How to get ahead in advertising

Forty years ago, Charles and Maurice Saatchi founded the advertising agency that was to become one of the most glamorous and influential forces in the land. Their story is a parable for our time, says Peter York

But for Saatchi & Saatchi, the London advertising agency founded 40 years ago next week, you mightn't be reading this page. Indeed, there just mightn't have been an Independent at all – something in the time-space continuum could've gone slip-sliding away. That's the way The Independent's original 1980s' founding Gang of Three – Andreas Whittam Smith, Matthew Symonds and Stephen Glover – tell it, anyway.

When they originally conceived the paper, Maurice (now Lord) Saatchi was one of just two people Whittam Smith rang in 1985 for a sanity check. (The other was a banker, of course.) Maurice put him on to John Perriss, Saatchi's media director (later to head the Saatchi Group's new media-buying agency Zenith). In no time, the three had a Saatchi team of 16 – the agency had just lost a big newspaper account and, according to Symonds, wanted to have a high-profile new one – and a deal. The deal was basically that S&S would help them to raise the money they needed from investors on a "no win, no fee" basis (if it worked, they could start spending on advertising). Saatchi would do research among potential readers and advertisers to help develop their pitch, and they'd rehearse and sharpen the presentation. They also said, crucially: "We'll come with you, if you like." "We walked in," recalls Whittam Smith, "with the glamour of Saatchi beside us; it really helped."

"It's doubtful whether we'd have raised the money without their imprimatur – it helped get brokers and bankers on board," agrees Stephen Glover. Glamour? Imprimatur? Since when did an advertising agency have glamour (creativity, humour or charm, certainly) or confer an imprimatur? Since when did verbally precise men such as the Telegraph-trained Indy Three talk like this about the tough business of persuading the City's hard-nosed economic men to cough up the money.

The story of how an advertising agency counter-jumped and leapfrogged over its sector to become the nation's most glamorous and weirdly influential organisation for nearly a decade is an extraordinary English folk tale. It's about the way we were in the 1980s, and to understand both Saatchi & Saatchi's substantive achievement and its shamanistic, glamorous side, you have to remember just one basic precept of advertising: perceptions are everything.

And you have to start with the curious, rather equivocal role and status of advertising agencies in the 1950s and early 1960s. Advertising was not quite a gents' profession, not quite an art. But certainly it employed gentlefolk and artists. The gentlefolk were mostly "suits", the account-handler types who dealt with the clients and presented the work. The artists – visual and verbal ones, famously dreaming of their novels, film scripts and first Cork Street shows – did the work. An emerging group of researchers thought about consumers and their habits (one, Mark Abrams, at the long-gone agency London Press Exchange, wrote the key report on "The Teenage Consumer" in 1959, outlining the potential of youth as a new consumer group). And rather more pragmatic types – the media buyers – did the deals with media owners. All under one roof.

Set up like this, a "big" London advertising agency would employ around 300 people in somewhere tolerably genteel, ideally Mayfair W1, or at least Mid-Town Holborn or Southampton Row – no raffish Soho or edgy Shoreditch then. Marcoms (a later word for the sector) weren't exactly a power in the land back then – and the "creative industries" sector was 30 years away.

Ad agencies were mostly either medium-small private companies or local branches of large American chain agencies, the Madison Avenue Mad Men businesses, which had expanded to service the international growth of their US clients. They weren't London-quoted companies, Stock Exchange staples. Agencies offered everything from class-correct reassurance to crude science (acres of research about consumer awareness and responses to their advertising). And they didn't lead on anything as grand as "creativity"; that came later. Clients training it up to town from, say, Walton-on-Thames, might find that altogether too poncy a claim. Easy Modernity, meaning American-influenced new-as-tomorrow layouts, was on – as was haute-suburban elegance in illustrations and photographs and mild, "well-written" humorous copylines. The constantly cited conventional wisdom was that Brits were difficult to sell to in the full-throttle, balls-out American way; they needed to be charmed or amused into buying. That 1950s and early 1960s amusement looks stupefyingly mild and whimsical now.

It all changed as the 1960s went on, of course, but later than the ad-land mythology really acknowledges. There was a time lag between the magic youth-culture year – 1963 – and its reflection in advertising. Just dig up any early-1960s fashion magazine and the advertising looks 10 years behind the editorial. Dull. Formulaic. The London advertising agency generally credited with bringing a new, sharper and distinctly British 1960s style to advertising was CDP – Collett Dickenson Pearce, founded in 1960. A 2001 BBC documentary, The Men from the Agency, argued that CDP didn't just change British advertising, but practically everything else in the cultural landscape as well through its alumni. CDP employed a mass of clever young people but the film focused on just three – the film producer and cultural panjandrum David (now Lord) Puttnam, the film director Alan (now Sir Alan) Parker... and Charles Saatchi.

As Saatchi himself tells it, he was there practically by accident, brought in in 1966 by CDP as a part of a banded offer as a writer with his older, better-known team partner, Ross Cramer, from the US chain agency Benton & Bowles.

Anywhere else, at any other time, Saatchi would have seemed unpromising. Half-educated and headstrong, often wild around the head – a proto-punk one week, a giant bubble-cut the next – without the suits' Oxbridge style or the trad writers' craft skills of whimsy and reference. Certainly without any conventional kind of sociability. But he already had a working knowledge of modern America and its crucial films and pop music, and an absolute focus on the prize – producing advertising that cut through, demanded attention, and got people to buy, or to change their behaviour. Advertising that reflected how young audiences really thought and spoke. The Saatchis' insightful early biographer Ivan Fallon (also a former chief executive of Independent News and Media's UK division) says: "Charles had the fast antennae for changes in public taste – you can see that in his collections, starting with the comics. He's got that amazing ability to sense a trend before it begins and put himself at the edge of it." Saatchi was at CDP from 1966 to 1967, increasingly recognised for his work with Selfridges and Ford, on the way to stardom in his world.

In 1967, he left with Cramer to start Cramer Saatchi, a sort of outsourced creative agency, which sold smart new creative work to older, established agencies who took the credit. But two years later, they started planning to launch their own full-service agency, dealing directly with clients. When Cramer decided to go his own way (into the film business), Charles Saatchi had to recruit a new managing partner – a lead suit to deal with the clients, as he was already becoming famously disinclined to meet them.

He found his new partner close to home, in his younger brother, Maurice, who was better educated – he had a sociology degree from the LSE – and far more conventionally persuasive and charming. Maurice with the big specs. Maurice with a growing track record for analysing markets, selling in to them. Maurice had been working in the trade-magazine business with a new publishing group called Haymarket, led by Michael (now Lord) Heseltine, the publishers of the new advertising business title Campaign.

Actually, Charles found Maurice literally at home, rather than close to it. As Fallon points out in his 1988 account of the Saatchi story, The Brothers, both Charles and Maurice continued to live at home with their parents well into their twenties – through the early success, the American journeys, the girlfriends, everything, they stayed at home. Like Italian boys.

But Iraqi-Jewish, actually. Both Charles and Maurice were born in Baghdad and brought to Britain in 1947, as Iraq became increasingly anti-Semitic and impossible. They'd settled in that strange plutocratic area between Hampstead and Highgate in north London, near the "Millionaires' Row" of The Bishops Avenue. It's an area of large Hollywood-ish between-wars houses, popular now with Russian oligarchs, Gulf State royalty and Asian entrepreneurs. The family had mercantile wealth – their father owned clothing factories in Britain – with no claim to fashionable deprivation, but still the Saatchis were singular, slightly exotic and non-Establishment. Their brotherness and otherness helped to give them an edge – a sort of fearlessness, a lack of commercial inhibition, or social genteelism, which would seem particularly right by the time the 1980s came around.

What the original Saatchi and Saatchi agency, founded on 14 September 1970, achieved over the next 20 years changed not just perceptions of what an advertising agency could be, but the expectations and imagery of success in business more widely. Though S&S was highly "creative" and produced famously original work (the Saatchis made it famous – with high-intensity PR), other agencies were creative and original too, and not just CDP – the brothers had a raft of new-generation, late-1970s/early-1980s start-up peers. What was singular was their "Big Picture" commercial ambition; the way they grew and developed the business and made a rather marginal category increasingly central and bankable. They transformed a former "lifestyle" business into something that looked like a global titan.

The great joke about advertising agencies had always been their stodgy, unmemorable names, in combinations like solicitors' partnerships, all practically unknown outside the small world of London ad-land. But Saatchi and Saatchi created the first widely known advertising-agency brand, still the only one most people can cite. From the earliest days, Charles was forever briefing – first the trade press, especially Campaign, and later the nationals – on Saatchi's triumphs. A constant flow of stories generated a constant flow of headlines, and then, the sign of real currency, came references in plays, television comedies and newspaper cartoons. By the mid-1980s, everyone knew them.

Building a brand was central to their idea of developing a global "communications" group at real scale – and fast – through acquisition. That meant bankability, persuading the City that they were worth backing. Throughout the 1980s, S&S bought and bought, small specialist businesses – particularly in the USA – and one large international chain, Bates Worldwide. By the time they were lending their "glamour" and "imprimatur" to The Independent's pitches, S&S was a FTSE 100 company, the apparent peer of some of its major clients. It was in the Big League. A player.

As Ivan Fallon now says: "It was a huge achievement: in 17 years, they'd created the biggest agency group ever. They'd completely changed the ways ad agencies were rated by the market. (Before then, ad agencies had no value – the assets went down in the lift.) And they opened the way for Martin Sorrell [now Sir Martin, formerly Saatchi's finance director, the architect and engineer of many of the agency's early acquisitions] to invent the kind of company Maurice had conceived. The problem was that they'd never actually run anything. They could do the big deal, the prospectus. But Martin Sorrell does the close work. They couldn't manage the companies they bought. But their ideas – like the globalisation theme they got from Ted Levitt (the late Theodore Levitt, author of The Marketing Imagination, Harvard Business School professor and one-time S&S board member) – were really important."

And there was more. The Saatchis' work for the Tories – the ad everyone remembers was the "Labour isn't working" poster with its snaking queue of the unemployed – was parlayed through publicity into a widespread association with power, and with Margaret Thatcher herself (although that relationship, many said later, was actually with Tim [now Lord] Bell, their brilliantly persuasive business-getter until 1984, and was perceived as a Saatchi asset).

And S&S was seen as having a new kind of social power, too, the power that comes from being at the centre of new things, the power of transatlantic and global reach and, above all, the power of contemporary-art collecting – then a growing market among international youngmoney types (and later the hedge-fund boys' tipple). By the mid-1980s, Charles Saatchi, that half-educated, headstrong boy, had become the world's most influential contemporary-art collector (what was so impressive was that he'd followed his own taste, as Fallon points out, back in the 1970s "when he was still earning about £30,000 a year"). He'd had to trade and develop the collection just to keep buying. Self-taught but hugely knowledgeable, massively, consumingly enthusiastic, collecting – and displaying publicly – has become Charles Saatchi's major preoccupation (alongside a series of near-obsessive hobbies, like the competitive go-karting he took up at 50). Contemporary-art collecting was smart power –and the Saatchi Gallery reinforced the brand from 1985 on.

In the mid-1980s, in my role as a management consultant, I had to tell a client, an S&S competitor – a large, long-established, well-funded advertising agency full of clever, charming, creative types – that Saatchi had simply changed the meaning of success in their sector and that their potential clients remained, most of them, deeply impressed. My own client simply couldn't compete on all those fronts – they couldn't tick all those FTSE, Tory, etc, boxes. But at the time, there was enough profitable business around for both of them, so they'd just have to wait and see if the Saatchis overreached themselves.

And they did, eventually – although the Saatchi trajectory had seemed unstoppable. Not only was S&S a FTSE 100 company in the 1980s but, at one point, it was the largest business of its kind in the world, overtaking the two dominant American groups, Interpublic and Omnicom, at precisely the time that a new kind of British business was buying up iconic chunks of America – buildings and retail chains – in a flurry of machismo. Size mattered.

But the world turned: business sentiment started to change after the Black Monday stock-market crash in October 1987. As the end of the boom was called in late 1989 and 1990, the bravura Saatchi style began to look dated, extravagant. Group profits shrank and the debt overhang began to look really painful. So far, so familiar – a raft of other acquisitive fast-growth UK companies were seriously overstretched by 1989-90. It was how they managed through the early 1990s that mattered. S&S, according to industry observers, could've made it through, if they'd made changes fast enough. If they'd put in the hours, done the close work of integrating all those acquisitions, and cut the costs.

In 1989, for instance, the global holding company S&S PLC had moved to a new show-off block, all glass and marble, in Berkeley Square, leaving the UK agency back in the original shabby Charlotte Street building. Key to the deal was having the Saatchi name on the building in mile-high letters, though the PLC actually occupied only one floor, the top one. But it overlooked the established J Walter Thompson agency on the other side of the square. (It had been a worldwide Saatchi policy to buy or rent buildings that could be visibly branded.) That glamorous building became a focus of the bitter struggles of the 1990s.

But the real overreaching came when Saatchi tried to buy the Midland Bank in 1987. The rhetoric of globalisation and development into other kinds of service businesses was central to the Saatchis' City dialogue (they'd already bought Hay, the international pay-and-perks consultancy). The Midland was then one of the largest retail banks in the world – and the argument was that S&S could run it more effectively because they understood markets and customer service. One off-the-record account has Sir Kit McMahon, the Midland's chairman, going to Margaret Thatcher, the Saatchis' former client, to complain and her saying it was going too far: it just couldn't be allowed.

And it wasn't. When it became public, the Saatchis were seen to have done more than overreach themselves – they started to be described as fantasists. The old stories of them packing empty offices with people hired in off the street to give the impression of a bigger, busier business, and of presentation suites rented for the day, decorated like stage sets and "struck" in the evening, all began to circulate again. The Saatchis' essential showmanship, the culture of the grand gesture, so right in the early 1980s, looked painfully wrong in 1990.

The struggle for control of Saatchi & Saatchi in the early 1990s, before the brothers left to start up their own new agency, M&C Saatchi, in 1995, was astonishingly acrimonious and amazingly public. The brothers, the new managers brought in to restore financial discipline, and the rebellious shareholders, all leaked constantly. And precisely because S&S was such a famous national brand, such a key symbol of our corroded 1980s expectations, those leaks made front-page stories. The company's fame and its instinct for publicity all worked against it. It was incredibly value-destructive, for the share price and for morale down on the shop floor.

The Saatchi legacy isn't the two – quite separate – advertising agencies that remain: M&C Saatchi, seventh in the UK market in the Campaign/Nielsen rankings, and the rump of the original Saatchi & Saatchi chain, now owned by the French marcoms company Publicis, and ranked No 16 in London. Inventive as M&C remains, neither is exactly a business titan now. The influence is in the massive Saatchi diaspora that seems practically to run the country (David Cameron's strategist, Steve Hilton, worked there, as did Adam Crozier, the new CEO of ITV, and an eager group of ex-employees is currently compiling a book tracing the other 700 or so ex-Saatchi-ites out there).

And it's also in the world's largest communications group, the modestly named WPP, built up by Sir Martin Sorrell, the Saatchis' former finance director, who left in 1985 to run with the ideas he'd been – frustratingly, as he tells it – charged to develop at Saatchi. A global, diversified business, created with two massive US acquisitions – J Walter Thompson and Ogilvy & Mather – and a great many smaller ones. A huge portfolio of "Creative Industry" and advisory people businesses, but run as tightly for financial returns as the most back-office-ish Basingstoke insurance company you could imagine. Like the Saatchis, Sorrell is constantly quoted, a regular on radio and television, but as a conventional captain of industry, a particularly articulate commentator, talking about the world economy, or British business with the Bric countries – strictly no hyperbole and nothing fluffy, ever. Of the Saatchi experience, Sorrell now says: "It was phenomenal in its time and it was very exciting working there – you could do what you wanted to do. But you just couldn't get the external credit for it."

Sorrell works, by all accounts, practically a 20-hour day, from a low-key group head office. And he's forever at the emerging markets coal face, heading off to Mumbai and Beijing to get new offices rolling. Anything remotely Britpop, louche, self-indulgent-looking has been ruthlessly edited from WPP's presentation of itself as a thoughtful, clever business partner. The implicit parallels are with McKinsey or Accenture and the returns he'd like to match are those of the New Tech greats such as Google and Microsoft. It's a world away from Saatchi in its pomp – the raspberry Rollers and the branded buildings.

Meanwhile, the original advertising business, that glorious mid-1980s video-promo world of S&S's spectacular commercials for British Airways – Manhattan airborne over Croydon or Hugh Hudson's great opera-tracked cast-of-thousands winking eye – is utterly unrecognisable. Fragmented, complex, working out how to build brands in difficult new ways, online or through assiduous "relationship management". They're ceding ground to newer, duller-sounding specialisms (loyalty-card operators, search-engine optimisers) on the one hand, and on the other to Shoreditch Boy Wonders who engineer events or devise YouTube spoofs that make their way round the world in 24 hours. The ad briefs that matter are increasingly global ones, so the work has to be "culturally neutral" – so careful with the humour, the verbals, and the references and let the CGI take the strain. The London Look is a mixed blessing.

And advertising's appeal to latter-day likely lads like the Saatchis – the hyper-educated and the market traders – has steadily gone down ever since the 1980s Big Bang opened the City to the talents. There's been a mass of new ways to show off and make money around the globe. We still admire advertising, even now, but it's old advertising we love, for its strong retro charge. Those 100 Best Commercials programmes work just like Life on Mars, a reminder of something impossibly remote. Glorious. Tacky. Unimaginable. Were we ever there?