Strategic Mistakes by Xerox CEO
"Xerox: The Copier Company" epitomizes one of the greatest strategic blunders in the history of high technology corporations. The legacy of C. Peter McColough's tenure as CEO at Xerox was that he gave away the future of the company while he was at the helm. When McColough took over the reins of Xerox in 1968, Xerox was fully enjoying the 40-45% growth in their 80% copier dominated market share. McColough had the vision to see that in the office of the future, information would be stored electronically and he wanted Xerox to dominate the storing and reproduction of digital information just as it had dominated that on paper. To this end, Xerox developed the first personal computer three years before the first Apple computer and more than eight years before the appearance of the IBM PC. Having the computer and networking businesses firmly hooked, McColough failed to reel them in.
At the outset, McColough appeared to be the champion of his company and perhaps the entire business era. For example, to ensure Xerox's presence as a leader in the "architecture of information," McColough established the Palo Alto Research Center (PARC) to develop digital office technologies. After all, he reasoned, the best way to predict the future was to invent it. In the early 1970's, many corporations were cutting their R&D budgets while Xerox, on the other hand, provided unlimited funding to PARC who gathered together a team of world-class researchers in information sciences and physical sciences. This team invented virtually every aspect of today's personal computer, including the graphical user interface, on which Windows and Apple are based, along with the mouse, the laser printer, computer networking, internet protocol, bitmapped graphics and e-mail. Despite these profound achievements in computer technology, Xerox is still known as the copier company because McColough failed to commercialize or protect this new technology.
Nature and Cause of the Error
At the root of McColough's strategic error was his failure to support his predictions for the future of Xerox with corporate action. McColough touted PARC as the future of the company, yet he neither protected the stunning technological developments from PARC nor evolved Xerox from the service company that it was, to the technology provider that it could have easily become. The error comprised two main shortfalls: failure to commercialize the technology; and failure to protect the resulting intellectual property.
Xerox's failure to commercialize the computer technology that they had developed was the inability of the corporate leopard to change its spots. Xerox became the world leader in photocopiers by delivering a product that the customer wanted and understood, creating an innovative business model to make the product attractive to the customer, and protecting their intellectual property. When marketing the personal computer, Xerox completely abandoned all three tenants of the previous success.
In marketing the personal computer Xerox refused to recognize the evolving market and tried to fit the market to their product rather than the other way around. Xerox aimed to duplicate their past successes and make and market computers the same way they made and marketed copy machines. Since Xerox made their huge profits in copiers by leasing the machines to businesses, and charging per page for the copies, they created copiers that were top quality, fast, and came with comprehensive maintenance and service. They were built rock solid because any down time ate into Xerox’s profitability – a broken or slow copy machine couldn’t print money as fast. Xerox copiers were proprietary machines that were leased through a network of Xerox sales representatives. Copiers were sold by authorized copier salesman, not in retail establishments and relied on the customer to recognize the usefulness of the computer. Xerox's strategy did not permit a customer to...
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