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Xerox’s epic failure: What went wrong?


Innovation is a crucial component of a company’s growth and success in today’s fast-paced business world. A prime example of the importance of innovation management is Xerox Corporation, which was once a leading American corporation in the photocopy industry. Despite its early success, the inability to innovate led to Xerox’s failure.

Xerox had been successful in transforming the photocopy industry with its development of xerography, a dry photocopying technique. To print pictures, an electrically charged photoconductor-coated metal plate and dry powder “toner” were used.

In 1938, their photocopy machine became famous when Chester Carlson invented “xerography”. In 1961, the company accumulated a profit of $60 million.

A deep dive into the “Xerox failure” story:

1. Xerox’s narrow and impulsive decisions:

Xerox’s major downfall happened in 1981 when the company introduced the Xerox Star, a workstation designed solely for document management. Xerox Star was launched for $16,000.

The product failed miserably in the market as IBM provided their PC for business for $1,600. Furthermore, Xerox eventually decided to venture into insurance and financial services, which were completely separate from its core company.

The business also took on the burdens of working with E-Z Pass, automated traffic tickets, and even Medicaid.

The situation worsened when Xerox’s computer-oriented innovators and xerography-focused sales force resolved disputes without proper marketing, and the Palo Alto Research Center’s inventions were doomed to become technical marvels.

Shortly after, Xerox management disabled itself from competing in the information races entirely by diverting a large portion of its cash to “safer” business sectors such as insurance.

2. Not evolving with time:

With the increasing demand for personal computers, the need for copiers and printing systems decreased. The company failed to recognize the potential of personal computing technology and instead continued to innovate its photocopy machines in the late 20th and early 21st centuries.

Despite having a lot of technical knowledge, Xerox was unable to adapt to the changes brought about by the twenty-first century. The once-innovative business became stagnant.

Apple, on the other hand, recognized the potential of the personal computer market and invested heavily in research and development. They revolutionized the personal computing industry with their iconic Macintosh computer and paved the way for the modern computer.

This led to a decline in demand for traditional photocopiers. Xerox missed out on significant growth opportunities due to its unwillingness to adopt personal computing technology, which contributed to the company’s downfall.

Apart from its lack of innovation, there were other factors contributing to Xerox’s failure. 

3. Underestimating employee innovation:

Xerox could have made huge profits off its employee innovation if it hadn’t made an alliance with EDS. They both (EDS and Xerox) entered into an outsourcing agreement in 1994.

Xerox initially transferred to EDS about 2,000 employees who performed operations with clearly high levels of efficiency, retaining only a staff of less than 400, primarily planners.

As a result, Xerox transferred the management of mainframe systems, legacy software, telecommunications, and PC support. Legacy software includes crucial billing and sales commission systems.

For Xerox, it was a poor decision. These trustworthy employees left the company who were needed in an environment of quickly shifting market conditions.

Additionally, the culture of the conservative and highly regulated EDS people clashed with the liberal and innovating Xeroids, who faced pressure to decrease expenses.

In late 1998, Xerox stopped paying EDS invoices. Due in large part to “billing disputes” with Xerox, EDS was forced to write off $200 million, or nearly half of its 1998 earnings. EDS sued Xerox in a multibillion-dollar case in February 1999.

4. Declined value in the market:

According to the lead sentence in a Wall Street Journal article in 2010,

“Xerox Corp. is launching its most expensive advertising campaign in two decades, as Chief Executive Ursula Burns looks to reposition the company as more than just a copier maker.”

Burns said the new ads are “aimed at disrupting old perceptions of the Xerox brand and positioning the new Xerox as the world’s leading enterprise for document management and business process.”

Though Xerox wanted to reposition itself, it failed to attract customers. Such diversification contributed to the failure of Xerox.

Not just this, Texas accused Xerox of fraud in 2014 due to the company’s mismanagement of the state’s Medicaid program. Then, in 2016, Xerox came under criticism once more for handling New York’s Medicaid program improperly.

The Xerox failure: Is Xerox still in business?

Xerox Corporation is a major American corporation in Norwalk, Connecticut. Founded in 1906, the company was the first to manufacture xerographic plain-paper copiers.

In the late 20th century, Xerox failed due to a lack of innovations. In 2018, Xerox was acquired by Fujifilm with a 51% stake under the Fuji Xerox name to help them recover after the loss. The new company had a combined revenue of $18 billion.

The Xerox failure story highlights the importance of managing innovation in today’s business world. Companies that fail to innovate risk becoming stagnant and being left behind by their competitors.

As leaders in your organization, it is crucial to prioritize innovation and invest in methods to get innovation flowing. Not just focusing on research and development to generate more ideas, but implementing an innovation management tool will ensure long-term success. 

Choose from the best idea management tool list that we curated for innovation leaders or get a free trial of InspireIP now.

Recommended read: Innovation Lesson for Leaders from Nike’s fuel band failure.

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