Innovation, alongside disruption are two of the most overused words in business at the moment. Like obscenity, many people have their own idea of what innovation is.
Judy Estrin wrote one of the best books about the subject and describes it in terms of hard and soft innovation.
Hard innovation is companies like Intel or Qualcomm at the cutting edge of computer science, materials science and physics
Soft innovation would be companies like Facebook or Yahoo!. Companies that might create new software but didn’t really add to the corpus of innovation
Silicon Valley has moved from hard to soft innovation as it moved away from actually making things. Santa Clara country no longer deserves its Silicon Valley appellation any more than it deserved the previous ‘garden of delights’ as the apricot orchards turned into factories, office campus buildings and suburbs. It’s probably no coincidence that that expertise has moved east to Taiwan due to globalisation.
It can also be more process orientated shaking up an industry. Years ago I worked at an agency at the time of writing is now called WE Worldwide. At the time the client base was predominantly in business technology, consumer technology and pharmaceutical clients.
The company was looking to build a dedicated presence in consumer marketing. One of the business executives brings along a new business opportunity. The company made fancy crisps (chips in the American parlance). They did so using a virtual model. Having private label manufacturers make to the snacks to their recipe and specification. This went down badly with one of the agency’s founders saying ‘I don’t see what’s innovative about that’. She’d worked exclusively in the IT space and thought any software widget was an innovation. She couldn’t appreciate how this start-ups approach challenged the likes of P&G or Kraft Foods.
Apple announced that features showcased during the 2024 WWDC enhancing Siri would be delayed. Apple Intelligence delayed represents a serious breach of trust for Apple’s early adopters and the developer community. On its own whilst that’s rare from Apple, it’s survivable.
Apple has made other FUBARs: the Newton, some of the Performa model Macintosh computers in the 1990s, the Apple Pippin, Apple QuickTake cameras and the Apple Cube computer from 2000.
The most recent game-changing product has been the AirPod series of headphones which have become ubiquitous on the tube and client video calls. But there has been a definite vibe shift around perceptions at Apple.
Recent product upgrades to the MacBook Air were given a muted welcome. Personally I think Apple came out with a banger of a product: the M4 processor in the MacBook Air M1 form-factor at the Intel MacBook Air price of $999.
The Vision Pro goggles are at best a spoiler on the high-end market for Meta’s VR efforts, and an interesting experiment once lens technology catches up with their concept. At worst they are a vanity project for Tim Cook that have a very limited audience.
Conceptually Apple Intelligence told a deceptively good story. Let others develop the underlying LLMs that would power Apple Intelligence. This solution is partially forced on Apple due to the mutually exclusive needs between China and its other markets. But it also meant that Apple had a smaller AI challenge than other vendors. On-device intelligence that would work out the best way to solve a problem and handle easier problems without the latency of consulting a cloud service. More complex problems would then be doled out to off-device services with privacy being a key consideration. The reality is that Apple Intelligence delayed until 2027 because of technical challenges.
One of my most loved films is Chungking Express directed by Wong Ka wai. It was one of the reasons that I decided to take up the opportunity to live and work in Hong Kong. This YouTube documentary cuts together some of the oral history about the making of the film. The story of the production is nuts.
Drone deliveries
Interesting documentary by Marques Brownlee on the limited use cases and massive leaps in innovation going into drone delivery systems.
Effective Marketing for Financial Services
Les Binet presents a financial services-specific view on marketing effectiveness. It has some interesting nuances, in particular how brand building is MORE important in subscription services.
Tony Touch set
Tony Touch did a set for Aimé Leon Dore. It’s an impeccably programmed set.
LUCID Air focus on efficiency
It’s rare to hear the spokesperson for an American car company quoting Colin Chapman’s design philosophy – which he shared with Norman Foster.
Majorana 1 is a new processor that would be used in a quantum computer. Majorana 1 is an 8 qubit processor. This is a relatively modest processor, IBM’s Heron processor clocks in at 156 qubits. The reason why creator Microsoft was excited about Majorana 1 was about the underlying mechanism. This depends on a ‘topoconductor’ – a new type of material that provides better control and scalability. So Microsoft envisages with topoconductor million plus qubit systems that would fulfil the full potential promise of quantum computing.
Majorana 1 is viewed as having potential to move current work on artificial intelligence further. Generative AI is essentially probabilistic in nature. There is an almost Bayesian relationship happening as an LLM guesses based on its training data to date. Quantum computing promises exploring multiple options all at once, which would aid probabilistic problem-solving.
Thankfully, Microsoft’s video explanation of Majorana 1 provides a good primer on how quantum computing works and the role that a topoconductor plays.
Majorana 1 is named after Italian physicist Ettore Majorana who theorised about the particle being used.
Ben Miles has covered the skepticism around the science underpinning Majorana 1.
40 billion enemies
This Westinghouse film from the 1940s on refrigeration and the dangers of diseases made me wonder about what the film-makers would have thought about our current wellness crazes including RFK Jr’s prognostications on vaccines and pasteurisation.
The diesel-punk aesthetic is strong in the vehicles portrayed at the start of the film from trains to propellor powered planes and a clean-looking semi-wagon design. And it has some great life hacks for getting the most out of your refrigerator, some of which I didn’t know and my Mum loved the tips.
The Pisanos
It isn’t often nowadays that you see ‘spec’ ads any more. This spec ad including the behind the scenes documentary afterwards were all created using Google Deep Mind Veo 2 to create all the characters and shots.
There are still tell-tale elements that the video is based on generative AI. Part of the reason for the swift editing is the gradual breakdown due to the probabilistic nature of the generative AI process to do what is being asked for it.
In the Mood for Love & 2046
I had never seen many of these interviews that provide an oral history of In theMood for Love&2046 by Wong Kar wai. It goes into more depth on the creative process of films than I had seen previously. I also didn’t realise how much these films overlapped on the shooting schedule.
There is no way in the AI augmented film industry that anything could happen like In the Mood for Love could happen now. As a bonus here is a 2024 Olay advert that featured Maggie Cheung.
Clutch Cargo was an animated series first broadcast on American television in 1959. Clutch Cargo was created by Cambria Productions – who were a start-up animation studio. Cambria used a number of techniques to radically reduce the cost of producing the animated series.
A key consideration was reducing the amount of movement that needed to be animated. There were some obvious visual motifs used to do this:
Characters were animated from waist height up for the majority of the films, this reduced the need to animate legs, walking or running.
Much of the movement was moving the camera around, towards or away from a static picture.
To show an explosion, they shook the camera, rather than animate the concussive effect of the blast.
Fire wasn’t animated, instead smoke would be put in front of the camera. Fake snow was sprinkled so that bad weather didn’t need to be drawn.
Cameraman Ted Gillette came up with the idea of Syncro-Vox. The voice actors head would be held steady, they would have a vivid lipstick applied and then say their lines. Gillette then put their mouths on top of the animated figures. Cambria made use of it in all their animations with the exception of The New Three Stooges – an animated series that allowed Moe Howard, Larry Fine and Joe DeRita to be voice actors after their movie contracts finished and they were affected by ill health.
These choices meant that Clutch Cargo cost about 10 per cent of what it would have cost Disney to animate. The visual hacks to cut costs were also helped in the way the scripts were developed. Clutch Cargo avoided doing comedy, instead focusing on Tin-Tin-like adventures. ‘Physical’ comedy gags create a lot of movement to animate. By focusing on the storytelling of Clutch Cargo. The young audience weren’t bothered by the limited animation, as they were captivated into suspending their beliefs.
Ozempic Could Crush the Junk Food Industry. But It Is Fighting Back. – The New York Times – Lars Fruergaard Jorgensen, the chief executive of Novo Nordisk, which makes Ozempic and Wegovy, told Bloomberg that food-industry executives had been calling him. “They are scared about it,” he said. Around the same time, Walmart’s chief executive in the United States, John Furner, said that customers on GLP-1s were putting less food into their carts. Sales are down in sweet baked goods and snacks, and the industry is weathering a downturn. By one market-research firm’s estimate, food-and-drink innovation in 2024 reached an all-time nadir, with fewer new products coming to market than ever before.
Ozempic users like Taylor aren’t just eating less. They’re eating differently. GLP-1 drugs seem not only to shrink appetite but to rewrite people’s desires. They attack what Amy Bentley, a food historian and professor at New York University, calls the industrial palate: the set of preferences created by our acclimatization, often starting with baby food, to the tastes and textures of artificial flavors and preservatives. Patients on GLP-1 drugs have reported losing interest in ultraprocessed foods, products that are made with ingredients you wouldn’t find in an ordinary kitchen: colorings, bleaching agents, artificial sweeteners and modified starches. Some users realize that many packaged snacks they once loved now taste repugnant.
Apple resumes advertising on Elon Musk’s X after 15-month pause – 9to5Mac – the negative reaction to this that I have seen from Mac and iPhone users that I know is interesting. It’s the scales have dropped from their eyes about Apple’s performative progressive values. Yet the signs have been out there for years – in particular with regards anything that is even tangentially connected to China.
Zuckerberg’s rightward policy shift hits Meta staffers, targets Apple | CNBC – employees who might otherwise leave because of their disillusionment with policy changes are concerned about quitting now because of how they will be perceived by future employers given that Meta has said publicly that it’s weeding out “low performers.” Meta, like many of its tech peers, began downsizing in 2022 and has continued to trim around the edges. The company cut 21,000 jobs, or nearly a quarter of its workforce, in 2022 and 2023. Among those who lost their jobs were members of the civic integrity group, which was known to be outspoken in its criticism of Zuckerberg’s leadership. Some big changes are now taking place that appear to directly follow the lead of Trump at the expense of company employees and users of the platforms, the people familiar with the matter said.
I decided to pull together some of the better resources I could find on DeepSeek. It distracted and disrupted my writing calendar as I was researching a post what will be called Intelligence per Watt, once i have it published.
John Yun’s take on DeepSeek is well researched and thoughtful rather than a hot take trying to explain why the sky fell in on Nvidia’s share price.
ChinaTalk have put together a large amount of expert opinions on DeepSeek.
Study: 67% Of Gen Zs Want To Take Charge Of Their Health But Face Gaps In Communication| Provoke Media – Despite being known as the digitally native generation, Gen Z is skeptical of online health information and even telehealth appointments. In fact, eight in 10 Gen Zs say they’ve encountered false or misleading health information online and more than 60% say prioritizing in-person visits over virtual ones is important to feeling respected by healthcare providers.
Louis Vuitton APAC strategy: Inside the luxury brand’s Asian success | Jing Daily – “Given the economic downturn and competitive luxury market in China, Louis Vuitton has been seen adjusting its strategy to appeal to more diverse audiences, i.e. launching more affordable bag styles, participating in pricing games (points collecting, coupons refund), and launching cross-over marketing activities,” says Yu.
This year alone, the house has hosted its exclusive four-hands dinner at its Michelin-starred restaurant, The Hall, alongside Chengdu’s Latin American Michelin one-star restaurant, Mono; launched ultra-limited-edition diamond bracelets and a serpent-inspired timepiece for the Year of the Snake; rolled out its highly anticipated Murakami collaboration; and unveiled a new men’s store at Shanghai’s IFC Mall.
“[Louis Vuitton’s] strategy is rooted in consistency,” says Xuan Wang, activation director and partner at Tong Global and luxury PR veteran. “It has embraced a more localized approach — granting its Chinese team greater creative autonomy — while not losing the essence of the brand.”
I have worked at Interpublic twice during my career. Once at the very start of my career and more recently at McCann Health. I was never vested in Interpublic stock and I don’t own any Interpublic or Omnicom shares. This is not financial advice I am not telling you what you should do.
This post is not intended to be, and shall not constitute, an offer to buy or sell or the solicitation of an offer to buy or sell any securities, or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
I am pointing out the bits in discussions that I found interesting, and some bits that I found deathly dull, but pertinent.
The shape of it
The acquisition would be done by issuing stock. It wouldn’t involve Omnicom’s cash reserves or raising debt to make the purchase. Following the deal, the new Omnicom would be owned by
60.6% of former existing Omnicom shareholders
39.4% of former Interpublic shareholders
Deal expected to close in the second half of 2025. Once it is closed Omnicom expected to get $750 million in cost savings over the following two years. Combined cashflow of more than $3 billion a year.
Investment analyst call
The investment analyst call was led by Omnicom’s John Wren and featured Phillippe Krakowsky. One of the main factors raised on the call by Wren was the reduction on debt to EBITDA of Omnicom from 2.5x to 2.1x. The combined organisation also had a more balanced maturity profile on debt.
The deal impacted scale in two ways:
Efficiencies due to scale.
Increased capacity to borrow and fund future purchases.
What was less clear from the call was the value to customers. Healthcare was cited as an area of opportunity as both businesses had a substantial healthcare marketing offering. But nothing on how to capitalise on the opportunity.
What I didn’t hear was how the combined business was going to get to 750 million of savings, but that they were confident that they could hit that number in two years after the deal closed.
I also didn’t hear a clear position on how the combined firm would deal with the drain of advertising revenue from marketing conglomerates and media companies to platforms. There was some lip service given to being able to better address generative AI related change as a larger group.
Finally there was no analysis, or consideration about how Omnicom and Interpublic would surpass their competitors innovation. Instead the focus was purely on existing combined size.
Shareholder value
At the time of the announcement, the deal was said to offer a premium in terms of value to Interpublic shareholders.
As for Omnicom shareholders, they claimed: The transaction will be accretive to adjusted earnings per share for both Omnicom and Interpublic shareholders.
Slow gains – which might make taking that money out of their existing shares and instead putting it in a S&P 500 tracker ETF seem more attractive.
Industry animal spirits (aka what people were saying in my feeds and op-eds)
The reaction on social platforms was shrill and overwhelmingly negative. The reasons given included:
The inevitable job cuts.
The internal preoccupation that comes from two large organisations coming together.
The lack of clarity about unique benefit that the new company would provide.
The two-year inward focus on consolidation would allow more innovative competitors (depending who you listened to this would be Accenture, Brandtech, Dentsu, Publicis, Stagwell) gain further ground.
Later on, the discussion moved on towards the reactionary nature of the discussion itself.
From within Interpublic itself, I heard concern about the future from people in different parts of the business. This was down to a lack of internal communication rather than anything specific in nature.
Left unchecked, it could be morale sapping and might encourage some of the best talent to leave for more stable environs.
Update: January 17, 2025 – Campaign magazine podcast. The most interesting argument made in the podcast was that the media buying and creative arms of Interpublic are seen as having little-to-no-value and that deal from Omnicom’s perspective was all about Interpublic’s data platform.
Any self-respecting investment banker worth their salt would be able to break the conglomerate down into constituent parts and sell it off (as what has happened with Interpublic agencies R/GA and Huge already).
In the PR and social / influence sector Golin and Weber Collective would make natural groupings to be spun off and still with enough scale to compete on the global stage.
From a creative agency perspective, it would be a similar situation with Mullen Lowe and McCann World Group.
IPG Health looks like it had already been pre-packaged for private equity when it was carved away from its advertising groups and nominally has a full suite of offerings to provide the pharmaceutical sector clients.
For bits of networks that you can’t sell. For instance if the purchaser doesn’t want to have an agency office in Malaysia (Malaysia is only in here hypothetically, in reality I have no idea why more global corporate headquarters aren’t located in the Cameron highlands); you can recoup some of your money by facilitating a management buyout. These are more common than you realise.
Instead the podcast participants think that clients are just all about first and third party data platforms. I would argue that’s a simplistic view that ignores:
The relative complementary nature of the Interpublic and Omnicom networks in terms of product spread and geographical reach. In most markets, one or the other network has an appreciably stronger position. Where there is consolidation needed, this would most likely result in redundancies in the Asia Pacific and European regions.
Client brands need for continued brand building and the current chaos in the major platforms pivoting to the new presidential administration’s direction.
‘Bad neighbourhoods’ for brand content will adversely affect the ability of brands to advertise or promote themselves effectively. It’s harder to build effective brand memory structures in what consumers are likely to perceive as a hateful, or hostile environment.
Finally there is the the little acknowledged fact that social platform advertising is disproportionally supported by D2C marketing and varying forms of hucksterism from Temu to get-rich schemes. This isn’t the kind of businesses that fill up the client ranks of large marketing conglomerates like Omnicom and Interpublic.
What business thinking says
Harvard Business Review claims that 70 to 90 percent of mergers and acquisitions fail. By comparison, anywhere between 25 and 80 percent of large IT projects fail. 70 to 85 percent of new consumer product launches fail. TL;DR running a business is tough.
Secondly, Omnicom and Interpublic grew historically through acquisitions. Which would mean that they understand how to move a business forward and integrate their new acquisition.
The business model that marketing services conglomerates historically worked on was a mix of an arbitrage play, driving integration and efficiencies.
Arbitrage
Omnicom and Interpublic both relied on a few ways to gain an arbitrage benefit:
Private companies are generally cheaper to buy than publicly listed firms. It’s a matter of economics, publicly listed firms list in a closer to perfect market. Secondly, buyout contracts to get the management to meet financial targets that facilitate either a faster financial payback or a cheaper price on the business.
Larger companies like Omnicom can borrow money at more favourable terms than a small to medium-sized business. Larger companies that have lower levels of leverage will be able to get money in a more favourable format than more highly leveraged business of the same size.
Driving integration
Historically these groups take a light touch on integration for agencies where the capabilities are common to more than one agency, WHERE the acquired agency is hitting the ambitious financial targets set by the holding company. Integration in terms of integrated new business pitches and common selling of new products or capabilities.
This might be where the client is looking for an integrated solution. Or it might be where it makes sense to pool resources to deal with a new area like Amazon advertising and retail media or generative AI services.
Once a newly acquired business has become ‘part of the furniture’ and the founders have stepped away, you are more likely to see it become more deeply knitted into the holding group business fabric. This is likely to include common systems and processes: time-tracking software, HR and talent management software, accounting software, cloud services and productivity software.
Efficiencies
Sources of efficiencies overlap integration through standardisation and being able to buy in bulk. A second source of efficiency is consolidation of common business functions:
Accounting / finance
Business development
Freelance staff pool
Human resources and recruitment
IT
Knowledge management
Legal services
Open questions
Both Omnicom and Interpublic have experience of integrating and spinning off parts of their businesses. What’s different about the Interpublic acquisition is that the scale involved is different from anything else that’s been undertaken in the sector.
How will this be done successfully?
What (additional) value is in the resulting business for clients?
ADWEEK polled marketers to better understand their attitude to the merger. On balance they weren’t supportive of the deal. Twice as many respondents were negative about the deal compared to those who felt positively about it. The good news was that almost 60 percent either hadn’t made their mind up or were on balance neutral. At this point I need to caveat the results with the note that there wasn’t a breakdown on the types of respondents in terms of their role and seniority.
But it implied that Omnicom had a serious communication job to be done convincing wider stakeholders on the merits of the deal.
The problem might be greater than telling a better story. By some estimates 60% of Interpublic and Omnicom scopes of work are allegedly already understaffed – if true, likely putting customer satisfaction at risk. And that’s before the reduction in headcount to match the need for cost savings.
