Edition: U.S. / Global

Xerox's New Strategy Will Not Copy the Past

Published: December 18, 1994

JOHN NELSON and a dozen fellow middle level executives sit in a classroom at the Xerox Corporation's training center here, earnestly studying the digital future.

In all-day sessions at the modern complex, nestled in the rolling hills of Virginia, they listen to lectures on the new technology and computer-age sales tactics. The training program lasts a week, and this group of Xerox students certainly seems to be getting the message. Mr. Nelson, a district business manager in Hartford, and his colleagues speak fluently of "digital solutions" in business and the need for the copier company to "capture the benefits of digital technology."

The corporate reeducation is a critical step in Xerox's strategy to bring its copier business into the computer revolution. Clearly, the old days of simply selling copiers and then enjoying the annuity income from continuing sales of paper, toner and service are rapidly receding. Today, when an office worker wants a few copies of a memo or letter, the person is as likely to push the "print" button on a personal computer a couple of times as walk over to a machine and make duplicates.

The ease of PC printing is just one example of the inroads digital technology has made in the office. Xerox has not only recognized the necessity of overhauling its electromechanical machines. It is pursuing an ambitious plan to digitize the corporate world's paperwork, trying to capture much of the business market for copying and printing. To signal the shift, Xerox is now calling itself "The Document Company" -- no mere copy machine maker -- and has adopted a new logo (a single X partly printed in digital-style squares).

The strategy began in 1990, when Xerox introduced mammoth machines called Docutechs, which cost up to $300,000 each. They scan paper documents and convert them into the 1's and 0's of digital code. Once in digital form, the coded text or pictures can be easily stored, modified, printed or sent over computer networks.

The Docutechs have proved a success, with sales expected to reach $1.5 billion this year. Yet Xerox still depends on traditional stand-alone copiers for 80 percent of its core nonfinancial-service business revenues of more than $14 billion. By 2005, the company predicts, digital products will account for the majority of its business.

To help get there, Xerox has introduced a flurry of new digital printers, copiers and scanners in recent months. The company has also introduced software, which it calls the Document Services Platform, to link its machines over computer networks, allowing them to communicate with each other and with the machines made by other companies.

To broaden the potential market for its document-imaging technology, Xerox has formed alliances with a bevy of computer software and service companies including Microsoft, Novell, Sun Microsystems, E.D.S., Lotus, I.B.M. and Hewlett-Packard. These projects are intended to insure that Xerox offerings work with those of other vendors. As is so common in today's computer business, some of the alliance partners, like I.B.M. and Hewlett-Packard, are also competitors.

The Xerox digital strategy will make it more like a computer company. And indeed, Xerox has a rich legacy in the computer industry -- a curious blend of innovation and failure.

Once, Xerox had visions of becoming a computer company. Roughly 25 years ago, its executives searched almost frantically for a computer company to buy. It even took made a bid for the Digital Equipment Company. Eventually, Xerox did buy a computer maker, Scientific Data Systems, but that quickly became a financial millstone.

Later in the 1970's, Xerox developed the first personal computer with a mouse and icon-based software at its Palo Alto Research Center, known as Xerox PARC. Steven Jobs toured the centered, recognized the prototype as the future of personal computing, and built that future as well as a personal fortune at Apple Computer Inc.

This time, Xerox executives hope they have found a formula for success by working hand-in-hand with the computer industry instead of competing toe-to-toe in it.

"The most important thing to understand is that our strategy now is fundamentally different than our digital strategies of the past," said Peter van Cuylenberg, a computer industry veteran Xerox hired last year to manage its leap into information networks.

Today, analysts say Xerox should be in a strong position to push its high-tech plans because it has put its own house in order. For years, the fear at Xerox headquarters in Stamford, Conn., had been that something would replace dry copying as thoroughly as xerography obliterated the messy, wet systems that proceeded it.

IN fact, the real threat came in 1970's from companies like Canon and Ricoh, beating Xerox in its own bailiwick. In the 1980's, after losing business to Japanese rivals, Xerox made big strides in improving its quality and lowering its production costs.

So the company has managed to confine the Japanese competition to smaller copiers and Xerox remains the dominant supplier of large machines, which are more profitable. Today, the company is acknowledged to have the broadest product line in the business, ranging from simple copiers and fax machines costing $300 to high speed printers capable of printing, collating and binding books at close to $300,000.