Xerox Refocuses On Its Customers

Chief Technology Officer Sophie Vandebroek is using customer-led innovation to get a jump on the competition and kick-start sales

By Nanette Byrnes

Three years ago, a team of Xerox researchers dreamed up a commercial printer with two engines instead of one. Rather than following the company's standard development process—build the prototype, get customer feedback—they decided to hold focus groups with customers and potential customers to find out what they thought of the idea.

In a video clip of a session in Boston, one of eight Xerox held in the U.S. and Europe, seven men sit around a conference table. They look a bit dazed. Heads rest on hands. Panelists lean far back in their chairs. Until a question comes that snaps them to attention. What would they think, they are asked, of a high-speed machine that wouldn't have to shut down if a problem arose, but could operate at half-speed?

"This thing would go down, but down means it's still functioning while service is on the way?" asks a young man with unruly hair and a boldly flowered tie. Yes, he is told. "Sweet!" he sings, rocking back in his chair. As the video fades, another customer's voice explains the group's bullish reaction. "You're dead if you're down," he says. "You're over." Bingo!

A New Sway for Customers

But back at research headquarters in Webster, N.Y. where 30 Xerox engineers and scientists were watching via live Webcast, there was surprise. While they'd suspected that customers would like the second engine, they had the reasons all wrong. They'd imagined the second engine would be used for fancy inks or special colors. Not to help a broken machine limp along until help arrived.

"The team had had a certain idea of what customers wanted," says Stephen Hoover, vice-president of Xerox's research and development hub. "Going out and actually talking to them&that really changed that." The new focus became building a machine that would both run fast—pumping out 288 pages per minute with both engines working—and keep on running if one engine conked out.

Customers didn't always have this kind of sway at Xerox. For most of its history, certainly up until the 1990s, the $15.9 billion maker of copiers and printers so dominated the market that it could put a product out with little to no customer input and still get sales. When the complaints rolled in, the company would make changes in subsequent versions. "When I first worked with Xerox in the 1990s they didn't listen so well," recalls John Lacanghina, founder of ColorCentric, a $14 million Rochester (N.Y.) company that specializes in Internet-ordered, short-run printing, and someone Xerox consulted repeatedly during the development of the dual-engine machine, called the Nuvera 288 Digital Perfecting System. "That's changing." It has had to. No longer captive to Xerox, customers are buying Canons, IBMs (IBM), Kodaks and others.

Trying to Boost Anemic Growth

Xerox has long emphasized R&D, investing 5 or 6% of revenue in it. In 2006, $922 million, or 5.8%, of its $15.9 billion in sales went to research, development, and engineering. Such spending has returned 558 U.S. patents and allowed the company to refresh 95% of its product line in the last two years. But even that hasn't been enough to boost Xerox past anemic 2006 revenue growth of just 1%. And so Xerox Chief Technology Officer Sophie Vandebroek has turned to customer-led innovation as a way to get a jump on the competition and kick-start sales. "Dreaming with the customer is critical," says Vandebroek. "Involving experts who know the technology with customers who know the pain points."

Vandebroek, who was promoted to the company's top technology spot in January, 2006, expects more than just talk (see BusinessWeek.com, 3/20/06, "Making It Work By Not Doing It All"). Lab rats are encouraged to meet face to face with some of the 1,500 to 2,000 customers who visit showrooms at the company's four global research facilities each year. Others work on-site for a week or two with a customer, observing how they behave with the product. "Dreaming with the customer" is now part of every engineer's performance review. A newly hired team of ethnographers, PhDs in anthropology and related fields, is charting customer behavior.