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Will Merging Sapient and Razorfish Solve or Exacerbate Publicis’ Problems?

screen-shot-2016-11-21-at-8-59-36-amAround this time last year, media conglomerate Publicis Groupe released a video of CEO Maurice Levy on YouTube. Levy explained that the company was moving to a more client-centric organizational model comprised of four divisions: Publicis Communications, Publicis Media, Publicis.Sapient, and Publicis Health.

As Digital Clarity Group noted in an analysis of the announcement, the idea of this reorganization was to create more of a shared services model within each division. Levy (or more likely, his PR team) chose the bizarre motto of “No Silo, No Solo, No Bozo” to emphasize how the new model would break down barriers between divisions and allow for greater collaboration in order to better serve clients.

However, the structure that Levy outlined actually indicated, as DCG analyst Tim Walters noted at the time, that the incentives were not aligned to effectively deliver Levy’s proclaimed focus on client service, seeing as employees, executives, and different agencies were still incentivized to compete for resources and clients. How could this be breaking down silos if such competition still existed?

What’s wrong with this picture?

Fast forward one year. Publicis Groupe’s 9 month financial results for 2016 look pretty anemic, showing a mere 1.9% organic revenue growth over 2015. And between Q1 and Q3, it looks like a gradual slowing down of organic growth each quarter, from 2.9% at the end of Q1 to just 0.2% in Q3.

Even more concerning, North America is growing much more slowly than Europe, despite billions that Publicis has spent in the last few years in acquiring digital agencies with substantial North American practices, such as Sapient, Razorfish, Rosetta, and DigitasLBi. The results show, in fact, that 9 month organic growth for the U.S. for 2016 over 2015 was less than 0%. This hints strongly at some lost business in one of the world’s largest markets, which new client wins have not made up for. Could it be that the new organizational structure was not actually working out to be so client-centric after all?

Publicis didn’t think so – at least on paper. Despite these results, the Q3 report concluded that the new organization is achieving “positive momentum” and “a new growth cycle is kicking off.”

And yet a mere few weeks later, Publicis has just come out with an announcement of further organizational changes within the Publicis.Sapient division: screen-shot-2016-11-21-at-9-01-37-amdigital agencies SapientNitro and Razorfish would be merged to a single entity with a mouthful of a name and a cobbled-together logo: SapientRazorfish. Guess the positive momentum just wasn’t looking positive enough.


Why SapientRazorfish?

Here are the key highlights of the announcement:

  • The purpose of the merger is to create a more integrated organizational structure in order to best serve clients that are looking to transform their businesses to be “digital first.” These clients need partners who can help with improving customer experience and operating efficiency.
  • Sapient executives have clearly come out better than most of their Razorfish counterparts. Sapient people gained roles in the new structure that include Chairman and co-CEOs of Publicis.Sapient and CEO of SapientRazorfish. The CEO of Razorfish will become Chief Strategy Officer of SapientRazorfish and head global practices for Publicis.Sapient. No word about any of the other Razorfish management team was in the press release. Expect that digital agency headhunters will be busy placing ex-Razorfish-ites in the months to come.
  • Publicis is positioning the merger as being a continuation of the “Power of One” approach it began in 2015 with its acquisition of Sapient to form Publicis.Sapient.

In light of the slowing growth of the last year, particularly in the U.S., Publicis clearly had to do something. Yet in its zeal to appear that it is breaking down silos and creating efficiency to be more client centric, the company is paradoxically continuing to follow a strategy that doesn’t seem to be working. 

Publicis is clearly failing to retain enough clients or win enough new ones, so it is baffling that Levy’s response is to promote and award new titles to the same executives that have presided over this problem. What’s more, Publicis may actually be destroying the brand value that it paid dearly for in its digital agency acquisitions (e.g. Rosetta being quietly tucked away). Is SapientRazorfishDigitasLBi still to come a year from now? And will clients vote with their feet and move to competing firms or do more in-house in response to the continued employee churn that is sure to result?

Sadly, unless Publicis reconsiders its current strategy and continues to shuffle around the same executives – notably, once again the same male executives: the lone female executive from the previous restructuring has recently left the company – it is unlikely to truly become the client-centric company that it aspires to be, let alone the faster growing company for which its investors undoubtedly are agitating. And while Publicis continues to go through variations on the same theme, other competitors with employees incentivized to collaborate rather than compete will be able to step in.

Are you a current customer of Sapient or Razorfish and wondering how the merger might affect you? Feel free to contact us. And if you are looking to figure out whether a digital agency or another type of service provider is right for your project, check out our recent reports “The Five Types of Customer Experience Management Service Providers” and “How To Choose Really Great Service Providers For Customer Experience” (registration required for both).


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