Leading from dusty to digital

The week before Sir Crispin Davis became chief executive of Reed Elsevier, Fortune magazine asked: “Is this the first company to be destroyed by the internet?” The next day, when he met one of the biggest customers of its academic journals, he was greeted with the words: “We do not like you.”

It was an unpromising, if unsurprising, start. By 1999, when the marketing executive arrived to fill Reed’s year-long leadership vacuum, its shareholders were seething after three profit warnings, its customers felt ill-treated and its Anglo-Dutch dual board had become notorious for infighting. “You can’t help feeling sorry for Crispin Davis,” the Daily Mirror concluded.

Next week, however, Sir Crispin will achieve his goal of stepping down on his 60th birthday after almost a decade in charge. This time, Reed will not have to wait for a successor. Ian Smith, a former chief executive of UK housebuilder Taylor Woodrow, has been working in a next-door office and meeting colleagues and clients since January.

Sir Crispin, a solicitor’s son who describes Mr Smith as “a much better communicator than I am”, is not one of the media sector’s outspoken personalities, yet he has lasted almost twice as long as the average FTSE 100 chief executive – in spite of the turmoil wreaked by the digital disruption that Fortune highlighted a decade ago.

Sitting in Reed’s New York offices opposite Grand Central Station before a final management meeting, he still has the measured, slightly professorial manner of the Procter & Gamble “Proctoid” he was for the first 20 years of his career when he made his name by introducing Pampers nappies to the UK.

The key to longevity as a CEO, he says, is “to keep reinventing the company – you can’t stand still”.

Looking back on 10 years in which adjusted pre-tax profits grew from £710m to £1.2bn ($1.7bn) on revenues up from £3.4bn to £5.3bn, however, it is clear that much of Reed’s return to favour stems from actions he took at the start.

His approach to what Reed’s then chairman described as “a big business that needs a strong hand” serves as a timely case study of how an outsider can get to grips with a drifting company.

Arriving from a turnround job at Aegis, the Anglo-French marketing group, Sir Crispin found a business with strong brands – from the Gray’s Anatomy medical tome to Variety, the Hollywood bible. But profits had been sliding since 1997, customers were resentful and the 95 per cent of revenues coming from print books, journals and magazines was under threat from the internet.

Reed also suffered from a convoluted corporate structure. “I remember sitting down with Morris [Tabaksblat, Reed’s chairman until 2005] one evening over dinner and asking: ‘Why is the company in such a mess?’” Sir Crispin recalls. Customers, shareholders and employees were all fed up with the company’s culture and structure, they concluded, but it had survived because 15 or 20 executives and board members wanted to preserve it. Mr Tabaksblat set about creating a single board; Sir Crispin cut a swathe through the executive team, replacing 21 of the top 25 managers within 15 months.

How, as an outsider, did he know who to keep and who to fire? “You spend a lot of time with people, pretty intense time. After 30 years in business, you develop pretty good instincts as to whether they’ve got it or not,” Sir Crispin says. Within little more than a year, in which he folded 19 divisions into three global units, “no one had any of this Anglo-Dutch baggage”.

Sir Crispin identified a small team of allies, including finance director Mark Armour and corporate strategy director Nick Baker, to hammer out a new strategy. Today, “the four people who were good are still with us” and the strategy is little changed. Reed had to evolve from being “a dusty print publisher” to become an online information provider, they realised. “The key decision was: do we follow or do we lead [our customers online],” Sir Crispin recalls. They opted for an aggressive stance, ramping up annual product development spending from £60m to £250m, helping distinguish Reed from consumer publishers that have struggled to charge for their content online.

Almost three years ago, he decided Reed needed “to raise the bar again”, refining its strategy beyond simply digitising content to embedding it in productivity-enhancing online tools for lawyers, scientists and doctors. The number of technologists employed by the company has grown from 400 to 4,800 in 10 years and the share of revenues coming under the ungainly banner of “workflow solutions” has risen to more than 50 per cent.

At the same time, Sir Crispin acknowledged that, to improve profit growth, Reed would have to rethink its assets. Reluctantly, he put the Harcourt education businesses he had acquired in 2001 up for sale. “I think going into education was a wrong turning,” he admits now. “Fortunately, we were able to exit it quite well.” (Some of Harcourt is now owned by Pearson, owner of the Financial Times.)

He was not so lucky with the planned auction of Reed Business Information, the trade magazine business, which was abandoned this year. “In retrospect, we should have moved earlier but we really didn’t think we could sell both education and RBI well at the same time,” he says. “If we’d known that this downturn was going to happen, we may have said it was worth the risk.”

The Harcourt disposal allowed Reed to return £2bn to investors, however, and was followed by a £2.1bn bid for Choicepoint, a risk analytics business with double-digit revenue growth and 30 per cent operating margins, and smaller purchases to expand its position in healthcare.

Conscious of investors’ desire to see debt reduced, Sir Crispin says the RBI magazines are still marked for sale. The 80 per cent of Reed’s revenues coming from science, medical, legal and risk “are going to help us significantly during this downturn”. However, “they’re not immune but they will show growth”.

The focus for his successor, he says, will be on execution – of the “workflow solution” strategy, cost-reduction plans and the ChoicePoint integration. Mr Smith will need to overhaul Reed, he implies. “The strategy, I would say, is clearly right. It is working. I would not anticipate any major strategic change.”

He is at pains to emphasise management continuity in spite of analysts’ speculation that long-serving insiders such as Andrew Prozes, CEO of LexisNexis, or Erik Engstrom, CEO of Elsevier, might feel passed over.

“This really has been a team effort,” he says with satisfaction. “One of the most rewarding experiences a management team can go through is transforming a company.” In spite of the opprobrium heaped on many businesses, he adds, “I still think running a FTSE 100 company is an absolute privilege.”

Sir Crispin is hoping to spend some time on the golf course with his high-achieving brothers: Ian, the outgoing managing director of McKinsey; James, a former Freshfields senior partner; and Nigel, a high court judge. But he is in the market for a chairmanship – perhaps of a private equity venture or another turnround situation – “if some company is brave enough to want me”. He already sits on the boards of GlaxoSmithKline, Oxford University and the National Trust.

A decision will have to wait until after March 17. “To be honest, I’m a man so I can only do one thing at the same time.”