Online Extra: She Put Bounce Back in Xerox

In three years, Anne M. Mulcahy cut costs, lifted productivity, and averted financial disaster -- while still funding R&D

When the board chose Anne M. Mulcahy to lead Stamford (Conn.) Xerox (XRX ) back in August, 2001, it was in terrible shape. It was fighting the Securities & Exchange Commission over accounting practices and struggling with $14 billion in debt. Bankruptcy was a real possibility. Nonetheless, after making substantial cutbacks, bringing in a new chief financial officer, and meeting with innumerable customers, Mulcahy has managed to stabilize the once-teetering giant.

By yearend 2004, debt will dip below $10 billion. And Xerox has met earnings expectations in each of the past 10 quarters. Mulcahy expects new products to spur sales growth in 2005, the first increase since 1995. BusinessWeek Senior Writer Nanette Byrnes recently spoke with Mulcahy about her stint in the corner office. Edited excerpts of their conversation follow:

Q: Looking back over the last three years, what would you say has been your biggest challenge as a CEO?


Probably one of the hardest things was to continue investing in the future, in growth. One of the most controversial decisions we made was to continue our research and development investment. When you're drastically restructuring in other areas, that's a tough decision. It makes it harder for the other businesses to some extent. But it was important for the Xerox people to believe we were investing in the future. Now two-thirds of our revenue is coming from products and services introduced in the last two years.

Q: Was the controversy about R&D spending outside Xerox or within the company?


It was all outside. Inside we'd developed a vision. People bought into it very much.

Q: Moving into 2005, what would you say is the biggest difference between the Xerox of today and the Xerox of three years ago?


The experiences that we've been through have certainly focused [us] on really being excellent in execution. Building back our credibility and respect has been a big part of what we've been about. Meeting and even beating expectations had to be a big part of that.

Q: How has the culture changed at the company?


We've brought a lot of the culture with us. There are a lot of great parts of the Xerox culture that are part of its history. I think we're a lot quicker, a lot more efficient, a lot tougher than perhaps we were in the past, a lot harder in making decisions. You have to be focused on what you do well and what you don't do well.

Q: Looking ahead, what will be the big challenge for Xerox?


We call it the journey to growth and greatness -- and growth is a big part of that. The year 2005 is time for total growth in the company. We will have addressed a lot of the lagging issues of the past. Maintaining and sustaining a growth strategy is at the top of our agenda.

Q: Do the skills for running the company's growth differ from the skills you needed to drive the turnaround in your first years as CEO?


There are some things you do differently. Leadership is kind of a constant. Whether your mission is turnaround or growth, getting your people focused on the goal is still the job of leadership.

Q: Do you expect the broader business environment to be better in 2005?


I hope so. It would be nice. I don't think I've yielded yet on saying there's been any great tailwind. A lot of what we've done is adapted a strategy to help companies deliver productivity, reduce cost, and become more efficient. We've been kind of playing to the current economy -- in a world where investments are hard-won, you have to deliver a value proposition that delivers a return. I don't expect to see any major shifts. This is kind of a steady economy.

Q: You've said that it wasn't your life's ambition to be CEO of Xerox, that it's a bit of a surprise that you ended up running this company. Now that you've been in the job for several years, would you say you like it?


I would say I love it. It's great to be reflecting on the last couple years and knowing we've come through some tough times. I've been 28 years at Xerox, and I have a strong feeling about the real privilege of leading this company.

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