[R K Swamy group chairman Srinivasan Swamy (left) and group CEO Shekar Swamy have played key roles in setting industry standards across the advertising and media world]
A little more than two weeks ago, when the news filtered in of a split in the 37-year-old relationship between R K Swamy, an old advertising warhorse from Chennai, and BBDO, one of the most well-regarded creative agencies and part of the Omnicom group in the US, it didn’t make the headlines. There was no rancour or hushed conspiratorial whispers from either side. Its clients and employees didn’t seem overly bothered either.
For those in the know, that wasn’t exactly surprising. The R K Swamy group has always preferred to keep things low key. It seldom jousts for creative awards, preferring to focus on its hardworking, straightforward advertising for clients. There is a strong perception that the government and public sector make up a large chunk of their clientele, including the likes of LIC and SBI. The reality is, however, that only about one-sixth of revenues at a group level is linked to large governmental institutions. That perception might have led to the widespread belief that the agency's work is somewhat staid. Its clients don't seem to mind though. After all, the agency serves a plethora of major private sector brands, including Hawkins, Havells, TAFE tractors, L&T, Rasna, Parrys, Orient, Cera, Shriram Finance, among others. These relationships have been running for decades. For instance, R K Swamy has managed the Hawkins brand since 1985, cutting across two generations of owners, first building the relationship with founder and marketing stalwart Brahm Vasudeva and now with his son Neil.
In an age when clients prefer to swap ad agencies at the drop of a hat, such relationships would seem almost anachronistic. (This column in afaqs on what it took to build that relationship of trust, published shortly after Brahm Vasudeva passed away, is a must read).
Over the years, as second-generation owners, Srinivasan Swamy (as group chairman) and Shekar Swamy (as group CEO) have played key roles in setting industry standards across the advertising and media world, seldom attracting attention to themselves. Shekar played an important supporting role when Brahm Vasudeva, Roda Mehta and K Kurien, among others, were setting up the Market Research Users Council (MRUC). And many years later, it was Hansa Research, which resurrected MRUC’s pet project, the Indian Readership Survey (IRS).
Professional managers who’ve worked with the brothers say they’ve stuck to old-fashioned values of integrity and given them space to operate. That’s in sharp contrast with the more flamboyant leaders in the ad industry, many of whom put themselves ahead of the institution.
Now, here’s why their decision to part ways with BBDO is interesting. Most home-grown Indian advertising and communication groups have thrown in the towel and sold out to large international networks like WPP, Publicis, Dentsu and Omnicom, with the exception of the R K Swamy Hansa group and perhaps, Madison Worldwide, founded by the evergreen Sam Balsara. The original founders at Ulka, Trikaya, Mudra, Rediff and Chaitra have one by one exited from the scene.
The manner in which the two Swamy brothers have stayed the course still remains, for most part, an untold story.
So, what were the learnings from their journey?
Local vision vs serving global clients
Most international networks bank heavily on big-spending global clients. Predicating success on these global accounts can be a tad tricky. First of all, these global accounts tend to demand significant dedicated resources. And even after global and regional hubs are created to serve global clients, time and again, they are prone to switching agencies for reasons that are beyond the control of the network.
But nevertheless, it was tempting for a local partner to get swayed by that opportunity of serving global clients and lose sight of the local market opportunity. As the local partner, R K Swamy retained its faith in the Indian market opportunity all along. And they believed that there would be enough local clients who would seek their services.
Take charge, and yet focus on win-win
To ensure that it didn’t lose sight of its vision, the brothers ensured that they retained management control of the joint venture at all times, with a casting vote at the board and the right to select the CEO. It also meant that they had to take responsibility for results. And deal with downturns like the one in 2008 following the global financial crisis and more recently, through the pandemic.
R K Swamy’s relationship with BBDO started off in 1985 and five years later translated into a 50:50 equity partnership in the form of R K Swamy BBDO.
Yet, unknown to many, in 2008, Shekar Swamy set up BBDO India as a separate unit as part of R K Swamy and then chose to spin it out, with R K Swamy taking a minority stake in that venture. This was done to allow BBDO India to focus more sharply on its global clients.
There are still several misconceptions about how BBDO India came into being. “Most people find it difficult to even comprehend that. They assume that BBDO started its standalone Indian venture,” says Shekar Swamy, group CEO, R K Swamy Hansa group.
What’s more, Shekar took the initiative to make a call to Josy Paul, the current chairman and chief creative officer at BBDO India, and connected him to the top honchos at BBDO. “He (Josy) was on our payroll for more than a year,” he adds.
In effect, R K Swamy had looked after the interests of its foreign partner—and that’s perhaps why they came to enjoy BBDO Worldwide’s trust for as long as they did.
Look beyond advertising
There is a strong strategic rationale of expanding beyond advertising. The ad industry has long struggled with its fee model. As this important Digiday article affirms, “Agencies’ fee-based business model hasn’t evolved in decades—and that may be a significant factor in the industry’s struggle to manage costs. With clients suppressing fees, asking for longer payment windows and seeking more project work, rather than long-term relationships, agencies may need to reimagine their business model.”
Now, diversifying one’s portfolio through a more integrated marketing services offering was one way to get out of jail. And R K Swamy did just that.
Its relationship with BBDO was primarily for content and creative services. BBDO did not want to expand its ambit, leaving that task to its other companies in the Omnicom group.
The R K Swamy Hansa group, on the other hand, articulated its aspiration to expand into a larger gamut of services with the aim of making marketing more efficient and effective.
To do that, apart from R K Swamy BBDO, it incubated Hansa Research (for insights and research) and Cequity Hansa (data analytics and MarTech solutions).
Big bet on consumer insights
In 2002, Ashok Das came in from ORG-MARG, where he was president, to lead the charge at Hansa Research. He was offered an equity stake in the venture. And he practically pulled up the agency from the bootstraps, given that the revenues were less than a crore.
In 2003, one of the key turning points was winning a bid for the humongously complex IRS study, which had moved from ORG-MARG to NFO-TNS. The transition didn’t quite work out. Marketing stalwart Nabankur ‘Nobi’ Gupta, who was chair of MRUC back in 1990-91, was involved in the process of looking for a new agency to take on the mandate for the IRS study. And Hansa Research threw its hat in the ring. It was a big gamble for a fledgling agency. And it meant taking on bank loans, on the assumption that they would be able to pull off an immensely complex project. Das says he was confident because before the bid, he called many of his erstwhile colleagues at ORG-MARG (now Nielsen) to check they were willing to come on board. As it turned out, many had worked with Das on the IRS project back in the mid-nineties. Subsequently, when Nielsen took over ORG-MARG, they chose to give up the IRS mandate and instead partner with IMRB-MARG for the National Readership Study. Hence, the core team at ORG-MARG were more than keen to move to Hansa.
As it turned out, it was the right call and helped build strong foundations for Hansa Research. So, what role did the Swamy brothers play? “They played an important supervisory role on the board, supported many of our key moves, but seldom interfered in the day-to-day operations,” says Ashok Das, former CEO of Hansa Research.
Back then, global FMCG giants like Hindustan Unilever were easily among the biggest research spenders. But they tended to either rely on their own proprietary tools and/or preferred working with large network agencies like Kantar and Nielsen.
Hansa took a call to consciously look for clients who were more interested in custom research. Over time, it built an expanded portfolio of services and also began building capabilities to carry out projects around the world.
To build the organisation, Das was able to lure away senior leaders from the large international networks. His promise: an entrepreneurial culture and considerable operating independence. Till 2013, Hansa grew at a scorching pace, but growth began to slow down.
Two years ago, when Das stepped down as CEO after a long 18-year tenure, a seasoned professional, Praveen Nijhara, was hired from Kantar, where he was senior executive director.
The Hansa Research team has now grown to more than 1,000 people, with the revenues in the region of Rs 60-70 crore.
Betting on data to refashion customer relationships
In 2004, Shekar first spoke about building a data/analytics business in an internal management meeting. The plan was kept low key till the lead team was in place. In 2007, Shekar made a call to S Swaminathan who was heading iContract, the agency’s marketing services arm. The two met over lunch at the Marine Plaza hotel. “The age of the customer was here, I told him. This needed a new set up, and could not have been done inside a traditional agency,” says Shekar. Swami then roped in Ajay Kelkar, who was then heading marketing at HDFC Bank.
The plan got off the ground quickly. All the planning and discussion took place in the living room of Shekar's apartment in Mumbai. Swami and Ajay were given sweat equity. Shekar also made it clear that the RK Swamy Hansa group wasn't expecting a rupee of return in the first five years. “I said build the competence, don’t worry about the loss in the P&L,” said Shekar.
While the venture was founded and driven by R K Swamy Hansa, Shekar said they were okay if Swami and Ajay were called co-founders.
It wasn't an easy ride. "We lost money for many years, as we were experimenting and building. We didn’t bother and kept going. I was chasing an idea. It takes years for these things to take shape organisationally,” said Shekar. During this phase, the group had to guide the business endlessly. “We were ahead of our time, but stuck with it,” adds Shekar.
Along the way, Hansa Cequity raised $5 million from private equity firm ASK Pravi in 2015, and made a couple of acquisitions, including Bengaluru-based data science and analytics firm D-Square and a Mumbai-based mobile app-based loyalty platform inloyal. Hansa Cequity, which counts companies such as Tata Sky, Croma, Birla Sun Life and Mahindra & Mahindra among its clients, mainly ran a services business but over the past eight years, it started building products as part of its strategy.
Hansa Cequity has now grown to almost 500 people. In October last year, both Swaminathan and Kelkar sold their stake to Hansa, and stepped down from the board a few months later. R K Swamy Hansa also bought out ASK Pravi's stake. And in a relatively smooth transition, Neeraj Sangani, a 20-year veteran with the group, took over as CEO of Hansa Cequity. Sangani ran operations as COO of Cequity for 16 months before that.
Bringing it all together
By all accounts, the pandemic took its toll on the group. But today, the business is gradually coming back to pre-Covid levels.
The R K Swamy Hansa group is now hoping to make up for lost time. It recently acquired BBDO’s stake in R K Swamy BBDO and sold its own minority stake in BBDO India to its foreign partner.
With a clean structure in place, it hopes to bring its three subsidiaries together (Hansa Cequity, Hansa Research and R K Swamy) and plan for a public listing, if all goes well, in the next one year. The listing will provide additional capital for growth. And an opportunity to tap into the synergies that exist, without cutting into the independence of each unit. A tentative start has also been made to expand its network to Singapore and Dubai, apart from a plan to rebuild its US business.
Srinivasan and Shekar, both now in their mid-60s, don’t look anywhere close to giving up. In a world of flashy admen, they’ve built a resilient, relevant and ethical institution, in their own quiet way. In its 50th year since inception, the R K Swamy Hansa group has now breached the $100 million mark in gross revenues—and the story isn’t over yet.
(A shorter version of this column was published in Business Standard)
Corrections and updates on 29 July 2022
Shekar Swamy’s role in setting up MRUC and in the creation of their data/analytics business Hansa Cequity has been clarified. An earlier version of this story mentioned that the R K Swamy group had invested in Cequity, a venture set up by S Swaminathan and Ajay Kelkar. Whereas the entity was set up by the R K Swamy group, under Shekar’s initiative.
This story was also updated with more details on R K Swamy group’s clientele and relationships.