Business requires reinvention. A few case studies can make this dynamic clear: A Finnish pulp mill founded in 1865 moved on to make galoshes, telegraph cable, and pulse analyzers for nuclear power plants before becoming the world’s leading cell phone manufacturer. Nokia’s classic models still hold 10 of the top 12 slots for most units ever sold. For most people, Nokia effectively disappeared when sales plunged with the rise of the smart phone and it sold its mobile business to Microsoft in 2014, but today the slimmed down Nokia Group is doing well selling networking hardware and software to telecommunications companies, according to Wired. “That doesn’t sound as sexy as making phones, but it’s a line of business that helped Nokia net over $14 billion last year.” That’s not bad for a has-been.
While some companies iterate endlessly, others get stuck. Polaroid did pioneering work in digital photography but its instant film business was so profitable—margins in excess of 65%—that the company didn’t diversify even when it saw the end coming. As former CEO Gary DiCamillo said, “We knew we needed to change the fan belt, but we couldn't stop the engine.”
After dominating the early history of the personal computer, IBM looked to be in similar trouble in the 1990s. Despite developing the first commercial router, IBM ceded the space to Cisco, and then failed to see a market for technology to improve the performance of the World Wide Web. But in the two decades since, the company has successfully developed new businesses, including cloud computing, consulting, and business services. Its Watson platform has captured both business and popular attention.
Xerox was so dominant in copiers that in 1975, antitrust authorities ordered the company to license its technology to Japanese competitors. “Within four years of the consent decree,” Forbes says, “Xerox’s share of the U.S. copier market dropped from nearly 100% to less than 14%.”
Xerox also faced some of the same failures to capitalize on inventions that IBM did. At Xerox’s Palo Alto Research Center (PARC), the company invented early versions of the graphical user interface, Ethernet networking, and natural language processing—but then turned them over to other companies for returns that didn’t reflect the critical importance of these innovations, notes Forbes.
Yale Insights talked about the challenges of reinventing an iconic company with James Firestone ’78, president of corporate strategy and Asia operations for Xerox. “This is actually a challenge for Xerox,” he said. “We’re so well known for something that is part of today, a huge part of the past, and unclear in its role in the future.”
Following the 2010 acquisition of Affiliated Computer Services Inc., Xerox sought to diversify into back-office services for government agencies and corporations, according to the Wall Street Journal. Now, there are plans to split services and document management back into two separate companies by the end of 2016. The company’s CEO, Ursula Burns, has announced she will step down when the split is finished, but many other details have yet to be announced.
The company that invented copiers and laser printers continues to expand what high-end imaging and printing technology can do. While that strategy is effective in many parts of the world, Firestone said, “much of Asia prefers lower cost, simpler solutions.” The challenges are daunting, but as Xerox figures out what works in Asia, it is developing a set of technologies that “we think could have value outside Asia,” Firestone said. “We’re trying to expand that solution set, that’s optimized for Asia, across the world.”
Firestone noted that even when a company moves in a new direction it shouldn’t try to erase its history. “It’s very difficult to lose the past. You build on it.” At the same time, the change can’t just be a slogan; it must be something customers experience firsthand in every interaction. “You can’t just tell people you’re different; you have to actually be different.”