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VivaKi

12/2009-5643
This case was written by Herminia Ibarra, the Cora Chaired Professor of Leadership and Learning, Professor of
Organisational Behaviour at INSEAD, and Cristina Escallon, Director of the INSEAD Leadership Initiative. It is
intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of
an administrative situation.
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August 2009 was anything but a quiet summer holiday for David Kenny and Jack Klues,
Managing Partners of VivaKi. Instead, it was a season of intense work on the high-profile
acquisition of digital agency Razorfish, from Microsoft.

VivaKi itself was barely a year old, created in June 2008 by Publicis, the fourth largest
communications group in the world,1 in order to accelerate the growth of its new media and
digital operations. The Razorfish acquisition was a moment for celebration across the
company, yet ongoing challenges remained. Both managing partners were convinced that
VivaKi could change Publicis – and fast – but, as Kenny put it:

It is my belief that within five years most media will be digital and most television
will be done in a more digital way. Making sure we keep pace is the thing I am
most worried about. […] We have this theory with VivaKi that we are going to
retrain analogue people to do digital. Learning digital is like learning a second
language. You have to start over, and change the order in which you do things
and also find the right nuances. You have to be willing to sound stupid at first,
and to start again at the beginning. Some people can do this, and others are too
uncomfortable.

Klues also expressed his concerns:

Maybe VivaKi is allowing us to keep pace with, if not get a bit ahead of, the
unbelievable rate of change and development from a technology perspective. But
once you have the product, the tools and the techniques, you have to disseminate
them into an organization of 12,000-plus people, and that isn’t an easy thing to
do. Or perhaps you have to reverse [the question]: Can the people with the digital
expertise today explain themselves in such a way that the concepts can be
understood by these hundreds and thousands of people who need to learn them?
Just as importantly, can they be understood by our clients as the solutions to
marketing problems?

Creation of VivaKi
From the purchase of top British agency McCormick in 1978 to the assimilation of Saatchi &
Saatchi in 2000, and BCOM32 in 2002, CEO Maurice Lévy’s 30-plus years at the helm of
Publicis Groupe had been characterized by a policy of dramatic growth and diversification
through acquisition.3 David Kenny himself had joined Publicis as a result of its acquisition of
Digitas, the digital agency of which he was then CEO. When Digitas was acquired in 2007,
Publicis consisted of three major separate ad agency networks, Publicis Groupe Media, which
combined media-buying giants Starcom MediaVest and ZenithOptimedia, headed by Jack
Klues, and other media services.

1 The top four in terms of sales at that time were: Omnicom ($13.36 billion); WPP Group ($10.92 billion);
Interpublic Group ($6.96 billion); and Publicis Groupe ($6.55 billion). Source: ‘Forbes Global 2000’,
Forbes.com (accessed September 24, 2009). 
2 BCOM3 was the result of a merger between Leo Burnett and the American MacManus Group in 2002;
BCOM3 had a partnership with Japan’s largest advertising agency, Dentsu, which owned a 22% stake.
3 Rosabeth Moss Kanter, Publicis Groupe: Leading Creative Acquisitions, HBS Case Study, February 2009.

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Digitas, created in 1998, had been within Lévy’s sights from as early as 2002. By the end of
2006, Digitas, with $1 billion of media budget, was a minor player next to Publicis, the largest
media-buying agency in the world, with around $50 billion in purchasing power across its
agencies. Yet for Lévy, intent on transforming Publicis for the digital era, Digitas represented
the future:

Some media are dead or about to die and more will be coming in the future. There
is a new ecosystem which is starting to develop, which will create new tensions
and new opportunities. We should try to forget what we know about the old
world… Our business model has to be reinvented.

A deal was finally announced on December 20, 2006: Digitas’ 2,050 employees would
become part of the 44,000-plus Publicis group.

By the end of 2007, digital media accounted for around 15% of Publicis’ $7.5 billion in
revenues – which compared favourably with its main competitors (13% for Omnicom, 12%
for WPP and 10% for Interpublic).4

But Lévy was looking to accelerate the pace of change and challenged David Kenny, Jack
Klues, then Chairman of Publicis Groupe Media, and the heads of the media agencies to come
up with a new growth model. The team offered alternatives but each time Lévy pushed back,
urging them to think like a start up and look at the problem in a less conventional way. As
Kenny explained, they soon converged on the idea of scale:

Our idea was to put together the digital content of Digitas, as well as the digital
media capabilities from our ‘traditional’ media-buying agencies. With one
organization we could put together everything an advertiser needs and everything
that the media owner needs to migrate to the digital era.

Kenny developed a particularly close relationship with Klues, who put the purpose of the new
entity in layman’s terms:

You and I probably don’t think much about whether we get our entertainment or
information on-line versus off-line. The notion of the digital industry and the
analogue industry is tremendously blurred right now. Consumers think that way,
advertisers should think that way, and their agencies have to. So a big part of the
organisation is all about the seamless integration of analogue and digital.

Concluding that they needed each other to make the new venture successful, Kenny and Klues
proposed to Lévy that they serve as co-managing partners. On June 25, 2008, ‘VivaKi’
(‘Viva’ meaning ‘life’ and ‘Ki’ translated as ‘energy flow’) was launched, combining in a
single P&L entity media-buying giants Starcom MediaVest and ZenithOptimedia, specialist
consultancy Denuo, and Digitas.

By the first quarter of 2009, Publicis’ digital operations had grown by 9.8% to account for
20.5% of the group’s revenue, despite the worst economic downturn that Kenny or Klues
could remember. And by summer 2009, with the $530 million acquisition of Razorfish,

4 Kanter (2009)

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approximately one quarter of the group’s revenues were digital. The integration of Razorfish
‘tipped the scales’ of VivaKi to a majority digital composition and made Digitas/Razorfish the
biggest of its “brands” (as the companies are called internally). The media agencies brought
buying clout and scale to the VivaKi proposition. Now, with Razorfish, Publicis committed to
minimum guaranteed aggregate purchase levels of search-and-display (digital) advertising.
Microsoft, in turn, committed to retain Razorfish as a ‘preferred provider for digital strategy,
creative and experiential marketing’.5

Changes in the Advertising and Media Business


VivaKi’s creation was played out against the backdrop of a shift in the advertising and media
business – from so-called ‘analogue’ to digital. The economic downturn of 2008 only seemed
to accelerate the move away from the traditional 30-second TV slot or glossy print ad and
towards digital media, as the absolute costs of an online campaign were estimated to be as
little as 10% to 20% of comparable television spending.6 In 2008, only 12% of global ad
spending was on internet and mobile, but analysts at PricewaterhouseCoopers estimated that
in 2009 it would rise by 7.7% to $86.7 billion, and that by 2013 it would be up to 19% of total
spend.  7 In particular, the American television industry was said to be facing a $2 billion
shortfall between 2009 and 2013.8 But it was not simply that the marketing budget holders
perceived digital as cheaper than so-called analogue; they were also attracted by the
immediately measurable results of digital campaigns.

The challenge for Publicis and its competitors was to make the shift count in their favour; lost
revenue from traditional media had to be clawed back in digital spending. In spring 2009,
WPP and Omnicom, the world’s two largest advertising groups announced poor results, with
like-for-like revenues down about 6%. Publicis, ranked fourth in the industry, appeared to be
bucking the trend. Its results for the same quarter showed slightly smaller negative growth at -
4.4%, and a J.P. Morgan equity report for the same quarter showed Publicis as the number
one ranked player for net new business.

At the Cannes Lions festival – the advertising industry’s annual awards – of June 2009, the
most prestigious ‘grand prix’ prizes went to digital campaigns, including Barack Obama’s use
of new media to build grassroots support among the US electorate.9 But the changes in the
industry ran deeper than the distribution of awards. As John Gapper put it in the Financial
Times in April 2009:

In the analogue world, everyone’s job was fairly clear. The creatives devised
catchy slogans and wacky visuals, and media agencies plotted how to place them
before as many of the right consumers as possible. This clarity has dissipated as
the divide between the content and the means of distribution has narrowed…
Good digital campaigns do not simply involve banner ads on internet sites.

5 Publicis Groupe press release, August 9, 2009, ‘Publicis Groupe to acquire Razorfish from Microsoft
Corporation’.
6 Tim Bradshaw, ‘Adverts mark a seismic shift to digital’, Financial Times, June 29, 2009.
7 Financial Times, Lex column, June 26, 2009.
8 Matthew Garrahan, ‘US TV prepares for $2bn ad shortfall’, Financial Times, June 28, 2009.
9 The film category had 3,450 entries and 114 winners and ‘cyber’ had 2,200 entries and 88 winners. Publicis
itself won 15 awards (5 film, 2 cyber, 3 outdoor, 2 media and 3 design).

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Brands get attention when their agencies devise some interactive stunt that is
entertaining enough or provocative enough to make customers engage, for
example, by forwarding videos to friends, entering a competition, or signing up to
an online club. True success is when a brand campaign spreads virally. This
demands a lot of creativity… it draws on the entire range of the industry’s
fragmented skills.10

David Kenny summed up the resulting change in mindset required by the industry:

The typical planning process was to start with your product, position it, find out
what’s different about it, make a little 30-second film about it, maybe some print-
outs, tell a story, then decide the positioning and spend your money on pushing
your message to all the right people. Now, I think we start at the very end of that
process. We start with human beings and really understand them: what they care
about, where they get information, how they entertain themselves, what
communities they belong to, who they trust, and who they don’t. That leads you to
a very, very fragmented media plan, and then you have to put the message into
that context. You can’t just slap it on to Facebook – you have to be relevant. So I
would say the biggest change is that we have come to recognize that the people
are as important as the product and that the real value of marketing is to serve
people.

VivaKi Organizational Structure: Scale and Skill


While the newly-launched VivaKi combined the locomotive power of its main brands, each
continued to exist in its own right. The organizing principle was ‘scale’, reputedly one of
Kenny’s favourite words, which he explained as follows:

VivaKi is the parent of the brands, so all of the brands are within VivaKi – they’re
units if you will. Most clients, most advertisers work with one or sometimes two of
those brands on their digital and other media. VivaKi pulls together all of their
needs – across the brands – and the VivaKi organization faces the media owners.
So, for example, we can go as VivaKi to Microsoft and strike a deal on behalf of
all of the brands and their clients. It’s also the way we face the technology
companies, like the DoubleClick division of Google.

“We had two premises,” recalled Kenny. “One, scale will matter; two, skills will really
matter.” Starcom MediaVest Group alone consisted of 5,800 experts operating across 110
offices in 73 countries. ZenithOptimedia was a similar size: 5,500 employees and 218 offices
in 72 countries. Digitas had grown to 3,000 people and 30 offices in 16 countries.11 Razorfish
brought an additional 2,000 people in 21 offices worldwide. In order to capitalize on this
scale, VivaKi added technology and talent as pillars. Kenny explained:

VivaKi is also the R&D center. There are many new things we are working on
now: social networks, advanced forms of search, different forms of digital

10 FT.com, April 29, 2009 (accessed September 23, 2009) 


11 Figures from www.publicis.com (accessed June 29, 2009) 

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advertising for the television screen – and we can do this once on behalf of all of
the brands, so it’s a parent and an R&D center. […] We are helping more people
learn all the things they need to know in the digital area and we have created the
VivaKi Nerve Center, a very powerful set of core tools that everyone can feel
confident about taking to their clients – and delivering.

Cheri Carpenter, Director of Corporate Communications, summed it up: “When Jack and
David go to Google, they go on behalf of $57 billion in ad spend, 14,000 people12 and a client
roster of several hundred clients as opposed to each of the agency brands going on their own.”
On the flipside, recalling a recent pitch in which the brands were struggling to align on the
overriding idea to be presented, Carpenter observed, “It’s a really tough job because you have
agencies that have been competitors forever and now they are working to be collaborators.”

The second pillar, ‘Talent & Transformation’, aimed to transform rising stars from within
Publicis into digital experts and to attract existing digital talent from elsewhere. As VivaKi
helped clients go digital, so digital shook up the internal working methods of each of its own
units. As David Kenny said:

We put the data on the category managers’ and the clients’ desks every day, so
that they can act that same day. Before, it was a case of getting the data,
processing it, producing PowerPoints, sending them out and then acting. The
initial reaction was ‘You’ve eliminated my job’. But you need the full information
as fast as possible if you’re going to speed up the cycle. It’s very transparent and
authority is flat.

VivaKi, however, was also the central engine for buying traditional – as well as new – media.
While the Nerve Center and Talent reported to Kenny, Laura Desmond, Steve King, Laura
Lang and Rishad Tobaccowala, CEOs of Starcom MediaVest, ZenithOptimedia, Digitas and
Denuo respectively, all reported to Klues. There was a single P&L, the management team was
rewarded on joint results, and Kenny and Klues continued to co-lead VivaKi. Klues himself
explained:

The only way we were going to succeed on behalf of our clients and their
customers, was if we put our resources and our brains together. I knew one world
intimately and lived in it for 30 years, and David obviously knows the digital
world intimately and in all aspects. So what it has become is a very valuable and,
in a weird way, a necessary combination of the two of us working together.

12 The acquisition of Razorfish announced in August 2009 added a further 2,026 staff.

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Exhibit 1
VivaKi Organizational Structure

Talent &
Transformation

Curt Hecht
Kathy Dyer David Kenny Jack Klues President
Chief Talent Officer Managing Partner Managing Partner VivaKi Nerve Center

Laura Steve King Laura Lang Rishad Bob Lord Display


Desmond Tobaccowala
CEO CEO CEO
CEO CEO
Mobile

Search

Social

© 2009. All rights reserved. VivaKi. Proprietary and Confidential.


 
 Source: VivaKi, October 2009.

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Exhibit 2
VivaKi Brands

SMG is ranked one of the largest brand communication


groups in the world.

Our global network generates brand-building results


for the world’s leading companies.

• media management
• internet and digital communications
• response media
• entertainment marketing
• sports sponsorships
• event marketing QUICK FACTS
• multicultural media
• 5,300 people
• 110 offices
• 67 countries
• # 1 network in the US total billings in
2007 (#2 worldwide)*

* Billings June 2008 RECMA Report

• The ROI Agency


• The First Media Agency to “Unbundle”
• 218 Offices in 72 Countries
• 5,500+ Staff
• 2nd Largest, Top Performing Agency Over the Past Five Years*
• Touchpoints Research – the Largest Agency-Led Research Initiative
• M&M’s International Media and Marketing Agency of the Year 2008

y yy
yy yyy y y
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y y yy y y yy yyyyyyyyyy
yyy
yy y yyyy yy y y y
y yy y y
yy
yy y
y yyy
y
yy
yy yy
y y

y yy y y
yy y

* Source: RECMA 2009

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Exhibit 2 (cont’d)

> ”Creativity Drives Performance”


> Largest global digital network
> 29 offices in 16 countries
> Added 18 clients over the past year

Agency Awards/Achievements:

DENUO

• Denuo (rhymes with anew) means “afresh” in Latin


Modern marketplaces require a fresh approach

• A unit of VivaKi (the media and digital arm of Publicis Groupe)


Work for both Publicis Groupe and non Groupe Clients

• 4 cities, 25 change agents, 0 presidents/COOs


Built to be highly flexible, collaborative, and unbiased

• 3 years old and already in third manifestation


Rapidly iterative business model incorporates learning and adapts to modern marketplace needs

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Exhibit 2 (cont’d)

Who We Are: agency overview


We help industry leading companies create captivating experiences with
their customers around the world

• Born digital (1995)

• Over 2,000 professionals in 19 offices worldwide

• One of the largest media buyers – $700MM+ on over 1,000 sites in ’08

• Fosters a culture of innovation and optimization

• Ranked as one of the top agencies by Ad Age and Forrester

Source: VivaKi PowerPoint slides, October 2009.

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