Xerox Duplicates Its Early Successes
by Jim Citrin
Thursday, January 7, 2010, 7:40PM ET - U.S. Markets Closed.
Jim Citrin Leadership by Example
Posted on Tuesday, August 21, 2007, 12:00AM
On Aug. 1, 2001, Anne Mulcahy was named president and CEO of Xerox Corporation -- a corporate-America battlefield promotion if ever there was one.
A career veteran of the iconic company, Mulcahy started as a Xerox sales rep 30 years ago and worked her way up to become vice president of worldwide marketing in 1991 and president and COO in 2000. The 2001 promotion made her one of only five female CEOs of an S&P 500 company at the time.
Pulling Out of a Spiral
While that may have been a cause for some cheer, the company didn't have the luxury to host an elaborate celebration. It was in the throes of a near-death spiral.
Xerox shares had plummeted 80 percent in the prior year and the company had just posted a $281 million loss for the quarter -- its fourth quarterly loss in a row. Sales had declined for the first time in nearly a decade and, most urgently, the company faced a liquidity crisis, unable to borrow money to finance its daily operations.
Mulcahy was forced to take immediate and decisive measures, including selling billions of dollars in assets, laying off thousands of workers, cutting over $1 billion in her first year, and persuading banks to open up the credit nozzle.
At Peak Performance
Happily for the company's shareholders, employees, and customers, Mulcahy and her team were able to pull off these short-term fixes and get the company positioned once again for profitable growth.
It's been a stellar run over the ensuing six years, as Xerox has handily outperformed its competitors and the market overall. Its shares, for example, have risen over 115 percent compared to 15 percent for the S&P 500 and 30 percent for the Nasdaq.
I recently interviewed Mulcahy about the Xerox of today and how she's guiding the company going forward. Here are some highlights from our conversation:
Q: What's the single most important challenge facing Xerox today?
A: We're well into the transformation at Xerox from being a technology company to a services-led technology company, and this certainly continues to be the most important challenge for our future.
More and more of our revenues are now being delivered from services-led engagements, and there's less and less discussion about pure technology. Rather, our business is now about technology as an enabler to solve significant business problems that delivers bottom-line returns for our customers. For a company like Xerox, it's critical that our people really understand the services-led-solutions selling approach.
Q: How large is the services business today, and how does it compare with the time when you became CEO?
A: If you look at our annuity-based services contracts, it now represents between 25 percent and 30 percent of our revenue, depending on the quarter. About one-third of our revenues come from services-led engagements. A lot more of our revenue is annuity based; over two-thirds to be more precise.
But services-led engagements are now a double-digit-growth opportunity for the company, and that's really critical. Five or six years ago, our services business was diminutive. At the time the principal focus was on the price of the technology we were selling. That's not what customers are focused on now. They want a closed-loop proposal that incorporates capital investment, expenses, product, and service, and how the overall program delivers a return.
We all know the pressures on hardware margins, but the fact is that today customers are looking for returns that come with productivity and efficiency improvements and an integrated solution that drives a complete business result. They're less interested in a product that represents one component of the solution.
Legacies Earned
Q: Xerox has historically been known for two things: Innovations such as the copier, graphical user interface, and the computer mouse, as well as its legendary sales force. How has the organization had to adapt to this new services-led model?
A: I love this question, because these are legacies that Xerox has certainly earned. I think that's been a big piece of why we've been successful in services today. We've focused a lot more of our R&D investment on the solutions side of our business, to provide differentiated value through improved business processes and to create the tools that are required for customers to get greater productivity gains.
So we've been developing a whole new set of capabilities that differentiate Xerox from a lot of other folks out there -- our search tools, linguistic and translation capabilities, as well as many other opportunities surrounding smart-document technologies which we're inserting into our services portfolio. The innovation we see coming from our R&D centers and into our services offerings has been hugely important in creating value for our customers.
One of the historical aspects of a strong selling organization is a deep customer-centricity which is so fundamental now for a successful company. It's not just about the selling folks. We now develop on customer locations, for example. We have more engineers out there working with and talking to customers than we've ever had in the past. We're a leaner, more efficient organization, and everybody has to think in terms of the customer orientation.
This influences the decisions and investments that we make, all with an eye toward really creating customer value. We've shifted some of our investment, for example, from the sales force to our field organization, which is in many ways part of our transition from strictly technology to a services-led organization.
It's really about the knowledge we have about our customers and our ability to respond to the challenges and opportunities they put in front of us. Having a very strong heritage as a customer-facing organization is no question an advantage in thinking about the customer from a services perspective.
Dynamic Documents
Q: Xerox is "the document company." How is the traditional idea of the document changing, and what does it imply for Xerox?
A: The document is changing dramatically, and there's no question that we'll follow what we call the document container no matter what form it takes and wherever it goes.
Documents have always been static, but there's a change ahead to have active documents that can actually help do the work that's so time intensive and costly. For example, there's a transition to "smart documents" -- documents that have embedded intelligence and root themselves along business processes without manual intervention. Some documents will be automatically summarized or searched for in ways that are much more intuitive than technology allows today. Some will have sophisticated security technologies such as authorization codes, or even be "transient" documents that self-erase in relatively short periods of time.
This whole area of smart documents represents huge prospects for Xerox going forward, but we're just beginning to exploit these opportunities and their impact on the business world.
Leadership Values
Q: How do you think about leadership, and getting the right people in the right jobs at the right time?
A: I believe that one of the most important aspects of leadership in large companies is building great teams. Building great teams is really based on assessing and respecting what people do well and making sure that they're in positions where they can make the best possible contribution. It's the good-to-great analogy -- having the right people on the right seats on the bus.
I think about it as creating a team of people that has the capability to create broad "followership" across the rest of the company. That's the way to get large companies really moving, through the alignment of your people at the top with everyone across the company. This allows you to work across geographies, business teams, and products and move the needle in a fundamental way. This leadership dimension is the critical differentiator between good leadership and quite frankly management that doesn't really add a lot of value.
I'm grateful because Xerox has a heritage of developing really strong leadership, not just on the technology side, but on the values and people side, too. As a result ... it's a pleasure to be here.
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