Remember Xerox, the massive photocopier company that seemed to charge an arm and a leg for every sheet of paper that went through their copy machine? Invented in 1959, the Xerox photocopier owned the market for decades before competitors from Japan moved in and commoditized the business. The big bulky copiers were replaced with smaller units, the Xerox rep who kept the machine running was outsourced to a third party and after 40 years of domination Xerox’s bottom line started running out of toner. The copy company had been copied and Xerox needed to re-invent themselves and find new opportunities.
In 2001 a new CEO, Anne Mulcahy, was brought in to re-focus the company. She pointed Xerox away from selling hardware and toward selling services, providing other large corporations with accounting, payroll and technical support; a major shift for Xerox. Underneath the new grand strategy, ‘one stop outsourcing’, if you will, Xerox business leaders who headed up continents, countries and counties developed their marketing strategies to penetrate and develop their markets with Xerox’s new services. While the copier business continued to leak ink, business services outsourcing became 60% of Xerox’s revenue and the company was on a new path of growth.
A successful business model, like Xerox had, can create a smugness that lulls a company into a deep market complacency. Once everyone is fully hypnotized by the market magic and hooked on the superior profits, customers change, competition moves in and the profits dry up. But how do you know when its time to reinvent your product and in some cases like Xerox, the whole organization?
Signs that a change of strategy is needed include a decline in growth, increased ferocity in the competition and the beginning of erosion in the margins. It’s no secret that business is cyclical and sometimes, like Xerox, those cycles can last decades. Regardless of the success of a business model, the marketing strategy continually needs to be rethought. Which customers are we going to target? How are we going to effectively penetrate the market with the products and services we have? What is our market position? Granted, market cycles are usually shorter than what Xerox experienced and thus need to be revamped more often but whether it’s a grand strategy that needs redoing, as in Xerox’s case, or a shorter term market strategy that needs a makeover, the tools are exactly the same! (You can see the process here: http://www.iibd.com/pdfs/spp.pdf.)
Gone are the days when one brilliant leader or a high priced consulting firm develops the strategy for you. As information proliferates, today’s businesses need people who can scan the environment and identify market challenges, highlighting dangers and pinpoint opportunities. In short they need strategic thinkers, hunters and seekers of opportunity who can develop strategic plans and execute them. To paraphrase a famous football coach, “Strategy isn’t a sometimes thing it’s an all-time thing. You don’t think about your strategy once in a while you think about it all the time. You develop it, you adjust it and you execute it every day, every meeting, every encounter, every minute.”
Xerox revamped their grand strategy and refocused their business from selling products to selling services. What’s your strategy?
For more information see
1. Xerox story from HBR Dec 2015 P99 knowing when to Reinvent Mary Bertolini, David Duncan and Andrew Waldeck