Long before he came to DDB, CEO Keith Reinhard subscribed to the breakthrough work and philosophy of the agency that turns 50 this year.

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Indiana-born Keith Reinhard tried unsuccessfully for 10 years to break into Chicago advertising. In 1963 Frederick (Sandy) Sulcer, a 16-year veteran of Chicago's Needham, Louis & Brorby agency, noticed his work at the Biddle Agency in Bloomington, Ill., for State Farm Insurance, a mutual client. In 1964, Mr. Reinhard, then 29, was hired shortly before the merger that produced Needham, Harper & Steers.

Within three years he was a VP and by 1984, CEO. In 1986 he was a key figure in the merger of NH&S with DDB and the creation of Omnicom. (In March 1990 he brought Mr. Sulcer, then 59, back to DDB Needham in charge of new business. Mr. Sulcer is a consultant with DDB today.) Mr. Reinhard was interviewed in DDB Worldwide's New York offices by Advertising Age special contributor John McDonough.

Advertising Age: You became a VP-creative supervisor at Needham in 1967, which means you've observed a lot of changes in the business at an executive level for a third of a century. If you had gone to sleep in the '60s and awakened today, could you make any sense of it?

Mr. Reinhard: If one came on the scene now with a 1960s perspective, it would look like an entirely different business.

Ad Age: Everybody talks about the Balkanization of the mass market and media into little niches. It seems a parallel development has been the extension of what was once the basic ad agency brand-building function into a whole series of specialized tasks. Ten years ago you were warning your colleagues to wake up and smell the consultants, and of the need to offer "integrated marketing communications" in some form before it was too late. How would you grade industry reaction 10 years later?

Mr. Reinhard: I think we're coming around, but our business is still too slow to change. I go around the world and ask our managers if they can think of one client that hasn't changed its fundamental approach to business more than we have. Nobody can. Advertising is the most conservative industry, and we should be the most creative.

When we talked about integrated marketing a decade ago, the industry wasn't buying. "We'll make the ads," they said. "Somebody else will do that dirty, below the line work." [As a result], brand consultants and marketing consultants have intruded into our territory as the principal brand architects.

Ad Age: Why do you think the industry is so reluctant to change?

Mr. Reinhard: Because advertising was getting rich on 15% commissions and an 11% media inflation. As an industry, we fought any suggestion that we had to change and spent all our energies defending an obsolete system.

Ad Age: You're on record as far back as April 1990 favoring an agency compensation based on what you called "guaranteed results." That was asking a lot of the creative work then, and even more now with more outside consultants in the picture. How has that notion evolved, and does DDB still stand by it?

Mr. Reinhard: What we said in 1990 was that under certain circumstances we will guarantee that this program will produce an agreed-upon result. If I had to do it over again, I would not have used the "G" word, because it scared people.

It sounded like a publicity stunt. So now we refer to it as "results-based compensation." Or "success-based compensation," as opposed to performance [based]. That's because "performance" has a qualitative aspect where a brand manager who's short a few thousand dollars can take you from a grade of 4.0 to 3.5 and make his or her number.

We're saying, let's agree on what we want to do with a given program. Do we want more distribution points? Do we want to raise the perceived value from 12 cents above the second brand to 15 cents? Do we want to take share from competitor X, and how much over what period of time? Let's agree on a precise, measurable objective, and then let's agree to allocate resources, time and money to that objective.

We're proposing this in almost every new business presentation, and we convert some, not all. Last year we had 23 or 24 in the U.S. Our incremental income was around $6 million annually from these schemes. But it goes to the bottom line, because [there's] no additional cost.

Ad Age: So it depends on the willingness of your clients to dance with you on this idea?

Mr. Reinhard: Much more than that. It depends on their willingness to let us get involved with all the things that go into creating that result. The client has to agree that we can influence the larger marketing elements -- at least all the brand's communications.

There are other risks that even the client can't control, of course: competitive activity, weather, acts of God, who knows what. I think we should be willing to take those risks as well, as long as we're going to share in the reward.

Originally, the "guaranteed results" idea was inspired by the media explosion, because less and less of the marketing dollar was going to what we did as an agency. It was going to direct marketing, sales and trade promotion, sponsorships, all kinds of stuff.

So we said the only way we're going to get account executives and creative people to think holistically [about this process] is if that's how they get paid. As long as we get paid for doing only print ads and commercials, we'll never get our people to think beyond the lines.

It was also suggested by something said once by Bill Bernbach. He said that properly practiced creativity should make one ad do the work of 10.

Think about that. Why should the agency that creates one ad that does the work of 10 receive the same compensation as an agency that takes 10 ads to do the work of one? Why should the poorly performing agency get more money because it has to run its ad a lot of times to get the same result [as the high performing agency]? It all came out of Bernbach's recognition that there was tremendous power in a creative idea.

So we took it a step further and said if that's so, then why don't we hook our compensation to how good our work is. I saw it as a stepping stone to a meritocracy, which will not occur until 25 years from now. Twenty-five years from now, I hope you will be willing to pay more at DDB than you will at another agency for the same reason you pay more to McKinsey than to some consulting firm you never heard of. 'Cause they're better.

Ad Age: Why did the industry resist changing compensation methods?

Mr. Reinhard: Because we [as an industry] were so greedy, we should fight that. Advertisers responded to our system with perfect logic, "so it doesn't matter where I get my ads. I pay the same price." That put the agency in the same class with soybeans and pork bellies. It means we're a commodity, where the customer sets the price. And that's what happened.

Ad Age: Paying on the basis of results may seem appealing to an advertiser. But inviting the agency into the decision-making on broader marketing issues that have traditionally been the business of client management, that's a high price to pay in terms of letting an outsider into the tent.

Mr. Reinhard: Here's what we have now. (He draws a large pyramid, making three layers.) At the top we have the marketing consultants, often working at the CEO level with our clients. In the middle we have brand consultants. And at the base we have the communications companies, of which the advertising agency is but one, along with sales promotion, event marketing, Internet and so on. This is how the client looks at it. The top level is going to the board room; the bottom level is where the ad manager works. If we're going to get paid for results, we have to do two things -- and this is the agency of the future. Expand into the consulting space, not by labeling ourselves consultants but by going to clients with sound strategic initiatives.

We will do two things that the consultant won't do. We will expand and acquire all these capabilities here (pointing to the lower level of the pyramid), either by direct acquisition or through strategic alliance; and we expand upward into the consulting space. Then once we design the brand plan as an architect, we can help built it, because we have all these capabilities.

So the creativity is in creating brands -- and, by the way, owning brands ourselves and licensing them just like music licenses. And creating communications.

Ad Age: What do you mean by owning brands?

Mr. Reinhard: We can invent a brand because we know all about the consumer, and we know all about creativity. Sustainable, intrinsic product differences are very hard to come by. We can put it together, create a brand and license it, just like a music publisher: You get to sing my song, if you pay me that is. But you don't own it. Say you're a pet food company and you know manufacturing and distribution. And I say here's a line of new pet foods and beverages that we've tested, because we own the brand. Would you like to buy it or license it?

Ad Age: Do you consider yourself a disciple of Bill Bernbach?

Mr. Reinhard: Absolutely. When I started at Needham back in 1964, I wanted to do for our clients what Bernbach was doing . . .I was always putting Bernbach ads on my wall. But who wasn't then? I never worked with him, and met him only once. But I think that's an advantage. I can be more objective about what he did and said.

Ad Age: At the time of the 1986 merger, you reportedly wanted to drop the Needham name altogether and continue as DDB.

Mr. Reinhard: More than that. My first thought was to name the new entity simply "Bernbach." Our vision was to create an organization in which his ideas would flourish and be applied throughout the modern world. I thought "Bernbach" branded that mission well. The vision was mine and I was in love with it. I still am. It was so overpowering; I was never particularly sentimental about the Needham name, as several Needham veterans were quick to remind me. I did care about and have tried to preserve a lot of Needham values. The idea was to take the best qualities of both and build a new culture.

There were a lot of Needham people who said, "Oh, our guy won, so we'll all be Needhamites." And the DDB people figured they'd just swallowed a harmless little Midwestern agency. This is true of any such merger.

Both sides believed they will be in control of the larger entity. The name DDB Needham Worldwide was an accommodation to both external and internal constituent groups. Clients such as State Farm and McDonald's wanted to refer to their agency as Needham. It was the same for clients of DDB. Of course, there was great reluctance on the part of some board members to do the merger at all.

Ad Age: Did Bill Bernbach do all he could have or should have done to institutionalize his agency so that it could live without him?

Mr. Reinhard: He didn't, and that's why it was going to die. The reason he didn't, in my opinion, is that, unlike Leo Burnett and David Ogilvy, he was so afraid of rules. To institutionalize his ideas or even come close, he thought, would kill it.

He never wrote a book. And he was also afraid that if Helmut [Krone] and Phyllis [Robinson] and the other DDB stars couldn't actually show him the stuff personally and get him to smile, then he couldn't control it. So how could DDB ever be international?

Those are things, I'm told, that bothered him a great deal.

Ad Age: You've become more than a disciple, it seems. You've become Bernbach's St. Peter. He wrote the text; you built the church.

Mr. Reinhard: Me and a bunch of others. But I'll accept that characterization as amended. The idea had been to get together with DDB to bring Bernbach's ideas to life. Because they were dying. They were not going anyplace in 1984. We start with a tough premise: you don't have rules. Rules are for people who don't know what to do. And you don't have a lot of structure.

What you do is you articulate a set of beliefs that come out of Bernbach's teachings and discoveries. And then you articulate those across the world. And people who agree will join you. And those who don't leave you. And those who join you are able to build upon that philosophy and they're the new Bill Bernbachs -- in Sao Paulo, in London, Chicago, Vancouver, Stockholm, etc. You spread it and you can grow as far as you want because you keep extending the culture, but without set rules.

Today we can go to any part of the DDB network and find not only Bernbach's picture on the wall and his little gray book lying around, but new ads and commercials and Web sites that reflect his ideas.

Ad Age: A kind of intellectual cloning.

Mr. Reinhard: You might say that. The ideas are timeless, and all that was required was for someone to come and say "Let's do this." But the doing of it took a lot of like-minded people and the leadership of two men in particular, Bernard Brochand [president-international] and John Bradstock [president-North America & Latin America]. Between the three of us, you couldn't find a bunch who would seem to have less in common. John joined Needham in Australia in 1964, the year I joined in Chicago, and built the company into the most successful agency in the country. As president of DDB North America & Latin America today, he specializes in the toughest tasks around the world.

Bernard built the Paris office of DDB in 1969, and later left for Eurocom. I met him in New York in 1988; we went to dinner early and ended up talking until midnight. The connection was remarkable. He came over to head the whole DDB International division and infected everyone he met with his enthusiasm.

We're a study in contrasts. I'm a kind of laid-back dreamer. Bernard is a minefield of enthusiasm and persistence. "You have to have bigger dreams, more dreams, more passion," he tells me. John has hands of steel, is subtle and quiet, and prefers working behind the scenes. "Get your head out of the clouds, Reinhard," he says. "We've got practical problems to solve." He once told me to stop having more visions: "We're still working on the last three."

Ad Age: What would you like most to institutionalize that will live beyond you? It would seem to be the legacy that Bernbach created but failed to solidify.

Mr. Reinhard: Well, if I could have anything I wished for, it would be for this organization to take those insights into the digital age. There really is no Bill Bernbach of the digital age yet. Nobody is really doing the right-brain stuff, the emotional stuff, the storytelling based on great human insights on the Web. It's all about technology so far.

So I would like this organization to say, okay, as we cross the threshold into the next century, it's a matter of how to apply those Bernbach ideas in the new digital age. That's what I would like to have done.

Ad Age: How are you going to do that?

Mr. Reinhard: I'm not. Others will. Of all the decisions a CEO makes, the most crucial is deciding who you give the authority to when you go. It's the ultimate act of management. We went through a process that began last November with about five or six people. After poring over their many qualities, we put them together in an operating committee with real teeth and responsibilities and named Ken Kaess as its head. Nobody protested or resigned. Even among that very strong peer group, which included Keith Bremer, whom I consider the finest chief financial officer in the business, there was a consensus that Ken was the popular choice.

Ad Age: Have you set a timetable for your future?

Mr. Reinhard: No, I haven't. Last April we announced the formation of the committee, whose deadlines in the first quarter include a map for the future of DDB.

Ad Age: But no target date on your future?

Mr. Reinhard: Right. It's a transition period. We're moving more responsibility to Ken every day. When it's time, we'll know.

Ad Age: Do you think you'll recognize the business 25 years from now?

Mr. Reinhard: I believe it may be unrecognizible. Advertising as we knew it is becoming a subsidiary of brand building, which includes everything from ownership of venues, sponsorships of bands and Web direct music to concert tours. These are the big leading-edge things. That's where brands will be built. Mass media and traditional advertising will be only part of the mix.

Ad Age: Advertising has always reflected the culture around it. And you are saying the two are morphing into one entity?

Mr. Reinhard: To the extent that we need to create brand presence everywhere possible, yes. We used to be the marketing partners of clients because brands were built through advertising. In 1960, 58% of ad dollars were spent on consumer package goods. And the media were very manageable.

No one had a remote control unit. The audience was captive. The products went straight from the shelf to the home. There was no service culture. The brand was what you said it was in the ad, what it looked like on the shelf.

Then boom! The media explosion. The advertising business didn't understand the profound effects of that explosion and kept trying to do things the same way. But now we have 500 channel environments and more, plus uncountable Web sites. And all of those need content. I expect we will be getting back into the content business, either by inventing it ourselves or merging with people who know how to do it.

It all ties back into the brand, which is a lot more than a logo. Advanced brand building today means creating a brand experience. I'll use The Body Shop as an example, because we don't work for them and they don't do advertising. But they have a brand and a strong ideology built outside traditional media. First they come up with a point of view, which is for furtherance of indigenous people and human rights and against animal testing and so forth. Then they come out with a product which supports that point of view.

Then they put it in environments that reflect that point of view. And they train their staff to support that point of view.

Why isn't it logical to take the next step -- programming that appeals to people who share that point of view? And who's going to create that programming? There aren't enough people in the normal factories of entertainment. So we will get back into the content creation business for both Website and television.

Ad Age: We're seeing the creation of a lot of communications conglomerates, whose principal product is culture: Time Warner, Viacom/CBS, Disney/ABC, movies, TV, publishing, music, sports, theme parks. Why hasn't an Omnicom or WPP been invited into that kind of communication mix?

Mr. Reinhard: Maybe they have. Somebody reminded me last month about a remark Ken Roman [of Ogilvy & Mather] made when Omnicom was created. He said, "this takes the game to the next level." That was 13 years ago. The question was, what is the next level? From my standpoint, the next level could be a merger of a communications firm with an entertainment group or an Internet company -- or both.

Ad Age: Any immediate prospects for DDB?

Mr. Reinhard: No. It will be up to Ken Kaess and his team to do it.

Ad Age: If asked to name your mentors and teachers, I assume you would name Paul Harper, Blair Vedder, perhaps Al Klatt and others. But instead, let me ask you about the blunders you saw on the way up and what you learned from them.

Mr. Reinhard: I had good teachers. But I did see what happened when bureaucracies formed. I saw how politics could almost tear an agency apart. In 1975 at Needham there was a defection of two top creative directors and several others to start another agency. A lot of it was political. So what do you learn? Scrub out politics. Obviously, you always have some, but I think we have as little of politics and bureaucracy here as anywhere in our industry.

Ad Age: How did this come about?

Mr. Reinhard: You surround yourself with people who can form a group vision that's more important than the individual petty politics. You also learn that the reason cliques form is out of protection, because there's uncertainty about who's in charge and where the firm is going.

That's when you learn what leadership is: creating an agenda in which everybody can get rewarded if they join together in a larger effort.

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