Joe Wilson Made Xerox An Original Powerhouse

Joe Wilson had one little problem in trying to launch the Xerox copier in the late 1950s.

His early machines sometimes caught on fire.

He couldn’t exactly tell prospects not to worry, since each came with an extinguisher.

Wilson’s solution was, naturally, to build machines that didn’t light up — but also to show how easy they were to operate.

He used a chimpanzee to make copies at demos. That changed the conversation and revolutionized business communication.

Today, Xerox (XRX) brings in $22 billion annually from a wide range of copying and digital printing products and consulting services. And its stock, struggling since 1999, has almost doubled in the past year.

Wilson (1909-71) grew up in the family business, Haloid Photographic Co., which sold photo-sensitive paper at a lower price than its Rochester, N.Y., neighbor, film giant Eastman Kodak.

His grandfather, J.C. Wilson, who founded the company in 1906 and became mayor, inspired young Joe with his self-discipline and will power.

The Learner

Wilson developed an appetite for reading at an early age. By the time he was an adult, he was consuming two books a week, able to quote Shakespeare and Plato for insight into solving business problems.

After graduating from the University of Rochester in 1931, Wilson spent two years getting an MBA from Harvard. He then joined Haloid as a management apprentice to his father, J.R., granddad having died in 1930.

The next year, Haloid acquired control of Rectigraph Co., which had a primitive process to produce document copies without using photographic paper.

Wilson married Peggy Curran in 1935 and was good about not bringing his work home. Later, as head of the company, he insisted that all calls from his children be put through so they didn’t feel business was more important than family.

In 1936, Wilson was put in charge of hiring, and displayed an extraordinary ability to remember and understand people. Even after Xerox became a global corporation, he would astonish line workers by asking for updates on family matters.

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Naturally shy, Wilson hated speaking in public, but forced himself to give as many speeches in the community as he could accommodate. He would eventually be regarded as one of the most eloquent business leaders of his time.

Although Haloid’s sales rose from $3.9 million in 1940 to $9.7 million in 1949, its profit margin was cut by half because its photo paper was out of date. Meanwhile, it struggled to create an affordable copier that could be used in offices.

Kodak and 3M (MMM) already had image transfer machines, although they were slow and required expensive, special paper. Wilson wanted his firm to pass them.

He was in a position to do so, having become Haloid’s president in 1945 (later adding the CEO title) when his father retired. Knowing he had to re-invent the company, he had his research director, John Dessauer, comb trade publications for product ideas.

Right up there was a process developed by a Columbus, Ohio, lawyer named Chet Carlson.

In 1938 he transferred an image on a page without chemicals or special paper by creating a picture with an electrostatic charge (like plastic wrap that clings to your hand) on a drum, using dry powder to make the picture visible.

Carlson approached 34 companies, including IBM (IBM) and General Electric (GE), to make a copying machine in partnership, but they all passed. Finally, in 1944 he signed an agreement giving 60% of any revenue to Battelle Memorial Institute, a nonprofit research lab in Columbus, for further development. Battelle named the process xerography, Greek for dry writing.

Wilson and Dessauer visited two years later and agreed to pay $25,000 to Battelle each year, plus 8% of future revenue, if Haloid was able to develop a photocopier based on Carlson’s principles.

No one knew that producing a commercially viable machine would take 13 years and $92 million (worth $750 million now), wrote Charles Ellis in “Joe Wilson and the Creation of Xerox.”

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The company survived by doing research for the U.S. military and licensing other companies to use its increasing number of patents for niche products. It saved every penny, working in tiny, shabby offices and using subcontractors for manufacturing. Wilson mortgaged his house, while Haloid borrowed $1 million from a bank and $3 million from an insurance company.

“Wilson had studied corporate finance at Harvard and understood the importance of demonstrating consistently prudent financial discipline, having clearly articulated business plans designed to capitalize on opportunity and matching this with actions, so lenders would have confidence,” wrote Ellis. “Wilson’s priority was not sales or profits, but cash flow, and he was a stickler for accuracy, which appealed to bankers.”

In 1958, the firm changed its name to Haloid-Xerox, since it was banking on xerography, and aimed to launch its 914 machine, which would make one duplicate on 9-by-14-inch paper in 22 seconds.

Big And Expensive

When the 914 came out in March 1960, it had 1,260 components, weighed 650 pounds and cost $29,500 (worth $230,000 today).

Most companies couldn’t afford that, so Wilson made a crucial call: He would lease the copier at $95 per month.

The 914 and Wilson’s strategy vaulted Xerox ahead of the pack. Other companies came up with 40 competing copiers, but they were slower, difficult to use, required special paper and proved more expensive per copy.

Forbes magazine, which had dismissed Wilson as a dreamer in 1957, now reported, “He is nothing if not a big thinker,” as noted by the editors of Forbes’ “Greatest Business Stories of All Time.” “Potentially, Xerox is not so much a company as an industry.”

The firm’s revenue leapt from $31 million in 1959 to $59 million in 1960. By 1962, 10,000 machines had been installed across America and the company was listed on the New York Stock Exchange with its new name, Xerox Corp.

It turned into a sensational stock winner, rocketing 3,300% into the early 1970s.

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The Right Price

Xerox helped its cause by cutting the cost of the 914 dramatically in 1965. Making the machine for $2,400, the firm leased it for $25 a month at 4 cents per copy. The average user made 8,000 copies, so Xerox collected $4,500 per machine each year. It had 60,000 installed by 1965, for 61% of the copier market, and revenue soared.

Photocopying changed daily life in innumerable ways:

• Dozens of employees working on a project could easily circulate status reports for comments.

• Government departments were able to distribute new policies to workers quickly.

• Teachers could pass out copies of lessons, while students no longer had to tediously write down information from reference books.

• Doctors could give patients an X-ray on paper for 5 cents instead of making another original for $5.

Xerox continued to spend heavily on innovation. It filed its 500th patent in 1966, when it used $40 million for research and development out of its $500 million in revenue. The company reports that it now has 11,500 active U.S. patents.

Also in 1966, the number of copies made using all brands of machines stood at 14 billion, a massive rise from 20 million in the mid-1950s.

Xeroxing was now a generic term for making copies. The company fought this term, preferring the less catchy “copying on a Xerox Brand copying machine.”

Wilson stepped down as CEO in 1968, becoming chairman. In 1970, Xerox revenue reached $1.5 billion. The next year he died at 61.

“Wilson was an inspiration to everyone to persevere, taking calculated risks with a daring vision of creating the office of the future,” George Cook, who worked at Xerox for 32 years and is now a professor at the University of Rochester’s business school, told IBD.

Today Xerox has 140,000 employees in 160 countries and is headquartered in Norwalk, Conn.

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