Xerox

Canon as one of the world’s leading manufacturer of office automation products has undergone many changes and transformations to emerge market leaders in certain product categories. One of the underlying principle of Canon’s success has been its definition and subsequent implementation of corporate strategy and more importantly its strategy making style. Corporate strategy can be broadly summarized as identifying the  purpose of the corporation and means the corporations would employ to achieve its goals and objectives. Corporate strategy is thought out and implemented at two levels namely corporate-level strategy and business-level strategy.  The former seeks to set the goals and objectives of the organization formulated in terms of business it wants to be in and the later seeks to identify its internal capabilities and match it with external agents like customers (Lynch 2003). Strategic planning and decision making process also involves time factors in terms of long term and medium term planning.

The characteristics of strategic decisions normally comprise of the following factors :

• Strategy is often linked to the long-term direction of the organization
• Strategic decisions are very likely to be limited to the scope of the organization activities
• Strategic decisions tend to concretize objectives in terms of advantages over competition and hence leading to market leadership position
• Business environment factors like expansion into foreign markets, new product development redefine the strategic fit of the organization. In other words strategic fit aims to address the constants shifts in the market environment

Though various types of organization strategies have been developed and analyzed in the field of corporate strategy and decision making, the concept of generic strategies postulated by Porter seems to be supported predominantly in the corporate strategy discussions. Porter (1980) proposed three generic strategies which he deemed as essential components leading to a competitive advantage in the market place. He summarized these three key components as cost leadership, product differentiation and focus.

This paper seeks to analyze the Canon’s strategy and decision making process based on the case study and align it to the existing academic models discussed briefly above. Canon has been enormously successful in its decision making process and has been able to gain market leadership as a result of its strategic fit. One of the main tenets of corporate strategy states that the strategy should be aligned to the scope of the organization’s core competencies and should also reflect its long term and medium term impact. When Canon started to diversify in the 1960s into copier market, it established a clearly defined strategic fit in terms of the market it wants to address, the business model and customer base. Xerox defined the copier market in the 1960s with the introduction of its Plain Paper Copying technology and enjoyed a monopoly in large copier business. With its patented technology, direct sales force and technical support capabilities, Xerox presented formidable barriers for the existing businesses like IBM and it was even more complex for new entrants like Canon.

Canon at that time was not even present in the copier business anywhere in the world. But Canon exhibited a classic example of strategic decision making by leveraging its existing core competencies in microelectronics and optics and imaging and developed a new technology without violating Xerox patents. It also was successful in its scope definition and limited itself to serving small and medium enterprises and individuals. Canon’s strategic positioning relative to its customer market has played a crucial role in its overwhelming success in the copier business. Canon also exhibited the traits of strategic decision making as discussed by Porter (1980).

It primarily achieved its objectives through cost leadership, product differentiation and focus. As an integral part of its strategic fit, Canon clearly delineated itself from the business model of Xerox and built its own business model based small customers. As the customer in Small and Medium Enterprises (SME) did not have needs for large scale copying and hence did not require high prices Xerox machines, Canon competed with Xerox strategically on the price point (Govindarajan & Gupta 2001). It also defined and differentiated its product category and positioned it in the market such a way that it could easily establish market leadership position by creating its own market. Canon also maintained its focus on the market it created by evolving distribution approach catering to the customer segment it served. Canon’s success can be attributed to its selection of unique and well defined strategic position in the industry, where it had a distinctive set of customers, products and activities (Markides 1999).

Strategic management and decision making also places a lot emphasis on the ability of a corporation to change the rules of the game. Game theory especially has contributed significantly towards redefining the rules (Johnson, Scholes & Whittington 2005). Canon has applied this successfully against the existing competition by simply sidestepping the entry barriers of imitation but instead creating a market where the rules have not yet been invented. In other words Canon simply changed the way it engaged with the competition by standardizing components and achieving a cost efficiency enabling to dominate a market segment ( Hamel & Prahalad 1989).

Cooperative and network theories of strategy play an increasingly significant role in corporate strategy initiatives. Cooperative strategies are an integral part of prescriptive corporate strategy and have formal and informal relationship mechanisms as their central tenet. A prescriptive strategy has a pre-defined objective and main elements that constitute the particular strategy are laid out in advance before implementation. In the case study it is very evident that Canon practices cooperative strategy by linking it corporate level decision making to business level decision making process. In contrast to organizations setting strategy at the headquarters level and cascading it down to business units, Canon makes business level groups and functions integral part of the central decision making process.

In this regard the corporate headquarters clearly sets the long term strategy and grants freedom to business functions to set a medium term strategy within a preset limitations. Hamel & Prahalad (1989) argue that decentralization in the organization does not necessarily lead to operational efficiency and highlight that organization are overcommitted to concepts like strategic business units. Shared global brand development and shared core competencies are a defining trait of many Japanese organizations. Canon too exhibits these traits by its emphasis on linkage between various business units and central HQ from a strategy building standpoint.

Corporate culture also is of significance when corporate strategy is planned. Canon like other Japanese companies has a distinct corporate culture when it comes to human resources. The strong people culture where the individuals are encouraged to voice their opinions and insights towards to collective decision making is an integral part of strategy at Canon. It does not imply that the decision making is loose or without reference to central strategy. Canon has a set mechanism in place where the central plays the most important role in strategy and other units support the strategy making within the constraints set by the central head quarters. This actually emerges as distinct spiral of knowledge when the knowledge is moves away from its traditional mooring and gets redefined in a transformational way. In fact Canon encourages a form internal competition in product development and various groups attack the same problems. As an end result company is able to look at an optimal solution and also gains insights into multitude of perspectives. Canon seeks to adopt a similar mechanism, albeit in a limited scope, in its corporate strategy making process.

Canon has been hugely successful in scoping its activities i.e. who are the customers, what is the product that will appeal to these customer group and how will it be achieved. The growth of the company seems to indicate that the company has successfully addressed these questions and emerged with market leadership position. Another defining characteristic of the company has been its ability to leverage from its existing core competency and create a new one from it. This aspect has been evidenced in the manner company took on Xerox and developed a new market. Canon as a company seems to have developed and fulfilled one of the central aspects of strategic planning i.e. it has clearly distinct long and medium term planning capability and more importantly it has been instrumental in such a way that these planning capabilities complement each other and contribute positively towards overall company strategy.

The successful business model Canon has employed and its focus on strategic development are of importance to the companies outside this industry sector as well. Companies can learn from the strategic decisions made by Canon in its success against Xerox in the personal copier business. The manner in which Canon was able to differentiate its product from that of the competitors is an important lesson that can be derived from its successful implementation of strategy. This will especially be beneficial to the niche companies who may not currently possess the bandwidth to taken on competitors in mature markets. Product differentiation necessarily entails product innovation which is beneficial to the companies from a growth and finance perspective.

Canon exhibited all the traits postulated by Porter (1980). Canon’s successful implementation of cost leadership, product differentiation and focus are important lessons for other companies. The product differentiation has been evidenced much later in Hewlett Packard also when it created a new market by developing lower cost inkjet printers. In the tradition of Canon, HP also challenged its own rules of the game and established a new product aimed at totally new market. This enabled HP to gain market leadership in inkjet printer category in exactly the similar fashion Canon did it 20 years ago in the 1960s. HP too adhered to Porter’s principles of cost leadership, product differentiation and focus.

Dell is another technology company that questioned the existing rules of competitive engagement and invented a whole new market aimed at individual customers. Canon has established a completely different product support model by modularizing the product development in its battle against Xerox. In exactly similar fashion Dell also invented a new business model of direct marketing in the personal computer domain. Canon’s focus on long term strategic planning and medium term planning and the synergy between these two are also important factors that may prove beneficial to the other organizations.

Reference

1. Hamel, Gary, Prahalad CK 2005. Strategic Intent  Harvard Business Review Jul/Aug2005, Vol. 83 Issue 7/8, p148-161.
2. Ikujiro, Nonaka, 2007. The Knowledge-Creating Company Harvard Business Review Jul Jul/Aug2007, Vol. 85 Issue 7/8, p162-171.
3. Markides, Constantinos 1999. Six Principles of Breakthrough Strategy Business Strategy Review Summer99, Vol. 10 Issue 2, p1-10.
4. Govindarajan, Vijay, Gupta, Anil K 2001. Six Strategic Innovation: A Conceptual Road Map Business Horizons Jul/Aug2001, Vol. 44 Issue 4, p3, 10p.
5. Allen, Richard,Helms, Marilyn,Takeda, Margaret,White, Charles 2007. PORTER’S GENERIC STRATEGIES: AN EXPLORATORY STUDY OF THEIR USE IN JAPAN. Journal of Business Strategies Spring2007, Vol. 24 Issue 1, p69-90.
6. Marino, Kenneth 1996. Developing consensus on firm competencies and capabilities Academy of Management Executive August96, Vol. 10 Issue 3, p40-51
7. Lynch, Richard 2005 Corporate Strategy Prentice-Hall, Essex
8. Johnson, Gerry, Scholes, Kevan, Whittington, Richard 2005 Exploring Corporate Strategy Text and Cases Prentice-Hall, Essex
9. Porter, Michael 1980 Competitive Strategy  Free Press, New York.

II. Brief History / Background of the Company / Company Profile The history of this Computer Shop is so inspiring for me because they start in a small business and for being industrious they build a lot of business that make them higher than a eagle. Before we start planning build a computer shop we decided to start selling Shirts, Footwear and some accessories we keep all the money we collect from our small business until we get a place where we can rent for our Computer Shop.

We start making computer stands after hat we bought only three (3) Computers and we build our computer shop in the month of June year 2006. One day we start opening our small Computer Shop. Even though I have only here (3) Computers were not expecting that we can have our customers early in the morning even though our price per hour is Twenty Five Pesos (25). In one day we collect only three hundred fifty Pesos (350) but even though that money is too small for us, it is okay because it can help for our business to make It Big.

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We continue opening our Computer Shop until we buy another Four (4) Computers so we have Seven (7) Computers and because of that we collect a lot of moneys that help us to buy a Printer Machine and a Scanning Machine because of that we are so stressed because there`s a lot of task we do. So we start finding our helper and we find Jiegs Silang he is a High school graduate but he is so intelligent he is a fast learner about computers. He live in Nasugbu Batangas he is our helper until our Computer Shop becomes one year.

We decided to name our Computer Shop and the name of it is Awoor Open Kalate Compuer Repair Shop, we decide to that name because we also repairs computer like Formatting and PC Assembling. This business is so amazing because it helps to give education to my children we continue managing our Computer Shop until we collect moneys o buy six (6) Computers so that we have a total of 13 Computers. We complete our computers in he year of 2011.

We are so happy and thankful because we’re not expecting that our business will become long and then we add some small business like Master Shomai, Coco Prince add some, Fish Ball, Kikiam and Kwek Kwek Stall. In the year 2012 were not expecting that the small business we add will become large until we fund a lot helpers, like Michael Silang, Accelle Joy, Darwin Silang and John Paul Montales. They are he one who helps us to build and to manage our business which is seven years from 2006 until 2013 even though we reach seven years we did not decide to stop our business because it help me to have a Good Life.

III. Summary of the OJT Experience The Trainee is Mr. John Paul Noveno Montales, On-the-job training is one of the requirements of any students taking up the Diploma in Computer Electronics and Technology. I started in my OJT on month of July 07, 2012 and in this month of July I’m pretty well trained to work here because I worked here before and today I start to OJT I achieved like Hard disk drive of the computer is broken and for this work I replaced another Hard disk drive.

I also have other achievement such as typing a very long story, laminate of ten pieces of ID pictures, Xerox of one piece of English book and of course all of this were done and completed. And month of August I also have other achievement like if the power supply of the computer is loss and for this work again I replaced another power supply and finally the power supply of the computer is working again.

Throughout the month of august I also have other achievement like the ram or memory of the computer is not working for short it was loss and I did this it should be to clean up the memory using a pencil eraser to work it again. Month of August I am still typing a very long story of a parable, Xerox of ten pieces Diploma, ten pieces of Birth Certificate, ten pieces of Bio – Data and laminate five pieces of ID pictures and of course all of this were completed.

And now in month of September I’m very happy because my supervisor was promote me to a computer assistant and this I recounted my parents that I was promoted to a computer assistant. I also have another achievement of this month of September like Xerox, printing, laminate and typing another long story of the parable that just as I had done previously. The last time that I’m attend in month of September 30, 2012 I stopped to attend the OJT because I’m very busy to make my project in my major subject and I also review my minor subject and major subject for this coming final exam.

The month of November I will begin again to attend the OJT because now I have time to OJT because I`m not too busy in school and my supervisor was very glad because I was able to return to OJT again and I was very glad also. I made this month of November was reformatting ten pieces of computer on the other comp shop but it was owned by my supervisor and I made ?? it two days because relatively long after I reformat and Installed drivers and games of course I finished all do ten pieces of computer and it will be open to earn money.

And this month of December I still did OJT and I experienced our Xerox machine was broken and exactly two man who want to undergo Xerox a whole book, and ten pieces of Bio – data and I do not know how to fix the Xerox machine and I call my supervisor to say that the Xerox machine is broken and my supervisor said wait for me to fix the Xerox machine and I told to the customer who want to undergo Xerox was not available but after a few minutes my supervisor came to his shop to fix it and I’m happy for that.

I stopped again to attend the OJT and this was the Second time to stop to attend my OJT because that time was to prepare for Christmas and of course this was the day we have a family gathering together sometimes we just take along – together and that only occurs when there is an occasion like Christmas. I started again to attend my OJT because I`m not busy in my family and now I have time to attend my OJT and today I will do what should I do like Xerox five pieces of documents and PC assembling.

Now I stopped again to attend my OJT and this is the Third time to stop to attend my OJT because today was New Year’s Day and I’m happy because this was the day we have a family gathering together again and of course we all have families complete and by twelve o’clock in the morning We watched fireworks in the sky and then we all eat together.

And this month of January I started again to attend my OJT and I also achieved like formatting a computer, pc assembling, and I experienced our motherboard of the system unit were overheat and because it was broken and it was not available so I just replaced another motherboard for it to work again and I’m happy because the motherboard of the system unit was working so we can use it and now that the time of my OJT was near I spent my days only to complete my OJT and I was very glad because the seven months I spent hours on the comp shop I was fully finished my OJT.

A. New knowledge, attitudes, and skills acquired The first that I had learned in the Awoor Open Kalate Computer Repair Shop is to be a hard working person and to be a responsible to all things that should I do. I also learned how to fix Xerox Machine and how to use it. It was so easy to Xerox but in my OJT experience it was so hard if there were a lot of papers to be done and I was so glad that I learn how to use it. I also applied at the Comp shop my knowledge in computer when I was high school. Sometimes it was so boring and tedious to have my OJT because I am lone and don’t have friends to talk but the only thing that I did was play some music and watching movies it was my doings when I am bored and tedious it was why don’t stop my OJT and to accomplish my goals in my life and I need to finish my OJT for my family. B. Theories actually seen in practice I realized that if there was an OJT was not so easy, tedious, made me being lazy I felt it when I am doing a lot or you had nothing to do but I made it by pushing myself to did my jobs and to push myself to be a hard working person.

I also learned that in all aspects of problems there was a solution. I also push myself not to stop my OJT and not to stop to fix my problems that I encountered. Now, if I have a problems that I can’t solve I pursue to make it and to be successful to my OJT instead of giving up I will make my best to be a successful person. C. Feedback that can be given to the company or institution When I started my OJT my supervisor ask me that what I can do to his computer shop or if I know something about in computers.

I said yes to my supervisor I have know something to computers and I said to my supervisor that if there was a thing that I didn’t know was to betray my supervisor and I said to my supervisor that I am fast learner. I also said to my supervisor that I can help more to his computer shop because I am getting better when I am doing something and practice for it and I am good in some jobs like typing some documents and repairing computers. I enjoy my OJT.

In some doings I am compatible with my OJT because I had some ideas to help to my OJT and I experienced the others problems so my OJT was not so hard at all. D. Benefits gained The benefits that the trainee learns at the Awoor Open Kalate Computer Repair Shop are as follows: to be discipline at the work and to be responsible and intelligent, must always be on time, and to be patient with the customer should come. I started to my OJT I learned to be responsible to all aspects and to be diligent, hard working and of course to be friendly and patient.

I promise to myself that I will not forget what I learned. I will remember it until I am alive and use it to all things that can apply because of you have this attitude you can recognize by others. It will be applicable when I friends or I have my own job and to my fellow workers. In what I learned to my OJT and to my loving parents I will use to all things in my life and I am so proud that I learned. I will do my best to be a successful man to have good and peaceful life. E. Problems encountered

The problem that the trainee encountered at the Awoor Open Kalate Computer Shop is the Xerox machine was broken and exactly two man who want to undergo Xerox a whole book, and ten pieces of Bio – data and I do not know how to fix the Xerox machine and I call my supervisor to say that the Xerox machine is broken and my supervisor said wait for me to fix the Xerox machine and I told to the customer who want to undergo Xerox was not available but after a few minutes my supervisor came to his shop to fix it and I’m happy for that.

He had been fired in absentia, the bizarre but perhaps inevitable outcome of a CEO succession that had begun so promisingly yet ended in utter disaster for Allure and Xerox no less than for Rick Thomas. Xerox’ failures to commercialism the breakthroughs made in its famous Palo Alto Research Center (PARA) in the asses and asses–including the personal computer– have been thoroughly documented. It is also common knowledge that over the past few years the company fumbled the digital future yet again by badly underestimating the inkiest printer, a deceptively humble device around which Hewlett-Packard Co.

HAP) has built a profitable division larger now than all of Xerox. What is not well understood–what has been hidden until now behind the silence of its participants– is that Xerox’ downfall was also rooted in executive-suite discord so intractable as to amount to corporate civil war. This is the story of the management fiasco at Xerox, based on exclusive interviews with Allure, Thomas, and many other company executives, past and present. On one side of the struggle were Thomas, the perpetual outsider, and a small coterie of like-minded executives, mostly newcomers to the company.

Pitted against them were Allure, the consummate Xerox insider, and most of the senior management team he had assembled since he was first named CEO in 1990. This is a saga in which neither of the two principal antagonists fits comfortably into the role of villain. Each man’s reach exceeded his grasp by an ultimately ruinous margin, but neither seems to have acted from venal motives or indifference to the greater good of the company and its shareholders. Allure, now 62, and Thomas, 56, shared a basic belief that Xerox needed to reinvent itself to succeed in the Digital Age.

In the end, though, ACH would blame the other for screwing up the implementation of the strategic plan they developed together. Thomas contends that he never had the authority he needed to be an effective leader because Xerox’ board, dominated by Allure, denied him the crucial prerogative of assembling a full management team of his own. “The analogy to my experience would have been if Lou Serener had tried to turn around IBM with John Akers still there–and without his own team,” he says. However, Allure insists that he did nothing to impair Ottoman’s authority. There can only be one CEO, and I expected that,” he says, adding that Thomas erred in forcing a pace of change on Xerox that it simply could not withstand. “The problem Rick had was he did not connect well enough with people to get a good feel of what was going on in the organization and what was and wasn’t possible. ” ONCE-HOT STOCK. Less than two years ago, Xerox looked to be a company on a roll. Earnings were rising smartly, and investors were bidding up its shares in a market enthralled with all things tech. Xerox hit a record high of nearly $64 a share in May, 1999, Just three weeks after Thomas replaced Allure as CEO.

Today, the stock trades round S/, a Tee collars above ten price at wanly It last on ten New York stock Exchange in 1961. The evisceration of $38 billion in shareholder wealth already qualifies Xerox as a corporate catastrophe of the first order. And the company’s woes are not over yet–not by a long shot. Xerox posted a loss of $198 million over the last three months of 2000, the largest quarterly loss in a decade. By even the most optimistic forecast (its own), the company will not edge back into the black until the second half of this year, at the earliest. With $2. Billion in debt coming due this year and a $7 billion bank loan mooing in 2002, Xerox is cutting spending, firing workers, and trying to raise as much as $4 billion by selling off assets. Its take to date: $550 million. Anne M. Mullahs, a popular 24-year Xerox veteran promoted to president and chief operating officer when Thomas was fired, astonished analysts in October by conceding that Xerox has “an unsustainable business model. ” Mullahs later backed away from this statement, saying that she meant only that the company needed to cut operating costs and redirect investment from money-losing to high-margin businesses.

Shrinking Xerox down to the scale of its diminished prospects may be ardent but does not a new, sustainable business model make. “l hear about asset sales, about refinancing, but I don’t hear anyone saying convincingly, ‘Here is our future,”‘ says a senior Xerox sales executive. “What I see is a retreat back into the comfort zone of the way things used to be before Rick Thomas. ” The prevailing view is that the company will avoid the humiliation of Chapter 1 1 bankruptcy. On the other hand, financial management has not exactly been Xerox’ strong suit of late.

The company Just fired 13 employees of its Mexican subsidiary, accusing them of doctoring the unit’s books to make its performance look better than t really was. Xerox took write-offs of $119 million–a hefty sum for a subsidiary with revenues of $400 million. The company maintains that no one at headquarters was complicit in the abuses and that its internal audit controls are adequate. However, Xerox will not have the last word on these issues. The Securities & Exchange Commission is investigating, and Xerox and its management have been hit with at least 11 shareholder suits.

BRAZIL BROUHAHA. Doubts about Chief Financial Officer Barry D. Remorse’s stewardship go beyond the issue of Xerox’ accounting integrity. In 1999, the company sot 13%, or $1 billion, of its net worth because of foreign-currency losses, mostly in Brazil. Analysts were stunned that Xerox would have left such a big chunk of its equity exposed to the vagaries of the notoriously volatile Brazilian economy. Xerox suffers from “a clear deficiency in financial oversight,” contends Richard J. Lane, a vice-president of Moody’s Investors Service, which downgraded Xerox bonds to Junk status last year.

Adds one stock analyst: “l can’t believe that Roomier is still there. ” Roomier declined to be interviewed. If Thomas had had his way, Roomier would not still be at Xerox. He says that he wanted to replace Roomers out was toll Day Lealer Tanat ten Dora would not countenance his dismissal. Allure disputes this but does acknowledge that all was not well between Thomas and Roomier. “Clearly, there was a personality conflict,” he says. “Rick had lost some degree of confidence in Barry and was not as accepting of Parry’s advice as Barry thought he should be. By late 1999, Allure says, Roomier had agreed to remain as SCOFF only as long as it took to find a replacement. Thomas drove to work on May 10 intending to offer the SCOFF Job to a man he had interviewed several times. He never got the chance, because May 10 was the day Allure canned him. Thomas says now that he erred in not insisting that Allure also step down as chairman when he transferred the CEO title. It wasn’t that Allure bossed Thomas around. The two worked out an arrangement by which Allure would be permitted to attend top management meetings, but only if he promised not to speak.

Although Allure was as good as his word, he undermined his successor by his mere presence. Says one former top executive: “l knew it was doomed to fail when Rick and Paul would be in the same meeting and the line of eyes around the table would keep sousing on Paul even though Rick was doing all the talking. ” The irony, no doubt a bitter one for all concerned, is that Allure yearned to leave Xerox behind and take full retirement. But duty–and his board–would not let him. “Even before the transition, Paul thought he should step aside and be on his way,” says Nicholas J. Nicholas Jar. A former CEO of Time-Warner Inc. And a longtime Xerox director. “But a number of people on the board wanted him to stay [as chairman] because Rick was an outsider. The thinking was, We like what we see so far with Rick, but we’d like you to be here, Just in case. ‘ Xerox’ bungled CEO succession is an object lesson in the difficulty of reinventing an old-line company. For a good 20 years now, Xerox executives have been restructuring, revamping, and repositioning virtually nonstop. But in the last analysis, Larder’s Xerox has been far better at proclaiming the need for change than actually making change. There was always a huge gap between the visionary aspirations the company nominally was pursuing and what it actually drove employees to do,” says a former senior Xerox executive. There was a time when Xerox embodied visionary aspirations realized. Throughout the asses, the company was as potent a symbol of the transformational power of technology innovation as Apple Computer Inc. (PAPAL) and Microsoft Corp.. (MOST) would be later. Xerox is descended from the Haloed Co. , a photographic supply company founded in Rochester, N. Y. , in 1906.

Under Joseph C. Wilson, its longtime leader, Haloed spent 14 years and virtually all of its income to develop the 914, the first xerographic copier. Introduced in 1959, the new copier was a money machine nonpareil. By the time the 914 was retired in 1973, it was the biggest-selling industrial product of all time, and Xerox was in the dictionary as a synonym for photocopy. Success spooled Xerox, In a sense. 10 sustain Its rap growth, It name to move beyond copiers, but what could ever measure up to the 70% gross profit margins of the 914?

Xerox was defined as “the copier company” in its very DNA, blinding it to the enormous commercial potential of Para’s many innovations. Attempts to buy its way into new businesses were equally unsuccessful. Whether it was mainframe computers or financial services, Xerox tended to buy the wrong company at the wrong price and then run it into the ground. Novelty in any form simply was no match for the well-heeled copier bureaucracy–or “Burro”–spawned by the phenomenal success of the 914. CUT-PRICE COMPETITION. Burro almost was the death of Xerox.

The company’s xerography patents began expiring in the early asses, and its 95% share of the market dwindled. By 1982, its portion of the U. S. Copier business had declined to 13% under an onslaught of cut-price copiers imported from Japan. Through sheer force of personality, CEO David Seekers, a former IBM marketing executive, inspired the Xeroxed masses to commit to elaborate Japanese-style programs to improve product quality ND pare manufacturing cost. Rejuvenated, Xerox reclaimed lost market share at home and by 1990 was even taking business away from Canon and Ricoh in Japan.

In keeping with Xerox tradition, Seekers stepped down as CEO in 1990, when he turned 60, and yielded to Allure. The son of a Massachusetts vegetable farmer turned quarry operator, Allure had Joined Xerox in 1966 and worked his way up through the finance and administration ranks. Seekers remained as chairman, but not for long. Just nine months after Allure became CEO, Seekers resigned from the board to accept the No. 2 spot at the Education Dept. In the Bush Administration. L had zero involvement in Xerox during the two years I was in Washington,” Seekers says now. And I never went back on the board. ” Free to act on his belief that Xerox needed new blood, Allure remade senior management with executives imported from the outside. The two Allure recruits who would rise to the highest rank were Roomier, formerly finance director of British Telecommunications, and William F. Bubbler, an affable sales executive from AT&T. Allure developed close relationships with both men, especially Bubbler, who spent so much time with the boss socially that they were presumed inside the company to be est. friends. Bubbler, who recently retired, declined to be interviewed.

Seekers brought Xerox back from the abyss in the copier business only to Jeopardize its future anew by putting the company into property and casualty insurance on a grand scale. By the time Allure took over, Xerox’ balance sheet had been crippled by billions of dollars in insurance liabilities. This time, Allure saved Xerox, methodically disentangling the company from insurance and other financial-services businesses. He also got Xerox’ stock moving again with a Street-pleasing mix of cost-cutting and ewe product introductions, including the first digital copier–Document Center.

With great fanfare, Xerox refrained itself as “The Document Company” in 1994, signaling its ambition to move far beyond copiers as the growth of desktop computing stimulate EAI nudge Increases In ten mummer AT documents Delve created In keeping with accepted management practice, Allure had discussed succession prospects with his board a couple times a year since the early asses. There were several internal candidates for a time, but none panned out. In late 1996, the board decided to create the new position of president and chief operating officer and to go outside to fill it with someone who could move up to CEO in a year or two.

Through the executive-recruiting firm Ramsey Brine Associates, Xerox found Thomas, the 52- year-old chief financial officer of MM. Says Allure: “We were looking for a change agent, and he seemed to be a perfect match. ” BEST SHOT. Thomas had spent his entire business career working for Louis V. Serener, first at McKinney & Co. , then American Express (XP) and ERRS Nabisco. At IBM (MM), Thomas ranked Just below Serener in the hierarchy but was only a few years younger than his mentor, whose retirement was not imminent in any event.

After much soul-searching, Thomas concluded that Joining Xerox might be his best shot at becoming CEO of a major company. He met not only with Allure but with several other executives and directors, impressing one and all with his knowledge and intensity. “We had such an engaging discussion,” recalls Nicholas. “Three hours went by like that,” he adds, snapping his fingers. Thomas boasted a gilt-edged resume. He had collected four advanced degrees from four different institutions of higher learning, including a PhD in international economics from Tufts University.

In 1992, the French government had awarded Thomas, a devoted Francophone, the Legion of Honor for helping build American tourism in France as an executive of American Express. His breadth of business experience also set him apart at Xerox, which was filled with managers who had joined straight from college and never left. Thomas had been chief of corporate strategy at Ames, president of Nabisco International, and the leader of Vim’s restructuring of its personal-computer operation. Xerox shares rose $2 on Ottoman’s hiring in June, 1997.

Dispensing with the false modesty usually spooned out on such occasions, Thomas emphasized that he was no mere Mr.. Fixity. “l see myself as more f a leader, someone who can size up a situation and act on it quickly,” Xerox’ new president declared. “l came to Xerox to be chief executive. ” Thomas moved into Sears’s old office. The newcomer was struck by the hushed formality at headquarters. In 1969, Xerox had stripped off the top few layers of executives from its bustling base in Rochester and relocated them to a three-story building on a hill outside Stamford, Con. L can’t emphasize enough how mandarin and isolated the headquarters culture became over time,” says a former executive. At once cerebral and passionate, Thomas is the corporate equivalent of the Washington policy wonk. Longtime colleagues say he is someone who continually walks around with a hypothesis in his head that he is only too happy to share with anyone he encounters, regardless of corporate station. Thomas likes nothing more than Trellising, Intellectually changer Locutions. However, en can at times become overbearingly blunt in his criticism and, like Allure, is all but incapable of small talk or water-cooler bonhomie. Rick can seem haughty,” says a former Xerox colleague generally sympathetic to Thomas. “He is not really a warm person. ” BIG DISADVANTAGE. Inbred Xerox needed Ottoman’s intellectual energy and outsider’s perspective, but in terms of personality this charm-challenged brainier was a bad fit, as he himself realized. “To be successful at Xerox, you have to be liked,” he says. “While everyone likes to be liked, for me it was more important to get things done. ” Executives at Intel Corp.. (INTO) were famous for having slashing matches and then going out afterward for a beer.

But at Xerox you had to watch your tongue. “Xerox is totally political, but it’s hidden behind a patina of fake collegiality,” says one battle-scarred veteran. It didn’t take Thomas long to start violating decorum. One of the first things he did was order up a review of the economics of the existing Xerox product line. He was presented with charts showing that Xerox was “world class” in terms of manufacturing and development costs. “My response was ‘How do you know? “‘ he recalls. “They told me they’d get back to me. ” The third time he got this answer, he put his foot down.

It turned out that staffers had relied on a sampling of 1994 market data so limited as to exclude most of Xerox’ Japanese competitors. Thomas ordered them back to the drawing board. Weeks later, he finally was presented with evidence hat Xerox had failed to maintain its hard-won parity with the Japanese. Says Thomas: “It was clear to me that we were at a large and material cost disadvantage against the Japanese across the copier market. ” There was not much that could be done to alter the underlying economics, since research and development accounted for two-thirds of total product costs.

But the new president did begin agitating for sharp reductions in Xerox’ bloated payroll and overhead, which, in Ottoman’s view, left the company dangerously exposed to price- cutting by more efficient competitors. Allure, who had engineered a major cost- outing early in his tenure, recognized the need for further cutbacks, but swift, preemptive action had never been his style. Instead, 50 different Xerox management teams spent six months hashing out a complex restructuring plan finally unveiled in April, 1998.

It set forth 150 different initiatives aimed at saving $1 billion a year in cost cuts and productivity gains. Some 9,000 Jobs were to be eliminated, 10% of Xerox’ workforce. Internal tensions were rising but did not appear to be hurting Xerox’ performance. Operating income was bounding upward in regular quarterly increments, while revenues now were rising at a double-digit rate. Larder’s early asses decision to reorient the company’s office-product strategy around digital multifunction machines (copiers that also scanned, faxed, and printed) seemed about to pay big dividends. But Thomas was uneasy Just the same.

For the time being, Xerox had no competition in digital copying, but the Japanese would bring their own digital machines to market soon enough Ana IT Tort nine, would broadly offer comparable quality at lower cost. Could Xerox sustain its revenue growth when it no longer had the market to itself? The burgeoning popularity of the inkiest printer posed an equally dire threat to Document Center’s rosy unit sale and revenue projections. By now, inkiest sales were exploding in the so-called SOHO (small office, home office) market, which Xerox had studiously ignored for years in maintaining its focus on high-margin, high-end equipment.

By mid-1998, Thomas had concluded that Xerox had to make changes in its business strategy to deliver on its emphatic promises of double-digit revenue growth. He wanted to push hard into color and take on mighty HP in inkiest. At the same time, he believed that Xerox’ direct-sales force had to shift emphasis from pushing hardware to selling “output management solutions. As Thomas envisioned it, Xerox’ best long- term growth opportunity lay in helping big companies create new ways to use documents more creatively and efficiently.

In practical terms, this meant signing companies to outsourcing contracts or selling them special Xerox-written software. This, in turn, required turning Xerox’ box-sellers into systems consultants and reorganizing the sales force around industry groups rather than geographic areas. Some of these notions had been circulating through Xerox for years but had been acted on only sporadically because of opposition from one Burro faction or another. Thomas articulated his vision with a clarity and an urgency new to Xerox.

If, after countless management meetings, Ottoman’s ideas eventually prevailed, it was because Allure agreed with him, not because he had won over anything close to a majority of his colleagues. Within the ranks, opposition was steadily building, though rarely was it expressed overtly. Burro had always excelled at passive resistance. “l kept putting groups of people in rooms to work on fixing a problem, but it wouldn’t get fixed because someone would disagree and the issue would not be settled,” Thomas says. Ottoman’s frustrations were momentarily forgotten when he was named CEO at Xerox’ annual meeting in April, 1999. I’ll always remember it as a summit moment, a wonderful feeling of arrival,” says Thomas. The happy man hardly gave Larder’s decision to remain as chairman a second thought. This was not his only mistake. As a consolation prize for Bubbler and Roomier, Allure proposed giving each a seat on the board and the title of vice-chairman. Thomas didn’t like the idea but went along. “l felt I couldn’t say no. I really thought this was Pall’s way of making sure everyone felt O. K. With my promotion. Of course, it straight-jacketed my ability to make changes. ” Thomas was able to make some executive changes.

He moved the company’s European president aside to make way for Pierre Damon, a dashing Frenchman who was considered Xerox’ most aggressive homegrown executive. He replaced Damon as head of retail distribution with James Firestone, a former IBM colleague. He brought in Michael Minor, a 39-year-old cellular-telephony executive as head of corporate strategy. When the head of Xerox’ outsourcing subsidiary retired, Thomas recruited u o e 36-year-olla cancel International emcee AT as’. N. Executives and a handful of other senior leaders believed in Ottoman’s change agenda but did not come close to changing the balance of power.

Says one ally, who resigned even before Ottoman’s dismissal: “The challenge of changing Xerox was so profound that Rick needed eight or nine senior people pushing hard along with him as a group day after day. ” INVESTOR FLIGHT. In the third quarter of 1999, Xerox posted an 11% drop in income instead of the healthy gain predicted. Investors deserted Xerox in droves, slicing nearly 25% off its value in a single day. It was as if everything had gone wrong at once. Document Center revenues were falling behind projections as lower-priced alternatives cut into its market share.

The heavy expenses of entering the inkiest business were really starting to bite, and competitors were even beginning to eat away at Xerox’ monopoly in high-end digital publishing. The Brazilian subsidiary, long the company’s largest source of profit outside the U. S. , was reeling from colossal currency translation losses and soaring interest rates. In North America, productivity was deteriorating as the sales force braced for the reorganization scheduled to begin in January. Xerox’ business woes brought the simmering tensions between Thomas and other executives too boil. By all accounts, there wasn’t a lot of yelling and screaming.

But as Bubbler and Roomier complained with increasing vehemence to Allure, the fissures within top management became apparent to the board. Says one director: “Sure, we were alarmed–alarmed as an eight-alarm bell. ” Thomas soured his relations with Mullahs, who had tried to bridge the growing divide between the CEO and his vice-chairmen, by clashing with her brother, Tom Dolan, who was the company’s head of North American sales, reporting to Bubbler. Dolan disagreed with so many aspects of the sales-force restructuring that Thomas pressed to have him transferred to a less vital Job. Rick’s clash with Tom hurt Rick hugely with Anne,” says a former executive close to her. In mid-December, Allure circulated a memo to senior management affirming his support of Thomas. The board is “unanimously supportive of Rick” despite the “clearly disappointing performance of the company,” he wrote. Behind the scenes, though, Roomier, Bubbler, and other executives were coming to Allure and threatening to resign unless Thomas was removed. In the first quarter of 2000, Xerox actually exceeded the Street’s expectations, modest though they were.

But the die was cast. “There was no last straw, no flash of lightning, no thunder,” Allure says. “Rick had clearly lost the confidence of me, the board, and his extended management team. When that happens, you have to make a change. ” There seems little doubt that Thomas did lack feel for the human and political realities of “the Xerox family” he had only recently Joined. And he shares responsibility for the crippling strategic error of spending heavily to belatedly halogen HP at a time when Xerox would have been better off husbanding its cash. N ten toner nana, Logical markets Walt Tort no old-line company. It Is Kelly Tanat ten pace of change that Thomas tried to dictate was in fact the pace Xerox needed to play in the Digital Age. “The lesson of Xerox is that halfway measures don’t work,” says a former executive. “If you bring in a change agent, then let him make change– or don’t even start. ” Xerox probably will survive. It might even return to solid profitability. But its hopes of becoming an important player in the “office of the future” probably have been dashed for good.