As a new wave of smaller scale and boutique consultancies eye the Asia Pacific market, Craig Hoy takes the pulse of the industry to discover whether size really matters in the agency world
The agency market in Asia is tough. A shortage of talent, a surfeit of competition and a culture of local firms under-cutting global operators combine to squeeze margins, lengthen working days and add stress and strain to the routine client/consultant relationship.
But far from this scaring away new market entrants, the Asia Pacific agency sector is expanding rapidly. At the boutique end of the spectrum a raft of new market entrants emerged in 2014.
The new kids on the block, often run by industry “veterans” including former Levis Strauss corporate affairs chief Tod Gimbel, think their relative size gives them a competitive advantage over the household names. But does size matter, and is big really beautiful anymore?
Steven Liew, Executive Director with APCO Worldwide in Asia Pacific, says it is customer service rather than size which is important. “Any agency, big or small, must guard against being too impersonal in the ways they deal with their clients. Being customer-centric is the only way to survive in this industry. People like to work with people that they like. If we don’t invest the time and efforts in making sure we delight our customers, they will go somewhere else. It doesn’t matter whether we are big or small,” he says.
This point is backed by Isabelle Neo, Liew’s former colleague at Paypal and eBay, who says clients are not really concerned about the structure or ownership of their vendors, but instead focus on innovation and delivery. “The old adage ‘It’s not the size of the steak but the way it sizzles’ holds true,” she says. “In-house clients seeks out consultancies to solve a problem they have. While we will be interested to know how the consultancies are set up, the reputation of the agency and the consultants it hires, what we really care about is how a consultancy can help us to fulfil a need we have.”
More than just size…
Christian Schubert, Vice President Corporate Communications Asia Pacific at chemicals firm BASF, says “agency size in itself is not a criterion” when he is seeking consultancy firepower. “It only becomes relevant in regard to the scope of the project. For a regional project where implementation support is required in several countries, only a larger agency might have the network and the local resources to cover the requirements,” he says. “But if it is purely about the creative task, only the size of the idea matters. Factors we look at include the understanding of our strategy and our needs, creativity, quality and reliability of delivery as well as the compatibility of the agency team with us.”
However, Gimbel, who last year joined European operator Landmark in Singapore as it expands into Asia, thinks clients do see a distinction between large global networks and smaller agencies. “Smaller, boutique style consultancies are usually built upon the experience and reputations of the principals,” says Gimbel. “The firms usually have strong subject area or industry specific expertise. When a client retains a small firm they are usually hiring the person or people who will be handling the account on a daily basis. There is a very good likelihood that the principals will be engaging directly with senior executives throughout the term of the engagement. Larger firms may also have very experienced senior people but they usually also have a bigger layer of middle and lower level staff. Access to the principals may be more limited and sporadic.”
Liew, who also recently joined the consulting sector after a long stint at eBay, dismisses suggestions that big agencies lack agility. “It ultimately comes down to the cultures and values of the agency. If the agency truly values its people, has an innovative culture and cares deeply about delighting their customers, it will have in place structures and processes which allow for agility and creativity. I still remember my days working at eBay where we believe that ‘culture eats strategy for breakfast’.”
Liew’s point is backed up by Edelman’s North Asia CEO Bob Grove. “Agency culture is key. If the agency is just about doing the numbers to satisfy the market, they will have a short-term focus. The agencies that treat clients as their most precious partners tend to attract the right people who are prepared to understand the complex world of a client’s life,” he tells PublicAffairsAsia.
Industry in flux…
But Bob Pickard, the former Burson-Marsteller AP boss who is now Chairman of PR operator Huntsworth, says the industry is in flux and predicts a squeeze on big firms. Despite offering “scale and scope of services, access to what are often deeper intellectual capital assets, and the PR ‘firepower’ to deploy concurrently across multiple jurisdictions” large agencies are under pressure from their smaller competitors, he says.
“I would say that large network benefits are dwindling, which helps explain the rise in market share of specialist and medium-sized agencies. More and more multinationals are hiring the best boutique agencies on a per-market or per-segment basis, which has resulted in a steep reduction in the number of truly ‘regional’ client relationships,” adds Pickard.
Ang Shih-Huei, Partner and CEO, Asia, at Bell Pottinger a UK headquartered firm, suggests it is increasingly important for agencies to think more about service expertise than putting dots on a map. The company has significantly upscaled its presence in Hong Kong and Singapore in recent months. “We have a presence in key centres all around the world. But unlike a network agency, we are not in every market. We feel it is more important to be in strategic markets than to be everywhere for the sake of it. It is important to have our own local capability in these strategic markets to allow us to deliver very customized communications programmes. While in other markets, we see benefits in bringing in best-in-class affiliates to help us execute specific local programmes.”
Huntsworth boss Pickard also believes that big PR agencies, which are owned by global PLCs focused on advertising and marketing services, are large enough to be impacted by corporate bureaucracy yet are not truly powerful enough to have the same impact and reach as other professional services.
“Some larger networks – especially the advertising-commanded ones which really don’t ‘get’ PR – often suffer from the ‘Brontosaurus’ problem, where they are excessively larded-up with process and therefore become agonisingly slow. The global commerce of public relations consulting probably amounts to no larger than a US$15-20 billion industry, so compared to other forms of commercial endeavour it is relatively small,” he says.
However, Lynne Anne Davis, President & Senior Partner, FleishmanHillard Asia Pacific, whose firm is owned by Omnicom, says that operating as part of a global network of agencies “leverages the expertise within its federated organization for the express benefit of specific client needs”. “This ensures agility and the ability for agencies within the enterprise to compete when it makes sense and likewise, cooperate when that helps to satisfy an overall client requirement,” she says.
Big but boutique…
Despite this, Davis also points out that FleishmanHillard has also sought to segment some of its offerings in order to reflect client – and audience – need. For example, FleishmanHillard operates an Islamic practice, focused on issues such as Islamic finance and Halal foods, under the banner of Majlis. “It’s about recognising that different audiences have fundamentally different needs,” explains Davis. “Bringing together the collective expertise within the network to serve a specialist group enhances your value proposition and gives the particular audience or clients servicing the sector comfort that the counselors working on their business have a real affinity with their challenges, their culture and their environmental opportunities.”
Davis also points out that large agencies can also structure their service offerings to deliver a boutique style service. FleishmanHillard has established the BlueCurrent Group, which offers specialist services in areas including integrated influencer, brand and content marketing; digital and social creative services; and innovative communications strategies leveraging emerging disciplines. Meanwhile it has developed VOX Global, another boutique firm under the Fleishman umbrella, a fast-growing business offering advisory services in public affairs and “special situations”.
This point is, in part, supported by Damien Ryan, whose Hong Kong-based firm Ryan Communication is shifting its focus from being a specialist financial communications provider to a more mainstream provider – but still focusing on clients who “seek independent views and an alternative approach”. He says there is a big opportunity for large agencies to “boost specialist practices in Asia”. “However, few large agencies have a culture of autonomy that would allow and promote independence in a specialist practice,” he adds.
Ryan also supports the view that “culture of an agency influences client service”. “The bulk of large and medium agencies operating in Asia are part of three or four publicly traded companies. Their priority, by default, is to achieve consistently higher earnings,” he contends.
From his Singapore vantage point, Tod Gimbel believes strongly that an agency’s size does impact the overall customer service experience, stressing that clients are increasingly less brand-centric as they search for highly personalised services. “Hiring a smaller firm is like going to a five star restaurant where the owner and chef is in the kitchen cooking your meal while using a large firm might be like going to one of Gordon Ramsey’s 15 restaurants; you will probably get a good meal, but Chef Ramsey will probably not be cooking it for you.”
Donough Foley, an ex-Burson agency lead, who has held senior roles with Philips and Qantas and is now Senior Vice President Government and Public Affairs at Moody’s Asia Pacific Limited, is less convinced that service culture is related to size. Instead he says it is “your relationship and the confidence you have in the agency or the individual client rep to do the job that is required”. “There are quality people in all agencies with different specialties but the onus is on the client to understand what they are looking for and make the decision based on a specific need or expertise. That is not often the case,” notes Foley.
Former Unilever comms chief Jonathan Sanchez, who has also moved into the consulting sector with the launch of his own firm STAND, admits that major global corporations often push back when their communications teams suggest breaking long-established links with global agency giants.
“Whilst Global VP for Sustainability and Communications for Unilever across SEAA, Russia and Africa, it was hard to convince both brands and the corporate side of the business to invest in smaller sized agencies,” he admits. “This isn’t unfair, given that they often don’t operate globally – but there is a role to fold in the strategic and creative thinking and I believe this is where large agencies are starting to show a critical weakness.”
Ada Wong, Head of Public Affairs and Communications, Asia at global dairy producer FrieslandCampina, believes that there are some clear benefits to working with smaller agencies. “The boutique agencies we work with are very specialised in their knowledge and approach and this is reflected throughout the team and the services offered. I enjoy working with a smaller – and often far more agile team – who contribute their expertise and deliver a tangible benefit to our business.”
But Edelman’s Bob Grove says agency positioning has less do with scale, and is more connected to structure and ownership: something which, as an independent agency, he believes gives Edelman the freedom to innovate. “There are very few large agencies with a big enough scale to offer the depth of expertise that a combination of boutiques could offer. With specialist skills being more and more in demand, agencies have to be either really large or focused,” he says. “Large agency is a misnomer as it’s relative to the industry. Most so-called large agencies are small outside their key markets.”
Sanchez, who recently left his role as global head of communications at Unilever to launch STAND in Singapore and Bangkok, predicts big changes in the marketing and communications industry. “The marketing industry will be split into big and small. The squeeze will be on the middle. Large agencies, such as the leviathans of WPP, will play the role of ‘platform’, the likes of iOs, Android or Windows, hosting the client relationship and delivery. The smaller companies, like ours – a leadership and sustainability consultancy – will act as ‘apps’ on the platforms, providing unique, highly specialised expertise as opposed to the ‘generic’ level of delivery of today’s mid-sized media and marketing companies.”
Size and money…
FrieslandCampina’s Wong also suggests that smaller agencies are increasingly well equipped to band together to give themselves the global connectivity and scale required to compete with global networks. “A specialism can be applied globally and, in my experience, smaller agencies are often well networked through affiliates if and when the need arises to work with a partner in new geographies,” she says.
Gimbel agrees that smaller agencies can combine their efforts, but he concedes that big can be better when clients are confronting major projects or issues. “Smaller firms may lack the scale to pull off large labour and people intensive initiatives. While they can provide the strategies and tactics, the ability to bring these projects to life on the ground is limited,” he says. “One way we have found to overcome this issue is to put together a bespoke group of small specialised firms to be able to fully service the needs of a client on a project or initiative.”
Gimbel says the decision taken by clients about whether to do something in-house or with external agencies can simply come down to cash – and that determines whether they think big or small. “As a former corporate affairs regional lead for several large MNCs I am very aware of a large company’s expectations versus the limited resources allotted to meeting those expectations. Very few companies can really afford to set up an in-house team with the expertise and size to meet their needs and expectations.”
He adds: “A small firm can easily act as a ‘de facto’ extension of the in-house team both to help with strategy and activation, but also to help increase the capabilities of the in-house teams. The client can get very high level, experienced assistance and advice, at a cost which is far less than what it would cost to bring employees on board to do the same work. Small firms usually have lower overheads then the large agencies and can offer clients a more attractive fee arrangement.”
Wong, however, adds that achieving that success effectively boils down to forming lasting, and trusted relationships between client and consultant. And while this can be easier with more boutique end consultancies, it is effectively based on personality and the personal capability of the client side staff. “It is important to me to build a strong relationship with senior agency specialists and in smaller agencies this is far easier to achieve through the consultants’ choices to work with a carefully managed number of clients. I choose an agency based on the quality of the counsel the senior consultants can deliver and I have often found this to be highest within small agencies.”
And this factor, concludes eBay’s Isabelle Neo, requires agencies, big and small, to fully comprehend what their clients need. “I manage two business units with very different needs and across multiple markets and I generally look to my consultants to help me fill two needs: access and execution. Particularly in markets where I have little or no resource, I look to my consultants to help me get to who I need to meet and be my eyes and ears, and to some extent hands and legs.”
And for those who do deliver, Neo predicts clients will reward this with a degree of loyalty agencies often find lacking in Asia Pacific. She says that consultancies, whether large or small, should be thinking in terms of how to “create value add”. “Public affairs issues are often complex and ever-changing and it wouldn’t be a realistic expectation to find a consultancy/consultant that has intimate knowledge of all my issues, and a rolodex of everyone I need to know. But at the end of the day, the consultancy (and the consultant) that invests in learning about my business, my industry, and my issues, and grows with me, is the one that I will stay with,” she concludes.
Craig Hoy is Executive Director of PublicAffairsAsia. Editing by Oliver Fall.