Wolters Kluwer’s CEO, Nancy McKinstry, was recently interviewed by Dutch business magazine Management Scope about the company's transformation, vision on value creation, future trends, and her leadership style.
Wolters Kluwer experienced a drastic transformation under ‘iron lady’ Nancy McKinstry. ‘To be able to successfully weather this change, we needed a lot of knowhow’
Nancy McKinstry has been at the helm of Wolters Kluwer for more than 10 years. Having been with the Dutch publishing firm since 1992, McKinstry joined the Executive Board in 2001 and became chairman and CEO on 1 September 2003, managing the company in a no-nonsense way that also resonates in her personal life. She stays in shape by practicing yoga but is not into meditation. She works hard, is on the road two weeks each month and is strongly convinced of the importance of having a long-term vision and constantly investing in innovation. This tenacity has resulted in the successful transformation of Wolters Kluwer from what technology insiders call a ‘dead tree’ to an international provider of digital and online information services for medical, legal, financial and accountancy professionals. This success is exceptional in light of the fact that publishers were commonly referred to as dinosaurs – and with good reason.
What does your workday look like?
A large part of my daily work consists of working together with the divisional management and focusing on developing the business: allocating capital, applying technology and responding to customers’ wishes. Half of our revenues are generated in the United States. That means that a large part of our day starts at 2 in the afternoon. They are long business days and I am often travelling, but the fun thing about it is that I am able to work together a lot with local teams in other countries. Due to the dynamics in emerging markets like China, India and Brazil I am in close contact with both customers and the local management teams. I have lived in the Netherlands for ten years now and in this time one of the things I have learned is to be mindful of cultural differences, also for example in the way that decisions are made. In some cultures people first have a cup of coffee or meal together and build up a good personal rapport. In other cultures people get straight down to business.
How would you define value creation?
Value creation is one of our core values. Wolters Kluwer is strongly driven by shareholder value. And our customers are of course very important. They are professionals who put their trust completely in us when making critical, life-changing decisions. We focus strongly on creating extremely high-quality products. The third facet of value creation is about our employees. Wolters Kluwer has a great deal of relatively specialist knowledge – a large part of our employees are doctors or lawyers. Good employees are a precondition for good products and satisfied customers, which is the basis of shareholder value. Around 75 percent of our revenues are recurring due the subscription model.
How do you view value creation in relation to employees?
When I started as CEO in 2003 75 percent of our revenues were generated by print activities. This has dropped to only 23 percent now. So we have more than completely shifted. To successfully survive this shift we had to have a lot of know-how in the field of technology and product development. It is important for a knowledge-intensive company like Wolters Kluwer to retain employees for a long period of time. We have become much more of a global company. That requires locally involved people and for employees to gain experience outside their own field in the market. That is why we launched an extensive talent development program around 2006. It helps us grow the new generation of employees. Our incentive programs are not only focused on financial reward but also on content reward. For example, our customers work with our employees on specific product development in company innovation labs and the opportunity to work in those labs is part of the incentive program.
Ever since our transformation into a digital company the role of the team has become much more important. The online world requires that people work together more than in print, where the focus was often more solitary. Content experts now work together much more with technology specialists and market specialists. This has an impact on recruitment and selection, but also on the way that success is measured and rewarded. This is in keeping with the new generation of employees who are looking for more than just financial reward. They also want to add value in society.
How has Wolters Kluwer weathered the crisis?
Wolters Kluwer is a resilient organization. Eight to ten percent of revenues are reinvested every year, and this is something we continued to do during the crisis. To do this we have had to cut costs in other areas. The markets in Europe contracted during the crisis and our customers also felt the effects of the crisis. They did, however, continue to purchase our products and services. We also paid a great deal of attention to making our costs more flexible, for example through scenario planning, outsourcing and offshoring. We also moved some parts of our product development – which is part of our core business – to offshore vendors in India. This increases our ability to upscale and downscale.
Was the balance between the different interests of shareholders and other stakeholders under pressure during the crisis?
We do not have many different interests. There is a good balance within our organization between our objective to be a good corporate citizen, on the one hand, and our objective to realize value for customers and shareholders, on the other. As a producer of knowledge we are a very clean company, certainly now that we offer more and more online products. Our products contribute to development, to improving productivity and efficiency. And Wolters Kluwer’s dividend has been steadily growing for 25 years now. We have by and large been able to improve our profitability throughout the recession. We are extremely disciplined when it comes to allocating capital, which can as it were mean that we will no longer fly business class.
Has your vision of value creation changed in recent years?
No, it is still based on organic growth, which is our main objective. This is of course more challenging in times of crisis. Wolters Kluwer has now been transformed into a digital company. We have had to pick up the pace to achieve this. When I started at Wolters Kluwer in 2003 we were lagging behind. We now have a good basis and are well-positioned in our markets. The investment policy we have pursued has contributed to this. We are successful in combining expert knowledge, software, technology and services.
In which area is Wolters Kluwer set to grow in the coming years?
We invest a great deal in areas of expertise where we are a market leader: tax software, clinical healthcare solutions, financial risk and compliance products and corporate legal services. We also try to increase customer spending in these markets. We innovate but also expand geographically; there are still many markets where we can do a lot. We have an excellent existing customer base, although the total number of professionals in our specialist areas is growing relatively slowly. They all face similar challenges regardless of whether they are nurses, doctors, financial specialists or lawyers. They have to do more and more with fewer resources. It is becoming increasingly difficult for them to keep track of all the information, while the complexity is increasing and it is becoming more difficult to remain compliant. The third point is that it is difficult for them to get sufficiently qualified staff quickly enough. Our products and services do not only help increase productivity and efficiency, they also ensure that employees are productive quicker.
How do you maximize customer satisfaction?
It is a drawback in our sector that there is no external party that measures market share. So we cannot purchase any data but have to do a lot of research ourselves. We have started measuring things such as NPS, a simple measurement we use to benchmark at product level. In addition we pay a lot of attention to our branding. This past year we launched the new pay-off: ‘When you have to be right’. This reflects what our customers are looking for: they have to be sure they got it right. We took a close look at how our customers perceive our brand. In 2003 almost nobody knew Wolters Kluwer but they did know a lot of our products. Now Wolters Kluwer is much better known and we have reduced the number of products. We made a conscious decision to keep the name as it is even though it is sometimes difficult to pronounce, internationally speaking.
Is Wolters Kluwer ‘in shape’ for the future?
We have an excellent basis with digital products and services that account for 77 percent of our revenues. Our structural investment policy has resulted in steady growth. We have good market positions and are financially strong. The European economy, where 39% of our revenue is generated, is a challenge. Innovation remains important even after our transformation into a digital company. We continue to invest in the main areas, but we are also investing a lot in mobile concepts. I am still surprised about the enormous penetration of the iPad which was introduced more than three years ago. We are focused on developing solutions such as workflow tools that meet the needs of our customers who have to do more with less. Thirdly we are making more and more products and solutions for specific groups of customers. Specialists want to spend less time doing research and want to progress quicker from question to answer to solution. A lawyer specialized in security uses widely deployable systems and also increasingly security solutions intended for specialist tasks. We make a point of working together with customers on this type of innovation because we realize that it is very important to our customers that our solutions work well from the start. Professionals, unlike consumers, do not switch to new products quickly or repeatedly. Many new products require long migration periods that can take many years.
How do you view your own management style?
As CEO you have to have a number of skills. You have to have a clear vision, you have to be able to explain that vision well and get people on board – from employees to shareholders and customers. I am result-oriented and quite fact-driven. When someone makes a proposal, I expect to see it supported by facts. And I also attach great importance to teamwork. I cannot achieve success on my own; my success largely depends on the ability to be surrounded and motivated by the right people.
Will you still be the CEO of Wolters Kluwer in ten years’ time?
In ten years I’ll be 65. I am quite sporty: I bike and walk a lot and practice yoga, mainly to keep my muscles toned. I am very committed to this company and I have no plans to do anything else. I love this company a great deal and what the company does for its customers and the world is very important. I also really enjoy seeing how the new generation of employees is growing and developing. Our company-wide innovation awards come to a close in New York every year. That’s where you see young talent emerging from within the organization. You invest a lot of time as the CEO of any company, so you have to gain a sense of satisfaction from this. And I learn new things every day. Our employees are also very committed to their customers. Our people stand up at meetings and say things like: ‘this product saves lives’ or ‘my product helps companies get ahead’. While it is difficult to top the claims made by the medical community, our employees are intrinsically driven. It is nice to make money in the knowledge that you are doing good.
*The original Dutch version of this article first appeared in Management Scope on March 22, 2014.