(FORTUNE Magazine) – ''We are dead.'' John Bergin, McCann-Erickson's former vice chairman, slipped a note with those blunt words on it to an associate as the two watched Michael Ovitz's Creative Artists Agency make a dazzling pitch that would cost McCann the Coke account. In fact, the handwriting was already on the wall. A secret and unorthodox Coca-Cola study begun in 1989 on the future of marketing preordained the stunning move. Called Project Balance, the study tapped ten unconventional thinkers -- business consultants like Peter Drucker, Harvard marketing expert Ted Levitt, and research whiz Arthur Nielsen -- for their views on reaching consumers in this media-saturated age. Management felt some urgency: Sales of Coke's main brand were barely increasing in the U.S., and Pepsi's ads consistently scored higher. The group's first report, published in 1990, posed a provocative premise: ''A brand advertised in a normal way, with normal media, is likely to develop a normal image, and not something special.'' So the experts advised: Don't be normal. McCann-Erickson was a normal agency. So believed Donald Keough, Coke's president and longtime marketing guru who retired last April. Keough, 67, told FORTUNE in February that traditional agencies tend to approach advertising as if they're ''delivering coal'' -- shoveling money into network TV because it's easy money for the agency. Keough, who had known Ovitz since the days Coke owned Columbia Pictures, was intrigued by CAA's pipeline into pop culture and by Hollywood's ''raw creativity.'' A partnership was born in 1991. Enter Peter Sealey. One of the more insightful contributors to Project Balance, Sealey, 53, had been a McCann adman, a Coke executive, and then head of domestic marketing at Columbia Pictures. Keough made him director of Coca- Cola's global marketing. Sealey set up a skunkworks: himself, staffers Ogden Tabb and Elizabeth Rue, in Atlanta; and CAA's duo of Shelly Hochron, a former Columbia movie marketer, and Len Fink, who had worked at Chiat/Day. Brainstorming from spring 1992 through October, the Coke-CAA team devised over 100 ideas for the 1993 global campaign, then winnowed the list to about 50. ''We didn't do any formal research. None. Zero,'' says Hochron. Presentation day last October at ''the Tower,'' Coke's headquarters, turned into defenestration day for McCann. The agency proposed the usual half-dozen platform ads positioning Coke as a ubiquitous product, for all people. The CAA show, introduced by Ovitz, was a whirlwind 60 minutes in which the 50 ideas were pitched in many styles for many audiences. Seeing the Coke side so elated, Bergin passed his note to McCann vice chairman Marcio Moreira. Coke management selected 24 ideas from CAA, including those computer-generated polar bears. The McCann gang sold two. Unveiled last winter, the new campaign was praised as innovative, sexy, playful, and breathtaking. But was it advertising? Entertainment gymnastics, industry critics carped. Consumers recently rated the ads tops among all campaigns. Sealey went on to brag publicly that Coke's new advertising not only was far cheaper to produce but constituted a breakthrough for Coke as well. ''It's no longer one sight, one sound, one sell,'' he crowed. Maybe he should have kept quiet. He clashed with Keough's successor, Douglas Ivester, a quiet, methodical ex-accountant who is most likely Coke's future CEO. Ivester canned Sealey last summer, although he remains a consultant. Sealey's replacement is Sergio Zyman, 48, a temperamental former Coke marketer who crushed any notion that the company would return to the Madison Avenue fold. A week into the job, Zyman rejected McCann's ideas for the 1994 global campaign. CAA is set to do Coke Classic's entire 1994 campaign. Meanwhile, Ovitz and Bill Gates of Microsoft are meeting quietly. Apple Computer has retained Ovitz as a marketing consultant. And Nike recently hired CAA to help with sports marketing events for TV. At Interpublic, McCann's parent, CEO Philip Geier Jr. is busily realigning McCann's management. He wants another crack at Coke. America's most powerful adman says, ''We've got to do a better job.''