—In his first interview with international media, the global chief executive of the Japanese holding company talks to Campaign about his vision, client-centricity, the exodus of international talent, M&A and more—
By Gideon Spanier
“I might not look that way but actually I’m very fast at running,” Hiroshi Igarashi, the global president and chief executive of Dentsu, says, explaining how he is a huge basketball fan who used to be a member of a company team in his native Japan.
Igarashi played point guard – the “floor general” responsible for co-ordinating strategy and controlling the pace of the game – until he suffered an Achilles heel injury at the age of 42 at the start of the 2000s.
Now aged 63 and dressed in a business suit and tie for this interview – the first he has given to international media since taking the top job – he is in a hurry to change Dentsu, the world’s fourth largest agency group with about 72,000 staff.
Igarashi comes across as mild-mannered and courteous, presenting Campaign with a gift-wrapped fan with a painted design of Mount Fuji, during the conversation in Dentsu’s London offices in Regent’s Place.
But there is a hint of urgency when he talks, through his translator, about the opportunities and challenges facing the group and how he wants to double the percentage of revenues from global clients to 30% by 2030.
“In this competitive environment, I think that it’s very important that we do move quickly,” Igarashi says, speaking before the company’s recent Q2 results, when it followed several rivals in downgrading its annual revenue forecast because of client cutbacks in the tech sector and a slowdown in digital transformation work.
Dentsu wants to generate 50% of revenue from customer transformation and technology (CT&T) by the middle of the decade, with the remainder coming from media (the historic core outside Japan) and creative.
His talk about the need to move fast might appear self-evident at the dawn of a new age of artificial intelligence, yet his language carries significance because of corporate Japan’s reputation for considered decision-making. Dentsu has a long history since it was founded in 1901 but it only expanded significantly internationally when it bought Britain’s Aegis Group for £3.2bn ($5bn at the time) a decade ago.
Igarashi has spent his whole career at the company since joining as an economics graduate in 1984 (see fact box, below) and he has little profile outside his home market (he doesn’t speak English but understands a little).
He rose through the domestic business as an eigyo – an important account executive role in Japan that involves a deep working relationship with the client. He had some exposure to international clients such as Volkswagen and Gucci, he says.
He went on to become head of Dentsu Japan in 2018 and was appointed as global chief executive at the end of 2021, starting formally in the job in January 2022.
Igarashi soon made an impact as Wendy Clark, the charismatic chief executive of Dentsu International, the business outside of Japan, stepped down in a shock move in September 2022—only two years after she had been recruited from Omnicom.
Aggressively pushing the move to ‘One Dentsu’
Dentsu had talked about bringing its domestic and international businesses closer as part of a “One Dentsu” strategy since before the pandemic and had been through multiple restructurings, including a move from about 160 agency brands to six globally since 2020.
However, Clark’s exit showed Igarashi was pushing integration more aggressively in pursuit of global clients.
Dentsu International—previously known as Dentsu Aegis Network, following the acquisition of Aegis Group—was dropped as a separate business division and brand at the end of 2022.
Now all four of Dentsu’s regions, the Americas (29% of revenue), APAC (9%), EMEA (20%) and Japan (42%), report to a single, global management board—with the aim of delivering “at the convergence of marketing, technology and consulting” for its clients, which include American Express, Carlsberg, Microsoft, Procter & Gamble and Vodafone.
Igarashi himself has been more active internationally this year, travelling multiple times to the US to New York and Silicon Valley to meet major clients and the big tech platforms, attending the Cannes Lions International Festival of Creativity for the first time in June and taking part in this Campaign interview and photo-shoot.
He says it is “important” for Dentsu to be more visible and present in the global ad industry because it has a responsibility to step up as a “B2B2S” (business to business to society) company—providing business-to-business services that have an impact on wider society.
Igarashi also talks about looking after Dentsu’s “people” and the importance of “diversity” as well as fostering “trust” and “love” between the company and its clients.
He enjoyed mixing with staff at its recent, internal North Star Awards for creative work in London (“the atmosphere of the ceremony was like Hogwarts in Harry Potter”, he says) and in another small but symbolic step, close colleagues address him as “Hiro,” rather than the more formal “Igarashi-San.”
All of which suggests he wants Dentsu to be a more open and inclusive company as it seeks to compete against US and European rivals on the world stage.
Does this mean that we should think of Dentsu as a Japanese-based operation, with four regions underneath, or more of a truly global business?
“What I am moving towards, or my goal, is to become a truly global network,” he says. “It’s not at all the case that I am trying to build a business that [operates in a way that means] Japan will be the core in everything.”
He notes non-Japanese executives hold a number of key global roles for the first time. These include Nick Priday, the chief financial officer, and Alison Zoellner, the general counsel.
Turnover of executive talent
The theory about moving to “One Dentsu” might sound logical but the reality is proving less straightforward.
After a decent bounceback in 2021 and 2022, organic revenues have been under pressure, dropping 1.6% in Q1 and 4.7% in Q2. Igarashi has had to cut Dentsu’s 2023 forecast twice, chiefly because of weakness in the Americas and APAC.
A lot of senior international talent has exited. First, Alex Hesz, a big hire who was due to join from Omnicom as global chief strategy officer, pulled out at the last minute. Then Fred Levron, the global chief creative officer, and Jacki Kelley, the chief executive of the Americas, departed. More recently, James Morris, chief executive of Dentsu Creative in EMEA, left at the end of August.
How does Igarashi believe “One Dentsu” is going, because the perception is that it has caused a lot of upheaval? “It’s going very well, as we planned,” he maintains.
Igarashi is “very grateful” to Clark, Levron and Kelley and “the legacy that they have been able to leave for us.”
He had “a lot of good moments” with “Wendy,” who made a big “contribution” in terms of the company’s “societal” impact and it was “exciting” to work with “Fred” on the launch of Dentsu Creative last year, he says.
Still, the turnover of executive talent doesn’t look great, especially given the departure of Kelley, another senior leader.
As the Americas chief executive, she took on an additional role of global chief client officer at the end of last year, following Clark’s exit, yet she appears to have been unconvinced by Dentsu’s strategic direction and has returned to her old employer, Interpublic.
Igarashi doesn’t respond directly to that point but says he is looking to hire a new global chief client officer—an acknowledgement that Dentsu needs more talent to court international clients. Michael Komasinski has already replaced her as Americas chief executive.
Hiroshi Igarashi fact file
Fighting to win global clients
The international talent exodus matters because Dentsu needs leaders who can win and retain big accounts around the world, not just in Japan.
Dentsu has previously talked about wanting to land $100m clients but recent evidence suggests it has not been making much headway in terms of new business and it missed out on major integrated reviews such as Coca-Cola (to WPP) and Pfizer (to Interpublic and Publicis). Both had been existing clients.
Igarashi responds that “pursuing scale” is not his aim. Instead it’s about “pursuing client-centricity” and being the client’s “growth partner” on a “mid- to long-term basis” that will drive success for Dentsu, he says, noting the company already works with about 95 of the world’s top 100 advertisers in some capacity.
While “One Dentsu” means operating as one global team, he says his colleagues outside Japan could learn something from the Japanese approach to very long-term client relationships.
Playing the long game makes some sense, particularly for someone who has worked for Dentsu in Japan for four decades, but some clients want short-term reassurance.
Lucinda Peniston-Baines, managing director of The Observatory International, which advises clients on agency relationships and pitches, says: “The ongoing structural integration, acquisitions and leadership changes at Dentsu are still somewhat unnerving for prospective clients, with the creative proposition still to bed down.
“In the current climate of tight budgets and the need for efficiencies in agency operating models and maximum effectiveness in the communications they deliver, this is going to continue to be a short-term hindrance.”
Too slow to integrate Aegis?
Stock market analysts are also impatient to see evidence of progress. The long-term “underperformance” of the international business versus its global agency peers over the last four to six years is a “Dentsu-specific” issue, investment bank Barclays Capital suggested in a research note in May.
That raises an interesting question as Campaign sits in what used to be the London headquarters of Dentsu Aegis Network: was the Japanese parent company too slow to integrate DAN, given that the takeover of Aegis Group was completed in 2013? The domestic and international arms were kept separate for another decade.
“Maybe it has taken 10 years to get here, but once the decision is made, we work quick,” Igarashi says, adding pointedly: “And the decision has been made.”
He believes the move to “One Dentsu” is in the best interests of both clients and the company.
“It’s very important that, if we look at it from the client’s perspective, that we do have a combined effort and integrated group,” he explains. “We cannot emphasise just ‘international only’ or ‘Japan only.’ I think that we have to have a combined effort or else we will not be able to win [against agency rivals].”
He continues: “So I have made my decision—our decision. We should be and will be moving very fast from here.”
That means more simplification in an organization that has already carried out two big, international restructures and made significant job cuts in 2019 and 2020.
Breaking down internal barriers
“We need to remove some of the internal barriers” across Dentsu and organize more around clients, Igarashi told senior leaders in a memo at the start of the summer.
Breaking down silos makes sense to some insiders, who describe Dentsu as a matrix-type structure that they say still involves too many different layers.
There are six global agency brands: Carat, Dentsu Creative, Dentsu X, iProspect, Merkle and Tag Worldwide, the content production business, which Dentsu bought in March.
There are also three over-arching global “service lines”—creative, media and CT&T—as well as client leaders and national, international and global leadership.
For client-centricity to work, it’s about “bringing solutions that are connecting all the different capabilities” together—“without any restrictions or limitations”—and “then being able to bring more value to our clients,” Igarashi says. “That’s the kind of transformation which I’m trying to make.”
In practical terms, does that mean the company is going to place more emphasis on a client P&L—the profit-and-loss account for servicing each client?
Yes, the client P&L is going to become “central,” he suggests. “If the P&L with the service lines is something that is going to hinder our growth within the business, with the clients, it’s something that we have to fix.”
There have already been signs of this shift in the US, where Komasinski restructured operations to improve “our speed to market” in August, with more focus on the parent company and its client leads and the agency brands and less emphasis on the service lines.
The individual agency brands are still “very special” because of their “specialisations,” Igarashi says. But when a client asks for an integrated approach, “that is when Dentsu as a brand comes into force” as the parent.
As part of that shift, he wants to “enhance” Dentsu “as a brand” and improve its “brand equity,” Igarashi explains, using similar language to some of his rivals such as Omnicom, which has also been looking to boost the holding company brand.
Has Dentsu been too modest?
Igarashi’s desire to boost Dentsu’s standing on the global stage contrasts with the company’s modest approach in its home market where it is the dominant player in the agency sector.
Dentsu Japan can be self-deprecating and is sometimes reluctant even to share work with journalists, according to colleagues at Campaign Asia who spoke with Campaign in preparation for this interview.
Does Igarashi recognise that picture? No, he says, with a smile, pointing out how Dentsu’s agencies often do well at Spikes Asia, the big annual festival and awards show that is co-owned by Haymarket, the publisher of Campaign.
Still, it is clear that he wants Dentsu to be more proactive and outgoing—hence his visit to Cannes Lions where he swapped his suit for a summer shirt, casual trousers and deck shoes on Dentsu’s rented beach.
He felt it was important “to be there” for a number of reasons, which went beyond networking with talent, seeing the creative work, and meeting clients, media partners and some of his fellow holding company chief executives.
Dentsu “should be committed” to being “part of” the industry-wide effort to tackle society’s biggest challenges from inclusion to climate, and Cannes Lions is changing to reflect that, he says approvingly.
He talks almost as if he were the chief marketing officer of Dentsu. Does he see that as part of his role as chief executive and he is trying to build “love” for the brand?
Igarashi doesn’t quite see it like that, although he is meeting more clients and talking to them about Dentsu’s offer—“So, I guess in that sense, I’m playing a CMO-like role myself.”
As for the idea that he wants to create love for Dentsu, he says: “Of course, we want to be loved. But I think that it can’t be just one way. I think for that we must love the client as well. It has to be reciprocal… That’s the thinking that I have when you talk about being loved as a company.”
Improving Dentsu’s corporate culture
Igarashi knows that Dentsu must improve its own corporate reputation after allegations of bid-rigging surrounding the Tokyo Olympics.
An investigative report by a committee of external experts came out in June and criticised a number of aspects of Dentsu’s “organizational culture,” including what it described as an “excessive ‘client-first’ emphasis.”
He promises that Dentsu will make the necessary changes in terms of compliance, transparency and risk: “I’m totally committed to making sure, with respect of the report, that these actions are taken.”
However, criticism of how Dentsu may have worked with some clients doesn’t mean that client-centricity itself is “wrong,” he insists.
Improving the corporate culture matters in other ways. In a sign of greater transparency, Dentsu disclosed in its annual report that the number of whistleblowing reports across a range of issues, including bullying, harassment and financial affairs, more than doubled last year.
“There’s nothing more important than the health and the wellbeing of our people,” he says.
Japanese companies have had a reputation for long hours—an issue for Dentsu in the past—so how does the company balance its desire to support its people with the need to drive profit margin? For example, the company has moved about 10,000 jobs to low-cost locations such as India but now tries to avoid talking about offshoring as a term.
Business performance does matter but the focus is on organic revenue growth, rather than profit margin, according to Igarashi, although the company has been keen to tell investors it will still hit its margin despite slowing sales.
He adds Dentsu is not a company that manufactures tangible products, so “the growth” and “the nurturing” of “our people” is key.
No sale of the international business
Dentsu appears to be fully committed to its global strategy but that does not stop some industry observers from wondering if the company might sell off its international business.
Ian Whittaker, a Campaign columnist and long-time financial analyst in London, recently wrote an opinion piece in which he suggested that a sale of the non-Japanese business might be a possibility, even though he stressed he had not spoken to the company and saw no evidence that a deal was on the cards.
What did Igarashi think of the article? His eyes light up and he is happy to respond: It was just “Ian’s opinions or thoughts” and they were “not based on any conversation” with the company.
What’s more, a sale is “totally not part of my mindset” and “I’m not thinking about anything like that.” He is “very much focused on moving forward with the One Dentsu vision.”
How about reframing the question: Hypothetically, could Dentsu buy big or merge with another large international group? For example, IPG or Vivendi-owned Havas, whose key shareholder, Vincent Bolloré, used to have a big stake in Aegis Group.
Igarashi doesn’t entirely dismiss the idea but says it’s like the question of whether Dentsu needs $100m clients.
“Pursuing scale” or “becoming big” is “not the end goal” — “rather, it’s pursuing client-centricity,” he says. “Now, as a result of that if we become bigger or scaling alongside what we are working on, if [a deal] it comes along, that might be the case [that we would consider it].”
This could involve “maybe an acquisition” or “perhaps an alliance with some place that would uniquely enhance what we have—that might be something,” he says.
“But it never would be the case that I would be looking for [just] scale or to be big, and then pursue something for that purpose. That’s not part of my thinking at this point.”
Dentsu has been the weakest performer of the large agency groups in terms of organic revenue growth in the first half of 2023 but some investors appear to believe it may have reached the bottom.
Silchester, a UK-based value investor, which has a 5% stake in WPP, has quietly built up a 6% shareholding in Dentsu, a regulatory filing in July showed.
Bank of America said in an analyst note in August it sees scope for a “rebound” at Dentsu in the second half of 2023 and beyond, driven by faster growth in Japan, a higher proportion of revenues from CT&T and “strong potential for M&A” by making further bolt-on acquisitions.
Fiona Orford-Williams, a director of Edison Group, a research company, says: “Dentsu is such an interesting company and so often over-looked. The opportunity to bring together the best elements of the Japanese business and the best elements of the international business—provided it can be pulled off—can make it a significant force.
“Pulling it all together under the One Dentsu concept is a major undertaking—a complete transformation of the structure—but my feeling is that Hiroshi Igarsashi and his team understand the challenges in doing it.”
There have already been some benefits such as bringing down finance and foreign exchange costs, plus the earlier sale of the Shiodome building, the Tokyo headquarters, and of some minority interests shows “management’s thinking has broken out from a more typical Japanese [domestic] approach,” according to Orford-Williams, who recently spoke with chief financial officer Priday for a research note.
“With the scale of change, it was bound to be difficult to bring everyone along” in terms of talent, she says, but adds management “seem very happy, though, about the new leadership in the US, China and India.”
Some rival agency holding company chiefs spend many years, even decades, in the top job and Igarashi has already shown his commitment through his long service but he won’t say how long he expects to stay in the role.
New board governance rules mean it’s “up to the nominating committee to make a decision to allow me to continue” each year, he says in the concluding part of this interview, which was conducted via video call a few weeks later—with Igarashi sitting tieless in his office on the 45th floor of Dentsu’s skyscraper HQ in Tokyo.
He likes being chief executive: “Being able to create new value for clients and doing that with colleagues is something that I’m very, very happy about and really love doing.”
Promoting senior talent is also a “very important” part of his role, making sure there is a “good depth” of future leaders and successors in place.
He maintains there are lots of “talented individuals” within the group who can step up at the top level, although both insiders and competitors think that’s an area of weakness in the wake of the international talent exodus and he can’t keep promoting a few familiar faces from within.
Dentsu’s chair is Tim Andree, the American who used to run Dentsu Aegis Network and who speaks Japanese. So, one day, could the next chief executive of Dentsu be someone who is not from Japan? “It is very much a possibility that it’s a non-Japanese,” Igarashi says.
Dentsu’s “floor general” still loves to watch basketball in his spare time but, as he sits in his skyscraper office, he must know he has plenty to do to get his team moving and, more importantly, scoring.
This article originally appeared at Campaign UK.