Sir Martin Sorrell: disruption means companies are more local and global all at once

Disruption comes in two forms: geography and technology. That was the message from WPP founder and CEO Sir Martin Sorrell at the Consumer Goods Forum Global Summit, underway in Cape Town this week. He should know too. As head of one the world’s largest advertising holding companies, he oversees an empire of agencies who are both massively affected by, and at the vanguard of, both forms of disruption.

Then again, riding the waves of disruption is built into WPP’s DNA. When it was founded in 1985, WPP was in the business of making shopping baskets. Today, it is the world’s largest advertising company by revenue and employs nearly 200 000 people in 3 000 offices across 112 countries around the globe.

Making the world bigger

The last of those numbers is only going to keep growing too. WPP recently opened up shop in Cuba, recently freed from US trade restrictions. And according to Sorrell, it also has its sights set on Iran, itself emerging from decades of sanctions.

Again, this shouldn’t be too surprising. As Y&R CEO David Sable told Memeburn in a 2014 interview advertising agencies are always among the first companies to enter new markets.

To a large degree, that’s because they’re either following their biggest clients into those markets or anticipating where their clients will go to next. And with growth slowing, or even stagnating, in more mature markets (Sorrell believes that “the new normal is low GDP growth”), newly opened ones represent a sound bet on the future.

“The next billion consumers are not going to come from the US and Western Europe,” Sorrell said, underlining a maxim that has driven companies in a number of sectors for some time now.

And according to the WPP CEO, countries such as Iran and Cuba represent particularly lucrative markets. Both have high literacy rates with good infrastructure and reasonably high life expectancy.

Of course, not all geographic disruption is positive. Sorrell points to the growing tension between Russia and the West, which he believes many people underestimate, as something which could have a major impact on the global economy.

The biggest disruption however is one that transcends geography.

The rise of digital

Here at Memeburn, we’re well versed in the effects of digital disruption, but it’s worth looking at how big an impact it’s had on WPP’s own operations. Today, digital accounts for nearly 40% of WPP’s business, with another 50% coming from data (much of which is gathered digitally).

“Don Draper probably wouldn’t recognise 75% of our business,” told attendees at the conference.

According to Sorrell, one of the major learnings from that transition is the degree to which everyone can be global and incredibly local all at once.

As he pointed out, the most potent competition to multinationals is no longer other multinationals, but local companies. They tend to understand the markets they operate from better and, if people in other markets are interested in their goods, the global infrastructure around ecommerce means they can get it to them much quicker.

For that reason, Sorell says, it’s imperative for a multinational’s country managers to know who the best people in a country are and hire them.

Rise of the brands

Thing is, we’re not just seeing disruption in where people do business and what technology they use to do it, but how they do it too. You only have to think of the impact made by two of the companies most often referred to as disruptive — Uber and Airbnb — to see that this is the case.

But as Sorrell noted, they’re only one end of the spectrum. While they’re disrupting the business models of existing industries, other companies such as 3G Capital are using a zero-based budgeting model to disrupt on price.

When it comes to getting serious returns, the WPP CEO leans heavily towards the Airbnb side of the spectrum. “Think about the fact that Larry Page has invested US$100-million into flying cars”, he said in justification of his advice to invest in brands and innovation.

“If you invested in the top 10 brands from the last five years, your returns would be 100%, versus 63% if you’d invested in the S&P 500,” he said.

Ultimately, what’s clear is that no matter where you are and no matter what line of business you’re in, things are about to get seriously exciting.