ADK’s Koichiro Naganuma tells us about the importance of local knowledge and how the Middle East is the center of the Earth

Originally published in Communicate, July 2008

Koichiro Naganuma, president and group CEO of Japanese ad agency ADK was in town recently to familiarize himself with the workings and staff of AGA ADK, the result of a merger between his company and Dubai-based AGA a year and a half ago. Communicate caught up with him and Roger Sahyoun, president and CEO of AGA ADK, to talk about the unique appeal of this region to an Eastern agency looking west.

Communicate: Why are Japanese agencies like ADK and Dentsu (through its partnership with Drive Communications) moving into the Middle East?
Koichiro Naganuma: I think the reason is that many Japanese clients are getting into this region. And I do not think we follow the clients’ movement enough, so it’s high time for us to get into this market too. Many Japanese companies are paying more attention to growing markets such as the Middle East or BRIC, and I think our business is always with the clients. Which means that wherever clients go, we have to go.

Do you consider Dubai agencies as Western?
KN: I think so. For us,Dubai is closer to the Western standard [than to Asian agencies].

What is the difference between agency culture in the Middle East and in Japan?
KN: I think one of the biggest differences between the Western agencies and Japanese agencies is that the Japanese agency always stands for media owners. Our main business is selling the media space to the client, and then agencies get a commission from selling the media. That’s a typical Japanese agency’s attitude.
But I believe that agencies should stand for the client, not for media owners. Of course we need cooperation and assistance from media owners, but our basic mission is to help our clients’ business. We have to contribute to the clients’ growth and also make a profit. That’s our mission. And Western agencies act like that, but Japanese agencies don’t.
ADK is the third-largest agency in Japan, and ninth-largest in the world, and I position ADK as a new-wave agency, which means conducting our advertising and communication business in a different way from conventional Japanese agencies. By doing so, I can differentiate ADK from the other two giants in Japan, Dentsu and Hakuhodo.
ADK always promotes 360-degree communication with a media-neutral and solution-neutral spirit. Our business should not limit our sales only to mass media.
This [philosophy] is well understood, and shared with Roger [Sahyoun], because AGA is doing the same thing too. It’s a natural understanding, an acceptance of one another.

How did AGA and ADK form an alliance?
Roger Sahyoun: The relationship started three or four years ago with Isuzu motors for Saudi Arabia. ADK had an interest in the Middle East, looking at this growing market, and we had an interest in growing the agency.
The Japanese clients that we have activated were – I don’t want to say lost – but they were finding difficulty communicating with foreign agencies.
We have found a solution for that. We brought a Japanese person [into the AGA ADK team], who is backed up by local expertise in the market.
So that’s how we started consolidating the Japanese business of ADK, and this is how we got Bridgestone tires on board. We are servicing them not only in the Middle East, but in North Africa as well.
We have also got Toshiba, Nikon cameras, and Mitsubishi Motors on board now.

Why did you choose AGA over other companies in the region?
KN: That’s a historical reason, because we started working with them in Singapore, and Japanese agencies always respect history.

Does AGA ADK primarily represent Japanese firms now?
RS: No, we are not only a Japanese agency. AGA has its own clients. The intention is to take the culture of the Middle East and Europe into the Asian market and vice versa.

How many offices does ADK have now?
I think in Asia we have quite an extensive network, in almost every country. In the US, we have two offices. But our dividend from overseas is not so big, maybe 8.5 percent of our total billings. So I would like to expand our overseas revenue to more than 20 percent in the future.

What sort of percentage of the agency’s revenue does this region give?
Very small. So we will have to grow.
Within the 8.5 percent coming from outside Japan, the Asian market represents about 50 percent. Another 35 percent is from China, including Hong Kong and Taiwan, then the other 15 percent comes from Europe and the US.
It is extremely difficult for Japanese agencies to compete in the US and European markets. But in Asia, I think we can be active. In the Middle East, I would like to be active too. The Middle East, this region, is just the middle.

As you expand, do you ever open up standalone ADK offices, or do you only buy into local agencies, as you have here?
I do not have any intention to establish our own agency. That’s difficult. We need local expertise. If we do our business from scratch, that’s a total waste of time and money.

What expansion plans do you have within the region?
RS: Today, as AGA ADK, we are in Dubai, Abu Dhabi, Jeddah, Riyadh, Beirut, and Jordan. Recently we opened an office in Morocco; this office will also be supported by offices in Tunis, and Algeria.
Hopefully, before the end of the year, we will be opening two more offices, one in Egypt, very soon, and another one in Kuwait.
And we are going to follow the need of the Japanese market, because we have already started hyping them in Iran, so probably we are going to jump to Iran.
And we have a new Japanese client who has an interest in Turkey. So we are going to evaluate and study his business, then also go into Turkey. So the expansion plan is there. But for this year, we will be finalizing the North African part of our business, and Kuwait, and then we will be steady in the Middle East. In 2009, we will see.

You are also on the board of WPP. As ADK, are you not competing with other WPP agencies?
KN: I tell you, the best plan is kiss and punch. Even back in Japan, WPP owns JWT, Ogilvy & Mather and so on, and so on, and for particular clients we are competing, and for particular clients we are working together. That’s why it’s a case of kiss and punch. I think that’s the nature of our business.