A tale of two cities: inside Deutsch’s renaissance

A tale of two cities
In 1995, Mike Sheldon was trying to build a Los Angeles agency for Deutsch that more accurately could only be described as “just another floor of Deutsch New York.” There were seven people, huddled in a small space with zero resources — other than what they were able to siphon off from New York. “We were entirely dependent on New York,” said Sheldon. That was fine. After all, New York was the role model, the successful older brother who had gone off and done everything right.

Los Angeles, in comparison, was an experiment. It wasn’t the California city for an agency business, not by a long shot. Successful full-service West Coast agencies like Goodby, Silverstein & Partners were based in San Francisco, home of everything hip. The agencies that did have major LA offices, like RPA and Saatchi, were really there for the auto clients — Honda and Toyota, respectively.

But the experiment paid off. Slowly, Sheldon weaned LA off of New York. Along with co-CEO Eric Hirshberg (now CEO of gaming company Activision), he managed to get LA up and running. “There was the realization that we don’t need to be as closely tied.”

Val DiFebo, now CEO of New York, saw little brother LA grow up, too: “They did their thing,” she said. “We talked to each other, but not that often.”

But today, Sheldon, now charged with the responsibility of both New York and Los Angeles offices, finds himself coming full circle. With chairman Donny Deutsch’s departure now official, Sheldon late last year was promoted to CEO, North America, a new role that will now see him overseeing New York as well as LA. This coming-together of two offices will mean huge growth for Deutsch but comes with its own set of challenges.

For one, the “little brother” isn’t so little any more. By all accounts, LA is a bigger and better shop than New York. Revenue there has quadrupled since 2005. The agency boasts some of the hottest clients around — Taco Bell and Volkswagen — and the buzziest work, too. It has also assertively pursued and landed top talent: Winston Binch, chief digital officer, and Pete Favat, chief creative officer, for example.

In comparison, things have been relatively quiet at New York, where executives are looking forward to what this year will bring. A sense of reinvention is in the air: Just last week, New York appointed a new, hotshot CMO, Tara Levine from OMD, who is charged with revving up the office’s new business engine. (While the agency won Sherwin Williams late last year, it hasn’t done so well elsewhere, losing out on other active pitches like Choice Hotels, The New York Post and American Eagle Outfitters.)

Sheldon’s ascension to the top North America post is part of a series of executive moves by Deutsch that were forced, in part, by the formal departure of Deutsch’s colorful, charismatic chairman, Donny Deutsch, who officially stepped away from the agency late last year. Two agencies that have shared a name but barely anything else are now expected to drop everything and become “One Deutsch” — a rah-rah call for unity that may be necessary but isn’t going to be easy to achieve.

As part of transition, many regional office leads ascended to North American positions. It hasn’t escaped anyone that every single major promotion was given to a Los Angeles Deutsch-er. Along with Sheldon, Binch took on North American responsibilities; Favat, former chief creative in LA, the same role across North America, and Jeff White, formerly the new business chief in LA, is now CMO across North America. It was clear that “LA won the race,” as one former Deutsch New York exec puts it.

‘Reckless belief’
Founded in 1969 as “David Deutsch Associates,” the agency took off when David’s son Donny came on board in 1989 and turned what was a print boutique into a national name. Donny Deutsch’s aggressive persona — he’s been known to say he has the “best body in advertising” and isn’t afraid to show it off — combined with smart business acumen and a brilliant right hand in the form of Linda Sawyer, CEO (and now chairman), to create a great agency that blended irreverence with strong business results. Deutsch was a cool place to work, a place unafraid to take risks — when it won the Tri-State Pontiac business, it shipped a red Pontiac to Russia, as a joke. When the shop worked on Ikea, it did breakout work with its TV spots featuring gay men and a (gasp!) a single mom. “Nobody had our profile,” recalled Sawyer.

In 1995, Deutsch execs, Donny and Sawyer among them, realized that they had started picking up a few clients on the West Coast: Bank of America in San Francisco and Mattel out in LA. Management was spending a lot of time in LA. And that happened in a time when nobody was opening offices in LA. “It was a market that was kind of dead, but hungry,” said Sawyer. “There was nothing exciting happening there.”

But: “We kept feeling like Los Angeles was the market to open in. It wasn’t as crowded,” recalls diFebo. Deutsch was definitely taking a chance: “A creatively minded agency just didn’t exist in Los Angeles,” said Sheldon. “And it was a safe haven from assholes.”

That’s when Sheldon, who was coming in after six years at TBWA/Chiat/Day — was hired. Unlike other agencies, Deutsch didn’t transplant New Yorkers. Instead, Sheldon hired locals. It won Baskin Robbins and Mitsubishi.

“We had this reckless belief in ourselves,” said Sheldon. “We had so much entitlement and so much supreme confidence. But it was different from a New York arrogance, what people like JWT or Ogilvy had, where they thought they’d come and take on these surfboard-toting dudes in LA, and clean the table with them. We were from LA. We got it.”

LA grew. One big reason was Sheldon’s big belief in hiring ahead of revenue. He invested in a big digital facility, and people, when barely anyone was calling for it. In 2010, eons before most other agencies, Deutsch LA brought digital production in-house. It took Sheldon two years to convince Binch to come on board. The agency went from digital being 5 percent of revenue to 26 percent. In 2011, Deutsch LA created “The Force,” the most-watched Super Bowl ad of all time, for Volkswagen, a cultural tour de force that not only raised the bar for Big Game advertising but also changed how ads were teased and distributed socially.

“It’s not like New York wasn’t working,” said a former Deutsch exec. “They were fine. They just weren’t LA.” That is true. New York was plodding along — it picked up a few accounts, revenue was inching upward. But it didn’t have the star power hires nor was it doing sexy work.

“New York is moving at a slow pace,” said this exec. “It’s hanging on the fumes of what made it successful back in the day. And LA is innovating and making investments.”

What it came down to was this: There were two legitimate ways for Deutsch to grow after Donny. One possible way was to rebrand one of the agencies to eliminate conflicts among clients — a move that other agencies, like BBDO, have experimented with. (BBDO was rebranded as “Energy BBDO” in Chicago in 2005 in an effort to broaden client bases and potentially avoid conflicts.) In Cannes last year, Deutsch LA employees were walking around telling people they weren’t going to be Deutsch any more — it was just going to be “DLA.”

The agency chose to go the other way — merge the two offices so complementary skills could benefit each other.

Why merge?
Executives at Deutsch say the “One Deutsch” idea is good for business. Michael Roth, CEO at Deutsch’s parent company, Interpublic Group, said that the company has always been entrepreneurial, and the parent left them to their devices as needed, with each office building up its own operations. “It’s nothing new; we’ve historically had the same thing happen with FCB in New York and Chicago,” said Roth. The new Deutsch is a good thing, said Roth. “This is a logical break point, and we’re very excited.”

When Donny last year decided that it was time for him to get out of the agency, Sawyer said she started trying to figure out what “Deutsch 3.0” would look like without him. “Yes, we could have kept things the same,” she said. “But there is an opportunity to position ourselves differently.” It just “made sense to tap some of the talent in LA and sprinkle that on New York.”

Sawyer is one of the only executives who comes right out and says that it’s no coincidence that when succession happened, LA execs won out. During interviews, all of them, unequivocally, say each office has its strengths. New York is good at media and planning; LA is good at creative and digital.

Part of that is a historical strength. Deutsch’s roots — before LA — were as a print boutique with a strong focus on accountability and business results. It famously was one of the front-runners in direct marketing, before the practice took off. And it was one of the first agencies to bring both traditional creative, PR and media services under one roof. That focus on planning and accountability is still New York’s strength.

In comparison, LA is like its freewheeling little brother, with some of the best digital production and creative chops around, as well as a music offering non-existent in New York.

There’s definitely a gap between the offices. Like with any merger, leadership needs to educate itself. Favat, who now oversees creative across both offices, has been through it before. When he ran creative at Arnold, he oversaw multiple offices worldwide, from London to Shanghai to Amsterdam. When he was hired at Deutsch, he said he “felt a bit of relaxation when Mike said I only had to worry about LA.”

Six months later, when the merger talks began, “I paused a bit,” he said. “I didn’t know much about New York.” Favat said there was a “holy shit” moment when he started getting to know New York. “There’s an extreme pool of talent there; it’s like a gold mine.” And disciplines like channel strategy come more easily to that office. Already, the changes are evident. PNC, one of New York’s bigger clients, has moved its experiential advertising from a different agency into Deutsch, because of LA’s success in that area. New York is now starting to provide communications planning to a number of LA clients because of its historical strength there.

Binch said the wider New York area also affords him a better pool of talent. “We’ve been recruiting a lot of engineers [in LA] but in New York, because of publishing, there’s more talent for other stuff.”

To combat any possible gap between the two offices, Deutsch is making some moves. There are a lot more cross-country trips. A Deutsch plane has been (mostly jokingly) suggested. Sheldon spends half the month in New York. Binch said the agency is actively investing in technology that will let people from both offices see each other across screens. “Consultancy sucks,” he said. “When you’re spread thin across multiple offices, it is inevitable.” Kim Getty, president at Deutsch LA, said she’s spending a lot of time “just eating chips and salsa” with her New York colleagues. “Culture is driven by personality and relationships. That’s just the way it works,” she said. “The better New York does, the better our work is in LA. And vice versa.”

DiFebo, whom observers call “the heart and soul” of Deutsch New York — she’s been there almost 23 years — is excited. “We can now tap into their digital production. We can implement their training programs. They have a music offering that we don’t,” she said. “We are one Deutsch now. If someone asks us where business is run out of, maybe we’ll pick a place. But we’ll go in as one Deutsch.”