When Nancy McKinstry took the helm of Wolters Kluwer NV in 2003, the Dutch company was hurting on multiple fronts. The nearly 200-year-old provider of information and workflow solutions to the legal, accounting, healthcare and financial services industries was struggling to digest a string of acquisitions and to adapt its primary business—publishing— to an increasingly digital world.
McKinstry, an insider who had previously been a member of the company’s executive board and CEO of its North American operations, quickly embarked on a risky approach that proved prescient: She cut costs by moving information from print to electronic formats and by reshaping the company so that its various divisions shared services. McKinstry also restructured underperforming businesses and invested in expanding the company’s product lines. Within a few years, revenue and profit began to climb again, and by May 2007Wolters Kluwer’s share price had jumped by 50 percent.
What’s more, it seems McKinstry’s magic is continuing to work today. The company’s annual revenues of approximately $5 billion are holding up well in 2009, despite more cautious spending by Wolters Kluwer’s customers—many of which were hit hard by the economic downturn. In fact, in the six months ended June 30, 2009, free cash flow jumped by 38 percent to $215million (â‚¬=$1.47) or $197 million at constant currencies. The company’s online business is also continuing to pick up steam, with electronic revenue climbing by 7 percent in the first half of 2009 to comprise 52 percent of total revenue, up from 50 percent in 2008. For the third quarter of 2009, the company saw 9 percent growth in electronic revenue.
McKinstry credits a strong and stable subscription base—more than 70 percent of the company’s revenues are driven by subscription and other noncyclical sources—for the steady performance, but is quick to note that advertising revenues and the cyclical businesses, such as sales of books and other product lines, have been hurt by the current climate, as has new business. “Selling is tough right now,” she admits. “Customers are scrutinizing every single purchase much more intensely than they have in the past.”
But at the same time, global trends toward increased regulation, more complex compliance requirements and a strong focus on productivity could be a boon for Wolters Kluwer’s workflow solutions software products, which aim to streamline work processes. McKinstry sees demand for healthcare treatment protocols, for example, as driving interest in UpToDate, the clinical database and physician decision support tool the company acquired in 2008. A Web-based application that draws on a database that incorporates the clinical experiences of approximately 3,800 physician experts, UpToDate creates recommendations on how to diagnose and treat thousands of conditions in 13 medical specialties.
“I’ve been around the healthcare industry for some time and for the first time we’re starting to really see a focus on productivity tools and on use of technology to improve outcomes,” says McKinstry. “We’re able to go to hospitals and doctors and show them a return on investment that doctors who use UpToDate have a better outcome in terms of their treatment of patients than those who don’t.” Eventually, predicts McKinstry, the government may mandate electronic medical records as part of healthcare reform, which will give UpToDate and other healthcare programs another boost.
Going forward, the company will look to strengthen its software offerings, continuing to make the transition from print-based publisher to provider of online information, tools and services. “A lot of what we do is watch how our customers work,” explains McKinstry. “We follow them around the hospital or the office to understand what they’re doing and then say, ‘O.K., they’re using our products for these functions, how can we capture more and more of that work flow?’”
In addition to developing products with potential, McKinstry faces the challenge of finding ways to bridge cultural gaps so that products that succeed in one market can be adapted for distribution seamlessly across global markets. “Part of what I’ve learned is to recognize some of the characteristics of different cultures,” says McKinstry, who is Wolters Kluwer’s first non-Dutch CEO. Recently, for example, the projections a U.S. team was providing for a potential acquisition were viewed as unrealistic by their peers in Europe. “We had a discussion and we ended up in the middle—the U.S. guys recognized that maybe their expectations were a little high and the European team realized that they hadn’t understood the product and its potential to grow at a certain pace,” she recounts.
McKinstry credits six years living in the Netherlands—where she, her husband and two children moved to take on the CEO post—for providing the cultural perspective that enables her to appreciate cultural nuances and bring them into alignment. “It’s given me a tremendous understanding of different markets and geographies,” she says, “and, as a result, I think I’ve become more adaptable.”