Saturday, December 8, 2007

Dell and WPP Restructure Marketing Services

I remember the time (1989) when Kodak outsourced its IT operations to IBM: The IT outsourcing industry was at its early days, some companies saw outsourcing as a way to restructure their operations and focus on their core competencies while others saw it as a misplaced strategy that gives away the corporate crown jewels. The Fortune magazine story started out as follows:
"WHY NOT FARM OUT YOUR COMPUTING? Hiring another company to do your data processing can save you big bucks. Some say it's the biggest trend since the PC burst on the scene a decade ago..." and went on to quote Kathy Hudson, Kodak's IT Director at that time: "IBM is in the data- processing business, and Kodak isn't. IBM runs our computer center as it's supposed to be run -- as a profit center rather than a cost center."
My doctoral student, Lawrence Loh at MIT Sloan School of Management wrote his award-winning thesis on IT Outsourcing and we wrote a scholarly article in Information Systems Research on the "Kodak effect."
--
Now we may have the Dell Effect when it comes to [out]sourcing marketing services. The following post from a Dell blog is worth reading and reflecting.
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Dell announces new agency agreement with WPP valued at $4.5 billion in agency billings over three years

Dell is announcing today that it will partner with WPP, who will join Dell to create a new global integrated marketing and communications agency.

Together with the WPP agency, Dell is creating a new marketing model designed to further propel Dell's growth. We've been calling this ‘Project Da Vinci' because we've been looking for the combination of artist and scientist—an agency that has both the creative horsepower and ability to measure the business impact of their work.

The agency will be charged with building shareholder value via programs that are centered on "creativity with a business purpose". We believe this is the first time a global client and agency have come together to redefine the "agency" on such a scale.

The process started with Vice President of Global Marketing, Casey Jones, joining Dell eight months ago and discovering that the Company was working with more than 800 agencies worldwide. Project Da Vinci was soon started and, as Casey has often said, "Instead of dating 800 agencies, we are creating a partnership with one firm. We want our partner to spend 100% of their time thinking about our customers, rather than how they will get the next assignment."

We've made several observations together during the agency review process that will guide our effort going forward. Here are a few as well as additional commentary on this vlog (link) from Casey, who is our leader of Da Vinci.

Key Observations

  • The rationale for one partner - A "partner" is someone who works with you not for you. Shares your business goals and is invited into the heart of your marketing process. By combining our agencies we can invest in the long term, in the people and tools to unlock far greater results than a patchwork quilt.
  • Why Dell and why now? - Dell is known for simplifying PCs and the supply chain beginning 23 years ago. It's in our DNA to simplify all we do and now we are going to apply our expertise to simplify marketing at Dell.
  • The Internet revolution - When you have one billion people online and another one billion joining them over the next four years, it becomes very important for us to have the right analytics, the right team and the ability to build campaigns in days, rather than months.
  • The importance of agency talent - We want Dell's agency to be the agency of choice for the most talented people in the world.
  • How we will coordinate - Most agencies integrate by gluing teams and people together within their holding company with a completely separate P&Ls. Da Vinci will have one global P&L. One great team at WPP to match up with our team, so we can create magic together. One team that is known for highly productive relationships between those who create and those who manage the daily work. Pretty simple stuff.
  • The importance of analytics - Improving shareholder value is the ultimate award for all of us to win. Yes, we don't mind winning industry awards, but our customers and our shareholders are our focus, not what we can win in Cannes. A combination of great analytics and creative is key.
  • The centralization of new relationships - We will empower our new agency to handle all subcontracting relationships with talented professionals and firms who want to work with Dell. They will be encouraged to join our Da Vinci team.
  • The investment in our future - WPP will invest in our relationship as much as we do in them. It's mutual from day one.

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I see it as another key building block in thinking about strategy in a network era as a portfolio of capabilities obtained through relationships.

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