Nancy McKinstry, CEO at Wolters Kluwer since 2003, steered the publishing firm into the digital era
This article originally appeared in the Financieele Dagblad in Dutch.
How do you transform an organization with a turnover of more than EUR 3.5 bln and almost 20,000 employees? Ask Nancy McKinstry. This 56-year-old American expert-through-experience has the longest tenure among CEOs of Dutch AEX companies.
"It’s more evolution than revolution," says the woman who in the autumn of 2003 became CEO of Wolters Kluwer, the company that provides information to medical staff, accountants, tax experts and lawyers. Our clients also evolve. They are doctors and accountants, for example. They have to really be convinced that new products and services are better. The fact that we still derive 20% of revenue from print is because our clients still value it.
McKinstry steered the traditional publishing firm Wolters Kluwer into the digital era. Paper publications disappeared and were replaced by apps that lawyers could use in court to look up case law and applications that help doctors to make a diagnosis via their iPad. Now, the company is working on the next change: producing computer software, for salary processing and tax administration, for instance.
In 2003 when you became CEO, Wolters Kluwer made a net loss, the shift to digital was struggling to get off the ground. What had gone wrong?
The strategy of the 1990s had run its course. That strategy was basically that we made acquisitions, optimized the acquisitions and from the cash that generated, could buy more new publishers. But the number of acquisition opportunities had significantly declined. On top of that, we were faced with the arrival of the internet. We entered a new era where you really needed to invest. We had to change our content to make it suitable for the internet. Only we did not know the nature of those investments.
What was to be done?
In the first place, organizing the company around our client groups rather than the decentralized country approach. Alongside that, we began an investment program: we put every 8 to 10% of revenue into new product development every year. We still do that. Also, we had to get to know our clients much better. Wolters Kluwer was very product-driven, but we did not know what our customers did with those products. That knowledge had to get deeper.
Your predecessors were proud of the decentralized approach. They talked about their flotilla, the fighting fleet of small, flexible ships.
The flotilla idea fueled people’s own responsibility and autonomy. Those are values that we did not throw overboard. The country approach was also good for talent development. People quickly became kings of their kingdom. That was also an aspect we didn’t want to destroy. But in a world where you suddenly have to invest enormous sums in IT platforms, you can no longer permit different approaches. We had to bring the business together. We had to start talking to each other about the customer’s needs. The country approach had run its course. But Wolters Kluwer was at that time also a burning platform. We could not allow ourselves debate and time.
The outside world remained skeptical that Wolters Kluwer could make the shift. What was the turning point for you?
The decision to invest strongly was absolutely critical. With a book, you need an editor and a writer, who work on it for one or two years. The workflow became completely different. As well as the editor, technology and commerce also came into it. It took two to three years to build something, and then two to three more years to bring it to market well. Before you know it, you’re seven years down the line. That demands patience and commitment. There was certainly skepticism in the early years. People wondered if Wolters Kluwer could really do this. The perception was that we did not understand the technology. But that motivated us even more.
Also, we changed the portfolio. We divested EUR 800 mln of revenue, including the education arm where it all began at Wolters Kluwer. At the same time, EUR 900 mln of new revenue has been added, companies which contributed complementary technology in our core markets.
In times of need, companies often choose an outsider. You came from the organization itself. Did that make a difference?
Stable leadership is crucial. It was good that there was someone who knew the business well. It’s a complex business. I didn’t have to go through a 24-month learning curve. I knew the team well, I knew the business well. In the first 30 days, you take the most important decisions. In addition, I was very committed to this company and I still am.
As a publisher, you had the IT specialists march in. Was that not a culture shock?
There are now more software builders than editors working at Wolters Kluwer. They are a critical success factor. But you need both: technology and content. If you only build a platform without content, it won’t work. We work in teams here and learn a lot from each other. For the editors, the work has become more interesting. They need more skills, but also have more opportunities, work in a much more international way. It was striking that it was the editors who drove the transformation, only that technological knowledge did have to come into the organization.
The next phase is from digital to software. A third of our revenue today comes from software products, which enable our clients, for example, to organize their work processes more efficiently. And we want to increase this by approximately 50% in the next three to five years. In India and the US we have set up "centers of excellence." We have established innovation labs for new products in the Netherlands and other countries. Here, too, we link content with technology. These are developments designed to drive future growth.
But technology companies have grown quickly, while revenues at Wolters Kluwer stayed the same in all those years. Don’t you ever get impatient?
We manage for profitable growth. If you look at our results, they are in line with sector peers. The divisions we have now built up all have strong prospects of further margin growth. Parties like Google or Microsoft are not our competitors. Microsoft builds products for general use. That is another world than ours. Google is not efficient enough as a search engine for our professional customers. They need the right answer in one click. Google cannot offer them that.