How to implement the XEROX Business Strategy?

After 100 years of success, XEROX′s business strategy faced new challenges in which it was essential to update its business strategy to maintain and increase its competitiveness, growth, profitability, and validity of one of the most innovative organizations in history.

Since the 1950s, Xerox business strategy lead a small company to the leader in photocopying processes, in 2006, the global market size was USD 804 billion (HBR, March 2014) and by 2018 it was USD 980 billion.

After questioning the current situation and the future of the company in such a dynamic world in which CEO Ursula Burns said in the interview to the Financial Post (August 2013) the following:

“As we begin to see the world change, also, through e-everything, digital everything, and the fact that it can communicate just in time and that most things are getting smaller and can deliver things complex in a tiny package, what we had to do (since I was pressing our business automation business process), we had to step back and say “If all we did was let the business go and nothing else, just because of the weight of the other innovation we would be discontinued, and people would not be interested in what we do. This explosion of technology and information forces us to look at our business model and change it because we would be less relevant every day if we didn’t do something.”

CEO Ursula Burns

XEROX then decided to embark on changing its business strategy according to the demands of its customers, not only with the sale of equipment, the new model not only included providing its customers with innovative products, now it would consist of a range of services integrated into the product offering integrated solutions.

Business strategy includes maintenance of products and supply of consumables with only one side intending to increase customer service and reducing documentation costs.

XEROX customers always seek to improve the service experience and cost reduction is what all organizations pursue regardless of size, but the solution that XEROX finds with the new strategy resolves the concerns of organizations while generating different benefits for the multinational.

Printing equipment represents a cost of between 1% – 3% of the total profit and the complete loss of documentation can reach up to 15%, in addition to the carbon footprint that represents about 6% of the total carbon dioxide emissions.

XEROX business model

The XEROX business strategy sold photocopiers and printers with a profit margin of between 36% – 37%, sale of consumables and maintenance at the customer’s premises and rented the equipment. The average profit margin after the deal was 43%, which represented 70% of the annual profit.

The new business model no longer sold photocopiers, now XEROX′s business strategy leases the equipment including maintenance, service & consumables.

“We do not expect to do anything less than what our customers want us to do in the hardware space. There have been predictions about the paper and the need for it and the fact that no one will print. If this is how it develops, we will not spend much time in the hardware space. I doubt that it will happen like this, but what we are doing in the technology business is that we maintain very close contact with the industry trends. We are making sure to double our investments in areas that trends indicate as areas of growth, not in printing but in demography for society and how information is used. Therefore, we are doubling in places that require us to duplicate ourselves because there is growth in those segments and we are divesting in areas that are no longer growing or that can see that it will not grow shortly.”

Ursula Burns, August 2013

Customer-focused service, the key to the XEROX strategy.

The Eureka project, arises from an anthropological investigation carried out by John Brown in the Research Center located in Palo Alto California, the study results from following up the technicians talking to each other while they drink coffee, what the research shows is that technicians use that space to talk about their experience and what they are discovering, they even presume their exploits when repairing damages that would seem impossible.

The finding showed that technicians share knowledge and experiences with each other, which generates knowledge for the organization, which applied in each repair carried out, from the investigation, the company decides to systematize how to distribute understanding among technicians.

XEROX developed a platform called EUREKA; the platform contained all the knowledge of the technicians about the repair of the equipment, the database included audio files with the sounds of the material and the description of the smell. The deployment of the platform helped reduce the diagnostic time by 5% and the cost of parts in the same proportion. The exciting thing about the project is that a control table that receives and processes the technician’s information not implemented; each of the technicians was responsible for generating the knowledge.

First, the technicians were equipped with radios with headphones so that they could communicate with other colleagues and give or ask for advice; the results were positive; unfortunately, the knowledge had limited impact. Led them to generate the platform, where a database created for people to empty consciousness, including a description of odors and audio recordings with the sound of the equipment with failures. Development is a social network of knowledge through laptops.

Xerox case was made possible by revitalizing knowledge socialization based on technology. Computers and databases.

When did you know that the strategy was working for XEROX?

“There was no specific event or moment in time, but the company’s return to profitability was evident when customers indicated they were willing to stay with [us], with the understanding that, frankly, we had a lot to prove. We had to show that we could respond and that our technology was not disadvantaged. We needed relationships with customers that were more value-oriented than transactions. By 2005, when customers recognized that we were building relationships, our history began to change for them, and that was an important milestone for us because we knew we could sustain the future.”

Anne Mulcahy, June 2008

The measure of success of XEROX and the companies is customer loyalty, in an interview with Anne Mulcahy before leaving the position of CEO and Ursula Burns taking the role, Anne said the measure of success was the answer of customers in 2005, although the inflection in the profitability chart saw since 2003 the change in trend,

The decisions made during that period were not easy, many CEOs tend to cut expenses, it seems to be the simple option to lay off staff and possibly it is because it is not so easy to reduce costs in other items of the financial statement but offers short-term advantages and perhaps in some companies there are annual cut-off processes, but the results in the long term are not encouraging, and the transformation in every company should seek success in the long run, not only for the next quarter.

In the case of XEROX, investment in research and development was high along with a significant focus on productivity adopting methodologies such as Lean and Six Sigma.

Another critical point is that XEROX learned to focus on what is right, left the household equipment business, was not profitable, transferred production to Flextronics of some products, worked closely with its partner Fuji to obtain better results and all that based on a robust culture that allowed making adjustments to the strategy that XEROX was implementing.

Having cost discipline is essential, but it is more important to have a solid strategy, XEROX decided to work on a customer-centered plan with a series of innovative products and services that solve customer problems and help them be efficient. , a key point is that they take away from the client the administration of the documentary processes and let the client fulfill their business objectives without worrying about the printing of documents or the management of technology helping their clients to generate the savings proposed to the time that optimizes the use of resources.

How to implement XEROX′s business strategy to your company?

1. Focusing on the activities of the organization on the client, in many cases, it will be counterintuitive, and the company could lose sales or margin, but working for the client is more profitable than working to exploit the client. Xerox offers its clients consultancy to reduce the volume of impressions, configure equipment to print double-sided or select the best material for the needs of the organization.
2. Innovating in the product/service, you cannot achieve different results by doing the same, it is essential to do tests in a controlled environment to look for better options.
3. Innovate in the service; products can be replicated with relative ease, with everything and patents, a right combination of product – Service is difficult to replicate in the short term and can give a competitive advantage to the company that implements it sooner and always with the focus on the customer.
4. As Samsung′s business Strategy, XEROX decide to invests in innovation, from its budget, 35% of its investment budget in technology for the short term, 35% in incubation of technology for the medium term and 30% in technology exploration for the long run, ensuring that it remains in force at different times of time In addition, the research and development team is hybrid, some people are working day by day and others working in a quiet environment.
5. Thinking about what the client needs and will need in the future, XEROX decided to investigate demographic data and invest in what the market will need in the future and stopped investing in research and products that are not going to be necessary according to demographic data.
6. Working with the best, XEROX bought from the company called Affiliated Computer Services (ACS) in 2010; a company specialized in software development and process outsourcing that allowed XEROX to enter new markets, some of them with high demand for Print.

La transformación en las estrategia de negocio deben estar basadas en lo más importante en todas las empresas, los clientes, ya que una solución creada a su medida mitigará las probabilidades de fracasar.

XEROX went through a crisis shortly before accepting the need to update the business strategy, it is very common, many companies decide to start the transformation when the crisis is deep; Companies such as XEROX, FORD or General Motors have gone through major crises and have come forward after a series of activities, we can list some of them as follows:

1. The clarity in need to renew
2. They were willing to sacrifice some of their great assets
3. Management got involved in each of the transformation activities
4. They focused their efforts on delighting the customer
5. They share the vision of the future with the company and are part of that vision to each of the employees

On the other hand, many companies have not overcome the major crises, Blockbuster and Kodak, saw the crisis and failed to seize the opportunities, both companies were industry leaders and despite the fact that Blockbuster had the opportunity to buy Netflix and Kodak invented the digital camera They did not know how to face the situation and take advantage of it.

It is important for each organization and each person to embrace evolution as part of the life cycle and review / adjust the business strategy periodically to take advantage of the opportunities that arise.