Xerox CEO invites others to copy her leadership strategies

TORONTO – Five years ago last month Anne Mulcahy reluctantly accepted the job of president and CEO of Xerox.

At the time, the century old Rochester, N.Y.-based company that pioneered photocopying was starring at bankruptcy and the stock took a 15 per cent nose dive after Mulcahy was introduce as its new CEO.

“Not a big confidence boost,” she said of the stock drop during a luncheon at the Canadian Club Thursday.

Becoming CEO of Xerox, she said, was the hardest decision of her career. “I did not want to be the captain of the Titanic,” she said.

Her first move to save Xerox from extinction was to call Warren Buffett, the billionaire investor of Berkshire Hathaway Inc. fame. She wanted him to invest in Xerox, which at the time was facing a cash flow crisis, mounting debt, irate customers and massive staff defections. The company in 2000 lost US$273 million.

Buffett invited Mulcahy to his favourite restaurant in Nebraska where he reinforced his view of never investing in technology companies.

This was not exactly what Mulcahy wanted to hear, she said. But, Buffett did give her advice that sharpened her focus for saving the company. Buffett said: “You’ve been drafted into a war you didn’t start. Focus on your customers and lead your people as though their lives depended on your success.”

She called this advice “sobering,” especially when Xerox’ cash reserves were at zero and the employee base was looking bail on the company.

Mulcahy had another problem she’d have to solve before implementing this customer first, technology second plan. She knew that some of the senior leaders of the firm did not have confidence in her leadership. So she quickly called a meeting of all senior Xerox leaders and said to them point blank that if any of them wanted to leave she would help. Mulcahy did this tactical move because she realized time was running out and wanted the leadership team to start focusing on the customer and buy into her plan.

“To my surprise, four people asked to leave from the leadership team. But those who stayed became very active. They were stretched, but I did not want armchair quarterbacks criticizing my every move. We needed to work quickly,” she said.

Today, Xerox drives two-thirds of its revenues from products introduced just two years ago, Mulcahy said. In 2005, Xerox released 49 new products and is embarking on a new strategy to improve its software offerings. The company reported earnings of US$978 million and has taken more than US$3 billion out of its cost base by outsourcing several parts of its value chain. And, Mulcahy said the company is finally debt free.

Mulcahy gave credit to the channel for Xerox’s turnaround. “I do not want to declare victory, but the signs are very positive,” she said.

Among her key strategies, Mulcahy said she created the Focus 500 program, were all

executives are assigned to supports the company’s largest customers.

“This shows customers that executives care,” she said.

Mulcahy also brought in Officer for the day, where key members of the leadership team field customer support calls. “This keeps us in touch with the real world. It grounds us. It helps us find where the problems are so we do not repeat them with other customers.”

She said that investing in R&D strengthened the company’s core business and ensured future growth.

“Customers knew it would have been a hollow victory if we avoided financial bankruptcy only to face a technology drought,” she said.

Another strategy was to align customers with employees. Mulcahy developed customer champions within Xerox to tightly connect staff with customers. Today one in every five Xerox employees work at customer sites full-time.

Mulcahy said her focus is to deliver value by reducing customer costs and complexity rather than selling technology products.

“Businesses, universities and governments have poured hundreds of billions of dollars into technology. And let’s be frank — the return on that investment hasn’t always lived up to the promise. That’s because the old world of I T was made up of what I like to call a little ‘I’ and a big ‘T.’ The focus was always on the technology. We’re changing that. Our view of I T is made up of a big ‘I’ and a little ‘T,’” Mulcahy said.

Xerox research has found that 75 per cent of customers who defect list they are satisfied on customer surveys. “Satisfied doesn’t cut it,” she said. Under her stewardship Xerox has ratcheted up customer service offerings through Lean Six Sigma tools. The company has about 200 Lean Six Sigma projects underway with customers.

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