The Observer: The bashful over-achiever

The Observer: The bashful over-achiever

“two boards, two chairmen and two chief executives – gave it a schizophrenic corporate culture.”: “Could the oil giant Shell, which still has a similar structure, learn any lessons from this?”

Sir Crispin Davis is no fan of the limelight. But his tactics in driving up Reed Elsevier’s profits have angered MPs and put him in the public eye, says James Robinson

Sunday August 8, 2004

History does not record when Sir Crispin Davis last visited the dentist, but it’s safe to assume that he found it a more pleasurable experience than being interviewed by a journalist. The chief executive of international publishing behemoth Reed Elsevier does not enjoy the attention that running a FTSE 100 company brings.

‘I love the job. I think to be chief executive of one of the leading FTSE companies is a huge privilege and I think I’m very lucky, but I hate all the personal publicity,’ he concedes. ‘It’s part of the job, part of the territory. Some of it is unavoidable, because you’re trying to get the Reed Elsevier story across.’

That story makes far better reading than it did when Davis arrived five years ago, ending Reed’s year-long search for a new chief executive. By that time, Reed had already shed its colourful past as publisher of the Daily Mirror and owner of IPC, then the UK’s largest consumer magazine group, to concentrate on the dull but profitable business of academic publishing.

But the company structure created by the 1993 merger of Reed International and Dutch scientific publisher Elsevier – two boards, two chairmen and two chief executives – gave it a schizophrenic corporate culture. Davis tackled that quickly, placing himself in sole charge of a single board.

Could the oil giant Shell, which still has a similar structure, learn any lessons from this?

‘Well, the solution was not honestly that difficult. Every board member who did not see and share the same vision of one unified company left,’ Davis says. Managing by consent is clearly not really his style.

Davis then set about articulating a clear corporate strategy in a characteristically matter-of-fact manner. Reed was reorganised into three clearly defined divisions – science and medical, business, and legal – and Davis added a fourth, education, through the £3.1 billion acquisition of US-based Harcourt General in 2001.

Finally, he set about sweating those assets, applying the branding acumen he acquired at Procter and Gamble to improve the marketing of its products.

Anyone who can turn what one industry source calls ‘a basket case’ into a group described approvingly as ‘a publishing juggernaut’ by a media analyst last week is sure to win the support of the City. Davis has a sizeable fan club in the Square Mile thanks to his uncanny ability to turn in above-average profits growth, year in, year out, despite the prolonged global economic downturn.

That trend continued last week when Davis announced underlying interim pre-tax profits of £433 million, a 5 per cent increase. It is little wonder he has become a fully fledged member of the City establishment, bagging a knighthood in the Queen’s birthday honours list this year and acquiring the compulsory heavyweight non-executive positions (GlaxoSmithKline and a place on the board of Tate Modern).

Reed’s annual profit growth even won Davis the moniker ‘Mr 10 Per Cent’, an echo of the ‘Mr 20 Per Cent’ nickname ascribed to Sir Clive Thompson when he pulled off a similar feat at Rentokil.

‘Oh, God. Do me a favour, leave that out,’ Davis says, no doubt aware of the fate Thompson met when his profits finally fell. ‘What I am trying to do is deliver consistent above-line performance, and I think in the last five years we’ve delivered pretty successfully. Our goal over the next five years is to do the same – whether that is 7 per cent or 17 per cent depends on the market.’ Crucially, Davis has achieved all this by shifting a huge proportion of Reed’s content online, despite the huge investment this has required (close to £900m over three years).

‘The City has understood and supported the investment programme and the long-term nature of it. I hope it’s encouraged by the results it’s delivering,’ says Davis, with just a hint of satisfaction in his voice.

Many publishers were slow to embrace the internet, partly because they doubted consumers would put down their newspapers and magazines just because they could access the same information from laptops. But the products Reed provides – scientific journals, books for schools and trade magazines – are better suited to the electronic age.

Even so, the move online has shaken the sleepy world of business publishing to its core. ‘Five or 10 years ago you produced a book, then you produced a revised edition the year after that. It was the same with journals,’ Davis says. ‘But deliverdigital technology and the move to online marketing and products is really making this market dynamic. That is one of the key factors that will drive our growth going forward.’

In 2000 Reed’s total online revenues were £120m. This year they will be £1.2bn, a tenfold increase. How long before everything moves online? Twenty years, perhaps?

‘It may be sooner. Today about 75 per cent of our scientific business is online. Five or six years ago is was 5 per cent.’ The proportions are similar in Reed’s legal business, where nearly 70 per cent of content is available online.

Reed’s business-to-business arm, which publishes trade journals including Estates Gazette, Variety and New Scientist, has been slower to move online, but even here 15 per cent of revenues are now generated via the internet. ‘Our internet revenues have gone from nothing to £200m in four years in business-to-business and they’re growing at about 30 per cent a year.’

The internet represents a threat as well as an opportunity, however. A whopping 25 per cent of Reeds’ profits come from scientific publishing (its medical journals include The Lancet), but its business model is under threat from ‘open access’ providers, who make the same research freely available online.

Subscribers pay thousand of pounds a year to subscribe to one of Reed’s journals. Under the open access model, they pay nothing at all. The cost is borne by the scientists, who publish their work for nothing in Reed’s journals, but pay a small fee for doing so under the open access.

Open access has become a cause célèbre for some commentators, who argue that scientists in developing countries can’t afford to pay Reed’s prices. Davis was hauled before the House of Commons Science and Technology Committee earlier this year to explain his pricing policy, an experience he probably didn’t relish.

‘I think the process enabled us to put our views across, to make our views very clear,’ he says diplomatically. Still, it is difficult to imagine Davis being savaged by a left-wing Labour MP, who effectively accused him of profiteering, and feeling sanguine about it. ‘I think I better keep my mouth shut,’ says Davis. You sense that if he could keep his mouth shut all the time, he would be a far happier chief executive.

Profile

Name Sir Crispin Henry Lamert Davis

Age 55

Nationality British

Family Married, three daughters

Lives Sunningdale, Berkshire

Education Charterhouse; Oriel College, Oxford, MA in Modern History

Career September 1999-present: chief executive Reed Elsevier. 1994-1999: chief executive, Aegis Group. 1970-1994: various management positions at Procter & Gamble

Interests sport, gardening, art, antique furniture

What they say

‘It will be interesting to see whether the economic model he’s committed to in scientific publishing is still viable’

Media executive

‘I’ve worked for him for years and I still like working for him – and I can’t say that about my previous bosses’

Colleague

‘He’s turned Reed from a basket case into a word-class business’ City source