A Transformation

In early 2000, after two years of plummeting stock prices, Xerox Corporation, one of America’s premier companies, had lost about two-thirds of its value. The company that had been synonymous with the office copier faced the new millenium with the serious possibility of bankruptcy. If Xerox was to survive in the new environment of digital documents and messaging, global sourcing, and intense competition across all markets, it desperately needed two things: turnaround and transformation.

Standard operations in such a situation would have dictated bringing in a savvy corporate wunderkind from the outside, loaded with stock options, a platinum parachute, and all the trappings of CEO splendor. Instead, Xerox chose a one-time English and journalism major who started out in Xerox field sales, spent her first 10 years in sales and sales management, and then worked her way up through a variety of nonsales positions. This unconventional approach paid off. CEO Anne Mulcahy has led Xerox out of its darkest hours to become a reinvented service-oriented, globalized, successful corporation. So much for SOP.

As a CEO, Mulcahy herself is anything but standard. Nothing in her career has been cautious or typical. “I will never forget my first sale,” she remembers. “I went out and sold a 660 desktop copier, then went back to the office and was told we don’t accept sales, we just rent technology.”

Selling more than you are expected to is not a bad mistake to make on a first assignment, and Mulcahy has carried that bold attitude forward to the CEO suite. “There have been lots of disappointments and mistakes along the way,” she says. “That is part of being a company that tries to move quickly and take advantage of change. You cannot be precise; in this environment you have to move quickly. I would rather be 90 percent correct at the right time than 100 percent too late.”

And Xerox had to move fast. In 2000, Xerox was a digital company but did not have the business model or cost base it needed to prosper. “We had lost touch with markets and were not as competitive as we needed to be,” Mulcahy explains. “At the same time we had a great customer base and a great employee base.”

Profits Up

Seven years later, more than 57,000 Xerox employees have pulled in more than $17 billion in annual revenue – almost half of which comes from 159 countries outside the United States – and more than $1 billion in profit. About three-quarters of Xerox business now comes from services, not hardware, and the services segment shows strong growth.

“We transformed Xerox into a service-led company that brings value to customers with document solutions, not just support for copiers,” Mulcahy stresses. And this transformation will continue. “We are investing in new businesses and segments, searching for ways to provide customers with more capability at lower prices, moving quickly to stay ahead of the curve and not just play catch up.”

Overall, Mulcahy sees a $125 billion opportunity in the document-management market and is focusing on four areas of growth potential. The first is the rapidly expanding use of color. “Color is getting more affordable faster, and we live in a color world. There is huge double-digit growth in color, and we are the world leader in color, with a big array of printers from desktops to publishing models. Over time we want customers to focus on color and not even have to think about black and white.”

Document-management services are the second big area of growth, and the third is the transition from offset to digital printing. Mulcahy says there is an $18 billion immediate opportunity for digital use in the $400 billion offset market.

Xerox already leads in color printing, document management, and digital printing. “The fourth area of growth is selling to small and medium-size businesses, where we are not the leader but have an opportunity to gain share.”

A Global Reach

Xerox has long been a multinational corporation, but its global reach has been getting wider and more flexible. “A lot of our customers wanted global deployment, and that has been a wonderful benefit for us.” Xerox is rapidly expanding its business in Russia, Eastern Europe, and other Eurasian nations.

In the 1960s and ’70s, Xerox basically replicated its US operations in other countries. “Now we are market driven,” Mulcahy emphasizes. “We will go in sometimes at the entry level, work through partners, get embedded in the local community, and have relationships with local clients. We can use tiered channels, and sometimes we need a light touch.”

Multibillion-dollar opportunities in cutting-edge technologies and rising nations do not awe the onetime rep who sold, rather than rented, a desktop copier. “This is not over yet. I hope my biggest success is still in the future,” Mulcahy says. And she credits much of her success and Xerox’s improving performance to thorough exposure in the field.

“Having spent so much time in sales and other important positions, I have been in the positions managers hold, and I knew our customers as well as the field sales force from my first day as CEO. I knew you have to keep customers in the forefront.”

Mulcahy’s career at Xerox thus helped her grasp the essential challenges early and start the necessary transformation quickly. And her familiarity with fellow Xerox execs was a huge advantage. “One of the most important parts of running a large company is creating followership, building a great team, touching the people you work with, and making sure you are all aligned on the same objectives. I like to say I got the job because of experience and had the ability to get the team aligned on common objectives.”

Although she knows her own company thoroughly, Mulcahy is not shy about asking for help from outside Xerox. Warren Buffet is a friend who has supported her professionally. “He looks at business in terms of fundamentals and integrity,” Mulcahy explains. “A lot of business is just common sense and logic, but it can get very complicated and confusing. He brings me back to basics and the fundamental principles of business.”

Keeping Pace with Technology

Anyone managing in high-tech and the digital world can get whiplash from the fast pace of technology change. Of course, some of the changes have been very helpful. Mulcahy says technology has enhanced the sales function with tools and data that enable reps to understand customers much better.

“Technology allows reps to be much more effective in responding to customers. The role of the direct sales force is to bring value and services, and this has helped hugely.” She sees electronic interaction between reps and customers as another big technological gain, especially for the large accounts that are served by Xerox’s own sales force.

Mulcahy herself exploits the wealth of information that new tools have made available. “It is great to have all this information so you can hear from your customer firsthand and stay in touch. The emails I get, I view as a gift. I can hear what people are saying quickly without having it filtered through management. There is a huge benefit in getting firsthand information if you take advantage of it.” The Xerox CEO spends a part of every day responding to emails from customers and employees.

But along with technology come challenges, such as information overload. “This is the classic business problem screaming for a solution, and we try to help customers with this,” Mulcahy notes. Xerox offers a database and tools for searching, categorizing, and summarizing the wealth of the Internet and digital archives. And for many customers who still rely on paper, for example those in litigation support and health care, Xerox offers services and search repositories to deal with the clutter.

Mulcahy has seen the information-age challenge coming for a long time. “When I joined Xerox in 1976, there was talk of the future office being digital,” she remembers. “Since then we have tripled our use of paper, and a lot of the growth comes from printing emails and documents from the Web.” So Xerox seeks business by helping its customers bridge gaps between the paper and digital worlds by automating processes, such as scanning and digitizing documents. “Companies can use smart document technology to become much more efficient. It may be counterintuitive, but we want to reduce paper usage.”

Mulcahy believes that surviving paper messages should have as much impact as possible, especially on potential customers. So another way to overcome information overload is to colorize and personalize paper messages. Xerox offers this solution.

Even in the information age, some things do not change. Xerox’s reputation for solid, well-serviced, and reliable equipment remains key to expanding both product and service sales. Mulcahy credits two factors in helping to maintain Xerox’s good name: building reliability into the technologies that Xerox deploys and having tools that allow Xerox to anticipate problems and respond quickly. “You have to build reliability in and make sure the response to any problem is first rate.” The tools used to accomplish this include diagnostics and Web-based communication that allows customers to reach Xerox any way the customer chooses.

Xerox’s sensitivity to customer preferences predates Mulcahy’s leadership, but it is consistent with her whole career. “Sales is a great place to start to learn how to be a success,” she stresses. “Sales helps you understand what drives the business and that customers are a critical part of the business. Then as you move up into sales management, it provides an opportunity to focus on motivating a team of people. This will be important in any business function, but you learn it in sales management where it is critical, the jewel in the crown.”

A Sales-Driven Company

“Xerox has always been a sales-driven company, and sales have been the center of our universe,” says Doug Lord, who has headed Xerox’s US direct-sales force as president of the U.S. Solutions Group since January 2008. And Xerox is backing up Lord’s words as it tries to tap all those opportunities that Mulcahy sees in document management and services. In just the first half of 2008, Xerox hired more new salespeople than in the entire two previous years. “We believe there is a large opportunity in the market, we believe coverage is very important, and we think we can gain more market share,” Lord explains.

Xerox sells in the US market through several channels. First is the direct sales force, which now stands at more than 2,000 reps, sells to larger customers and is divided to serve three different business segments: firms with more than 2,500 employees, those with 500 to 2,500 employees, and smaller companies that usually have 100 to 500 employees. This direct sales force shares coverage of 25 multinational accounts, many of which are based in the United States, with the global account team. “We want to grow our international sales to these accounts, make sure they get the same type of high-touch coverage they get in the United States, and we put our very best people on these accounts,” Lord says.

The second US market channel comprises approximately 2,500 authorized agents in 500 independent firms who sell all Xerox products and services to small and midsize firms. The third channel consists of the more than 400 dealers who sell fax and midrange digital devices, and the final channel is made up of the 13,000 North American resellers who are the primary sales channel for Xerox office printers.

Xerox sales are structured similarly in most of the world, with some local adjustments. Lord says the Canadian sales force, which he used to head, functions in the same way as in the United States, but “it’s a little different in Europe.”

Direct sales reps sell the full range of equipment and services to their large accounts. “We are in the midst of changing our coverage in the middle-size market,” Lord says. “We are devoting more resources to expand our footprint out in middle-size accounts.”

Recruiting and selection are the most important factors in developing the sales force, according to Lord. He breaks the challenge up into two parts. Xerox wants “industry-savvy people” to sell to large accounts. “We look for people who have experience in each industry and experience selling into that industry.”

At the same time, Xerox is looking for “well-educated people who will begin sales training not unlike what I once took, and whom we can develop over time with small accounts,” Lord says. He joined Xerox Canada in 1976 and has worked in sales, marketing, human resources, supply chain, and customer service units.

New reps are selected through a standardized process structured around a series of interviews with managers. Xerox does not use any sales tests, but relies heavily on the judgments of its hiring managers. The company also has a strong program for soliciting recruit referrals from its current reps. “Salespeople often know others who have a lot of potential,” Lord says. A reward “in the thousand-dollar range” is paid for successful referrals.

Trained for Success

Next comes training, for which Xerox has long been famous. In fact, the company once trained non-Xerox salespeople as a sideline. “When I make sales calls, I am surprised how many people took Xerox sales training many years ago,” Lord says. This outsourcing business has been sold, but new reps are still trained extensively and in-house.

New reps get four months of training before they are ready to sell. “Training is very comprehensive, mostly sales skills, but reps also have to learn about our products and services,” Lord says. Further training is given during the course of a career in sales or sales management, much of it at the Xerox training center in Leesburg, VA. This training increasingly focuses on what Lord calls “selling in the IT environment.” New reps are also given the technical tools and applications necessary for their assignments. For example, all reps have been given BlackBerries.

Like Mulcahy, Lord says the chief impact of technology on sales has been the increased availability of information about customers. “Before I make my own sales calls, I spend time on the Internet, learn what is going on in the customer’s industry, what is happening at the company, and about its key people. I am better informed and can get to the point quicker.”

Lord is hardly the only Xerox top exec still seeing customers regularly. Mulcahy instituted a “focused executive program,” which has about 300 of the company’s most senior executives – from many departments, not just sales – meeting with large accounts. “This helps the execs understand customer requirements, and then they can dispatch the reps to make sure these requirements are met,” Lord explains.

Xerox’s business strategy is now very ambitious and demands an understanding of many different requirements. “We just acquired Global Imaging, we are going after the print-for-pay market, and we are going after all market segments,” says Lord. “But we must have the right type of distribution and sales for each segment. Customers are different and like to purchase in different ways. We want to serve them the way they want to be served.”

Lord is confident that Xerox’s breadth of product, service, and channel choices make his company stand out among the global competition. But the sheer variety of all the markets and goals to be served creates new difficulties. “One of our biggest challenges is to make sure our compensation structure aligns with the desired outcomes of our business model in various sales positions. And these outcomes vary a lot depending on accounts.” Xerox has no iron rule on the number of performance metrics in its compensation plans for all these positions. But, Lord says, “we think the fewer the better.”

Fewer metrics, maybe. But the new Xerox is clearly going after a lot more markets. •