Creative Disruption

I spent the last few days of last week at WPP’s really quite brilliant Stream 09 ‘unconference’. Last year, I did a ‘OMG, The Internet Ate My Business’ session that was really the kick off for this book (progress update: too slow, thank you for asking). This year, I was more in receive mode. And there was a lot to take in.

The one session that everyone goes to is (Sir) Martin Sorrell’s state of the nation address: an off the cuff. The juicier bits of which were covered here by the Telegraph.

Having now listened to a couple of these, the most interesting dimension for me – is not the latest letter to describe the shape of the recession (L.U.V- if you’re interested), nor the pronouncements on the fate of the media industry, but the way that WPP has evolved over the years.

This year as last, he pointed to three growth trends that are dictating WPP’s direction as a group.

- The growth of the BRIC economies and ‘the next 11′

- The internet, now 25% of revenues and growing (including mobile)

- Consumer insight – which now accounts for 40% of revenues (more than advertising).

[I should add that the one different focal point this year was on the need to 'improve the way we do things' - ie focussing on efficiencies in processes, working across the group. In other words: short term need to keep cost down]

The precise details of each of these is not as important as the overall implication. Following these trends the group shifts from being a UK/ US advertising group into something completely different all together.

Following these three trends has meant change at all levels – from major acquisitions (eg TNS), to organisational change within operational business (eg Mediacom), to edge innovations and investments (eg the stakes taken in a number of start ups by WPP Digital).

As I’ve been putting the book together, a real gulf has appeared between companies/ groups who operate like this, constantly evolving and seeking out growth areas – the standard practice in say, the technology sector; and those who remain in one sector and in one country – which has been the standard practice in much of the media industry. Certainly among those who currently find themselves most troubled.

Some of this is down to public ownership. Investors prefer a public business to do one thing well. And to get bigger and better at it. You don’t get to diversify – because, they will argue they’d rather find a business that excels in a new sector, rather than fund your foray into it. The problem, of course, is that when that one thing you do really well stops delivering the returns it once did – you have nowhere to hide; and investors will leave you like so many liggers scuttling away from a party once the free booze runs out.

The problem is that in this workd, there are very few businesses that can just stand still in this way. They need to be able to evolve – to move into adjacencies, to nudge step-by-step away from the core business before it implodes.

My McKinsey-bred colleagues call this ‘classic S-curve thinking’. Yes, in some sectors it is classic. In others, however, it remains rocket science of the highest order.

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• Sir Martin Sorrell: Rupert Murdoch’s pay wall plan is right (telegraph.co.uk)
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• Recovery? You’re joking, says Sorrell (thejc.com)
• WPP profits down by nearly 50% (guardian.co.uk)

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