Wolters Kluwer CEO, Nancy McKinstry, discusses innovation at the company.
Wolters Kluwer CEO, Nancy McKinstry, was recently interviewed by Deloitte's magazine 'The Future of Supervision' on innovation in the boardroom.
The original Dutch version of the article first appeared in Deloitte's De Toekomst van Toezicht on May 27, 2014.
"You don’t know what is going to change the business, but you know that something will."
There are few companies that have been as heavily impacted by the digital revolution as Wolters Kluwer. The publisher of paper books and magazines has undergone a radical makeover in recent years. Under the leadership of CEO Nancy McKinstry the company has successfully adapted itself to a world whose reading is largely screen-based. “At Wolters Kluwer we combine technology with subject-specific expertise. I can’t see Google supplying software for accountants; they would first have to collect all the necessary knowledge and information.”
“77% of all the products and services provided by Wolters Kluwer are now digital,” begins McKinstry. “That is indicative of the enormous change we have experienced in a relatively short space of time. Part of that change has been to do with how the company operates.”
Innovation leading to transformation
Three major developments took place, with the supervisory board being closely involved, according to McKinstry. “The first concerned the organization. The decentralized group of companies that we were initially, with everyone acting autonomously, was centralized around our main markets. In 2010 we established global business chains because you need a certain scale in order to compete successfully at a technological level.
“The second major change was that we brought in new skills. The editors always took center stage with us, but these days we have more software and IT people than editors. And thirdly we transformed from a company focused on acquisition opportunities into a company with a program: since 2004 we have invested between 8 and 10% of our resources in new and improved products. We kept that going even during the recession. The supervisory board was involved every step of the way. They supported the transformation strategy and believed that these investments should continue, even if this meant cuts in other areas. In addition they kept their focus on the development of our talents and technology, and on innovation.”
The development of the board
It was not just Wolters Kluwer that changed, the board itself also went through a development, says McKinstry. “There has been a shift in the skills of our board. We have ensured that at least two members of the board have a background in technology, plus one in media. In addition the board has become much more international. It is fair to say that the changes in the company went hand in hand with the changes in the board.”
The traditional Wolters Kluwer products have not disappeared, says McKinstry. “Print media are very resilient, and the ‘old media’ still have a role to play. The choice of medium depends on what people want it for. A lawyer looking for the solution to a clearly defined problem is likely to find it in our online offering, but can of course also still consult our hard copy reference works.”
Keeping innovation on the agenda
Next McKinstry returns to the supervisory board’s role in innovation. “In addition to our daily meetings, once a year we hold a two-day meeting devoted to the strategy (including portfolio decisions and investments), technology and innovation. Our supervisory board has two committees: the audit committee and the remuneration committee. Innovation is not on the agenda at every meeting but it is definitely a regularly recurring topic. For example, UpToDate is an important product for our Health division. We decided to invest in creating a Chinese version, and discussed this at length with the supervisory board. The talks were not just about a product, but also about our global expansion and about innovation.”
A topic of growing importance is the mobile market, says McKinstry. “In our software division there is a visible trend towards cloud solutions. Our business models are still expanding the various types of subscription but I can imagine this changing in due course. This is another thing we discuss with the board. We try to get the degree of innovation right. While we do measure the number of new products and the revenue over the last year this only provides an indication. And so we are working on developing an innovation dashboard to allow us to keep track of what we’re doing. We want to achieve a certain annual growth rate: how much of this needs to come from revenue growth, how much out of the price and how much from new products? We focus on the new products.”
Adding value through technology
When it comes to innovation there are three key aspects for Wolters Kluwer, explains McKinstry. “First of all investments. Then we want to approach innovation based on a certain standard. This is what our iLab is for: we bring clients together with a select group of employees, who spend a quarter of their time in the lab working with clients to develop certain product concepts. When we looked into why innovation wasn’t delivering quite what we expected of it, we discovered that not enough ideas were coming in for further development. At the iLab we throw in as much as we can. A lot of ideas are quickly rejected, but on balance we end up with more. And finally it’s important that good ideas are acknowledged and rewarded.”
Technology also creates opportunities for other companies, says McKinstry, and Wolters Kluwer helps them to turn these opportunities into profit. “For example, accountants can add more value higher up in their chain because they – like lawyers and doctors – have the technological means to automate routine work, leaving them more time to focus on providing advice and insight. This allows them to gather huge quantities of data, which are very valuable. One of our products that does this is TyMetrix, which is used by internal and external legal professionals. TyMetrix is a platform for the recording of invoices, legal cases and business processes, and the relevant communications. TyMetrix contains vast quantities of data, which can be used for business intelligence. In order to obtain these insights we developed TyMetrix LegalVIEW. This database of anonymous legal accounts currently contains legal data worth over USD 40 billion. This data can be used to negotiate on legal expenditure or for example to obtain a better insight into personnel management.”
No worries about upsets
A technology that has proven itself in one market can sometimes be adapted by third parties for another market. This may present a risk to Wolters Kluwer, which after all creates many technological applications. But this does not worry McKinstry. “Of course ideas will always be developed in garages. Inventors like that can attain a certain size but in order to really grow they will need to hire in sales and other staff. We’ve already got them. Minor players have the ability to upset the market, but I don’t consider them to be a major threat. At Wolters Kluwer we combine technology with subject-specific expertise. I can’t see Google supplying software for accountants; they would first have to collect all the necessary knowledge and information. While you should never say ‘never’ I don’t see disruptions of this type occurring any time soon.” Other developments are more likely, according to McKinstry. “I expect artificial intelligence and robotics will be able to take over activities from humans, to a certain extent. But will they ever be able to make judgments like humans? Whatever the case may be, I believe the adage ‘invest and innovate’ is the right message. You don’t know what is going to change the business, but you know that something will.”
Creating the right environment
Wolters Kluwer is so familiar with innovation that it is in the company’s genes, says McKinstry. “We are able to grasp highly complicated subject matter and to make products that both meet a need and generate a profit. Innovation is all part of that; you have to do it in such a way that you can make some money out of it.
Innovation is a completely integral part of our company. We do not set a separate group of inventors to work who operate independently from the team and the people who have to sell the products. But in order to make innovation successful you do need to create the right environment and the right framework. That is why we have the iLab where our employees are able to spend 25% of their time, away from everyday business. In addition we have a small R&D group that focuses on new technology in six or seven categories. And in the last five years we have had people whose job it is to look at customer experiences and who focus on the user interface, design and navigation options of our products. These experts have to translate client experiences into recommendations that we are able to put into practice.”
Learning to accept failures
McKinstry acknowledges that making innovation measurable is a tricky task. “That is why the supervisory board does not set targets for innovation. One of the challenges inherent to innovation is that you have to accept failures. These days the risks are different from those associated with publishing a book twenty years ago.”
The objective remains to achieve organic growth. “This is an important objective for both the management and the stakeholders, and innovation is part of it. Our transformation is ongoing and the next technology wave is on its way. It is of course a never-ending journey. I think that in five years’ time we will be almost entirely a software company. At the end of the day our business is information, and that is going to be delivered to the customer in very different ways than it is now.”
Nancy McKinstry (1959) joined the Wolters Kluwer executive board in 2001 and was appointed CEO in 2003. Under her leadership Wolters Kluwer has grown into an international provider of digital and online information services for medical, legal, financial and accountancy professionals.
Positions held previously by McKinstry include that of CEO of Wolters Kluwer’s North American division and of CCH Legal Information Services, now part of Wolters Kluwer. Prior to that McKinstry worked for international management consultancy Booz & Company and was CEO of SCP Communications.
McKinstry is also a member of the Board of Directors of Abbott, as well as being a member of the Advisory Council of the Amsterdam Institute of Finance, the Advisory Board for the University of Rhode Island, the Advisory Board of the Harrington School of Communication and Media, and the Board of Overseers of Columbia Business School.