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The new rules

“Whom the gods want to destroy they send 40 years of success.”
The wisdom of that proverb helps greatly to explain Xerox Corp.’s decision to embark on a worldwide restructuring that will eliminate 9,000 jobs, roughly 1,400 of them in Monroe County.
Most companies re-engineer and downsize their operations as a last resort. Often, the remedy is misdirected or comes too late.
Xerox has chosen to reshape its operations from a position of strength: Profits soared 20 percent last year and its stock price has doubled over the last 12 months.
If the business isn’t broken, why is Xerox trying to fix it?
“In the digital world,” Chairman and CEO Paul Allaire said this week, “profitable revenue growth can only be assured by continuous significant productivity improvements in all operations and functions.”
In other words, Xerox has chosen to do now what’s necessary to remain at the forefront of an industry that’s undergoing a profound transformation.
This transformation is one of the kind that Intel Corp. CEO Andrew Grove describes as a “10X” change–a transition so profound that it changes the rules of the game.
Xerox made its name in the stand-alone analog era. Now, it is leading the way in the shift to networked digital equipment.
However, as Mr. Allaire noted, today’s success is no guarantee of competitiveness in the emerging digital world. Xerox increasingly is up against world-class technology companies like Hewlett-Packard Co. and IBM Corp. that run lean operations.
With selling, general and administrative expenses last year at nearly 30 percent of sales, compared with roughly 17 percent for Hewlett-Packard, Xerox is not in their league on the cost side.
Analysts cheered Xerox’s move, predicting it would accelerate the company’s already substantial momentum. It’s not a risk-free move, however. If employee morale sinks, the cost savings will come at a high price.
The early evidence suggests, however, that Xerox’s workers understand why the company thinks it must take its competitiveness to a new level.
–Rochester Business Journal


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