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HANNAH BATES: Welcome to HBR On Strategy, case studies and conversations with the world’s top business and management experts, hand-selected to help you unlock new ways of doing business. Wolters Kluwer — the Dutch multinational corporation — started in the 1830s as a publishing house. But it has grown into a global, information services company – and now earns more than 90% of its revenue from digital products. In this episode, chair and CEO Nancy McKinstry discusses how she successfully shifted the company’s strategy to focus on digital products – like tax compliance software for accountants. She explains how investments in product innovation contributed to Wolters Kluwer’s successful digital transformation. McKinstry also emphasizes the importance of patience, as consumers slowly adopted new products and services. This episode originally aired on HBR IdeaCast in December 2019. Here it is.
CURT NICKISCH: Welcome to the HBR IdeaCast from Harvard Business Review. I’m Curt Nickisch. Change is hard. Digital transformation is harder. Moving a company’s technology, people, and products into the future – that often fails. A recent survey found that less than one third of attempted transformations succeed at improving a company’s performance and sustaining growth. On the show today, we’re talking to a CEO who is successfully leading her firm’s shift to digital. Nancy McKinstry is the chair and CEO of Wolters Kluwer. The Dutch multinational began as a publishing house way back in the 1830s and has grown into a global information services company. When McKinstry became CEO in 2003, the company earned 31 percent of its revenue from digital products. Today, it’s 91 percent. The company’s stock price has doubled over the last three years. And that performance is a big reason why McKinstry is ranked as the top woman on HBR’s list of the 100 Best-Performing CEOs of 2019. And she joins me now. Nancy, thanks for being here.
NANCY MCKINSTRY: Thanks for having me.
CURT NICKISCH: You started your career in management consulting. Later you had a number of roles at Wolters Kluwer and eventually ran the North American business. Did you always have ambitions to lead a big company from the top?
NANCY MCKINSTRY: No. I did not. My journey was, I originally started out believing I wanted to go into the foreign service when I was in university. And then just by happenstance took an economics class and just found it fascinating. So I sort of switched from a desire to serve in public service to business. So I went to Columbia Business School. Out of there I went to Booz Allen Hamilton, a consulting firm in New York. And at that time, this would have been sort of mid to late 80s, early 90s. It was a really fascinating time to be in consulting because it was this sort of convergence between media, technology and telco – things like the internet and voice over IP and those kinds of things. So, I got to do a lot of really interesting work, you work on really complex problems, right? And so what that taught me was first of all, to be very data-driven because often it was the data, whether it was going out and talking to customers, or talking to competitors, or actually doing analysis with numbers, but it was the data that ultimately would largely drive you towards the solution. So it taught me to be very data driven and it also taught me to not be afraid of problems. Because what you learned there is every problem can be uncoupled and most problems have solutions. And if you just can kind of really peel back the layers and get to the root causes, you can solve things. And it also taught me a great respect and appreciation for teamwork. Because nobody in consulting works on their own. It is really a team effort. And that was those lessons I have carried through my entire career.
CURT NICKISCH: What other soft skills did you learn during that time that you’re thanking yourself for now?
NANCY MCKINSTRY: Yeah, a lot around communications. I still would say both my liberal arts degree before I went to my MBA, plus consulting taught me to be a very strong writer which I believe is still an incredibly important skill in business. And also, how to communicate a strategy in a way that people will understand and in a way that can motivate people to respond. But at the time I started out in university, this notion of what is – I didn’t even know what a CEO did. So it was never sort of this aspiration until later in my career.
CURT NICKISCH: You didn’t set out to be one, but when did you know that you did want to be one?
NANCY MCKINSTRY: Well, at the time that I became the CEO, I was running the largest business unit and the company was really behind. The company was not doing particularly well financially and we were behind in terms of coming to terms with the fact the internet was going to have a profound impact on the business. So, I was very concerned about the company and I really wanted us to move forward in a certain way. And so when succession became clear, I was able to articulate here’s what I would do with the business. And I actually credit our board because I was the first non-Dutch in the history of the company. And that took a great deal of courage I think, for them to say OK, we’re going to give this individual a chance. And in addition, I was a female, but it was really being non-Dutch that became critical. And so, at that moment I really, I was both honored to be given the opportunity to lead the company —
CURT NICKISCH: What a legacy, right.
NANCY MCKINSTRY: — but also feeling a deep sense of responsibility that we had to move quickly and we had to do a certain set of strategic things, or the company might not survive. Because at the time there was a lot of consolidation going on in the sector because the internet was having such a profound impact on the industry. So I saw it as again, both an honor, but also a real responsibility to be successful.
CURT NICKISCH: You’re an American. Do you think that made a difference?
NANCY MCKINSTRY: Yes.
CURT NICKISCH: Do you think that made a difference or how has being, I don’t know. Do qualities of being an American, I don’t know. Did that make a difference at all?
NANCY MCKINSTRY: So I don’t think that the nationality per se had an importance, but I do think what it allowed me to do is I was both an insider – because I’d been running North America so I really did understand the business and knew what we needed to do. But because I was different, I was not Dutch and I was a female, I could also do things very differently. I had the best of both worlds in the sense I was an insider, but an outsider. And I moved with my family to the Netherlands and I was able to make change in a way that I think it would have been very difficult for perhaps a male Dutch person to make the same level of change at the same pace.
CURT NICKISCH: It is an amazing journey. You take over in 2003. That’s a very early time in the digital economy relatively. Get through the great recession which hit publisher’s especially hard, content folks. And then, and yeah, and you actually made that, you made that transition and you’re seeing great growth from that in recent years. What do you credit that to?
NANCY MCKINSTRY: Yeah so it’s really, it’s a couple things. It is truly about innovation. It is because if you look now at what we do, so I often describe this which I think is again, goes back to sort of my interest in economics, is if you think about the first kind of wave of transformation going from print to digital. So just think about picking up all this content and putting it available online. That first wave, it didn’t create any bigger profit pools. In fact I would argue that the profit pools shrunk. Because you had to invest in two kinds of formats. And so that was really heavy work. And I credit every employee at Wolters Kluwer that people just worked really hard to make that happen. Now if you look at the next transformation that we’ve been on this journey, is around these expert solutions. And that’s where again, we bring content, or domain expertise together with technology. We develop a tool and we deliver it to our customers and the tool gives them enormous value. Whether it’s productivity, or insights, or better outcomes, really demonstrable results that the customer can see. That transformation and now we’re about 50 percent —
CURT NICKISCH: From information to services?
NANCY MCKINSTRY: — Services and really, software. Right. So this transformation, about 50 percent of our revenues now come from these expert solutions. That transformation is enlarging the profit pools. So what’s so exciting for me as the CEO and certainly the excitement among our employees is that this next wave of transformation is really rewarding because we’re adding so much more value to our customers and at the same time we can see that the profit pools will increase, therefore we’ll have more investment to drive even further growth. So that first wave was critical because we wouldn’t be where we are today without it, but it was a lot of heavy lifting to now get into this second wave. And it’s rewarding, I think for everyone in the organization to now see the kind of fruits of that labor of effort that was required in the early kind of transformational period.
CURT NICKISCH: Yeah. What was hard about that journey? I mean it sounds very successful looking back on it, right. And you talked about having a vision for it. There must have been some dark days in there too.
NANCY MCKINSTRY: Yes. And I would say that what was hard about it is that print lasted a really long time. I mean today we still have some of our divisions that are only 65 percent digital. And in the beginning of this transformation, if you had interviewed me back in 2003, I would have said, it was generational. That when the next generation of doctors or partners came into be that all of the print would disappear. Not the case. So what was difficult is beginning to recognize that how our customers work is around a use case. So, what are they trying to accomplish? And in some cases, still today, you’ll see young physicians with their white coats on and she or he will take out the book and look something up. So they have, the customer has decided there’s certain situations where print is still an effective way to do work. Now of course that’s not the future of Wolters Kluwer, or even the future of these professions, but I think back to the hard part is that the length of time it’s taken to migrate customers from analog to digital was much longer than I think we expected. So as a result of that, if you look at the tipping point, you know we had to get to about 75 percent digital before the numbers really started to move. So if you’re a shareholder, or you’re an employee, there were years in there where you’re thinking OK, because you had this weight of print shrinking, when was that going to become not so material? So today, it’s not material and therefore you see that all the good digital growth that we’ve had for years is really coming through in the financial results. We were managing these very long migration cycles. And what’s interesting now is that we’re seeing the same thing with the migration to SAAS. So we started with these –
CURT NICKISCH: Software is a service, right?
NANCY MCKINSTRY: Right, exactly. So, a quick example. We’re one of the largest providers of tax compliance software. So if you use an accountant to do your tax returns, pretty, I’m pretty sure he’s using our product to do that. And we’ve been in that business for many, many years. and we’re migrating customers. Customers are recognizing the value of this SAAS offering and they’re moving over. But we anticipate it will take probably 15 years to move people over in a major way. So these cycles are quite —
CURT NICKISCH: Which is about as long as you’ve been CEO.
NANCY MCKINSTRY: Exactly. So what is the implication of all this? It’s two-fold. One is that you as a leader have to make sure you’re investing in both formats or both opportunities because you still have a big base of on-premise customers. You have to keep those products healthy and at the same time you have to migrate. So you have to be very clear as you think through your capital allocation, we’ve got these two platforms for a while. That’s one. Second implication is that you have to make sure that you help the customer on that journey. And the third thing we found which again, I find quite interesting is that we, when we’re first to market with next generation products, we can gain market share. And again, an example is in the tax market. We’ve been in the market pretty much by ourselves with the SAAS solution and we’ve gained a lot of new customers. So part of our program around innovation is to be where we can, be first to market with next generation solutions.
CURT NICKISCH: Yeah. How much of that growth strategy involves international growth and new markets?
NANCY MCKINSTRY: Yeah, so today about 60 percent of our revenues come out of North America and the rest about 30 percent or so in Europe, and then the rest of the world is still a relatively small part. So we are investing in places and we have for years. In China, India, Brazil.
CURT NICKISCH: Are going to have more doctors and lawyers and accountants.
NANCY MCKINSTRY: Exactly. But the absolute markets are still pretty small. And I tell this story which again is a good reminder for our organization is when we started in China which is now about 35 years ago, there were no lawyers in China at that time. Now there’s about 250,000 lawyers. So compare that to the U.S. where’s there’s over two million. So these markets just on an absolute basis are for what we do is still relatively small. So the goal and this is again back to what’s so important as a CEO, is that you have to be able to have a perspective and a vision 50 years out, or 25 years out. Something longer than the near term because the monies we’ve been investing in China all these 35 years, it’s for some, it’s some long term future. It’s not moving our results in the current year. So you have to be able to again, have that patience around investing over the long term. Even today, I mean again, what’s interesting is we’ve taken this journey. If you look today, at these workflow solutions, takes a couple of years to build them in terms of fully featured, but then it might take five to seven years to build the market. So if you look at 2019, our best-selling products were built, started being built 12 years ago. So as an investor again, if you think about us allocating capital, what do you need to do? You need to be sure that you’re investing enough to keep your current products healthy and then you have to bring out a series of new products and make sure that the funnel of new products which is again, very healthy.
CURT NICKISCH: Let me ask you about another transformation. During your tenure the number of women in senior leadership at Wolters Kluwer rose pretty dramatically. I mean you also mentioned that you were the first woman CEO of the company, which was maybe not as important as being the first non-Dutch CEO. But talk about that transformation. Talk about that.
NANCY MCKINSTRY: Yeah, so first I would say, I’ve become a strong proponent of diversity. Not just gender diversity, but nationality diversity. Because what I have seen firsthand is our most diverse teams are the most creative, they’re the most innovative and they deliver the best results. So it is, if you’re a leader of a company, in particular a public company, and you want good results, why wouldn’t you as a business leader want to harness as much diversity as you can? So that was one. Second is, in terms of how we got there, I would say in the beginning it was very organic. We were on this journey. We were having to move quickly. It was very difficult to get the ship moving in the right direction. So we just started to hire a lot of people of all different nationalities, gender, diversity started to occur then. We promoted a lot of people because we needed their talents. And we started by just that activity to recognize wow, we were getting more diversity and lo and behold, again, the more diversity, teams were creating the best results. So it went from sort of this organic activity to then really managing diversity. And so what did that include? That it has included, really focusing on the middle management pipeline. And again, not just gender diversity, but nationality diversity. And so, I believe that in order to get that diversity at the top, you have to stop at middle management. Because at the end of the day as a CEO, you have to select the best people for the job. And you do that because you want to get the best results. And so, we started to run certain programs and give people certain experiences at middle management that would then allow us to have diversity at the top. So today, we have four divisions which are about equal in size in terms of revenue, and three out of the four are run by females. That didn’t just happen by accident. That happens by giving people experience at sort of that middle management and above level that allows them to be even in the running for those top roles.
CURT NICKISCH: Yeah, it’s a process again, another setting expectations.
NANCY MCKINSTRY: Yeah, and it takes times. It’s a process. It takes time, but it also takes a strong commitment. And now what you would see, I mean it’s quite interesting, is if you go to any meeting at Wolters Kluwer and you look, what you would see is people of all nationalities, gender, lots of females represented in the audience. It’s a very diverse group. So it’s very rare to walk into a room where everybody looks like each other. Yep.
CURT NICKISCH: So that’s one way it’s changed the company. How else do you think it’s changed the company as far as performance goes?
NANCY MCKINSTRY: I would say again, that our growth has improved. It’s not a one for one correlation, but certainly as we’ve become more diverse the organic growth of the business has improved and that’s coming again from driving innovation throughout the business.
I would also say it’s a bit of a flywheel, if you know that concept of a flywheel. Meaning that what you see is that people both stay with us and join us because they see the diversity. So it ends up being self-perpetuating because people say wow, if I’m Italian or I’m a female I can get to a certain level at Wolters Kluwer that maybe if I go to one of our competitors might not —
CURT NICKISCH: I’m going to have to break a barrier, yeah right.
NANCY MCKINSTRY: Exactly. And so it ends up being again, this self-propelling kind of activity.
CURT NICKISCH: Yeah. France, I know legislated this. They have quotas for women in senior positions.
NANCY MCKINSTRY: More at the board level. So some of the countries, the Netherlands is also now, it’s not necessarily a law, but it’s a best practice. They want 30 percent representation on the, at the board level.
CURT NICKISCH: Do you think goals like that work?
NANCY MCKINSTRY: Yeah. You know it’s funny. I completely changed my point of view on this subject. I used to believe up until maybe a couple of years ago that I didn’t believe in quotas. I believed it was all going to be a meritocracy and it would change and et cetera. But now —
CURT NICKISCH: Right, smart companies will just do it anyway.
NANCY MCKINSTRY: Because it makes sense from a business performance perspective, but now I really actually do believe it makes sense to set quotas in certain ways. Certainly at the board level. Maybe even kind of really having companies, maybe not a quota, but making companies report on how diverse they are at the top of their organization is very important. Because the change has happened too slowly. And what you hear from executives is oh, there’s not enough talented pick of —
CURT NICKISCH: Wish I could, but…
NANCY MCKINSTRY: — talented women, or not enough talent, African-Americans. And it’s just not true. There is plenty of talent out there. It’s just can you harness the talent and then develop it? Because again, you don’t get to the top without going through the middle. And what you have seen, is in the places where the quotas have been set. It’s making a difference. So, I wish we didn’t have to get there, but I honestly think we’re at a point where we’ve got to have some kind of catalyst that starts to propel more diversity. Because our customers are diverse. But what’s really interesting from my perspective is when your customers come to visit you and if they’re looking out at whoever they’re interacting with and it’s just again, a group that looks like each other, it has an impact. And sometimes they would comment on that. If I think back to when we weren’t so diverse. And so, diversity has a direct impact, I believe, on innovation and business performance. And I also believe it has a real impact on customer relationships.
CURT NICKISCH: You’ve talk about this now at the company or organizational level. What advice do you have for an individual who is trying to break a barrier like you did? What advice do you have for a woman who aspires to be at the CO position someday?
NANCY MCKINSTRY: Yeah, I’ve given this a lot of thought obviously because I do mentor individuals and I do get asked this question. I would say it’s really three things. First you have to deliver results. Nobody gets promoted unless they deliver results. So focus on that is your first job. Second is ensure that you are very skilled at setting priorities, developing strategies and communicating. So those are again, to get to the top you have to be able to articulate a vision. You have to motivate people to go down that track with you and really hold them accountable. So you have to be a skilled leader and you have to develop those skills over the course of your career. And then finally, figure out a way to build support. Whether that’s support within your family unit to help you along that journey because getting to the top requires a lot of sacrifice, or whether it’s support within your team and your organization to help you get to the next level. And I would particularly, I always say to women that ask my advice, take some risks. I have had this experience a couple of times where I’m approaching a female leader and I want them to take on a new assignment. And maybe it’s a turnaround. So a tough situation. And I’ve had female leaders say oh, I’m not ready for that. I’ve never had a male leader tell me they weren’t ready for the job. And so, I will say to them, you are ready. You need to take this job and I’m going to help you. And finally the last thing I would say which I think is true for anybody in business regardless of gender is surround yourself with the best people you can find.
CURT NICKISCH: I want to ask another piece of advice from you and that is for CEO’s regardless of gender who are leading a digital transformation, or a company through an innovative process to renew itself. What’s the biggest misunderstanding about leading one of those that you want to clear up?
NANCY MCKINSTRY: Yeah, I would say first and foremost really engage with your customers. Because I think sometimes you can go down these transformations and you might expect your customers to be doing certain things, or adopting things in a way that is not going to be the case. So you have to stay really close to your customer during the journey to make sure that you’re not way too far out in front, or you’re not investing in things that maybe aren’t going to pay off. So that close proximity to customers is very critical. And I think the other thing particularly again in a B2B space is recognize it can take some time. And that I think was the surprise in many ways, I think not just for us, but for anybody in the publishing arena was people just thought print would disappear. And it took a lot longer for that digital transformation to happen even though digital was growing well. You just, it was much, the tipping point took many more years than I think most people expected. So you have to really begin to understand that some of these things take some time. And then the final thing is to have the strength and the courage to keep the investment going. There’s pressure on OK, show us the results. You made all these investments. When are they going to pay off? And you really have to have kind of the strength of your own conviction and your belief in the strategy to keep investing. And versus it’s easy to say OK, let’s just go for cost cutting. That’s much easier than to go for innovation and growth.
CURT NICKISCH: Nancy it’s a really interesting business. Fascinating transformation and it was great to hear about your own journey there at the top. So thanks for coming in to talk about it.
NANCY MCKINSTRY: Thank you very much Curt. It’s a pleasure.
HANNAH BATES: That was Wolters Kluwer chair and CEO Nancy McKinstry – in conversation with Curt Nickisch on the HBR IdeaCast. We’ll be back next Wednesday with another hand-picked conversation about business strategy from the Harvard Business Review. If you found this episode helpful, share it with your friends and colleagues, and follow our show on Apple Podcasts, Spotify, or wherever you get your podcasts. While you’re there, be sure to leave us a review. We’re a production of the Harvard Business Review – if you want more articles, case studies, books, and videos like this, find it all at HBR.org. This episode was produced by Mary Dooe, Anne Saini, and me, Hannah Bates. Ian Fox is our editor. Special thanks to Rene Barger for his notes and his support. And thanks, as always, to Rob Eckhardt, Adam Buchholz, Maureen Hoch, Adi Ignatius, Karen Player, Ramsey Khabbaz, Nicole Smith, Anne Bartholomew, and you – our listener. See you next week.
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