Why Dentsu is finally taking the digital plunge

Everywhere we turn, we are told that the ‘digital agency’ is dead, that everything is now digital, that the very word ‘digital’ encourages siloed thinking. While those statements might be exaggerated, the spinoff of a digital-specific company by a major advertising agency does feel like something we might have written about in 2006 rather than 2016.

As many competitor networks look to internalise what were once standalone entities and “put digital at the centre” of their operations, Dentsu is launching an entirely separate company in Japan with an initial staff of 600, despite having maintained a ‘digital solutions’ unit for at least a decade. Hasn’t the ship already sailed?

“I have to admit it’s a little late, but we have to spin off from Dentsu so we can stay competitive,” said Toshiya Ohyama, the new company’s chief executive, who has worked at Dentsu for 30 years. “If we launch a company like this now, we can catch up with competitors. If we miss this opportunity, we will never catch up. Global clients are very advanced in digital, but Japanese clients are not—so we see it as a big opportunity.”

Ohyama lists primary competitors as management consulting firms such as Accenture, Deloitte and IBM, and specialised internet advertising companies such as CyberAgent, OPT and Septeni. One industry observer in Japan sees Dentsu Digital’s mission as being “to kill emerging threats”, even if they are not yet threats to revenue. But Ohyama also sees room for collaboration and partnerships with these companies in the right context. 

Break from tradition

Echoing Dentsu ECD Yasuharu Sasaki, who is working to modernise and broaden the agency’s creative processes, Ohyama explained that TV is still just too strong within Dentsu for newer disciplines to flourish. While digital is driving the growth of Japanese advertising spend, according to Dentsu figures, more than 50 percent of the company’s revenue still comes from TV.

“So people are more encouraged to promote TV media sales,” Ohyama said. “Even if we hire new talent, those people are usually allocated to TV sections. Inside Dentsu it’s difficult to focus on digital marketing.”

This is leading to caution or even scepticism from clients. In some ways, the power of the Dentsu brand, which has been built on TV, works against it. “Some clients believe Dentsu is only going to propose TV advertising to them,” Ohyama said. “They have doubts that because Dentsu wants to promote TV, it might provide results that make TV look better.”

Having a standalone entity can help put those fears to rest. Ohyama added that the new company will also be a way for Dentsu to derive more money from consulting and planning, which are not major revenue generators in the existing TV media/creative model. The company will also be able to work more closely with Dentsu Aegis Network (DAN), making the transfer of international best practice in areas such as data and programmatic technology easier.

Ability over age

An obvious challenge for the new company is staffing. The initial 600 will move from Dentsu proper and two subsidiaries, but Ohyama said he aims to hire a further 400 “from competitors and other areas”. That will not be easy given that the top-tier digital talent is in 1) already in short supply and 2) increasingly turning away from the field of advertising.

Dentsu Digital wants to foster younger professionals and greater diversity through a more flexible employment system than Dentsu is known for: its employees still tend to join as graduates and stay for a long period, which Ohyama admits has its drawbacks. Perhaps most notably, he wants Dentsu Digital to dispense with the hierarchical system Dentsu is known for and make things merit-based.

Most staff are aged between 22 and 40. “They are digital natives. If we have an image of seniority, it will be difficult to attract younger talent,” he noted.

Ohyama is realistic about the changing nature of the Japanese workforce. “I personally believe changing jobs every three to four years shouldn’t be considered such a bad thing,” he said. “We should be more positive about it. I’ve worked for Dentsu for many years, but I think staying with one company for too many years is not a good way for a person to enhance their skills.”

Some who work at Dentsu Digital will go on to start their own companies, and that is OK. The important thing is to have direction. Constant job-hopping without good reason can leave someone without a solid career at the age of 40, he noted.

Ohyama seems clear of his own direction—to bring Japanese companies up to speed with technology. Many still lack basic understanding, he observed. “In that sense I would like to support them. Expectations [from clients] are high.”

How will he measure success? “I took the position of CEO but my plan is to replace myself with someone in their 40s. When that happens, you will know the company is doing well.”

He pointed to examples of subsidiaries that have overtaken parent companies in the retail and telco sectors before stating a bold ambition:

“I hope Dentsu Digital becomes bigger and stronger than Dentsu itself. But please don’t tell Mr Ishii [Dentsu’s chief executive].”

This article appeared first in Japanese on Campaign Japan.