Run Notes: Anne Mulcahy, Xerox CEO Speaks to SAMA

These are my run notes from an address by Anne Mulcahy, CEO Xerox, to the annual meeting of the Strategic Accounts Management Organization in Hollywood, Florida.

I want to begin, I know there are lots of you who are good Xerox customers, and we want to thank you.  We take that very seriously.

My message is really simple.  We are passionate believers that innovation is the lifeblood of any organization: Xerox or our country.  That blood supply is in danger of becoming anemic if we don’t look after it.

The Turn Around

In the 90s we were doing very well.  A long string of double-digit gains.  Outpacing the market in valuation.  In late 1999 and early 2000, things appeared to begin unraveling.  We were attempting too much change too fast.  All sorts of issues with liquidity, regulatory . . . when you focus internally you give the competition permission to grow stronger.  The dot.com melt down.  We called it the perfect storm.  We were a company that could manage through one or two of the issues.  This was too much.

Cash on hand was going to zero.  Debt was $19 bn. Sales going down.  Not as focused on our customers or employees as we should have been.  Lots of defections: both customers and employees. Investors saw their investments cut in half.  That’s when I got named CEO.  Be careful what you wish for.

But, I was really fortunate.  I had two incredible assets.  One was a customer base that wanted the brand to survive.  The other was the employees.  They wanted the company to survive.

We spent a lot of time listening.  Customers told us that it was not just the technology. The customer experience had to be improved.  Analysts said we had spread too thin.  Employees said they’d do what it took, but they needed a clear direction.

So we laid out a plan.  Solve the liquidity issues.  Focus on competitiveness.  Most importantly, we had to choose where we would invest for the future.  Fortunately the results came in.

How We Did It

A lot of it was focusing on fundamentals.  Focus on running the company for cash.  Focus on competitiveness.  We took $3bn of costs out of the business.  But, we preserved all the capabilities that were important to the customer, and we preserved our R&D.

At the end of the day, it’s always the quality of your people.  It’s always the alignment of your people around a common set of objectives.  That was the magic of Xerox.

In the worst of times, we continued to invest for the best of times.  We not only saved the company, we saved it for the future.  We did not cut investments.  It was a non-choice for us.  We couldn’t have cut innovation and have a company down the road.  So we had to do both, cut costs and invest in innovation.

Fortunately, we picked the right choices: Xerox as a services led technology company.  Once known for copiers, printers, and paper.  We now have new technologies and services generating billions of dollars in recurring revenues. We’re a trusted partner.  A content management provider.  Bridge the paper and digital worlds.  We listened to and partnered with our customers.

Creating value for our customers and creating growth for our company

We invested heavily in color.  Lead the transition from black and white to color.  Move from offset to digital.  Invest in small and medium businesses.  Become a services-led partner in large enterprises.

Today we are the leader in color.  We just made some news when we announced ColorQube.  This was a ten-year investment for us.  Cuts the cost of color 62%.  Makes it very close to B&W.  90% less waste.  Less energy.  Adheres to EnergyStar.  12% less greenhouse gasses.  Security.  Diagnostics.

Our customers told us they want to print everything in color but it has to be affordable.  It has to be greener.

Another place where investments have paid off is document management.  Big organizations around the world look for help in managing information flow and converting from paper to digital.  We’re just getting started.

If you think Health Care where you have to fill out forms all the time, legal . . . all these documents need to be created, managed, searched, and stored. Today, 2/3 of our revenues come from products we brought to market in the past two years.

Dreaming with our customers.  We bring them into our labs.  This whole procedure is based on the heresy that customers don’t always know what they want. So we bring them in to show them what’s possible.  We ask them about what their problems and pain points are and then free their minds to dream about what’s possible.

When our customers tell us they’re very satisfied, they are 6 times more likely to do business with us than those who are merely satisfied.  The enemy of great is good (Jim Collins). Standards like good and satisfied don’t cut it.

Innovation

Our customers expect us to deliver better value to their customers.  To cut carbon footprint.  To bring digital technology to market.  To think about problems differently.

So we’re working on things like erasable/reusable paper.  Embedding intelligence into documents so they can route themselves and be secure.  Better storage and routing.  Lean six-sigma. Think about changing work.

It is tempting to cut innovation, but there are devastating results down the road.

American Competitiveness

Some of these challenges are due to changed in other economies like China and India.  We should welcome those as long as it’s on a level playing field.  Some are due to our selves.  We have failed to invest in education.  College graduates in engineering are falling.  Funding at the federal level in science, math, and engineering is falling.  This is the only place where there is real job growth.

As well, we have flat to declining immigration as we become more restrictive and their home countries have become more competitive.  Success comes from the quality of your people and the amount if innovation you bring to market.

Over recent history, most of the great innovations have come from the US.  It matters where innovation happens.  Because of that, most of the world’s high paying jobs are here.

We’ll get past this crisis, but my concern is the next one.  It will spread slowly.  We’ll wake up in ten or fifteen years and realize we don’t have enough scientists and engineers.  A big issue.  If we don’t address it now, we’ll lose world leadership.

The great news is that President Obama is thinking about this.  Our companies need to do the same.  A race without a finish line.  Continue to invest and innovate.

Question:  What about your predecessors?

We had taken our sight off a disciplined pipeline of innovation.  We weren’t listening to our customers.  We had the overhang of good financial results.

For any technology company, going to new technology is hugely challenging because you make less money on it.  So it’s important that you embrace it sooner than later.  My predecessors knew about digital, but we didn’t have the cost structure to go there.  We had a huge challenge.

That’s why we have such a great opportunity.  It’s hard to move forward when your earnings are good and revenues are growing to make big changes. It’s a great chance for businesses to get fit.  There have been a lot of issues that we haven’t paid attention to. The business community will come out of this in better shape.

Question.  Bringing customers into R&D.  Do you have a formal program to get mangers in the field to develop relationships in the field?  Do you have a mentoring program?

Development program?  I think we do a pretty good job of doing that.  A lot of attention on voice of customer.  Every senior executive is a “focused executive” for a key customer.  Their job is to clear the boundaries out of the way so our people can get things done.  It’s everyone.  It permeates the conference rooms where the decisions get made.

We have a customer officer of the day.  Take the initiative to solve issues, not just for that customer, but all customers.

The most important aspect is leadership.  Making sure our leaders are out working with customers all the time.  I spend the vast majority of my time with customers.  I was on the West Coast last week and met with 40 customers.  It’s that combination of training, structure, and processes, but it’s also making sure our leaders demonstrate that we’re out there.

Our engineers and researchers go to the classroom and work with grammar schools and high schools about getting excited about science and experimentation.  We’re a big sponsor of National Science Foundation. To get kids interested in the 10 to 12 year age group.

Question: Globalization of R&D

We have four research centers, two of which are located outside the US.  We’re also a global development supply chain as well. Employees in India, Fuji Xerox . . . we also work with partners outside Xerox.  HCL in India has amazing capabilities in India.  We do some development and they do some.  Helps us bring products to market much more quickly.  We’re very excited about eth possibilities for doing things more productively and bringing things to market more quickly.

Question.  We see a lot of irrational cost cutting . . . what tips do you have . . . this is the time to invest.  Not just cost cutting.

A great point and it’s tough to do.  These are really tough times.  Lots of our industries are seeing huge profit hits.  The worst thing we can do is to polarize your intent.  This is the time to be very focused on cutting costs.  Having said that, you can’t mortgage the future.  This is the time to be customer focused, provide a better customer experience . . .  do everything you can to bring dollars to the bottom line and pick your shots to make sure you come out of this a winner.

Two things.  Customer experience.  Your ability to be a great partner has never been better.  You have to make sure you’re covering your customers

The other is market share.  This is the time to make sure you come out a winner.  Everything is relative right now.  Anyone that gives up customers and market share makes a big mistake.

I expect us to take share.  I think our customers will remember how we dealt with them.  When we were in deep trouble, I remember the partners and suppliers that helped us and the ones that didn’t.  I’ve never done business with the ones that didn’t.

Question.  Challenges in what you’ve asked and compensation.  Alignment.

I grew up in a sales organization, so I understand how important it is.  But compensation isn’t the only thing.  This is more about leadership alignment.  People want to emulate.  What’s the model?  How do leaders behave?  What do they value?

If you want your people to be customer focused, then they need to see executives doing it.  I don’t think there’s anything more important.  It’s never simple, but I think that compensation is a tool that’s somewhat limited.  The real powerful motivator is the culture of the company. Make sure people see how we expect them to be behave.

Question.  Transition from a product-led to a services-led company.

It has been a long, tough journey.  I would never underestimate the challenge of making that move.  It’s a journey and we’re not all the way there.

When we began our global services organization, we set it up in a separate organization.  Incubate and protect.  We brought in some new people but also some of our existing people.  Long and painful.  A lot of learning.   We had to narrow our focus.  We were so focused on offerings and forgot the money was made in delivery.  A major part of our focus is on getting a world class, global delivery capability.  Time to revenue.  Time to profit.

It’s getting easier to be services-led because our customers are telling us that’s where they want us to be.  If you have a significant customer responsibility, you have a services responsibility.  It’s been a long time since I’ve been with a big customer who wants to talk product.

In this economy, people want to talk about optimization, outsourcing, tangible ROI.  Do we still have a mainstream product org?  Yes.  But more and more it’s about distribution inside companies and packaged services.

I think this migration is taking over from customer push vs. our thinking it’s more strategic.  It’s important that we think about protecting as we grow.  Blend internal development and external sourcing so we get the benefit of people challenging tradition.  Disciplined about rolling out services in a profitable way.  It’s much harder to get disciplined about rolling out services than products.  A global bid desk to makes sure we’re doing this well.

Tags: AnneMulcahy, Xerox, ColorQube, SAMA, Strategic Accounts, Innovation, HCL, National Science Foundation, Customer Experience