Mulcahy: Innovation, services key for Xerox

Xerox Corp. Chairman and Chief Executive Officer Anne Mulcahy has emerged as one of the business world's most respected leaders, having steered the troubled copier and printing technology company from a loss of US$94 million in 2001, when she took over as CEO, to a profit of $978 million in 2005.

Even after laying off almost one third of the workforce at the $16 billion company and pushing into services and "smart" digital document management technology, Mulcahy has her work cut out, as IT investors look for top line growth before they get more excited about the company.

At a recent strategy day for Wall Street and big users in New York an audience member congratulated her for being named the fifth most powerful woman in the world by Forbes magazine; she cut in, "I'd rather have double digit growth."

Mulcahy sat down with IDG News Service Executive News Editor Marc Ferranti to talk about smart documents, head count, and winning the innovation game.

Marc Ferranti: You're emphasizing the role of services in Xerox's future. Can you talk about how big the services group needs to get for the company to achieve the growth you're looking for?

Anne Mulcahy: Today it's over $3 billion in terms of about a $16 billion portfolio, and we certainly talk about having aspirations in the next five years to see our services-led business represent potentially about over half of our revenues.

MF: You talk about smart documents that "know where they are going."

AM: Yes, where they're going, who they should go to, how to intervene, particularly as it relates to regulatory approaches, how to get archived with the right kinds of tags. It's that whole smart document process that is really an important aspect of where we're headed.

MF: One thing that's been discussed lately is Western companies' ability to innovate, as a competitive advantage on the global scene; can you talk a bit about what you do at Xerox to foster innovation?

AM: I would say the most important way that we foster innovation is our funding of research, which so many companies have walked away from. We have four global research centers around the world that do everything from very upstream futuristic kinds for research, like [in] Palo Alto, to a media research center, like we have in Canada.

There's a pipeline that has to be supported to get to innovation in the marketplace, and the commercialization of it begins with the stimulation of innovation proposals, and that's been a huge focus.

We have a head of technology today, her name is Sophie Vandebroek; she runs an innovation process in the company that I think yields really extraordinary results. She has upped the ante on the amount of innovation proposals, the amount of patent applications.

MF: Do you foresee further workforce reductions at Xerox?

AM: If we foresaw them I'd be doing them because I don't think you wait long periods of time if you know you have to change.

I think in the world we're living in you have to constantly be adapting. We're building our global services business, for example, and sometimes you need to invest in more software engineers than in hardware engineers. We'll continue to be adaptive and opportunistic in terms of taking the decisions that we need to take to make sure that we're well-positioned, and I think that for any company that's a never-ending challenge.

MF: Nevertheless you're a much smaller company than you were years ago. How do you get the company to grow when your workforce is being reduced? You can only be so efficient.

AM: I think it's important to note that we've gotten the same amount of revenue with a lot less people, and the fact is that we don't live in a world anymore where revenue is driven simply by head count. It's a very different set of ratios that drive revenue, and we've not just eliminated but we've outsourced: For example, we've outsourced manufacturing; we've outsourced back office; we work with partners everywhere.

It's a very different approach, and we are able to grow our business through efficiencies and indirect resources at levels that we would never have been able to with lots of fixed assets in the past. There's just a host of people we work with today that aren't necessarily on our books but help drive the value proposition that Xerox brings to its customers, and I think that is today's business model.