The industry is prepared for what will happen when creative studios accept private equity investments: cost-efficiency, streamlined processes and the slow erosion of their culture. Koto is trying something new.
Charles Fallon has been appointed as the first chairman of this five-studio agency following an investment by private equity firm WestBridge earlier in the year. Charles Fallon, the first chairperson of five-studio agency WestBridge, was appointed to his position following the investment made by private equity firm WestBridge earlier this year.
You’re right if you think that the role of a ‘chairperson” is unfamiliar in the world of design. That’s exactly the point. “I’ve chaired a number of creative businesses over the years, and it’s a discipline that can help studios prepare and deliver growth,” Charles explains. With over 15 years of international agency experience–including a decade at Saatchi & Saatchi–and two decades in M&A advisory through his co-founded firm SI Global, he brings a perspective that extends beyond the quarterly targets that typically follow investment.
James Greenfield is the chief executive of Koto. This new appointment addresses an important tension that exists in growing creative businesses. “Most companies are growth or product first; Koto is people first,” He says. “In making that promise, you are protecting your people, but also your product, as the two are intertwined.”
Governance advantage
The timing of Charles’s new appointment is particularly intriguing. Koto has now 19 shareholders, and operates in Berlin, London Los Angeles, New York, Sydney, and Sydney. Charles is responsible for formal governance because of the complexity. Charles also has a broader remit that includes cultural preservation, which founders are usually very protective about.
“The question I always ask when joining a business is ‘Why are you successful?’,” He says. “As an investor in my own right, it’s critical to understand what makes a team successful, both the cultural DNA and capabilities. Simply, mess with these at your peril.”
This is a direct admission of the areas where creative companies fail to grow. It’s a pattern that is all too familiar. You hire talent, you impose systems and then watch your best employees leave. Then, you wonder why work has deteriorated. Charles has seen enough expansions fail to recognize the warning signs. “My role is to reinforce this brilliance, protect it even, and ensure the leadership develop the skills and resources to continue the growth and build the Koto legacy,” He explains.
James’s external perspective allows him to make decisions which, if not taken into account, could appear as a form of resistance against growth. “A chair for me as chief executive is all about guidance,” He outlines. “Charles has seen so many creative businesses and all the challenges they and we face before; having that person to help guide and inform is invaluable.”
This statement may seem obvious, but it’s not until you realize how few founders have anyone who can say “no” to the demands of their investors.
These changes are not visible to the client, or at least, initially. “I don’t envisage any change at first,” James Says “We are already working with the world’s biggest brands, so we are set up for all their challenges and changes, and not ours. But over time, I imagine more products and services will be available to them.”
This is a calculated response, which acknowledges that there’s pressure on businesses to show return on their investment while resisting the temptation to make unrealistic promises about transformation.
Cultural scale
It will be interesting to see if Koto is able to maintain its cultural consistency across the five cities, and any acquisitions that follow. Charles’ experience in building global teams is crucial.
“As you scale, it’s critical to double down on the human aspects—regular in-person meetings, constant connectivity, sharing success and investment in a diverse team,” He believes. In an age of remote operation, this might seem like an unfashionable and expensive approach. In practice, this might be the best way to avoid the inevitable fragmentation which follows geographical expansion.
James stresses the importance of communication in a systematic way. “having a strong strategy, a vision that people buy into. Empowered leadership teams that have autonomy to get things done. Learning from other global agencies and what they got right and wrong.” This last statement is very telling. Koto is determined to learn from the agency graveyard, which contains many cautionary stories.
What is the point?
The experiment is important to the rest of the world who are watching the unfolding events, regardless of Koto’s failure or success. This will be an interesting case study to see if formal governance is able to protect the creative culture of a company during its expansion or merely a way for them manage their inevitable decline.
Koto now has the most rare commodity among private equity-backed businesses in creative industries: the time to find out how they can scale up without losing what makes them so valuable. James’s definition of success is firmly grounded in the purpose, rather than on metrics.
The hope is that “we maintain our rational optimism for the world and our ability to influence that where we are relevant. We build brands and digital experiences that make the world a better place, and we do that through the pursuit of excellence.” It will be interesting to see if this philosophy survives contact with the quarterly board meetings.