Arun Sudhaman 11 Feb 2013 // 12:00AM GMT
Dentsu’s debut on the global public relations stage has been a long time coming. The Japanese marketing juggernaut has dallied with the discipline outside of its home market before, inking joint ventures with Burson-Marsteller in the 80s and China’s BlueFocus more recently. Yet its recent acquisition of US firm Mitchell Communications Group marks the group’s first concrete effort to build a PR capability in Western markets.
It comes, furthermore, a good 30 years after Dentsu began trying to establish an overseas advertising presence that would turn its domestic dominance into a global phenomenon. Those efforts sputtered, largely because the Japanese agency’s unique culture and business model proved difficult to export. Recent years, however, have seen Dentsu make substantial progress towards piecing together its overseas puzzle, thanks in large part to a savvy acquisition strategy that has included critical darlings such as McGarryBowen, 360i, Attik and India's Taproot, to say nothing of last year’s blockbuster deal for media giant Aegis.
Dentsu’s Japanese PR unit clocked around $85m in net sales for its most recent fiscal year, a tiny proportion of the group’s overall revenue of $4bn. So it should surprise few that it has taken the firm this long to make a major overseas PR move.
“When you consider how long it has taken, and the problems Dentsu faced to develop a reasonably functioning advertising agency network outside Japan, it hardly seems surprising that it has taken them a long time to get round to PR,” says veteran Japan analyst David Kilburn.
Instead, what has raised eyebrows is the identity of Dentsu’s new partner. The vertiginous skyscrapers of Tokyo are a long way from the leafy environs of Arkansas city Fayetteville, yet it is here where Mitchell is based. And it is here that, for better or worse, Dentsu has chosen to embark on its foray into international PR.
That comparison may do Mitchell a discredit. The US firm has risen to prominence in recent years, winning a slew of awards, and establishing itself as one of the country’s top independent PR agencies. Since 2007, Mitchell’s revenues have grown by a jaw-dropping 500 percent to more than $12m, reflecting a business that can hardly be described as regional; while Mitchell counts some major Arkansas companies as clients, its remit is national and, increasingly, international, for such clients as Walmart, Hilton Hotels, Tyson Foods, Southwestern Energy Company and Pace Industries.
“In our experience, clients have been interested in talent and the ability to solve business problems with communications solutions, rather than where you are located,” says Mitchell founder Elise Mitchell, who now takes charge of building Dentsu Network’s international PR offering. “We focus on big brands and Dentsu does too.”
Although Mitchell’s home market can hardly be characterised as a hotbed of global PR, the firm’s founder has long realised the importance of a multi-market perspective. “We’re very innovative about talent - we hire people wherever they are located,” says Mitchell. “This hybrid model has worked for us. The idea of continuing to expand that and further grow out is something that we feel very comfortable about doing.”
Certainly, the one person who perhaps mattered most was not deterred by Mitchell’s locale. Former basketball star Tim Andree is credited with reviving Dentsu’s international fortunes, after joining the agency in 2006 and rising to an uncommon level of seniority for a foreigner within a Japanese company. “The roots of great agencies can come from anywhere,” says Andree. “I wouldn’t discount them just because they are a small office in Northwest Arkansas.”
Andree is effectively applying the same strategy he used to build Dentsu America into a $500m business, buying a string of highly-rated independent advertising agencies and letting them breathe relatively easily. “What I’ve learned is you have to get great people,” he says. “These agencies are cultures, not assets. Then we have to get out of their way and empower them - let them pursue greatness.”
Those comments may not make Martin Sorrell sit up and take notice, but they represent a marked change in how Dentsu previously did business abroad. After routinely buying blue-chip agencies in various countries, overbearing management from Japan often throttled those businesses into a state of disrepair.
“Certainly, they have learned that controlling everything from the centre in a very Japanese way is not the way to run their strategy,” says Edelman Japan CEO Ross Rowbury, who has spent 30 years in the country’s PR industry, including a lengthy stint with Japanese PR firm PRAP. “The new approach they are taking is much more effective.”
“Maybe the Mitchell acquisition is not the largest foray into PR,” adds Rowbury. “But getting the owner onto the board means she can strategically advise them on how to approach this. I think they are buying someone who might be able to help them with the global expansion.”
“It really begins,” agrees Andree, “with Mitchell the person.”
Mitchell the person
Mitchell’s mixture of dynamism and strategic foresight has turned her Arkansas firm into one of the country’s finest. Unlike many owner-operators, meanwhile, she has done all this with no small measure of charm. You would be hard-pressed to find anyone in the PR industry with a bad word to say about Elise Mitchell, which proved important when Andree came calling.
“Elise is a tremendous executive in her own right - over the last 18 years, she has built a company that is considered small but won’t stay small for long,” says Andree. “We think Elise can act as a real talent magnet.”
That last quality is likely to prove pivotal to Dentu’s global PR ambitions. “We will build a global PR network that will serve clients in more markets with more capabilities through collaboration between Mitchell Communications Group and Dentsu Group companies,” is how Dentsu Inc spokesman Shusaku Kannan puts it.
In practice, what this means is that Dentsu is relying on Elise Mitchell to lead a multipronged approach. On the one hand she will be expected to expand her own firm into new markets. On the other, she is charged with identifying PR firms that Dentsu Network can partner with and potentially acquire.
“We want to build a global network over time, and Mitchell will be one of a number of agencies,” says Mitchell. “We hope to have a strong network of collaborative, like-minded agencies. Mitchell will be the first but their will be many to come.”
Elise Mitchell’s Dentsu PR roadshow starts now. “This is an exciting opportunity to be part of something new,” she begins. “A lot of the other holding companies have a lot of strong agencies already in them but as far as I can see this was the only situation of its kind that exists in our industry today. A lot of people are excited for the chance to be part of something new.”
Others might find the challenge of spearheading this effort daunting. Mitchell sounds as if it is the opportunity she has been waiting all her life for.
“This is the most exciting time of my career,” she continues. “I am sure there will be other PR leaders who will want to join this journey with us.”
Beyond the sales pitch lies a more pragmatic strategy. If Dentsu is serious about flexing its enormous capital (it is the world’s largest single-brand marketing agency) in favour of PR, then independent agencies all over the world should start paying attention. “The great opportunity was the fit,” she points out. “They were looking to get into PR and it was just an unprecedented opportunity in my view for us to be a first-mover.”
So Mitchell Communications Group is, to all intents and purposes, the first guinea pig in Dentsu’s PR experiment. Mitchell, however, sees this as an advantage, preferring to think that the very act of joining a less traditional destination like Dentsu should prove as attractive to innovative agencies as it did to her.
That kind of thinking is based on one of the major lessons that Mitchell, a keen motorcyclist, says she has learned in the 18 years since she launched her agency. “Looking through the turn is a phrase that comes from motorcycling,” she explains. “As you approach a turn, you need to look ahead at where you want to end up coming out of the turn. I love this principle, both for business and for life.”
Looking through the turn
Dentsu might also be advised to take Mitchell’s advice when it comes to considering the future. In Japan, the group’s PR unit is the market leader, but sometimes appears predicated on a model that puts advertising first, despite fundamental changes in the country’s communications landscape.
“Some people would claim it’s not really a PR company,” says one industry source at a rival Japanese agency, noting that Dentsu often bundles PR services within an advertising or media-buying programme. “A lot of the stuff they do, they do for free. Second, a lot of the stuff they do is advertorial or paid media. The third thing is, they seem to have a model of small PR companies that they actually hand out the work to.”
“They are known for massive, overwhelming deployment power on the frontlines of media relations,” says former Edelman Japan MD Bob Pickard. “If you want boots on the ground, no one’s better than Dentsu in Japan. But when it comes to the state of the art - brand building and strategic communication - they don’t immediately come to mind.”
Despite that, Dentsu often wins plenty of business because of its status as the 800lb gorilla in Japan’s marketing services sector. “They are well-connected, well-heeled, at the most senior section of elite society, with all the right relationships,” explains Pickard. “ A lot of PR agencies feel that Dentsu often has an unfair advantage because they have the advertising buy and PR might be an easy add-on.”
Andree agrees that marketing services are often bundled together, a natural function of media commission pricing in the country. The net effect is that Dentsu does not really have a domestic PR model it can replicate overseas “Our model works in Japan but it’s not something we’ve ever really exported,” he confirms. “We’re trying to build a new model for how you can connect the function of PR and advertising.”
If anything, it may be that Dentsu PR Japan can learn from its overseas PR initiative. “They are very conscious of the need to perhaps have a more aggressive venture into PR as we see the convergence of advertising and PR,” says Rowbury.
Public relations has also become a bigger priority as some of the firm’s clients, such as Toyota and Olympus, have suffered serious international reputation crises. “Japanese firms have been requesting Dentsu HQ to deal with PR in many countries for their survival,” points out Japanese PR veteran Schu Sugawara. “Demand is expanding but they have not been smart enough to win tough PR business overseas.”
For Andree, Dentsu’s global PR offer must begin in North America. “So much of the cutting edge is over there. We already have clients that have asked us for these types of services - there’s plenty of demand.”
How Dentsu’s international PR offering plays with its domestic unit will be interesting to observe. Then again, Andree has so far been able to successfully integrate radically different digital and advertising cultures into Dentsu’s global network. And the firm’s minority stake in the BlueFocus China joint venture is, by all accounts, progressing well, growing by 80 percent in 2012 to reach RMB 23m ($3.7m) in revenues.
“Dentsu has the need to expand their PR business in China but they have no ability in execution,” BlueFocus CEO Oscar Zhao told the Holmes Report. “We think Dentsu has great ability to influence Japanese clients. We are both satisfied with the results now.”
In Zhao, Mitchell and, of course, Andree it seems clear that Dentsu is putting its faith in a fairly strong cohort of international market leaders.
“For Dentsu to pull this off globally, they need to have senior people who really understand PR,” says Pickard. “They are more motivated now and they seem to be more frequently adopting the habit of employing international people in putting together their capabilities.”
Which brings us back to Mitchell. Kilburn, for one, believes that much hinges on the US firm’s performance. “With Dentsu capital behind it, Mitchell should become a stronger challenger agency in the US, especially for Japanese clients.”
So, should the likes of Edelman and Weber Shandwick start sweating about the emergence of an Asian-based global PR network that will give them a run for their money? Pickard calls this the “wave of the future”, noting that “it is only natural that Asia-based organizations should be seeking to build up international networks.”
“Even so it has a long way to go before it becomes a serious rival to the current market leaders,” says Kilburn. “Developing a worldwide PR agency network will be no easier for Dentsu than it has been for today’s global firms – an ambition perhaps, but with a distant horizon.”