We all know what goes on in advertising agencies. They are full of executives wearing interesting eyewear in open-plan offices, playing table tennis, drinking mojitos, having barbecues, and occasionally coming up with killer ideas before going off on skiing holidays.

Is this a true picture? Who better to ask than Nicola Mendelsohn, the chairman of Karmarama - which has just been named agency of the year by Marketing Week - and the first female president of the Institute of Practitioners in Advertising (IPA) in the organisation's 94-year history. Surely in these days of multi-media and multi-million pound contracts, advertising executives are hunched over their desks like everyone else. Not according to Mendelsohn. "We do play table tennis in the office, there is a garden with a barbecue, and because we had such a good year last year, we did take everyone away for a skiing holiday," she says, while sipping a mojito (an alcohol-free version, it should be said).

She adds: "We are asking our people to be creative and entrepreneurial so we try to come up with an environment that stimulates them."

Sounds like fun, but there is much more to advertising than chargrilled food and ping pong. An agency can be defined as a "factory that liberates creativity", says Mendelsohn. It is among the most competitive of UK industries - even the biggest player in the UK market has less than a five per cent market share. But the industry earns a lot of money for Britain - it accounts for six per cent of GDP, the same proportion as banking. So for Mendelsohn to be, effectively, the industry's spokesperson, is a huge achievement.

What she would like to promote in her new role is the self-confidence which she feels British advertising has lost. "We need to get back our swagger. Historically Britain has been the heartland of global creativity. We need to rediscover that pioneering spirit."

Manchester-born Mendelsohn, who was last week nominated by Ad Age as its "international woman of the year", certainly lacks nothing in self-confidence herself. Composed and articulate, she has been in advertising for nearly 20 years since she graduated in English and drama from Leeds University. She has, she says, been shown the way to success by the female role models in her own family. Her grandmother "worked until almost the day she died", and her mother, Celia Clyne, runs a successful kosher banqueting business. With her commitments to Karmarama, the IPA, and the small matter of four children between the ages of six and 14, one wonders exactly how much time Mendelsohn has for ping pong.

Advertising is now a vast and complex industry - a unique mix of arts and science. This provides a complex challenge for people like her. Mendelsohn says: "We need to make sure we have the creatives and also the number-crunchers. All the advertising you see, whether on television, the internet or on posters, is absolutely born out of consumer insight. We're crying out for maths graduates now - there is so much data to process these days."

Despite all the spreadsheets and the focus groups, coming up with a good campaign is essentially the same as it used to be, whether you are selling teabags, insurance or video games.

"The starting point is always the business problem you need to address. With one of our clients, Nintendo, it was the fact that gaming was all about spotty 13-year-old boys in their bedrooms. So why wasn't everyone else enjoying gaming? With Costa Coffee, the research indicated that people enjoyed Costa's coffee more than that of Starbucks, which is made by machine rather than by proper baristas, so we had to find a way of getting that across."

After no doubt quite a few barbecues, the Karmarama creative team came up with an advertisement which is among Mendelsohn's all-time favourites. "We took a load of monkeys and gave them coffee-making equipment to demonstrate that a monkey could not be trained to make a perfect cup of coffee. It showed people that proper coffee-making was an art form. I'm particularly proud of that one."

Mendelsohn says that if the message is strong enough, it will suit any medium. And if she is in any doubt about the power of what she is trying to communicate, there is always the Mrs Clyne test. "You have to distil everything you have learned about a product into a sentence that I could tell you in 30 seconds. I sometimes try it out on my mum. If she gets it, I know we have the basis of a strong message."

Advertising already features strongly in our lives. It is estimated that we take in around 1,000 commercial messages a day already. But this is as nothing compared to what we can expect in the future. Advertising, says, Mendelsohn, is about to get personal.

"Look at Clubcard. With the information Tesco gets about your purchases they probably know more about you than your partner does. They know whether you buy kosher and if you do, Tesco will promote matzah or fishballs to you. Both sides win. Tesco are getting you to spend more with them and you are saving money."

Mendelsohn thinks the future is in individualised mobile advertising. "You'll go somewhere like Brent Cross, check in through your mobile, and it will show up which shops have deals on and where. Businesses will develop better relationships with their customers and the customers will make savings."

It is her excitement about the industry which keeps her going. Indeed, when the Mendelsohn family sit down to watch TV together (her husband is former Labour fundraiser Jon Mendelsohn), no one is allowed to fast forward the adverts. "My kids love the fact that I do Nintendo's advertising," she says. "That makes me a cool mum."