A seemingly career-killing sales tactic: telling customers they're wasting money on a product that once formed the core of your business. For Xerox, this approach has actually created a powerful growth strategy.
At the heart of the strategy is Xerox's innovative shift from selling products to selling solutions. Instead of pushing copiers, printers, and related parts and services, Xerox is now helping customers manage their entire printing process.
Xerox (and other vendors such as Hewlett-Packard) offer customers a long-term way to control costs by offering consulting services to help them better manage their existing equipment. A Wall Street Journal article suggested that such efforts could help reduce printing costs by as much as 30%.
It’s a great sales pitch in today’s economy. While Xerox may miss out on copier and printer sales in the short term, it’s building potentially profitable, long-term relationships—and building a foundation to move into productivity-related ancillary services.
Companies looking for similar approaches need to remember three things:
1. Start with a deep understanding of how customers think about their problems. It’s easy for companies to fall into the trap of thinking that their customers only care about the products they buy. Often they don’t. Those products are just means to a problem. In Xerox’s case, they weren’t selling photocopiers, they were selling productivity. Understanding how customers think about problems helps highlight different ways to solve them.
2. Build a solution that solves your customers’ problems—not your company’s. Xerox could have easily designed a service offering that simply masked the fact that it sold and supported Xerox devices. But that’s not what customers wanted. More than half of the 1.5 million devices under Xerox’s management were made by other companies. Consider how a startup with no business foundation approached the challenge.
3. Give new businesses great freedom. Anti-entrepreneurial forces often crush new offerings that appear to be competitive threats. Adequate self-management can be critical to long-term success.
One of the reasons companies continue to struggle to innovate is the obvious risk of leaving their current business. Xerox shows how the right business model innovation can help a company gracefully abandon its traditional core business.
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