Five years ago last month Anne Mulcahy reluctantly accepted the job of president and CEO of Xerox.
The market wasn’t impressed. Xerox stock took a 15 per cent nose dive after Mulcahy was introduced as its new CEO.
“Not a big confidence boost,” she said of the stock drop during a recent luncheon at the Canadian Club.
Becoming CEO of Xerox, she said, was the hardest decision of her career. “I did not want to be the captain of the Titanic.”
Mulcahy called her promotion to CEO “not her life-long dream.” She wanted to discuss it first with her family. She understood that this was a global job and told her two sons that she would not be home for most of the time. Her boys responded: “And the problem is?”
Mulcahy said she accepted the job with equal parts of pride and dread. She did it because she believed she had a responsibility to the many loyal Xerox employees who had been working for the company for decades. After all, Mulcahy was one of them, entering her 25th year with the firm.
Mulcahy did not know at the time she would end up being – five years later – its saviour.
Her first move to save Xerox from extinction was to call none other than 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. In 2000 the company 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’s cash reserves were at zero and the employee base was looking to 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.
What outsiders didn’t know was that Mulcahy had two aces up her sleeve: a customer base that wanted to see Xerox survive and a workforce that wanted the same thing.
She began to implement a company-wide strategy based on listening not just to customers who told Xerox they needed to vastly improve its responsiveness, but also to industry analysts and its own employees.
One thing Mulcahy did not listen to was the bank that told her to dramatically slash research and development spending.
By holding off the bankers, Xerox today drives two-thirds of its revenues from products introduced just two years ago.
Last year Xerox released a whopping 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.