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Media buying is like running a fast food chain, says Harold Mitchell, the executive chairman of Australia’s biggest media-buying company, Aegis Media Pacific.
“We’re a bit like McDonald’s, in a way,” he says. “When you go to McDonald’s, all you have to work out is how hungry you are. You either have a Big Mac or a ‘little mac’. Why is McDonald’s so successful? Because they make it easy for their customers. So we say to our clients: ‘What is it that you need and we can fit it’, rather than ‘Here’s what we do and you fit in with us’.”
Media buying was not a stand-alone business in Australia before Mitchell made it one. Ad agencies used to buy media space – in newspapers, on TV, on billboards and so on – on behalf of their clients. When Mitchell set up Mitchell & Partners (now Aegis Media) in 1976, he introduced the idea of the middle man who could buy in bulk to reduce prices and keep a cut of the savings.
Mitchell believes in a single focus when working on a project. He explains: “If somebody comes to me and says, ‘We have developed four options’, I say ‘why’?
“We’ve had clients who think they need several options. I say, ‘I can give you one good one and three bad ones.’ Wouldn’t it be better if I came to you with the right one?”
While answering a question, Mitchell draws triangles on a notepad in his South Melbourne office to illustrate a point. He applies the same strategy he offers his clients to his company – the whole team climbing one major mountain, not six small ones. And he plans for the long term.
“So when there’s been an economic downturn, we’ve been able to maintain our service and build market share even though we may have sacrificed short-term profit,” he says. “However, when the economy’s turned for the better, we were at a much high level than our competitors who were scrambling to get staff and resources. We don’t wait and see what happens – we decide what we want to happen.”
Focus and falling apart
Mitchell says companies fall apart because they lack focus, long-term planning and deviate from their core activities. It’s something he knows from experience. “Sometimes company leaders forget the businesses they’re in – the core operations,” Mitchell says, reflecting on his own near-death financial experience. In the early 1990s, he ended up with a $32 million debt as a result of signing four personal guarantees on loans involving investment projects that eventually went bad.
It is a classic mistake for a company to make expensive acquisitions when it isn’t ready, able and equipped to handle new businesses. Typically, when the numbers from an acquisition don’t meet expectations, especially on the back of mounting debt, the cost-cutting starts. Inevitably, the company loses skilled and experienced staff – often to competitors keen to expand their market share – and it struggles to survive.
In Mitchell’s case, he invested in the Big Banana theme park at Coffs Harbour in New South Wales. It brought him to the brink of personal bankruptcy until media magnate Kerry Packer provided him with a $1.9 million interest-free loan.
Mitchell recalls: “I signed four guarantees and I refused to run away. Other shareholders and directors ran away. I spent the next seven years fixing it, which included paying Kerry back. Our company Mitchell & Partners wasn’t at risk, but I was personally at risk. Without Kerry’s support, I may have been bankrupted.
“The lesson I learned is not to get involved in things you know nothing about. Don’t do big business outside your core activities. It’s a recipe for disaster.”
Climbing out of the grave
After his brush with financial death, Mitchell recovered to build a company employing about 1100 staff, serving 4000 clients, while consistently generating media billings above $1 billion a year and now edging closer to $2 billion.
It was in the wake of the global financial crisis in 2010 that Mitchell pulled off a masterstroke by selling his ASX-listed company to English media firm Aegis for $A363 million. The Mitchell family owned 40% of his ASX-listed company, but Mitchell opted to take mostly Aegis scrip rather than cash. After the sale, Mitchell was appointed to the Aegis board and became executive chairman of the firm’s Australian arm.
Opting for Aegis scrip rather than cash proved a shrewd move, as Japanese advertising company Dentsu Inc bought Aegis for £3.16 billion in July 2012. Mitchell confirmed his 4.2% stake in Aegis is worth about $A200 million – almost doubling his money in two years.
The deal rush
Mitchell loves doing deals. When he sold his company to Aegis, Mitchell says the deal took 20 minutes.
“A good deal will always be like that,” he says. Mitchell scribbled the deal down on a single piece of paper and flew to London to meet with Aegis CEO Jerry Buhlmann. “I never thought the price I was asking was too high (A$1.20 for each Mitchell share), or that the deal wouldn’t come off. I was supremely confident.”
Mitchell maintains a key element of a successful deal is trust. “You have to put yourself in the other party’s shoes and work out what’s good for them as well,” he says. “Everyone has to win. If a deal is all about you, it won’t work. If price becomes a major sticking point, it won’t be much of a deal.”
To do a successful deal, he suggests meeting face-to-face with the other party’s decision-makers as opposed to swapping emails and letters with advisory firms.
“I’m always on a plane,” he says. “As much as I can, I try to be in front of people. I’m old-fashioned. I try to be confident, not arrogant – there’s a very fine line. I don’t want to exploit people; I don’t want to bluff them, I don’t want to play games – I just want to get a fair deal done. To reach a compromise, just keep talking with the other party. It may take time, but if it’s fair, a deal will generally get done.”
Mitchell says top business leaders are invariably those who “own tomorrow because they know what’s coming next”.
“Leaders are visionaries – they recognise the future,” he says. “They are curious and ask a lot of questions. They inspire and motivate staff to achieve goals in line with the business strategy. The measure of a good leader is quite simple – people follow.”
Mitchell says businesses are about two things: the first is people, the second is money. “If you’ve got the best people, you’ll make the most money,” he says.
“I work hard at maintaining good relationships with my staff. I say ‘here’s where we’re going and I’ll give you great support to do it’. “We’ve done well in the past, but all I’m interested in is what’s going to happen next.”
Negotiating the digital world
Mitchell expects to be leading the Australian arm of Dentsu when the deal is concluded at the end of this year. He says the acquisition of Aegis provides Dentsu with global coverage. “It will now be a world group,” Mitchell says, forecasting Asia will account for about 50% of global gross domestic product by 2050 due to its rapidly-expanding middle class.
“Asia is going to have more middle class people than anywhere else in the world and it’s going to drive demand for products and services,” he says. “Australia’s tourism industry will be bigger than mining in 10 years because a growing number of middle class Asian people will travel here for their holidays.”
Reflecting on his media career, Mitchell, 70, says the internet is responsible for the biggest change in communications since the invention of the printing press.
Before the internet, mass media was directed all one way – consumers read, watched, listened, absorbed or visited a shop. The digital world is two-way – a shopper presses a button on a computer or mobile device and companies discover what products sell.
“The famous story had always been that 50% of our advertising isn’t working; the trouble is we don’t know which 50%,” Mitchell recalls. “Online, you know everything and that’s the real difference. Internet advertising is more efficient and also cheaper because it cuts out all the waste.”
Mitchell says by 2013, about 25% of all advertising dollars will be spent in the digital space. He says the internet will accomplish in 13 years what it took television more than 25 years to achieve – about a quarter of Australia’s annual ad market.
Online advertising spending in financial year 2011/12 was about $3.135 billion, an increase of 21% on the prior year, according to online industry body, Interactive Advertising Bureau (IAB) Australia. Total ad spending across all media platforms in the same year was about $13.5 billion – an increase of between 2% and 3%.
Depending on the product, service and audience, Mitchell places ads where he believes he can get fastest and biggest impact. “Consumers are simply living their lives, so you have to be in front of them wherever they are,” he says.
While he expects newspapers to survive, he says 80% of media will be digital by 2020. He says the printed advertising word has a bright future: it’s just more of it will be distributed electronically via computers, smartphones, iPads and other tablets.
Harold Mitchell: Media briefing
Q: What is your favourite source of leadership inspiration and ideas?
A: Mostly, it’s modern day life – travelling and talking to lots of people. Always have your antenna up. From my dealings with media owners over many years, the best ones are great listeners. If I’m doing 90% of the talking, I’m only doing 10% of the listening. And there doesn’t seem much value there.
Q: What is the one thing a leader should never do or say?
A: ‘I’. Because that means you’re the most important person in the world and you never are. Rather than say, ‘I must do this and I must do that’, always say ‘we’.
Q: What two elements are critical to achieving change?
A: Imagination and courage. I imagined we could be number one in our industry when we started in 1976. And we did get there. In the beginning, it might seem the business isn’t working, so you must have the courage to stay with it.
Q: What was the worst moment of your career and what did you learn?
A: Losing two big clients in 48 hours. At the time, these two clients represented a third of our business and we relied too heavily on them. Our competitors bought them and we were sacked. I immediately realised it’s much better to control your own destiny.
Q: What makes a workforce productive?
A: Working as a team in the same direction. If you’re all trying to do different things in different places, it will take four times as long to do the job.
Q: What important qualities do you look for in your direct reports?
A: I want a report to be clear and concise. But, at the same time, I’m also looking for individual understanding and comment.