CASE STUDY PUBLICIS GROUPE 2009: TOWARD A DIGITAL TRANSFORMATION BY: GENERATION D I. Executive Summary Publicis Group has always been one of the leaders in the advertising and communications sector, they have managed to remain competitive by anticipating in the environmental changes and trends and by trying to transform every threat to an opportunity, nevertheless their mission is to remain “a world leader in sustainable value creation though imaginative ideas and connections. ” Drastic changes in technology and economy happened the last decade, forced them to restructure their business model.

The primary goal was to upgrade their digital skills to provide integrated services and solutions by using both new technologies and traditional media effectively and secondly, to expand their operations. Growth was managed by acquiring external small agencies throughout the world in order to create a global network, while they used Digitas contracted in a deal as the vehicle for the transformation and growth strategy into the digital realm. Many challenge arose, since an ‘’empire’’ of agencies were proven difficult to preserve.

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Managing corporate culture of the newly acquired business may proven to be the most difficult task and result in a failure of even the most well devised strategy and plan. The success of the whole project relied mostly in the cooperation of the units and the management team spirit. So far, Levy was driving every single merge and strategy of the company and had created a sense of family between the sister companies and employees. The leadership role had now to shift, as the Vivaki project should play this role in the future.

After careful evaluations, the new project had thought to bring potentials to understake such a task and role in this timely consideration. However, there are still major risk indicators for afore mentioned strategies. The main problem still persisted in keeping up with the role of being a leader in the marketing world, they had to maintain this status by performing more effectively in the digital world. Publicis Groupe has been keeping up by acquiring a large amount of agencies but this only increases their customer base instead of growing it.

Also, because of the recession, it is highly possible that the demand for marketing and communications will decline especially when marketing is usually the first department to be cut when funds are low. Therefore, it is important to achieve high marketing results with the lowest amount of funds. Considering the value/time ratio, we came down to offer three different alternatives that will help Publicis Group maintain its competitive advantage in the future. Our first alternative is to merge and integrate all Marketing & Communications business units.

This strategy consists on investing time and effort rearranging marketing strategies and efforts after merging with the newly acquired companies in order to overcome the period time where many companies would stop investing on advertisement. Under this point of view, PG would maximize their profit and ROi by strengthening their marketing departments and getting more profit out of their invested money. Its known the world over that digital marketing cannot work on its own. It needs to be integrated with the other marketing channels in order to give one powerful and consistent message.

So our strategy is based on enhancing our digital marketing department. Another alternative would be to have another digital group work with Publicis’ business units. While the other businesses stay independent, Publics group will be able to continue their project with VivaKi yet still have a place to go when they need digital work done. The digital network it creates will become a tool that can be accessed at anytime needed. This strategy will also help keep boundaries within the already existing groups. By allowing each group to maintain their project will show stability and management confidence.

By spending less time and resources merging through human resources, these resources can be used to spend on their current running projects. Our last alternative would be to leave each of the business groups to create their own digital teams. Any success or failure will be left for each team to take responsibility for. This could be good for those units that feel indifferent thoughts about the digital revolutions and treats it as a moving trend instead of a long term change. As most groups have a limited amount of funds and resources, they will be reluctant to change their ways.

Also, some groups will be better at becoming digital than others, depending on their team. While this alterative can cost more resources to achieve, it can also create rivalry between the groups for speedy innovation. Our recommendation for the Publicis Groupe is to merge and integrate marketing and communications business units. While this strategy can carry greater risk, it can also maximize their shareholder value and create digital competencies to surpass their competitors with communications between their business units to deliver customer value.

To begin the implementation, we will need to identify the key stakeholders that will follow the strategy. In this recession, we will have to lay off employees in the future in order to keep the remaining helpful employees safe. This way, it would show the Publicis Groupe knows how to calculate and avoid meaningless risk. Second, we need to also identify the mergers that would create synergy for the company. Publicis Groupe would merge the first two business units and maintain a strong communication from management.

With the merges happening, it is important to keep everyone in the loop informed of the changes and how it will affect them individually. Keeping a strong synergy will increase shareholder and customer value. The strategies given have a significant amount of risk in it, so a robust contingency plan is in order. In the best case, Publicis Groupe will continue to merge their business units and use them to maximize shareholder and customer value by creating synergy. This would help grow the customer base much faster organically. In the worst case scenario, the businesses are reluctant to merge or follow alternatives can be released and Publicis

Groupe can continue to pursue their project with ViavKi. II. Overview Technology is considered one of the major environmental forces that affect today’s businesses. With the beginning of the new millennium, the evolution of web from 1. 0 to 2. 0 has changed the landscape for the communications and advertising industry. The new tool reaches massive audiences in a more effective and efficient way than traditional media. Change is inevitable in order to compete and remain in the business. Companies should anticipate and transform this threat to an opportunity.

Publicis Group realized the need for transforming to more integrated services, where they would provide traditional and digital approaches at the same time to their clients. Globalization, economies of scale and competition have created the need for companies to operate in different countries around the globe. In order to remain competitive, Publicis noted that there was a need to adapt and acquire new dimensions. Therefore, the advertisement group took action and acquired 10 smaller agencies in order to enter new countries and start its globalization process.

In addition they restructured some of the existing sister companies. However, the newly acquired companies became a management challenge: The goal was to find a way to integrate and allocate them under the umbrella of Publicis Group. Issues such as cultural diversity and set of values between the employees were threatening this ideal integration. In addition management had also to consider another major issue, the company’s size had grown dramatically after all these acquisitions but still they had to remain flexible in order to gain the competitive advantage in this fast pacing, and demanding environment.

It’s worth mentioning that during the harsh period of economic instability that hit the global market in 2007 and 2008 Publicis Group tried to make the biggest transformation in company’s history. Skepticism and ambiguity for the future of economy obligated companies to reallocate resources and restructure their business model and position in the market. While it was considered a ‘’bad’’ timing for transformation it meant at the same time to be the company’s competence, due to the fact that the more accurate and cost efficient results it would benefit their clients and as a result the company.

III. SWOT Analysis [pic] IV. Stakeholders Analysis [pic] Due to Publicis Group global reach and influence the stakeholders are really scattered in means of influence and holding decision making power which is clearly visible throughout the whole case. The smallest group of P12 has the highest decision power therefore highly influential however they found themselves under huge pressure and influence of the society as whole resulting in major transformation where Publicis’ business model has to be adjusted in order to catch up with the societal change and consumer shift.

This unlike position for public influencers such as Publicis Group was, they had to realize where to aim their future initiatives as well as recognize their new partners in the market space meaning online ad space providers like Google or Yahoo. They were pressured by clients as they had to follow the changes as well and who at the same time recognized that digital media use is a way less expensive marketing option. Therefore finance department plays a significant role in decision making process and transition itself.

In case of Publicis Groupe human resource is the pillar and being build of 45 000 employees every step has to rethought twice as changing it is extremely difficult and time consuming. V. Major Problems Statement of Primary problem: In 2006, Maurice Levy, the CEO of Publicis Groupe, had a hard time developing along with the marketing trends where they needed to change from their traditional efforts to improve their digital skills and decided to work closely with Digitas, a company that was mastering their own internet interactive media direction but eventually saw he passion in Levy and made the decision to make a deal with the Publicis Groupe. Who: Maurice Levy of Publicis Groupe, Digitas What: Formed together to become “a world leader in sustainable value creation though imaginative ideas and connections. ” Where: Online Media Marketing When: Made a deal in 2006 Why: To combine their skills in being the best marketing agency in the world using innovation, imagination, and new ideas in the online industry.

Statement of Secondary problem: In the age of 2009’s economic turndown, marketers were looking to get more customers with less money because of the vast amount of online media that can be used to achieve this. Publicis Groupe has to continue to be able to prove themselves as a marketing agency by following the fast growing recent trends and also build their client base with the fewest amount of dollars. The future of Publicis Groupe needs to be run on reinvention, imagination, connections, and services whether it be online or offline with other agencies. Who: Future Clients and Publicis Groupe

What: Maintaining a business that is effective for their clients. Where: Worldwide, especially after acquiring agencies all around the world in Europe, Japan, China Brazil, and India. When: 2009 – Present Why: In order to stay in the marketing industry, it is important to keep up with the online trends and how fast the industry is going so that Publicis Groupe can still become attractive to future clients. VI. Significant Aspects of the Problem Macro Issues identified in the SWOT, impact of the issue as it relates to the central issue(s) Significant Factors: representative topics include:

Policies: Everyone in Publicis Groupe regards PG more as a family than a holding company. Each agency preserved its own culture, while valuing each other. Diversity stimulated innovation and mutual respect drove collaboration. Objectives: be complemented with the capabilities developed by independent digital advertising, direct marketing, and technology firms; to find out a new business model to be the company’s growth engines; to raise digital revenues to 25% of its total by 2010.

Human Behavior: Levy led a acquisition of Digitas for Publicis Groupe, then cooperated with Kenny and other colleagues to try to catch up competitors and be a world leader in the online industry. Production: media firms, creative agencies, and digital agencies all over the world are producing advertisement campaigns and value services. Ideas: when Levy was considering the whole deal with Digitas, he wanted to use Digitas to spur the total transformation of Publicis Groupe, to have all its pieces move in one unique digital direction.

The team challenged themselves to think like a start-up to find a new growth model, since Levy didn’t want to merge digital and media these two of the company’s growth engines. Then they got an answer which was scale. Instead of competing with Google, Publicis Groupe chose to be partnership with Google and other portal giants. Marketing: shifted from communicating at consumers to communicating with them. Stakeholders: board of directors, Yahoo, Microsoft, Google, other portal giants, customers, competitors Organizational structure: In 2004, Publicis Groupe had nearly 45000 employees across the globe, but the corporate communications was thin.

It had advertising companies, media companies, and SAMS ( Special Agencies & Marketing Services ). Under SAMS, it operated Digital/Interactive agencies, Healthcare agencies, PR/Corporate Communication, CRM/Direct/Shopper marketing agencies, Events Sponsorships, Multicultural firms, Design/Production firms, and Brand Consulting/Research agencies. Personnel: Digitas had a start-up culture, its people were used to making rapid decision, they were more focused and happy to work here. Products and services: advertisement campaigns and marketing services.

Mission: to develop a values statement centering on the commitment to Viva La Difference! ; to transform the whole group to be ready for the digital era. Finance: by the end of 2007, Digitas’s profit margins had risen from 10% to 14%, nearly reach Publicis Groupe’s 16. 7%. External influences: Since 2008, the global economy had taken a turn for the worse. Transformations happened in the Marketing and Communications Industry, new digital technologies shifted the balance of power to consumers. Management Style: the whole PG’s management is transparent, and one business goes down the whole place is in trouble.

Communication: when negotiated the Digitas deal, Levy kept a frequent and attractive communications with Kenny; after embedded, Digitas and PG’s senior executives were constantly on the move throughout the globe, to make transformation smooth and also keep virtual communications and met every three-to-four weeks with Google team. VII. Evaluation of Alternatives/Recommendation/ Implementation Alternative 1 – Merge and Integrate all Marketing & Communications business units A. Publicis Groupe (PG) has been famous for the huge amount of acquisitions they done in recent years.

They have essentially been buying their customer base rather than growing it organically. This is a form of empire building, which does not drive shareholder value. Given the anticipated economic recession and other external factors, we believe that now is a prime opportunity for Publicis to merge and physically integrate their marketing and communications business units to create synergies and maximize shareholder value. B. Given the anticipate recession, it is likely that demand for marketing and communications consulting will drop.

Many companies still follow the traditional thinking that the marketing budget is the first to get cut when finances are tight. This will allow Publicis to have additional time and resources to ensure that the merging and integration is executed properly. Additionally, other companies in Publicis’ portfolio that have profit & loss (P&L) responsibility will be motivated to merge with their new digital acquisitions, given the market trends and customer desire to utilize low cost marketing techniques and maximize return on investment (ROI).

This strategy would not only create synergies by reducing overhead costs, but would maximize communication and resources among the previously separate business units. This strong collaboration could help Publicis offer a more well-rounded marketing and communications service to their customers. Digital marketing, generally speaking, cannot be successful on it’s own. It needs to be integrated with all marketing channels to deliver a consistent and powerful message to end consumers. The ability to achieve this should deliver enhanced value to Publicis’ customers and allow them to grow more organically in the future.

Drawbacks of Integrating all Marketing & Communication business units: There are always significant risks when merging two or more entities. One of the difficult things is to get both sides to buy into the strategy and work to make it successful. There are almost always human resource issues that create significant problems when integrating two companies. Significant resources will be required to align the corporate cultures, compensation structures, and policies of the companies. It is human nature for some people to resist major changes. Alternative 2 – Have a separate Digital group to facilitate Publicis’ other business units

A. This strategy is the most similar to the status quo. PG can continue to pursue the VivaKi digital initiative that they have begun. Most business units would remain separate and independent, but have a go-to resource for everything digital. This would create a “nerve center for PG, an area where agencies can collaborate and draw on a reservoir of tools and talent to better serve clients” (p. 10 paragraph 5). With this strategy, the business units would not share clients, but would share ideas and collaborate on projects that required expertise outside their own.

This will help each business unit maintain their profit and loss responsibility and corporate culture. B. This strategy helps maintain the respect that currently exists between groups. It is important to note that they have already begun this initiative, so continuing to pursue this strategy will show stability and management’s confidence. This strategy also helps avoid the human resource risks associated with merging the distinct entities, while still allowing them to take advantage of the digital revolution that is beginning. Alternative 3 – Leave each business unit to create their own internal digital team A.

This strategy leaves the responsibility to each business unit or group to form their own digital team internally. Some business units under PG have already taken this inititative. These groups are more reluctant to join the major digital initiative, VivaKi, that PG has begun since they have already invested significant resources into adopting and pursuing this trend. B. Some business units may feel differently about the digital revolution. If they feel that this is a temporary fad, they may avoid investing significant amounts of time and resources into becoming competent in digital.

This is especially true since many groups have limited resources, budgets, and P&L responsibility. Ultimately, with this strategy, some groups will become much better at digital than others. This will create inconsistencies in customers’ experiences if they utilize more than one of PG’s business units. On the positive side, this could create some internal competition between groups. This could drive innovation and the speed at which companies adopt and take advantage of the trend. However, this could also reduce collaboration and information sharing between units, which could be detrimental to PG.

Additionally, this would take a significantly greater amount of resources compared to the two alternatives above and may still result in a lower overall competency in embracing digital. VII. C. Recommendation – Merge & Integrate Marketing & Communications business units We recommend that Publicis Groupe take advantage of this time to begin integrating all their marketing and communications business units to maximize shareholder value. This strategy carries the greatest risk, but also has the largest potential reward for PG.

We believe that by creating a major marketing and communications mogul with superior digital competencies will allow PG to surpass their competitors in the foreseeable future. On of the major advantages with this strategy is scale. In 2007, when PG’s management was looking for direction, they asked the question: “What would be the most strategically important customer for the portals? What would be the most strategically important customer for the media at large? What would be the most strategically important customer for the large and global advertisers?

If you could start up, what are they telling us that they need? Their answer was scale, which could cut through the complexity and enable the interaction of advertisers, media companies, and digital portals. ” (p. 10 paragraph 2). This strategy would allow seamless communication between the various business units and specialties to deliver superior customer value. If PG is able to successfully pull these mergers off, they will certainly have a distinct competitive advantage over their competition. VII. D. Implementation We will need to begin by identifying the key stakeholders involved in pursing this strategy.

Specifically, we will need to identify the key employees and understand their positioning on this strategy. Given the anticipated recession, if we feel that we will need to lay off more employees in the foreseeable future, we should do it now. We then need to reassure the remaining employees that their careers are safe. This is important to get their buy-in for the upcoming mergers. If they feel that their personal career is at risk in any way, they will resist the mergers. The next step is to identify which mergers would create the greatest synergies for PG and begin the due diligence.

PG should attempt to merge the first two business units to begin the initiative. There will need to be strong communication from senior management throughout the whole process, as employees need to remain informed of the progress and how it affects them. If successful, PG should continue to merge business units to create synergies and drive shareholder and customer value. If problems occur during the process, see the contingency plan below. VII. E. Contingency Plan There are many significant risks with the proposed strategy. Therefore, a strong contingency plan is important.

Best Case: If everything goes as planned, PG should continue to merge their business units strategically until they are able to achieve the desired scale. This will allow them to maximize shareholder value by creating synergies and enabling them to grow organically at a much greater rate. Worst Case: If major problems occur during the process that they are unable to overcome, PG management has two options. They can divest the business unit that is resisting the merger or revert to strategic alternative two and continue to pursue the VivaKi initiative.