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Scandinavian ad agencies have a long-standing reputation for producing innovative work. As a result, over the past ten years, several major networks, including DDB and Saatchi & Saatchi, have expanded into Nordic territory.

The latest recruit to the scene is St Luke's with its Stockholm-based 'Anglo/Swedish' agency. 'Sweden has always shown a lot of interest in us and the ideas behind St Luke's. They intuitively understand things such as flatter structures and less hierarchies,' Tim Hearn, St Luke's creative director, says.

St Luke's has long had a link with Sweden, thanks to its client Ikea, and has also travelled to Stockholm to make animated commercials for HSBC and BSkyB.

'Scandinavia as a whole produces a number of good creative people in the ad industry. Look at the number of Scandinavians working in creative departments in London,' Hearn says.

But in Scandinavia, as elsewhere, the trend towards network globalisation of the ad industry means that creativity is falling further down agency agendas.

Anshenrik Langevad, the creative director of Lowe Lintas & Partners in Copenhagen, admits that the trend for adapting a global commercial for different regions is growing as advertisers seek bigger markets. 'We are seeing Scandinavia develop into one market and we are now more often doing adaptations within Scandinavia,' he says.

And he admits that this can be at the expense of an agency's creative reputation. 'If you're just doing adaptations, it is not satisfying, not challenging and you don't attract talent to the agency.'

But if the creativity of Scandinavian agencies is under threat, what efforts are being made to prevent the gradual erosion of their standards?

Forsman & Bodenfors, the Swedish independent agency, won the worldwide Volvo account in February. However, in June it decided to resign it. The creative director, Filip Nilsson, says the reason for ditching the agency's biggest account was that the work no longer fitted with its principles.

'Before we took on Volvo, we did detailed research to make sure our 'tonality' would work with this account.

We found it would and went ahead. We won a Gold award at Cannes for one of the ads but then we found it was getting too political. Getting stuff through the organisation seemed more important than the work, so we decided to resign it.'

Ultimately, he believes this decision worked in the agency's favour.

'It was a tough decision but within Volvo it created a kind of respect. We are still handling their Scandinavian account,' he says.

F&B also feels that the decision protected its creative reputation. F&B has picked up a string of awards over the past ten years, during which time the agency has established itself as Sweden's top creative hotshop.

'We are beginning to see major clients coming to us and asking us to run international campaigns. Five years ago a big client would probably not have been ready to trust an independent agency like that,' Nilsson says.

It is not alone. The clothing group H&M recently picked the small Finnish agency Hasan & Partners to handle its worldwide expansion.

Langevad supports Nilsson's view that the industry's reputation is working to its advantage. 'We do have a reputation for producing good creative work. Things are more informal here and big companies seem to want to learn from that. Even multinationals like Unilever are demanding a very creative approach.'

Nilsson believes this switch in attitude is the latest stage in the development of the ad industry worldwide, fuelled by technology and increasingly sophisticated consumers.

'For examples of international network advertising at its worst, look at most of the ads in an in-flight magazine,' Nilsson says. 'It's just beautiful pictures and bland copylines, where an idea has been taken and adapted to try to please everybody and ends up pleasing nobody - it's just crap. Clients are getting more professional now, they can see that doesn't work.'

He cites F&B's award-winning pan-European campaign for SCA's nappy brand Labero as an example. Labero had been running a close second to Pampers in Europe for many years. 'They understood that we were not going to provide armies of account managers or help them sell the idea to their own people,' Nilsson says. 'What we offered was a strong creative approach and a high return on investment. It worked: Labero now has 60 per cent of the market.'

Nilsson believes agency networks with their roots in big brand clients of the 50s and 60s are destined for a difficult future. 'It used to be the case that if you wanted to do international work, you had to physically be in that country. Now everything is online, that's not the case. Clients are asking why they're paying an agency huge sums to manage accounts when they have people in their own organisations who could do it just as well.'

However, not everyone agrees. 'It's the implementation and account side of things that demands a network agency,' Patrick Isaak, creative director and former chief executive of Saatchi & Saatchi, Copenhagen, says. 'Yes, you can come up with brilliant creative work and leave the rest to someone else but that is not what many clients want. They want the account to run smoothly and they are prepared to pay for someone else to do it.'

Isaak has clear views on the role of satellite agencies within an international network - and simply adapting work from the mother agency is not part of a winning strategy, he says. 'I'm competing with other agencies and with my network affiliates too. Network agencies have a future only when local companies in the network produce outstanding ideas without being dependent on the mother agency.'

AGENCY LEADERS

Top three agencies in the Nordic region by country, ranked by gross income for 1999:

NORWAY

1. Leo Burnett Group, NOK181.8m

2. JBR McCann Group, NOK162.2m

3. Bates Group, NOK157.8m

(NOK1 = pounds 0.07)

DENMARK

1. Grey Communications Group, DKK276.4m

2. Reklametjenesten, DKK143.8m

3. Bates Group, DKK131.2m

(DKK1 = pounds 0.08)

SWEDEN

1. Lowe Brindfors, SEK340m

2. Ronnberg McCann, SEK161m

3. Sexton 87 Ogilvy, SEK140m

(SEK1 = pounds 0.07)

FINLAND

1. Sek & Grey, FMK102.3m

2. Hasan & Partners, FMK48.2m

3. Publicis-Torma Oy, FMK40.0m

(FMK1 = pounds 0.1)

Source: Danish/Finnish/Norwegian/Swedish Advertising Agency Associations.