In 1971, six friends graduated from the University of Texas at Austin and realized that they had better get jobs. One of them had sold ads for the college paper, and all of them had enjoyed making multimedia projects for the college. They didn't want to leave each other or Austin, so the group decided to start an advertising company -- GSD&M (a combination of their initials, of course). "We were naïve; we didn't know anything about advertising," says Roy Spence, GSD&M's president. "We were mavericks, not renegades. Renegades know the rules and break them by design. Mavericks don't really know the rules -- they just go their own way."
GSD&M lost their first client, a jeans store, because they ran the wrong size ad. But things improved for the mavericks. Thirty-four years later, four of those friends are still together and still making ads. But now their agency is 650 employees strong and is creating campaigns for organizations such as Wal-Mart, Southwest Airlines, BMW, the U.S. Air Force, Chili's restaurants, and a host of other organizations whose slogans you know by heart. And GSD&M is billing $1.5 billion dollars a year.
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Over the years, Spence has had a hand in the development of some of the world's greatest businesses. (He's so invested in them that he reflexively uses the word "we" when he speaks of his clients.) A close friend of Bill and Hillary Clinton, Spence has also observed decades of politics from the vantage point of the leaders and the led. And his ongoing education in advertising and human nature has taught him a thing or two as well. In this interview, the "Reverend Roy" -- as many of his friends and employees refer to him -- discusses some of what he's learned: how a sense of purpose can sustain a business, why values connect with customers but morals don't, and how advertising can have value in a fractured media world.
GMJ: You've been running the same company for 34 years, since the month you graduated from college. What's the most important thing you've learned?
Roy Spence: We represented a bunch of little retail stores because nobody else would hire us, and what we didn't know at the time -- I didn't anyway -- was that these guys had borrowed the money to pay for the advertising. So if we didn't help them create sales, we wouldn't get paid. And they lost a lot of money. So we learned in Year One that we're not in the advertising business at all -- we're in the business to build our clients' business. People talk about ROI and return on ideas, but at the core of our company -- not because we knew it, we just lucked into it -- is the belief that if we don't create sustainable branding and ideas that help our clients drive their business, we don't get paid. That first great lesson has been at the heart of our company from the start.
GMJ: No good advertising company creates the same ad for every client, but yours are strikingly different. Kohler print ads are done by famous artists, while Wal-Mart's ads look homemade.
Spence: Right. Our philosophy is simple. We don't have one creative style, because every brand -- its purpose, its values, its products -- is different. We do what we call reflective branding: We reflect the values and purpose of an organization within our work. I mean, everybody basically knows how to sell stuff -- "This is a product, and it has 25% more lemon," or whatever -- but we believe that the deepest river that you can dive into is values and purpose. So we seek to reflect a company's values and personality within our work, because it strikes a more authentic chord both inside the company and among consumers. By the way, much of our advertising serves as role modeling for the people who work at that company.
GMJ: Why? How do you do role modeling in a commercial?
Spence: Well, from a consumer's point of view, employee behavior has to match the brand promise. If it doesn't, the company is destined to over-promise and under-deliver. So we inculcate cultures in our advertising. We role model the culture, we celebrate the culture and values of that brand, and we use our advertising to motivate and build pride among the associates and employees of our brands.
This is especially important in service industries, because what so many business leaders don't understand is that their people may be the tiebreaker. No one knows or cares who made their Snickers bar, but for non-packaged goods, the image depends on the people.
One of the things Herb Kelleher [the founder of Southwest Airlines] said was, "They may be able to match our fares, they may be able to match our frequency, but they can never match our people." So our ads [for Southwest] promote freedom of the skies for consumers, but they also promote freedom for employees. They're free to have fun, free to make decisions, free to be themselves. And Southwest's employees are proud of the commercials -- we know because we survey them. We know, and they know, that they are also the audience for the ads.
Our ads for the U.S. Air Force have three audiences. They're meant to recruit airmen and airwomen, of course, but they're also intended to reflect the Air Force to every American. The third audience is the people who are already in the Air Force, because retention is a huge issue.
We always factor [culture] into service brands. These ads have a branding message to the public, but they also have an encoded message about the culture for employees. We recognize that ads can make people proud or embarrassed of the places they work. We'd rather go with proud.
GMJ: Tell me about your relationship with Jim Collins [author of Good to Great: Why Some Companies Make the Leap . . . and Others Don't and coauthor with Jerry I. Porras of Built to Last: Successful Habits of Visionary Companies.]
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Spence: Well, GSD&M was celebrating our 25th anniversary, and I didn't know if we wanted to do this anymore. The truth of the matter is, I don't know of any company today that has the same four partners after 34 years. So I was thinking about it when I read a review of Built to Last in USA Today. I went out and bought the book, and as soon as I finished, I got on the phone and called Jim. I called him because I didn't know how to pronounce the other guy's name, that's the truth. I said, "You don't know me, and I don't know you, but I'll fly you to Austin, Texas, because I want to hire you to consult with us on how we can build our company to last." Then, when Collins did Good to Great, we were an unpaid consultant with him. So that's how we got to purpose-based branding.
He inspired me to dig deeper than values and go to purpose. I think purpose trumps everything.
GMJ: What do you mean by purpose-based branding?
Spence: I've studied the whole issue of cultures because I was up close and personal with two of the remarkable cultures of the 20th century: Southwest Airlines and Wal-Mart -- underdogs, you know, that ended up being top dogs. And of course our company has a very unique culture too, and we relish it, and we live by it. So I gave these cultures a lot of thought. Then, in the late 1980s, I wrote an op-ed piece saying that I believe that because of the acceleration of technology, consumers will make a purchase decision based not just on what you sell, but on what you stand for. I'm not talking about morals -- morals are arguments that no one wins. But values are great connectors.
Now, a couple years before that, what led me to this idea was that Southwest was facing a lot of competition and getting a lot of flak. You know, we were cheap, and we were no-frills. They attacked us for being a cattle car and for all the things that Herb Kelleher did to keep costs down so that Southwest could spend the money on safety and airplanes and people -- which, in the end, are all that people really care about. So we took a close look at Southwest Airlines, and we saw that the business model was to keep fares low so we could give more people the chance to go and see and do things that they never dreamed of. And we looked at that model from our branding strategy and said we're not in the airline business, we're in the freedom business. We are in the business of democratizing the skies.
At that moment, we knew that being in a higher-calling business long term is a clearer and more compelling place to be -- not only in the minds of the consumers, but also in the hearts of the employees. At Southwest Airlines, every decision we make, we have to decide if it enhances people's freedom to fly or curtails it. And that realization led to a lot of wins, because people want to be in a business that's not just an operational business.
GMJ: But what exactly do you mean by "purpose"?
Spence: Purpose is a definitive statement of the difference you're trying to make.
GMJ: In the world?
Spence: In the world or in the marketplace. A definitive statement. That's the stake in the ground about why you exist, and it will never change. People get confused between purpose, mission statements, and vision. "Mission" is basically how you execute your purpose, and vision is a statement of how you see the world after you've done your purpose and mission.
But purpose is the deepest river: You start with "What difference are you trying to make?" Your tactics will change, your ads will change, your mission might too, but your purpose never will. You build on all of that, and do it every day -- not on Saturdays or Sundays or during sales. Every company that's survived and gone into the "thrive mode" has a purpose or had one. Sometimes you've got to dig down because leaders will change purposes and, I'll tell you something, that's when companies get in deep trouble. You start looking for love in all the wrong places.
GMJ: Give me an example.
Spence: When Sam [Walton] started going into urban areas, Sears, Roebuck and Co. was the dominant company, and Kmart was number two. Wal-Mart was a distant, distant third. Now, Sears was always known for "You can bring anything back." People abused that policy, but it was at the core of their trust machine. You could always trust Sears not to take advantage of you, and you could return anything, satisfaction guaranteed. So, just as Wal-Mart was about to launch into the urban areas, Sears gave up that policy. Some CEO, some bean counter, decided that policy was costing too much money. And that day, Sam Walton put a sign on every single store that said "satisfaction guaranteed."
GMJ: What should a company do when it starts to lose its way or realizes it's strayed from its purpose?
Spence: A purpose-based leader and company will 'fess up when they mess up. You don't want to mess up often, but when you mess up, if you 'fess up, people will give you another chance.
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I think there are a couple of ways that you can reignite the purpose. First, go back and find your purpose and be authentic. Second, 'fess up -- especially with your own people, because if you lose their belief, consumers won't believe you either -- and admit there were some things you did wrong. And third, slowly but surely, work to re-earn trust by performing your purpose on a daily basis.
But it's hard. You've got to be very careful of the word "tweak," as in "I'm going to tweak our model." You can do radical things with your products and your ads, but don't tweak your purpose. If you don't know what your core purpose is, then you'll change strategies every year, you'll bring in new chief marketing officers all the time, and it will cost you. If you start messing with your purpose, you better be really, really ready to go through a total reinvent, not a kind of reinvent.
GMJ: Can you name a company that totally lost its purpose and came back?
Spence: [Long pause] No, I can't. Like Enron. The purpose of Enron was to be the best in the world at gas and power pipelines; they had the best and brightest people in the world, and they were awesome. I mean the company was great; the culture was great. Then they decided to get greedy. There are so many examples of companies that started out with great purpose, but at some point, they lost their way and never recovered. I don't know of too many companies that lost their purpose, or changed their purpose, or corrupted their purpose, and came back.
GMJ: How can a company catch itself in time and find its purpose again? And what does GSD&M do to help?
Spence: We always tell people that every company in the "thrive" stage has always had a core purpose. We start by going back and looking at it. We hire cultural anthropologists on our staff to go back to the original charters of companies, to look at the original business plans, and to interview the fan base and the old-timers who were in the business of preserving the core. To last, organizations have to preserve the core and stimulate progress, as Collins says. So many organizations that have lost their way said, "Let's stimulate progress, and to hell with the core." Others get stuck in the mud, saying, "This new thing, well, that's against our core." Really, it's not against the core; they're just producing the same old crap they produced before. The core is not about what they produce; it's about what they stand for. We go back in there and start putting language and leadership to their purpose.
GMJ: A lot of companies are beginning to question the value of advertising in a fractured media world. What do you tell them?
Spence: I tell them they're exactly right. And I tell them there's a big difference between marketing and advertising. Marketing is how you drive your business, your channel of distribution, your point of sale, your packaging, your PR -- that's why they call them chief marketing officers and not chief advertising officers.
Advertising is a toolbox. We love this space right now because it's in constant turmoil. People who say advertising is dead don't know what they're talking about. It might get to be like it used to be, knocking on doors, except we're knocking by way of the Internet. There could be a great fulfilling of the circle where advertising goes back to -- and I know it's overhyped and overused -- one-on-one marketing.
That's what's so great. If you're fleet of foot and you're curious, if you're always looking at ways to make sales, not make ads, this is a great time to be an advertising company.
-- Interviewed by Jennifer Robison