Copy That

Copy That

CEO Q&A by Jean Gruss | Editor/Lee-Collier

Anne Mulcahy rescued American business icon Xerox Corp. from near bankruptcy. Her insights could help Gulf Coast businesses grow.

"Gentlemen, this company will not file bankruptcy."

Anne Mulcahy uttered those words to the board of directors that named her chairman and chief executive officer of Xerox Corp. about five years ago.

Since then, she's delivered. In 2005, earnings rose 9% to $978 million on revenues of $15.7 billion.

In a speech to the Forum Club of Southwest Florida in Naples, Mulcahy outlined some of the lessons she and her management team learned turning around Xerox.

First, listen to customers and employees. In her first 90 days as chief executive, she traveled around the world to listen to customers and employees and discover where "the fuel leaks were that were feeding the fire." To fix them, she developed clear rules for accountability for employees.

Second, Mulcahy gave employees a vision of where the company would be after it was saved. To make sure employees remained with the company, it was critical for them to know that the company would prosper.

Next, she protected the research and development department from the inevitable cost cutting that went on elsewhere in the company. This came despite pressure from lenders who demanded cuts in that area. Mulcahy says it was critical to develop innovation for customers so that the company could thrive once it had been turned around.

Fourth, Mulcahy made sure the customer was at the center of the company's universe. "It changes the conversation in the boardroom," she says. "If you're not listening, lots of little problems start sneaking up on you."

Fifth, Mulcahy says it's critical to have the right people in the right positions. What's more, they shouldn't be afraid to critique top management. "Reward people who tell it like it is," she says. "It's a really, really big deal."

Following her speech, the Review caught up with Mulcahy. Here's an edited transcript of the conversation.

Q: What advice do you have for our readers who are starting a technology venture?

A: I think there's a premise here of customer connectivity. At the end of the day, if you expect to commercialize and market, you have to have that connectivity from Day One. Too many people, when they're upstream, don't have the customer connectivity that really ensures that there's a commercialized value. That is important for anybody, whether it's an R&D community in a big company or whether it's a startup. Whether you're a public company or you've got a private investor, we live in a world where the notion of tons of investment and the big bang down the road is probably not something that materializes that much any more. It's much more incremental. It's much more paced delivery and functionality. It's putting technology in the marketplace and building on it almost in a co-development way with customers that I think is a really important model.

Q: So the 1990s are gone?

A: They are. But with a few exceptions. I mean there are some companies that break through and you say, "wow." Who would have thought about YouTube? But you know what? The majority of companies have a very different model.

Q: We have many privately held technology companies in Southwest Florida. Are there any advantages to going public in today's regulatory environment?

A: I do think there are. The context of public-shareholder structures is still very positive. They provide a portfolio of distributed ownership not driven by single-owner profile. I think that can be helpful. The other thing is, I would be the first one to tell you that quarterly earnings and the whole Wall Street phenomenon certainly drives a lot of pressure. But you know, it's a discipline and short-term discipline and delivery is not inconsistent with long-term investment. And quite frankly it's a good discipline. I think sometimes when we think we have all the time or money in the world, without the public visibility of shareholder returns we wind up not being as efficient and productive as a company. So I'm not a proponent of "private is better." I think it has its advantages, but I also believe that the public-company structure is one that can be very beneficial. I think we have to adjust some of the regulatory bureaucracy that has driven public companies to distraction, but hopefully some of that moderated regulatory environment will be materializing.

Q: How do you manage your company's research and development budget so that it gives you the biggest bang for your buck?

A: In terms of size, it's about 5% to 6% of revenues, close to $1 billion for Xerox Corporation. We also have an equity partner, Fuji Xerox, which spends another $600 million. So in terms of funding our technology development, the combined Xerox group has $1.6 billion. So it's a pretty robust research and development approach.

We focus on how quick we get to a revenue-generating scenario. It can be anywhere from two to five years. But the ability to derive revenues and really keep the portfolio fresh is something we think a lot about.

We also align a lot of our research and development with our business groups so they literally are customers. The one exception to that is in upstream research. There's got to be a lot of freedom and flexibility. Great innovators will always tell you that most great innovations happen by accident and not by design. There's got to be room for experimentation and you've got to be able to attract the best researchers because they have freedom. We have four global research centers that specialize in certain competencies but with much broader research agendas.

Q: Looking ahead several years, what are the most promising developments in your tech corner of the world?

A: It'll be a color world and all imaging will be done in color. The advances being made in quality and costs will make it very attractive for all communications to be done in color. Whether it's schools or businesses, color is hugely important from a communications-impact perspective. So that's a big deal.

Also, something we call smart documents, which are documents embedded with intelligence. Digital documents that route themselves through different processes, that have all sorts of security embedded within them, that clearly have protections against different constituencies. Smart documents are becoming a new version of digital networks. They have a lot of promise in terms of workplace efficiency.

Things like digital media are big as well. Today, paper is such a great media and most people still feel very comfortable with it. Someday, and we're working on this, it'll feel like that but it will have digital properties. So it will be reusable and it will have all the capabilities of digital versus static paper. That allows you to do all sorts of things. You don't have to carry around laptops or even handhelds. You'll have reading formats that are very easy in digital-paper capabilities.

Q: If I have a great technology that I think Xerox would be interested in, how do I pitch it to your company?

A: We have an invention process through our Xerox innovation group. It looks for the next best technologies outside so not everything has to be discovered inside. We look and see if we can license or acquire or partner on things that are emerging as important technologies. The whole invention-proposal process really feeds off external inventions. I think the world where you had to do it all inside is over and now it's your ability to scan the market and find good emerging technologies that you can build on.

Q: What do you look at when you're considering acquiring a company that has a technology that you want?

A: The number one criterion is: Does it support an area of growth? For us, that's growing our services business. We just did an acquisition of a litigation-support company that has a technology platform, but more in a services-oriented approach. We just bought a company that's called XM Pie that is a software company that does personalization, where you can put all sorts of variable content and data in documents and make it easy for people to communicate personally. For us, it's really an enabler to growth. We don't go way outside our core of expertise. It's got to be supportive of the core foundation of the company. We're not looking for big-bang deals but more modest and accretive opportunities that we can create value from.

Q: What advice do you have for women in the technology field?

A: I'm a big believer that good leadership is good leadership. I don't think it's genetically different. A lot of the fundamentals play here. Performance counts. So focusing on current job performance is a big deal. In some cases, women have tried to emulate models that weren't necessarily good fits for their own natural capabilities, so women have to be comfortable with their own set of capabilities just like men are and exploit those in the marketplace, versus trying to model those that they think are being looked for.

Q: Are there one or two lessons that stood out about your experience turning around Xerox?

A: Investing in the future during the best of times and the worst of times is a very important mandate. Nobody wants to be part of a company that is just about survival.

The other one is customer focus. It's really easy to lose and really hard to get back. The ability to maintain the focus on the customers during good times, bad times and never wavering is hugely important to the health of a company.