Thoman wants sharper image for Xerox

If you wanted a place at the heart of the information revolution, would you select a maker of photocopiers as your vehicle? Rick…

If you wanted a place at the heart of the information revolution, would you select a maker of photocopiers as your vehicle? Rick Thoman, a former lieutenant of International Business Machines boss Lou Gerstner, made that choice a year ago when he jumped ship to put himself in line for the top job at Xerox.

Its name synonymous with an earlier era of office machinery, Xerox might seem increasingly irrelevant in the age of computer networks. There was certainly a danger that it would get left on the fringe of the information revolution, says Mr Thoman.

"It was clear to me that in a digital world you simply can't grow at 5 per cent [a year] - at some point you become strategically irrelevant," he says. That could easily have happened to Xerox. Its growth rate ranked a lowly 47 among the top 50 information technology firms as recently as two years ago: only Apple and Digital Equipment did worse.

The change since then has been dramatic. A new generation of machines, which act both as copiers and printers, has lifted Xerox's growth rate above 10 per cent since this time last year, leaving aside the impact of the rising dollar. Xerox has attracted a powerful fan club on Wall Street. The man most responsible for this is not Mr Thoman, but Paul Allaire, the company's chairman. His decision to push Xerox into the digital age laid the foundation for Xerox's new burst of growth. "To Paul's credit, he has been right," says Mr Thoman, adding that it would have been easy for Xerox to remain wedded to its old technology - a failing he attributes to the struggling Motorola.

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But while the aloof Mr Allaire set Xerox on its new path, the more direct Mr Thoman has brought an extra sense of urgency to the transition. And he is standing in line to inherit the benefits from the new direction.

Mr Thoman has introduced a new, harder edge to Xerox management. Ask almost anyone who has worked close to him and the same word crops up: he is "aggressive", whether in attacking the company's overhead costs or using the courts to defend its patents.

That tougher attitude has shown itself in a number of ways during the past year. One of several initiatives Mr Thoman carried over from his days at IBM was a more aggressive approach to defending Xerox's intellectual property rights.

The number of new patents filed by the company last year was topped only by IBM, Motorola and Eastman Kodak, he says. Yet Xerox had no procedure for tearing apart and examining competitors' products and no legal staff charged with pursuing patent infringements.

The new president's hand was also apparent in Xerox's announcement this spring that it would cut 9,000 workers - despite increased growth and profits. Compared with the forced cuts at some troubled companies, the decision was seen on Wall Street as a show of strength.

The cost-cutting package - which brought good news for Ireland with the announcement that Xerox would create 2,200 new jobs in Dundalk and Dublin as part of its restructuring - was an attempt to propel Xerox headlong into a world dominated by younger, faster-moving technology companies with far leaner cost structures than the buttoned-down photocopier company.

"It was Rick, for sure," Pierre Danon, head of Xerox in Europe, says of the restructuring.

"Everything is shared between Paul (Allaire) and Rick - but he came in and led the execution."

That tough edge was displayed fully at IBM, where Mr Thoman established a reputation as a cost-cutter while in charge of the company's personal computer business. But he is clearly eager to shed the image of hatchet man - and to move out from the shadow of Mr Gerstner.

"I'm a builder of businesses," he says.

So far, at Xerox, that has meant hiring more sales staff and increasing spending on advertising, which has doubled in the past year. "We were locked into low-growth markets; our distribution was incomplete; we probably hadn't projected our image as strongly as we might [have]," the new president says.

To make up for some of those weaknesses, Xerox recently made its first acquisition in many years, adding 1,500 computer services staff to its 6,000-strong service force.

Similar acquisitions may eventually follow, Mr Thoman says, as the traditional photocopier repair man gives way to a new breed of service technicians. Actions like these are "allowing us to break out of our growth trap", he says.

The new president also claims to have brought a sharper sense of marketing to Xerox. Technology, product development, sales and service - these are all things that Xerox has always understood, says Mr Thoman. What it has not been good at, though, is "creating images in people's minds that they've never seen. I think I have helped them do that".

Meanwhile, the pressures to become faster and leaner are likely to intensify, as the battle with companies such as HP heats up.

"I always worry that we're not doing things fast enough," says Mr Thoman. He adds that Xerox's general and administrative costs should probably be half the 12 per cent of revenues that they represent just now.

Such observations suggest that the overhaul of the traditionally staid Xerox culture still has a long way to go.

"All companies in the digital world have to change," Mr Thoman says. "There has to be a great sense of urgency."

His self-declared motto is: "Above all, be active."

The new president's time has not yet come. Mr Allaire's recent successes have left the Xerox chairman securely in the driving seat until after his 60th birthday next summer. He is likely to hand over the reins of power at about the turn of the decade, a timetable that Mr Thoman says was always the plan.

For now, outsiders expect the new president to keep turning up the pressure for change, while keeping his head down. "He's not going to step on any toes until he gets the job," says another Wall Street analyst.

Of the eventual succession, Mr Thoman says: "Things are going very well and I'm still learning about the business, so there's no particular reason to accelerate it" - before adding quickly - "or decelerate it".