Consulting matrix

Veteran consulting firm exec Patricio De Matteis is the new boss of Dentsu ANZ, who will join in January from the $30bn US IT consulting and business process outsourcing giant, Cognizant, where he is currently Chief Digital Officer. 

De Matteis spent 15 years at Accenture Interactive, now Accenture Song, his most recent as APAC Managing Director until 2019, and along with former Accenture Interactive ANZ boss, Michael Buckley, led the deal to acquire The Monkeys for $63m – a multiple said to be 16 times EBITDA – in 2017. De Matteis left for PwC in 2018 to run its customer experience practice, following long-time Accenture ally Jane Livesey who switched to PwC as a partner but moved on to become CEO of Cognizant in 2020. 

“I’m stunned on that appointment,” said one consulting exec who worked with De Matteis. “He’s a good guy but very much in the CX and digital space. He’s high energy which gets a lot of people in. That role is a really big step for him in the current environment.”

Other former colleagues said De Matteis excelled in consulting speak and models and were unsure how that would land in the traditional agency and marketing services sector, although it is where Dentsu under the former global CEO Wendy Clark was headed. Clark unexpectedly exited Dentsu last month. 

Former Dentsu ANZ boss Angela Tangas had quickly aligned to Clark’s agenda and aggressively pursued a transformation program which saw the local group slash its service brands from 25 to five after an earlier rapid acquisition program under former CEO Simon Ryan across Australia and New Zealand. Dentsu has been vocal about becoming the most “integrated” of its global holdco rivals – it is consolidating to five global brands – Dentsu Creative, Dentsu X, Carat, iProspect and Merkle across three service streams: media, creative and customer experience management. 

The exodus

Tangas has overseen dozens of local key executive exits across media, creative and the former digital and customer experience units in her accelerated transformation program. Clark then promoted Tangas to run UK and Ireland in May to prosecute a similar agenda where some say she is facing early resistance from the Brits.

Dentsu said De Matteis could not speak before joining in January. But in an earlier, previously unpublished Mi3 interview with London-based Tangas, the one-time head of Dentsu X in Australia before taking the top job after ANZ CEO Henry Tajer exited in a showdown with global bosses, was steadfast on her sweeping overhaul of the local group to a “hybrid” model between conventional agency networks and big four consulting firms. 

Numbers game

Although the company’s filings for ANZ show losses upwards of $50 million over 2020 and 2021, Tangas told Mi3 “we've already doubled the enterprise value of this business over the last three years, double digit. We're feeling really confident about what the future holds for us. We’ve rationalised 26 brands down to five. There’s a really good baseline here for growth and that's been my priority to get the business in the best possible shape for growth.”

But how does a doubling of enterprise value – an alternative term to equity market capitalisation used in finance for company valuations – equate to circa $50m in losses over two years per Dentsu’s ASIC filings for 2020 and 2021?

“The reality here is we're trying to grow the underlying performance of this business,” Tangas said. “We talk about that as being operating profit, and that's where we're certainly seeing the fruits of our labour over the last three years, whilst we've talked about growing the top line at the same time over the same period. So that's ultimately how we measure success. I'm not going to get into balance sheet treatments and all the rest of it, remembering that we're part of a global group here and that's about as much as I'll say on that.”

But Dentsu ANZ did report losses over the past two years.

“Well, you've seen the data. Think about things in two separate ways. I'm responsible for improving the performance of the business, top and bottom line," Tangas added. "There's a cost of transformation that comes with that and I want to separate those two things is what I'm saying. So we're thinking about the long term success of the company. There's an initial cost that comes with setting the business up to deliver on the long term success of the company and that's what that transformational cost is. And we're now just focused on the continued enterprise value of the business and continuing to grow that.”

Beyond the hard dollar losses of this transformation program, there have been dozens of senior and mid-tier exits across the group, many frustrated with the new model and, in some instances that Mi3 is aware of, clients too. At one point in the past year, top ranking Dentsu execs were asked to reapply for their jobs as part of an organisational redesign. That approach and Tangas' management style was the trigger for a broad staff exodus, numerous former Dentsu execs told Mi3.  

Model maestros

“The model I understand at an intellectual level but it’s proving exceptionally hard to execute,” said one. “Angela has pretty much lost everyone. She’s lost all the leadership teams at Merkle, in media and pretty much everyone in Dentsu Creative and the old BWM Dentsu business. You may need to take a lot of short term pain to get rid of everyone and replace with the new, but the soft measures around credibility and client relationships will suffer. It still is a relationship business, Maybe that’s the cost of transition.” Tangas has, however, all but completed the rebuild of a new senior executive team that is regarded in market. Kirsty Muddle has the reins at Dentsu Creative; Danny Bass is now running Dentsu Media; John Riccio heads Merkle and Chris Bower running Dentsu's business consulting arm, Solutions. Other key appointments include David Halter as Chief Strategy & Growth Officer. The test for the new team, connected structure and operating style is now about delivering results - for Dentsu's existing client portfolio and in new business.   

With all the change in talent and an organisational redesign, Tangas says the business knew it would likely take a hit in the overhaul. 

“We're not underestimating the transformational change that we've been undertaking over the last three years,” she told Mi3. “This is proper business transformation. Seriously, we're transforming how we operate as a business, not just structurally, but all of our underlying operational processes. I don't say it lightly when the outcome here is how do we make it easy for clients to work with Dentsu and how do we make sure that we cultivate an environment where we attract and retain best talent so that we can have them do the best work of their careers? And that's not for everyone. So did we foresee some of the senior exits? Yes, we did. And that's to be expected of any change of this magnitude," said Tangas.

"We've been focused on product. Product is the biggest thing that can ultimately differentiate outside of people. And that's why we want to keep and attract the best talent. And I think we're in a really good space for that. I think we've come out the other side here. Yes, it's been rocky and we're super thankful to every client that has stood by us. We've got fantastic relationships with many of our clients.”

Come January, Patricio De Matteis has it all ahead of him.