How One CEO Successfully Led a Digital Transformation

AI is transforming the world, and it starts with the right compute. ARM is the AI compute platform trusted by global leaders, proudly NASDAQ listed, Built for the future. Visit arm.com discover. Welcome to the hbr ideacast from harvard business review. I'm kurt nickish. 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 just 31% of its revenue from digital products. Today it's 91%. 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 Hundred Best Performing CEOs of 2019. And she joins me now. Nancy, thanks for being here.

Thanks for having me.

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?

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, went to Booz, Allen and 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 voiceover IP and those kinds of things. So I got to do a lot of really interesting work. You work on really complex problems. And so what that taught me was first of all to be very data driven, because often 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. Right because what you learn there is every problem can be uncoupled, and most problems have solutions. Right. And if you just can kind of really peel back the layers and get to the root causes, you can solve things.

Yeah. What other soft skills did you learn during that time that you're thanking yourself for now?

Yeah, a lot around communications. You know, I still would say both. My liberal arts degree before I went to my MBA plus in consulting taught me to be a very strong writer, which I. 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, you know, in university, you know, this notion of what is a. I didn't even know what a CEO did. So it was never sort of this aspiration until, you know, later in my career.

You didn't set out to be one, but when did you know that you did want to be one?

Well, at the time that I became the CEO, you know, I was running the largest business unit, and the company was really behind. You know, 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, you know, 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 CEO in the history of the company. And that took a great deal of courage, I think, for them to say, okay, 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.

What a legacy, right?

But also feeling a really 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.

You're an American. Do you think that made a difference?

Yes. So I don't think that the nationality per se had importance, but I do think what it allowed me to do is I was both an insider. Right. Cause 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. I could also do things very differently. I had the best of both worlds in the sense I was an insider, but an outsider. Right. 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.

It is an amazing journey, right? You take over in 2003. That's a very early time in the digital economy, relatively get through the Great Recession, which hit publishers especially hard, and you actually made that transition, and you're seeing great growth from that in recent years. What do you credit that to?

Couple things. It is truly about innovation, right? It is, because if you look now at what we do, right. 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 pool shrunk because you had to invest in two kinds of formats. Right. And so that was really heavy work. Right. 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 a productivity or insights or better outcomes, really demonstrable results that the customer can see.

Right?

That transformation. And now we're about 50% to. To really solutions, right? Software. Right. So this. This transformation, about 50% 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, you know, 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 the 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.

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.

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% 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 being, 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 still physicians today and young, young physicians with their white coats on, and she or he will take out the book and look something up. 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. 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, we had to get to about 75% digital before the numbers really started to move. So if you're a shareholder or you're an employee, you know, there were years in there where you're thinking, okay, because you had this weight of print shrinking, you know, when was that gonna 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, you know, we started with these.

Workflow tools, software as a service.

Right, Exactly. So a quick example. We are one of the largest providers of tax compliance software. So if you use an accountant to do your tax returns, I'm pretty sure he's using our product to do that. Right. And we've been in that business for many, many years. And we're migrating customers. Right. Customers are recognizing the value of the 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.

Which is about as Long as you've been CEO.

Yes, exactly. So what is the implication of all this? It's twofold. 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 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.

How much of that growth strategy involves international growth and new markets?

Yes. So today about 60% of our revenues come out of North America and the rest, you know, about 30, 30% or so in, in Europe and then the rest of the world is a relative still a relatively small apart. So we are investing in places and we have for years in China, India, Brazil, you know, economies that, you know.

We'Re growing more doctors and lawyers and accountants.

Yes, 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 US where there's over 2 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 yet 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 some long term future. It's not moving our results in the current year.

Right.

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, right. 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 is again, healthy.

Let me ask you about another transformation. During your tenure, the number of women in senior leadership at Wolters Kluwer rose pretty dramatically. 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.

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 are the most innovative and they deliver the best results. So it is, if you're a leader of a company, in particularly 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 diverse 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 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 diversity at the top, you have to start at middle management. Because at the end of the day, as a CEO, you have to select the best people for the job, right? And you, 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, you know, we have four divisions which are about equal in size in terms of revenue, and, and three out of the four are run by females. That didn't just happen by accident, right? 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, those top roles.

Yep.

It's a process. Again, it's a process. Another setting expectations and.

Yep. And it takes time, right? 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, I mean, what you would see is people of all nationalities, gender, you know, you know, 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.

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?

I would say again that our growth has improved. You know, 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. Right. 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.

I'm gonna have to break a barrier.

Yeah, right, exactly. And so it ends up being this self propelling kind of, you know, activity.

Yeah. France, I know, legislated this. Right. They have quotas for women in senior.

Positions more at the board level. So some of the countries, you know, the Netherlands is also. Now, it's not necessarily a law, but it's a best practice. They want 30% representation at the board level.

Do you think goals like that work?

Yeah. You know, it's funny, I've 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 and I believed it was all gonna be a meritocracy and it would change and et cetera.

Right. But now smart companies will just do.

It anyway 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 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 changes happen too slowly. And what you hear from executives is, oh, there's not enough talented, you know.

Pick a wish I could.

Talented women or not enough African Americans. And it's just not true. There is plenty of talent out there. Right. 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 quotas have been set, it's making a difference.

Yeah.

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. 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.

You've talked 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 CEO position someday?

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. Right? Nobody gets promoted unless they deliver results. So focus on that is your first job. Second is, you know, 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. That track with you and. And really, you know, hold them accountable and then finally figure out a way to build support, you know, 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 and take some risks. You know, 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.

I want to ask another piece of advice from you, and that is for CEOs, 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. That you want to clear up?

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 customer 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 way, 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, it was much the tipping point took many, many more years than I think most people expected. So you have to really, you know, begin to understand that some of these things take some time. And then the final thing is to have the. The strength and the courage to keep the investment going. There's pressure on. Okay, show us the results. You've made all these investments. When are they going to pay off? And you really have to have, you know, kind of the strength of your own conviction and your belief in the strategy to keep investing.

Nancy, it's a really interesting business, fascinating transformation, and it was great to hear about your own journey there at the top. Thanks for coming in to talk about it.

Thank you very much, Kurt. It's a pleasure.

That's Nancy McKinstry, the CEO and chair of Wolters Kluwer. She's the top woman on HBR's list of the hundred best performing CEOs of the year. You can find that list in the November December 2019 issue of Harvard Business Review and@hbr.org this episode was produced by Mary Dew and Ann Sani. We get technical help from Rob Eckhart. Adam Buchholz is our Audio Product Manager. Thanks for listening to the HBR IdeaCast.

I'm Kurt Nickish.

Sam.