Copy His Success: Joe Wilson Zeroed In On Innovation At Xerox

Great corporate managers focus. Joe Wilson was no exception.

He really had no choice: Soon after rising to president at Rochester, N.Y.-based Haloid Corp. in 1944, he saw the writing on the wall.

Heavy government spending during World War II gave the photographic paper firm’s sales a boost. But with the war over the next year, the young executive saw his company’s profit growth melt under the heat of competition from bigger rivals Agfa, DuPont (DD) and Eastman Kodak (KODK).

Haloid had already been forced to stop paying a dividend to stockholders. And if Wilson simply coasted, Haloid likely would have had to let most of its staff go, sell out to another firm or shut down completely.

Wilson (1909-71) decided to change his company’s future, so he came up with a radical blueprint.

The Empire State native channeled his mind, managerial talent and the energy and skill of his staff into realizing that plan.

Copy That

In the works was the Xerox 914, a product that would showcase innovative photocopying technology and turn Haloid into a business empire of its own.

The new product used technology developed by inventor Chester Carlson in the 1930s to 1940s. It took nearly two decades to perfect.

Haloid employees, many of whom were seasoned chemists, had to change as well. Wilson never quit inspiring his employees to learn how to design, manufacture and service an intricate electrical machine grounded in optics and physics.

When the 914 was finally ready and made its debut in the fall of 1959, it shook the business world.

It gave offices the world’s first easy-to-use photocopier that made clean, precise duplicates on ordinary paper — the first copy in under a minute, then up to seven pages a minute after that. No more dirty, messy carbon copies. No more expensive machines in which creating master plates was hard, exacting work.

Wilson’s innovation also made photocopying affordable. Demand exploded.

Stock Shot

From 1959 to 1965, sales boomed from $33 million to $385 million — a compound annual increase of 51%. Haloid debuted on the New York Stock Exchange as Xerox (XRX) in July 1961. The name was coined by Wilson after he convinced his staff to market the firm’s new technology as “xerography,” hatched from the fusion of the Greek word xeros (or dry) and photography.

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That year, Xerox’s earnings grew 151%.

In the week ended April 5, 1963, Xerox shares broke out of a 12-week, flat-base pattern at 11 (adjusted for a pair of large splits) to new highs. The stock then soared 1,463% to its peak nine years later at 171.88 in August 1972.

Today, Xerox remains on the NYSE, with a float of 942 million shares trading back near 11 a share. The company serves customers in over 180 countries in the fields of copying, scanning and document management. In 2015, Xerox earned 98 cents a share on $18 billion in revenue.

“More than a half-century ago, Joe Wilson put a premium on imagination and on creating a company where change is a way of life,” Sophie Vandebroek, Xerox chief technology officer and president of Xerox Innovation Group, told IBD. “His leadership at Xerox resulted in both a successful company that transformed business communications and a culture of innovation that continues today.”

Wilson’s Way

How did Wilson turn Carlson’s new technology into a commercial gold mine?

One key was focusing resources on developing a revolutionary product that would be superior to everything else in the marketplace.

Wilson took drastic measures to achieve this. Research spending jumped from $250,000 in 1947 to $2 million in 1958. Xerox accountants constantly fretted over the escalating R&D costs. Wilson never relented, even if it meant cutting costs elsewhere within the company.

“The whole bent was toward research,” Jack Hartnett, a former Xerox board member and Wilson confidante, was quoted as saying in Charles Ellis’ “Joe Wilson and the Creation of Xerox.” “It meant sacrifices all along the line. I had no capital expense budget for the sales division of the business for years. No one could buy a chair for an office — or a typewriter. I had no money. None. No appropriations at all. It all went into research. It had to.”

Wilson thought deeply and carefully in choosing Carlson’s patented technology as the engine to carry Xerox forward.

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His team studied other photocopying processes hard, and they were all less desirable. The diffusion-transfer process had no patent protection, so barriers to entry were low. The Verifax and Thermofax technologies, Wilson decided, would not offer the same quality of copies as Carlson’s electrophotographic technique.

A third Wilson key: He ignored skepticism from company outsiders.

They’re Wrong, I’m Right

In the late 1950s, Xerox asked office automation giant IBM (IBM) to help finance and sell the copiers. IBM agreed to hire management consultant Arthur Little to see if the 914 would score in the marketplace. After a nearly yearlong study, Little dismissed Xerox’s product. It was too big and cumbersome to fit inside an office; too costly; too heavy for salesmen in IBM’s typewriter division to transport.

Little’s report added that “direct copying had little if any recognizable advantage over duplicating, which was clearly faster,” Ellis wrote.

IBM politely refused to join Xerox. That didn’t stop Wilson from believing he had a monster product. One reason: He and his managers came up with a simple yet lucrative pricing model.

In 1959, it would have cost a potential Xerox customer $20,000 — $108,000 in today’s dollars — to buy a 914 machine outright. That price tag was a nonstarter.

So John Glavin, marketing manager for the 914, came up with a novel idea: New customers, upon receiving the machine for free, would pay a rental fee of less than $100 a month to get 2,000 copies, then pay just 5 cents for every extra copy. No charge for repairs and maintenance.

Wilson took a few minutes to think it over, then gave Glavin the green light to proceed.

The idea of pricing such a brand new, high-tech product at 5 cents caught fire. Xerox salesmen fashioned buffalo nickels into cufflinks to communicate the message. Over the next two decades, Xerox made incremental improvements in the 914 and later models that reduced the frequency of service visits to customers’ locations. Profit margins bulged.

Rise In Upstate New York

Joe Wilson was born in Rochester, the first son of J.R. Wilson, head of Haloid from 1939 to 1944. Wilson’s mother, Kate, taught Joe polite manners and an early love of reading. The boy grew to love Shakespeare and other literary greats, became class valedictorian at West High School in Rochester, majored in economics at the University of Rochester and earned an MBA at Harvard Business School.

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After becoming Haloid’s boss, Wilson showed a modern approach to management.

Gilbert Mosher, who led Haloid from 1907 to 1939, rode in a chauffeured Cadillac and wore spats and a flower in his jacket buttonhole. He kept no chairs in his office for visitors and demanded employees stand up whenever he entered a room, according to Ellis.

Wilson avoided such arrogance. He strove to know every one of his employees by name.

He tried hard to boost the employment of racial minorities during the civil rights turbulence of the 1960s.

One day, a recent Xerox hire confided to Wilson that he could not take kids from inner-city Rochester on a two-week summer camping trip because he hadn’t worked long enough to get the time off. Wilson told him not to worry; the company sponsored the trip.

Anne Mulcahy, the CEO at Xerox from 2001 to 2009, learned of Wilson’s strong desire to be a man of his community. In the introduction to Ellis’ book, she noted that when Wilson died at age 61, he had a card in his wallet that carried these words:

“To be a whole man; to attain serenity through the creation of a family life of uncommon richness; through leadership of a business which brings happiness to its workers, serves well its customers and brings prosperity to its owners; by aiding a society threatened by fratricidal division to gain unity.”

Wilson’s Keys

Built Haloid into the corporate giant Xerox, which brought affordable and convenient photocopying to the workplace and the masses.

Overcame: Limited financial resources, skepticism from potential corporate partners.

Lesson: Envision a product or service that can make business more productive, then make it the most affordable and easy to use.

“We believe with Oliver Wendell Holmes that: ‘The mind of man is the only instrument that, when stretched, does not return to its original dimension.’ At Haloid, we stretch our minds through research.”

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