Lévy Shares His To-Do List

NEW YORK Publicis Groupe’s digital capabilities, Maurice Lévy, CEO and chairman of the French holding company, talked to Adweek‘s Noreen O’Leary about the state of the industry and Publicis’ prospects this year.

Just last week, Procter & Gamble consolidated all work on its Oral-B line at Publicis-owned agencies. And the company bolstered its digital capabilities by completing its $1.3 billion acquisition of Digitas slightly more than a month ago.

Q: Publicis Groupe recently posted a 15 percent increase in 2006 profits. What do you expect this year? In terms of growth, 2007 will be different from last year?
A: In 2006, we started out very strongly, then a weak Q3, and finally a very strong Q4. Due to the fact that some of the clients we lost—who had impaired Q3 numbers—were still there in (2006) Q1, we will have a (2007) Q1 that is starting out at a slower pace than last year. Results will grow much better in Q2, probably much better in Q3 and will have a Q4 something in the region of last year’s Q4.

Your margins are now 16.3 percent, a level you say is highest in the industry. How did you achieve that?
We have a consistent approach that internally we call “The Horizon Plan.” The idea behind it is to lower the costs of administration, logistics, IT, purchasing. We have a central team to work on what we call shared services. In the U.S., for example, we have shared services servicing all our operations: accounting, invoicing, administration, etc., for all of our operations. That is quite unique. Obviously, with that we have the critical mass that allows us to have better tools and better costs. We are now expanding in the area of procurement and we are expecting to significantly lower some of our costs. This is very important because our operating companies were having different IT systems, different approaches—people were buying whatever computers they wanted, etc. We don’t yet have one single system, but we are going in that direction and we are reducing the costs of our buying, starting with travel, hotels, software. The only area we can reduce our costs is the area of support services—everything that has to do with administration, logistics, real estate, etc. We have sometimes had some very difficult conversations with client procurement departments, so we have decided to have a procurement department to lower our costs. We don’t believe we can charge the client at a higher fee than the competition, so we have to be competitive on the prices we pay for things. We don’t believe we should reduce the investment on our people because we need to put the right resources in front of clients in order to deliver the best possible product.

Where do you plan on taking Publicis?
If you looked at Publicis 10 years ago, we were just a European agency. Today not only have we accomplished to be among the top tier, but one that is really focusing on client needs, and we have people who are innovators and creating some breakthrough solutions in many areas. If you look at the media fields, we probably have the best assets. If you look at the approach we have in communications, we have been able to really break some molds and our approach “vive le difference”—based on our respect of differences, not only in the countries but in disciplines—is something that has a lot of value and the values we are carrying and developing are right for today. We have been lucky to be what we are and the timing in which we are building our operations. We are not saying we are formidable; we are not arrogant. With a little bit of humility we understand we have been lucky. But we believe that today we have some of the best assets to serve the clients. We will probably grow much faster than our competitors and we still have the means to take some actions and make some acquisitions if we find the right ones.

Publicis Groupe is the second-largest Western operator, behind WPP, in China. Given the speed of change there, how difficult will it be for less-established industry holding companies?
The companies who have a strong position in China have an advantage today that will be difficult to compete with and that strength should pay very good dividends in the future. They will be able to better serve their clients, they will have the opportunity to train their people and expand their service offering. Advertisers need more and more sophisticated services. In the beginning, the only thing they needed was to put their brand on TV and some good ads would do the job. Today that is not enough. For example, now in some markets like the big cities, consumers are as sophisticated in terms of marketing as our Western world. When you go to Shanghai, Guangzhou or Beijing, the stores, the brands, the people, the fashions, the lifestyles are very close to our world and people are catching up to our own way of living at a speed that is just incredible. One of the biggest issues we have to face in this region is the issue of people, because trained people in our industry are limited. We are training them, educating them and once we have done that they are poached by the competition, so there is a situation that is quite difficult and we have to work on this in order to make sure we have the right talent. Because the talent is beginning to understand the way the business works and they are staying with the good agencies, so once you have the base you can also have access to the best people.

Do you retain any interest in U.K. media company Aegis?
We have made it very clear since the end of ’05 we are not interested due to the fact we withdrew from the bidding process in October 2005 and as long as there is no change in the situation we don’t believe we should step into a fight between (Havas CEO) Bolloré and (Aegis) management.

Can you address Leo Burnett Worldwide and talk that you are looking to change top management there?
Wrong. That’s wrong. It’s wrong—I’m not looking for any change in top management. (Burnett CEO) Tom (Bernardin) is doing a great job. The team that has been put into place with (North America co-presidents) Juan Carlos (Oritz) and Rich (Stoddart) are doing a great job. (Burnett COO) Tom (Dudreck), in his new role, is helping to move Burnett to a new place. Arc is doing extremely well, so we believe it will soon be time for Burnett to attract much more clients. They are doing extremely well internationally. What they need are some wins in the U.S. and this will happen.

Susan Giannino has been chief of Publicis USA for three years now. How is she doing?
We are very pleased. Susan has been instrumental in winning the Oral-B business and we are very pleased with the work she has done like putting in place (Publicis USA CCO) Bob Moore, who is a real star, and (Publicis N.Y. president, CCO) Rob Feakins. The agency is working together well. Publicis Worldwide will surprise people.

Do you envision a larger role for Linda Kaplan Thaler at Publicis?
Do you mean on P&G or at the holding company? On P&G it would depend on the opportunities and what P&G would like to put into Linda Kaplan Thaler’s hands. This is something we can’t predict. I can tell you The Kaplan Thaler Group is doing extremely well. They are growing; they had a wonderful year in 2006 in terms of new business. They are doing very well at the beginning of this year, and this is an agency that has considerable potential to grow.

Digitas and SMG share GM. Should they merge?
They can work together and they do already. The fact that Digitas is a stand-alone doesn’t prevent them from working with some of our agencies on a common client and that is something we are encouraging. I won’t say it is easy; it’s never easy, but it’s easier in our group than in many groups for at least two reasons: First, as we are a new group, we are not loaded with years of a silo-ed approach where people work alone with huge separations. This is something people understand and appreciate. Second, we have management approach, which is what we call in Publicis the “family approach” rather than the competitive approach. We are not encouraging our advertising agencies to compete against one another. To behave correctly in terms of family spirit, this one of the most satisfactory things. We have meetings of our top management (of Publicis operating units). We don’t discuss client issues; we discuss strategy issues and people are sharing their numbers, issues, concerns and we work as a group on common issues in order to find the right solution.

Can you give us an update on Rishad Tobaccowala’s digital consultancy, Denuo and David Droga’s Droga5?
With Rishad, the good news is we have been able to have a first year as an investing year last year, which was much better than a [typical] investing year because we were able to break even for a new operation that is great and we are expanding very quickly. The only limitation to growth of Denuo is the talent issue, but we are very pleased with Denuo. David Droga and some other operations that we are developing in other regions of the world are experimenting with new approaches and we are investing quite heavily in these new approaches. We are not yet able to communicate and tell exactly what we are doing, but we are already presenting some things confidentially to some clients and the reaction is very, very positive. In May or June we will have something [to say] that will be quite interesting and I think quite surprising.

What do you think will be the ultimate industry hierarchy? Do you think it will end up being the three global players: your company, Omnicom and WPP? Do you think Havas and IPG will still be in that ranking and can you address speculation of any interest Publicis might have in IPG?
I have a rule that I never comment on the competition.