Whatever Happened to Globalization?

In our business, there are tremendous opportunities for big agencies -- if they can demonstrate the ingenuity and the flexibility that small agencies are known for. Meanwhile, small agencies have to behave like big ones: They have to demonstrate a depth of resources, a breadth of coverage, and a knack for coordination. The issue isn't "big or small" -- it's "big and small." The great thing about the new digital technologies (email, intranets, electronic knowledge networks) is that they make it possible to be both big and small. They let you break up a big company into a massive number of small units, and they cut and slice the data so that you can still see the whole picture. At least that's the theory. In our industry, most clients aren't convinced yet. They tend to believe that the bigger you get, the less creative you get. It's up to us to change their minds.

You've hit on one of the defining tensions of business at the turn of the century. Being a global competitor means being a big company. But the logic of the Internet and the logic of innovation argue in favor of startups. What does it take for a big company to turn its size into an asset rather than a liability?

All of the CEOs whom I work with are wrestling with three make-or-break issues: overcapacity, new channels of distribution, and internal communications. Those are three of the defining issues for big companies as we enter the 21st century.

Overcapacity plagues every industry -- from automobiles to computer chips to beer. Quite simply, we are producing more stuff than people can consume. So it's harder to differentiate yourself. It's harder to charge premium prices. And it's harder to innovate -- because product improvements get copied at light speed.

Channel issues pose an even bigger problem. History teaches us that no old channel of distribution ever adapts quickly enough to the emergence of a new channel. And with the rise of the Web, new channels of distribution -- along with entirely new business models -- are being created faster than ever before. Traditional assumptions about strategy, pricing, and selling are under fierce attack. The Web threatens to turn every industry upside down and inside out.

Last year, WPP issued $300 million worth of corporate bonds through Merrill Lynch and J.P. Morgan. The whole process took three to four months and involved an army of accountants, lawyers, investment bankers, and brokers. Today, there's a Web site, called IntraLinks, that works with the big finance houses. It distributes details of a corporate-bond issue to a closed loop of investors on, say, Monday morning. It then asks for a buy/no-buy decision by the end of the week. That's the power of the Web.

So overcapacity and disintermediation -- the development of new distribution channels -- are two big challenges. But the toughest challenge by far is internal communications. We wrestle with it every day: How do we get the 33,000 people in our wholly owned and affiliated companies to face in the same direction, even as they stay loyal to their colleagues, to their clients, and to their home offices? How do we create a "network economy" inside WPP -- a social system in which people know, like, and respect one another, and are willing to share ideas quickly and openly?

What steps are you taking to improve internal communications?

For one thing, we keep working on strategy and structure. The WPP Group employs 33,000 people -- but equally important, it consists of 60 or 70 companies, each one different from the next. We stretch from Ogilvy & Mather Worldwide, which has 9,000 people, to Geppetto, which started 18 months ago with 3 or 4 people. From established businesses to startups, we're building a collection of strong, small tribes.

We also keep experimenting. We now have 21 organizational "test beds" around the world -- offices in which we're piloting new approaches to client service, new ways of working, new forms of office design. The J. Walter Thompson office in Frankfurt is an example. That office has grown enormously over the past few years; it now has more than 400 people. That's a sign of great success, of course -- but it creates problems. There was a time when everyone knew everyone else: People were friends, not just colleagues. With 400 people, that's no longer possible. Meanwhile, the more smart people we sign on to work with us in Frankfurt, the more people we have who are eager for promotions and new challenges. And if there's only one CEO in Frankfurt, only one set of account supervisors, that limits opportunities for growth.

So we split the Frankfurt office into four agencies. Each agency has its own CEO, its own set of accounts, and each agency has profit-and-loss responsibility. This restructuring lets us operate on a more human scale, it pushes responsibility downward, and it quadruples the number of senior management positions. It's been an extremely successful experiment.