‘They will be de-consolidated’: Sir Martin Sorrell on the future of traditional holding companies
“We’ve chosen to focus on growth, I mean I think the traditional holding company model is a busted model and it’s past its sell-by date,” declared S4 Capital’s founder and executive chairman, Sir Martin Sorrell, on Mumbrella’s podcast, the Mumbrellacast.
Sorrell joined Mumbrella’s founder, Tim Burrowes, for a special edition of the Mumbrellacast, which will be released tomorrow, October 13, to discuss the future of traditional holding group models.
Sir Martin Sorrell joins Tim Burrowes on a special edition of the Mumbrellacast
Together, the pair discussed how S4 Capital’s ‘growth model’ differs from traditional holding groups.
“McKinsey says the average company lasts for about 17 years on the FTSE 100 or the SMP 500, and WPP has been there for 35 years or so, so it’s probably had two lives in that sense,” explained Sorrell.
“But that model needs to be broken up, it’s not going to survive, it’s just not going to survive. It’s not right.”
S4 Capital uses a growth model, that focuses on top-line growth which drives total shareholder return. The business is digitally focused rather than on traditional media, leading the majority of its revenue to be derived from tech companies.
S4 Capital currently employs approximately 2,650 people in 30 countries, across The Americas, Europe, the Middle East & Africa and Asia Pacific. The group boasts business names including Mediamonks and Mighty Hive. Its acquisition strategy involves the merger of the new company into an S4 Capital business, such as Melbourne marketing company Biztech into Mediamonks, and most recently, Australian strategy consultancy Lens 10 into Mighty Hive.
“WPP’s model and Saatchis’ model is a backwards-looking model, because what it is is a market share model,” Sorrell said.
“In other words, you have different brands, you know they cannibalise one another, but you accept that because they build market share… so the logic of this [S4 Capital] model is very different.
Sorrell reflected upon the impact of the Global Financial Crisis in 2008, and how its creation of a “zero-based budgeting fad” de-consolidated conglomerates. Sorrell believes the same will happen with holding companies as marketeers take back control from agencies.
“Consumers are changing all the time… Their tastes and their preferences are shifting in terms of purchasing habits, media etcetera, the way they conduct their lives, they buy stuff online. The buy from bricks to clicks,” Sorrell said.
“So the change demands more control because things are shifting all the time. So creating a 30 second or 60 second TV commercial over a period of three months doesn’t work anymore. It doesn’t mean the big ideas aren’t important, it means the way they’re developed and distributed and applied are totally different.
“And that’s what the holding companies, they’ve got sort of an albatross around their neck which is the old stuff.”
In tomorrow’s Mumbrellacast, Sorrell will go on to discuss WPP’s recent mergers of JWT and Wunderman, and VML and Y&R, and why they do not work. He will also give his outlook on the economic climate and discuss the legacy of David Ogilvy.
To have this special episode of the Mumbrellacast hit your feed when it drops tomorrow morning, subscribe through your favourite podcasting app here.
Sir Martin Sorrell has also joined the line up of Mumbrella360: Reconnected, taking part in a highly anticipated fireside chat about S4 Capital and the industry’s path to the future. Tickets for the event, taking place November 17-20 are available here.
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topics
Biztech
Holding companies
Lens 10
MediaMonks
Mighty Hive
Mumbrellacast
S4 Capital
Sir Martin Sorrell
WPP
