Monday, March 1, 2010

Advertising holding companies and Sears.


There's a review in today's "Business Week" of a book called "Denial: Why Business Leaders Fail to Look Facts in the Face—and What to Do About It," which primarily focuses on the demise of Sears, once the largest retailer in the world. You can read the whole review here: http://www.businessweek.com/managing/content/feb2010/ca20100225_569590.htm

Reading the review, it struck me how similarly Sears and advertising holding companies behave. Here's a for instance: in 1967, the CEO of Sears, Gordon Metcalf decreed "Being the largest retailer in the world, we thought we should have the largest headquarters in the world." Sears then built the 110-story Sears Tower. Six years later in 1973, Sears' Chairman Arthur Wood decorated his opulent office with works by Degas and Monet. I'm thinking of the enormous offices--the entire holding companies floors--of people who don't make ads.

Starting 1974--36 years ago!--Sears' sales started to decline. Rather than focus on their core business, retailing, Sears bought real estate company Coldwell-Banker and financial broker Dean Witter. Here's the line that nails it for me: "Why the company's CEOs thought they would do better managing businesses in industries they did not understand than they would in general merchandise retailing remains one of life's mysteries." I'm thinking of holding companies buying auto-racing teams, sports marketers, talent agencies, etc.

This is really simple. If you're in the ad business, make ads, sell ads, distribute ads. That's the business you're in. But I've yet to see a holding company have this as their mission statement: "We make ads that make money for the companies who run them."

11 comments:

heygregwood said...

George - great post. The challenge I see in your argument is that making ads is a business model that is declining (from a revenue standpoint). Seeing how these are public companies, the exec team needs to keep earnings and revenue growing. How? Expanding what they do. We all (at least those of us who have worked at big agencies) know what happens when a agency expands what they do. Chaos. Well maybe not Chaos but at least confusion. The most important asset a agency has its its culture, it's DNA. It's what separates the Goodby's and CPB's from the Arnolds. As agency holding companies expand, cultural wars ensue. Confusion sets in.

I say, screw the holding companies. Find (or start) a company that is built for singular results. Given the complexities of communications today, specialization and a culture surrounding that specialization is key.

Anonymous said...

George, didn't you used to work on Sears at Ogilvy? Maybe you're in the book.

geo said...

Naw, Anonymous, never graced with working on Sears. Never. Never. Never. Not for a moment. Never.

Anonymous said...

You're right. I'm so glad WPP stuck to making wire and plastic products.

geo said...

heygregwood,

i wish it were that easy. and, man, i remember (and it wasn't that long ago) arnold was mentioned in the same breath as goodby and crispin.

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