We need to shift our thinking to New Delhi and not New York: Paul Polman, CEO, Unilever

Polman discussed the three drivers of change in the new economic environment and how the agency business should react to it.

When the world's second biggest advertiser speaks, everyone listens. In the Friday morning session of the International Festival of Creativity, Cannes, Paul Polman, the high profile CEO (chief executive officer) of Unilever, stated the importance of India and China in Unilever's scheme of things. This was the day after he reorganised the Unilever top management, and promoted India-born Harish Manwani as COO (chief operating officer), Unilever, with the focus on emerging markets.

Addressing a packed auditorium at Palais Des festivals, Cannes, Polman advised how the agencies should change in the changing environment.

He said, "The contact has changed massively and so has the language. Advertising meant for mass consumers is basically a single proposition and by standard matrixes, this is marketing at straight times."

Polman added, "Today, as we enter a new era of engagement, where there will be more fragmentation, more complexities and more channel options, both brand owners and agencies need new capabilities and new skills to interpret data."

Polman referred to the three key drivers of change:

1. The way we think about our market.

2. The way we anticipate consumer needs.

3. The way we manage our brands.

This will give rise to three kinds of challenges for both the marketer, and the agency:

1. As the economic power shifts to the East and the South, reflective of the recent organisational restructure at Unilever, Polman questioned whether the current agency model was the right one in helping the brand owners to anticipate the needs of 1 billion consumers.

2. Next was the impact of digital technology. Polman questioned if the agencies were fast enough to understand the wealth of engagement, and if they were equipped to help inspire advocacies through content which is more relevant, cost-efficient, and innovative enough to fuel positive online conversation.

3. The third point was sustainability, not just in terms of environment, but sustainability in all respects, through fair sustainable growth. He asked if the agencies understood the sustainable agenda and are actively taking part in it.

Talking further about Unilever, Polman said, "Unilever products are available in 180 countries, and one-third of the world's population uses Unilever products every day. Unilever makes a connect with consumers every time someone uses a Unilever product, which is 2 billion times every day. This makes us preferable, but also responsible at the same time," he added.

The commercial opportunity lies in reaching out to the next 1 billion consumers coming in, while the responsibilities will be to reduce the negative aspects of the Unilever product towards the environment, from sustainable sourcing in its own factories, to consumption.

"Given Unilever's geographical reach, growth ambitions and values, these drivers become important in the new business model," Polman further said.

According to him, the scale and speed of growth in the new economic powerhouse of Asia is changing quite a few things very rapidly. According to IMF, the economic growth in Asia, led by India and China, averaged at 8.5 per cent in 2010, and is expected to grow 7 per cent or more, in 2011 and 2012. These two countries, along with Indonesia, Brazil and Russia will be at the centrestage of the new world order. They will be home to most of the global population and economic growth. Consumers from these countries will be even more demanding, and will seek higher standards of health, hygiene and nutrition.

Currently, 56 per cent of the Unilever business comes from outside Europe and North America, which according to Polman, is on the higher side compared to any of the other major global consumer goods companies. Polman predicts this figure would go up to 70-75 per cent by 2020, asserting that Unilever is an emerging market company.

The company's growth ambitions, coupled with the potential connectivity with consumers shows the great task ahead, both for Unilever and its agency partners, to enhance resources and capabilities to reflect increasingly well on the market where the growth is, and not where it comes from, or where it has been. "This is why we need to shift our thinking to New Delhi and not New York," Polman stated.

The common denominator here, according to Polman, is the second driver of change, which is digital. The internet has changed everything that we do, be it taking pictures, listen to music, access information, communicate, or socialise. He shared that his belief comes from his visits to emerging markets like India, where farmers use mobile phones to gather weather reports, or financial services companies in Africa launching new tools for low-income customers.

Polman further stated that while media companies have always had a great connectivity with the consumers in the past, it was mainly in specific markets with very narrow focus. "For the first time now, we have media companies such as Facebook, Twitter, MSN, Microsoft, Google, Amazon and Apple, which are in the true sense global. The influence of these companies can certainly not be underestimated. These companies have the capability to understand their own, as well as consumers from other companies intimately. If iTunes allows Apple to understand what movies or songs we like, Amazon discovers what we will buy even before we purchase it through its recommendation engines," says Polman.

The implication of these on the marketing companies is enormous. Polman says that Unilever has taken a radically different approach to seize on these opportunities. "We have changed the roles and responsibilities of our marketing. We have introduced rigorous digital training for our team in partnership with this global media companies," says Polman.

For the advertising agencies, Polman says, "Agencies will also have to change like Unilever has, if they want to stay in the forefront. They have to seek the right balance between global coordination and local customisation."

According to him, the traditional model of global, regional and local structure has become inadequate. In the digital age, they have to reorganise themselves around consumers and not clients."

"The intersection of fast-growing economies and the digital world is the arena of enormous growth, and agencies will have to find ways to lead, partner and align without combined strength," is Polman's next advice to the agencies.

In the new age, the fundamental difference is that the brandworld will be shaped by mobile and digital, instead of traditional media such as television, radio and print. One key difference though, will be the ability to measure effectiveness. "Anyway, we know that half of advertising is wasted, and we do not know which half," he quips.

He puts in a word of caution saying that the digital world doesn't mean that there will be one size that fits all. In fact, there will be new complexities of culture, and we and our agencies have to gain new insights."

To view other interviews from Cannes 2011, click here.