McGraw Hill, the 130 year-old educational publishing company, is now a leading global provider of digital products and services in education, medical, business and trade sectors.
I recently met with president and CEO Simon Allen and discussed McGraw Hill’s decades old shift to digital from print. We also spoke about topics including M&A, the broader macro impact that the pandemic has had on the education system and how the U.S. Infrastructure Bill will accelerate educational equity by giving access to communities that need it most.
This interview has been condensed and edited for clarity.
Karen Walker: How has global expansion been part of the leadership at McGraw-Hill?
Simon Allen: I’ve had 35 years in the industry, the first ten years in the U S. So when I moved to the international markets, I was able to think about the business from a U.S. perspective, which is actually very valuable.
Our biggest international focus has been taking the brand (strong products and now technology) around the world. Before 2010, it was primarily the brand and the content in printed form. And because we are so well known, when I go into India through immigration the border patrol person will look at who I work for and say, “Oh, you’re with Tata McGraw Hill ! I use all your engineering books, I used your civil service books,” and so on. So even before you step into the country, you already have that recognition. It’s a wonderful feeling.
We were the first to go into Spain. We were the first to go into Mexico and other parts of Latin America. We are in Singapore and we were very early in Australia and India. So we’ve really been focused on sharing the brand with the world, while continuing our focus on the quality of the content and the authorship.
It’s what gives us so much pride. Of course, the vast majority of our revenue and our profit is earned in the U. S. We are determined to drive growth from our digitally delivered higher education and K-12 products. Although the global plan is centered around our platforms, we do, of course, localize our function.
Walker: I imagine this shift to digital, which has been going on for at least a couple of decades at McGraw Hill, found some acceleration with differing needs during the pandemic. It sounds like you were in a great position to take advantage of those opportunities. What have the last 18 months been like?
Allen: You phrase the question brilliantly because it is 20 years in the making. In 2013, we created our own digital group. We have over 200 staff that operate purely from a software engineering perspective, creating material and platforms for us and managing our product flow.
Higher education particularly was growing rapidly. The higher up the age range you go, as you’d expect, the more affinity for a digitally delivered education. Our professional business, where we have a lot of medical product, is very heavily digitally delivered. Now there’s very little that we do in print.
Walker: I want to interrupt. The prevailing thought is that younger people – digital natives – are driving digital. You just said the reverse.
Allen: That’s exactly right. Think about doctors and scientists – they are taught by professors or sometimes teaching hospitals. They want quick and easy access to very up-to-date content.
Our renewable digital subscription product sells the vast majority in that area because hospitals and students want immediate access to, for example, COVID information. We update that very frequently – certainly weekly, usually daily.
That’s critical because things are changing so rapidly in the medical and scientific community.
Then you drop down into the higher education group. 83% of our higher education business is digital. Pre-pandemic, it was roughly in the high sixties. I personally think it’s going to get upwards of 90% in fiscal year 2023.
In K-12, they’re the younger age range. There’s a distinct difference between grade six and 12, where there is a growing propensity for digital delivery. But K-5, there is definitely still a preference for print material from a literacy and math point of view. Our K-12 business total will be about 50% digital this coming year.
Walker: COVID massively accelerated the requirement for teachers and professors to be able to utilize digital content.
Allen: Imagine our sales force, our implementation teams and our marketing teams in March 2020: they were totally focused on working with teachers and faculty individually to bring them up to speed on how to use our Connect platform. We said, “Don’t panic. It’s okay. We’re going to show you how you use our product online digitally, and you can assess your students in the same way. We’ll take you through the way your course curriculum is set up, make sure that we assigned the questioning, the assessments and the grading based upon your timescale for your semester.”
We were incredibly busy doing that. One of the outcomes has been our best ever NPS scores. You can imagine that if you help people in an emergency, they’re going to love you forever.
Walker: I think it speaks to the strength of your platform and your team. What you’re describing is a tremendous scale that happened overnight. I’m sure it wasn’t without its bumps, but that amount of scale doesn’t happen without the correct infrastructure being in place.
Allen: Yes, the infrastructure was in place. Our digital platform group team moved very quickly to ensure that we could launch products much faster than we had planned. The best example is a product called Virtual Labs. It’s designed for higher education students to be able to work in the lab virtually. Of course, the demand for this skyrocketed from March to May of 2020. While you’ll never replicate a physical lab experience completely, this most definitely takes you through the processes and the preparation that you need to think about your lab.
We accelerated McGraw Hill Rise, an adaptive K-12 program that allowed teachers to recognize, “What is the COVID gap? Where are the students in math and literacy? How much have they lost?” And as you know, it was often six to nine months of learning that was lost.
Teachers needed to be able to identify the gap, who has it and how big is it so that we can address it and rectify it. So I’m immensely proud of the group that made that platform happen so quickly.
And on top of that, like everybody, our team of nearly 4,000 people around the world were suddenly working 100% remote. I couldn’t believe how well we adapted and how rapidly people were able to work and adjust. We were pretty flexible at that time, and we are now officially a hybrid company because we’ve proven that we can operate this way very successfully. We had an excellent financial year last year.
Walker: We mentioned infrastructure earlier. What has been the impact of the U.S. infrastructure and stimulus bills on you and your client base? We see news stories of people sitting in the parking lot at McDonald’s trying to download their school materials.
Allen: It’s been a significant benefit for us as a company, but frankly also for society, which is much more important.
The CARES Act and the rescue plan isolated a significant sum of money for K-12 development in online teacher training infrastructure. States across the union can choose which products they adopt at any time. That’s where we’ve seen big growth.
The Infrastructure Bill contains $65 billion that is directly focused on helping ensure that broadband access is available, and not just for the rural parts of the country. I think there are a half million underserved students in the rural areas. It’s well over 13 million in the urban school districts where there are real problems of access.
They’re the ones that we’ve been less able to serve as an industry. It is critical that we focus on them now because the equity gap must close. One of the biggest problems from the pandemic is that the equity gap – that was already fairly high – expanded even higher, and that’s not good for society in any way.
Allen: We recently acquired a K-12 company called Achieve3000, which focuses on what we refer to as the supplemental and intervention parts of K-12. Not the core adoption area, but supplemental areas in literacy and math.
Many EdTech companies are quite small – below $200 million, often below $100 million. I think you’ll see a good deal of consolidation in that sector over the coming months. For us, it’s an opportunity to recognize we’re a pretty full service education company, but you always have a look at what’s available. I would say there’s no urgency for us.
Walker: Coming back to you and your leadership career. The tagline for my consulting business is up and to the right, because that’s the spot on the two by two matrix where we always want to be.
Was there a moment in your career when you knew that you were moving in that direction?
Allen: Yes, and it’s more recent than people imagine.
I thought I’d retired in 2015, when Macmillan sold to a private equity firm. I took time to travel the world with my wife. Then in 2018, when we were on a beach in Hoi An, Vietnam, I received a call from a recruitment firm about the position of head of international and the president of international. I said to my wife, “You know, I’ve always had a soft spot for McGraw Hill because I began my career there in 1986.” Then I thought, “If I do this, I’ve got to go a hundred percent. I can’t just dabble, I’ve got to go back full in.”
So I said yes, and fairly quickly thereafter I was asked to run the higher education group in the U. S. That’s an area that I know and love, as well as where I began my career.
Then, for a variety of reasons, our investor Apollo (Apollo Global Management) asked me to be the CEO on an interim basis, thinking that we were going to merge with one of our competitors. That never happened, and then they asked me to stay.
I’m having a great time. I love this company. I love what I do. I love the people. I love our product and I know the business rather well after this time. So at that moment when they asked me, it was almost becoming an accidental CEO because I’d been in this interim position, waiting until the new person was appointed.
Who knows what the next year will bring, but I’m having so much fun. I’ve loved coming back. And of course we are doing very well right now.