which you might consider a sale of Publicis Groupe?
Publicis Groupe lost major pieces of business over the past year and has issues within its media and digital operations. What are your biggest challenges in turning things around?
We have anticipated industry changes before our competitors. Not only do we now participate in the advertising market but also in the fields of technology and consulting. When you look at the competition, we can compete with all our classic competitors on everything but market research where we never had interest. We're also capable of competing with the Accentures of the world where our competitors cannot. The biggest challenge we have to face is to execute properly that winning strategy.
Touching upon last year's Mediapalooza media account reviews, how concerned are you about the loss of business at Starcom Mediavest Group?
Obviously I'm concerned with the losses. But when you look at the decisions made and at the full year, you see that until the decision from P&G [to remove North American media business from Mediavest], SMG was a net winner in Mediapalooza. You can go through the numbers and at the end of November, we were a net winner. Then there were two decisions made in December. One is P&G, with the loss of roughly two-thirds of what we were managing. That was a big hit and changed the situation. The other, which has been reported as a loss of Publicis, is actually the loss of IPG's [U.S.] L'Oréal [media business]. We were not handling that part of the business, so it hurt our reputation.
What about Coca-Cola and Walmart?
I think we answered the Coke brief pretty well but we probably missed something. Our collaboration on media and creative continues positively. Walmart was not part of Mediapaloosa, it was not even a pitch. I had a conversation with the client regarding the decision and it had nothing to do with quality, price, people or service. Each case is specific. It's always bad to lose an account and unfortunate when you have a bad coincidence of losses but people misreading that could make a huge mistake if they were to consider we lost our energy, our competitiveness or our ability to take market share.
You just announced a restructuring of the Publicis Media Group, which follows broader changes at your company where it was divided into four hubs. Any further organizational changes?
At Sapient, everything has been done since last year. Publicis Healthcare has already been up and running. With Publicis Communications, all the change announcements have been made, and the people are motivated, focused and working hard on the new organization with clients to deliver on our promises. The last piece to be implemented was Publicis Media where the key announcement has been made.
About morale, there's a lot of speculation Publicis Communications' execs resent the lack of investment there while the holding company continues to make acquisitions.
With morale you will always have a few people who are unhappy because they have not gotten what they want and people who are resisting change. This is normal and true everywhere. But the vast majority by far, based on the number of emails I'm receiving about how people are reacting to our presentations, is always extremely positive.
Any additional layoffs as a result of these restructuring changes?
We have not planned any layoffs. We have planned a lot of savings and will invest a large part of them.
Are you still planning to step down as CEO next year? Have you decided to stay on because of all the corporate restructuring you're making?
The changes we are making are not the changes I am making. It is a team effort. Everyone is deeply involved in the new organization and has worked extremely hard on the repurposing of services and how to best drive our clients' transformation. One can only be confident about the future, and there is no reason why I should change my plans.
So we can assume you'll step down as CEO and take on a role more like that of a chairman?
I don't know the assumption. What I can tell you is that I have decided—and I'm not changing my opinion—that the AGM [Publicis Annual General Meeting held on May 25] in 2016 will be my last one as CEO.
This story first appeared in the March 21 issue of Adweek magazine. Click here to subscribe.