Why You Shouldn’t Copy Xerox Rachel Bransom In 1970, Xerox was doing everything right. They weren’t just a leader in the copier market, they were the copier market. With over $4.4 billion in sales, huge profit margins and a patent keeping competitors at bay, Xerox was one of the most important brands in the business world. In an effort to stay ahead of their competitors, who would soon have access to the same copier technology when the patent ran out, Xerox opened their Palo Alto Research Center (PARC) with the best engineers money could buy and a wealth of resources. PARC was designed to invent the products of the future office, and it did. There, in 1973, they invented the first personal computer.
This device, named the Alto, changed everything. For the first time, users could interact with their computer using windows, icons and menus that could all be manipulated with a mouse and keyboard through a Graphical User Interface (GUI). Before this, computers were only for those knowledgeable in programming who could give instructions solely through the command line. This technology leap was huge, and one that forever changed how humans and their technology could communicate. There’s a reason, however, that nobody knows it was Xerox that did the inventing.
Xerox’s biggest failure, and the one its then CEO must still regret, is that Xerox didn’t do anything with the Alto – at all. The invention was so ahead of its time, Xerox management didn’t see its potential and rejected the idea immediately, saying that nobody would want a computer like this in their home. Instead, they chose to stick with their reliable and profitable products of printers and copiers; what they definitively knew how to make better than anyone else in the market. The problem was, you can’t continue to make money off of the same technology for decades with only minimal feature improvements. Sooner or later (and for Xerox it was sooner), your technology will become outdated and everyone else will have moved on whilst you learnt to perfect an irrelevant product. In fact, Xerox didn’t pursue any of the inventions produced by PARC, unless they were relevant in the context of copiers, despite the fact they were funneling millions into the center. This approach is understandable, given how incredibly profitable their core business was at the time, but their success was ultimately one of the core contributors to the company’s demise.
Whilst Xerox may not have realized the Alto’s potential, Steve Jobs did. In anticipation of the IPO of a hot new computer company called Apple, Jobs and Xerox made a deal where Xerox could buy 100,000 shares of the company, and in return Jobs could tour PARC and learn about everything they had been working on there. After seeing the Alto and everything it was capable of, Jobs essentially threw out the current computer Apple was working on and rebuilt one based off Xerox’s. Later, Jobs said that Xerox “grabbed defeat from the greatest victory in the computer industry. Xerox could have owned the entire computer industry today.”
Whilst avoidance of risk played a big role in Xerox’s decision to not pursue the personal computer, it was also in the lack of potential their executives saw in the product. The problem with Xerox’s judgement was that they didn’t acknowledge the fact that invention is simply the first step in a long commercialization process. The computer PARC brought to them cost $12,000 in materials alone and took extensive production capacity to manufacture, and with that, Xerox saw it as a product incapable of generating profit. It was Apple who was able to see this as a starting point, and so they adapted the product to turn Alto’s gold-plated clunky $300 mouse into a plastic one that costs $15 and lasts for years. Xerox thought that throwing money at a team of skilled inventors was enough, and that from there million dollar ideas would surface. They were too invested in how their current products were being developed to understand how to truly invest in innovation.
After watching Apple take the ideas from the Alto and run with them, Xerox finally decided to put the Alto on the market. The problem was, they made little effort with the product’s launch. Instead of getting their marketing team to research a potential consumer base and sales techniques, Xerox sent the Alto through its existing sales channels. The company’s sales force, well trained in selling expensive back-office products in bulk, were now trying to sell personal computers to the same people. What’s worse, they were so focused on releasing their PC before Apple that they did little to improve the prototype before its launch, so the product was overpriced, bulky, and extremely slow. Not surprisingly, it didn’t take off. Three years later, in 1984, Apple released the first Macintosh; a significantly cheaper, faster and more user-friendly version of the Alto. Not surprisingly, it did take off. Not only did it take off, but it defined the future of personal computers and Apple is now worth $750 billion.
Could Xerox have taken Apple’s place and been the leader in the PC industry? In actuality, Xerox had a lot of the right ideas. Management understood, if only on a superficial level, that innovation was necessary to keep Xerox alive, which is the reason behind PARC’s creation. PARC was a huge step in the right direction, but in order for a product to be a success in the consumer market you need more than just the right technology. What Xerox should have done was create an environment similar to that of PARC for a business development team, one that does not think and act the same as Xerox’s core company. Millions spent in technological invention is wasted if nothing is spent on commercialization. As Peter Drucker said, “the purpose of a business enterprise is to create a customer.” The company’s focus was on the wrong side of the equation here.
It was not only Xerox’s structure that was lacking, but also its mindset. To really encourage transformational growth, a company has to be both patient and committed to the idea of innovation, neither of which Xerox could claim to have been. Products were produced in Silicon Valley’s PARC, brought to Xerox’s headquarters on the East Coast, and decided by the executives whether or not to pursue. The very people making the product didn’t have a say in the decision and so the definitive answer was given by those who may know how to run a company, but know nothing about what it means to turn a good idea into a marketable product. Moreover, these executives held completely different priorities than those of the product developers. Those in the top echelons of a company are typically more invested in short-term profits than they are in producing good products for people. It should have been a decision backed by market research and consumer testing rather than a general disapproval from the executive team.
Whilst Xerox made a few bad decisions that led them to miss out on potentially trillions of dollars of revenue, it should be said that there was a reason that much money was within arm’s reach for the company. Xerox was on to something. The very fact that the company realized the need for investment in innovation suggests they valued invention far more than most other technology companies at the time. PARC in and of itself was a huge success and proved that investment in breakthrough research is necessary for any company who wants to make a difference in the industry. Far from just producing the personal computer, engineers at PARC developed object-oriented programming, laser printing, Ethernet, and even a prototype of e-mail. The inventions that came from PARC play a huge role in society even today, and that is largely because of the environment Xerox created for the scientists working there. PARC managers were never expected to direct invention in any way, and there was no pressure on time or money. In giving their engineers freedom to experiment and create, Xerox was returned revolutionary products.
Despite this tragic defeat and photocopiers fast approaching obsolescence, Xerox is still up and running, currently valued at $13.2 billion. The company has made significant changes in order to avoid making the same mistakes and they used their knowledge to improve the company. PARC continues to find new advancements in technology, and relationships between the center and corporate have improved. PARC has also employed social scientists, psychologists, and anthropologists to study how humans interact with machines and ways to improve their technology accordingly. Scientists at PARC say a new generation of interfaces is needed to cope with today’s explosion of information, and they are determined to be at the forefront of it, once again.
Xerox presents a classic case of being so close, yet so far from success. In creating an environment incredibly conducive to innovation, they invented technology far ahead of its time but then failed to recognize its potential. Instead, they dedicated their focus and marketing resources on the copier market, which they knew was shrinking fast. When they finally recognized the potential of the personal computer, they launched it too early without making it cheap, fast, or user-friendly enough, so Apple capitalized on the idea instead. Instead, they should have invested sufficiently in a business development team to work with PARC, as well as market researchers to guide commercialization. Of course, hindsight is always 20/20, but today’s market leaders should learn from Xerox’s mistake, because Google or Facebook might not know the extent of the goldmines their research facilities may be sitting on.
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