Xerox, A Service Company?

Xerox has become much more than the copy and paper company that we know and love. In an article entitled, “What Does Xerox Mean To You?”, by the blog Seeking Alpha discusses among many other things the brand equity of Xerox. Their brand is so powerful that we often replace “copying” with “Xeroxing”.

Interestingly, making copiers is only a small fraction of what the company is involved with. The company over the years has completely changed its core competency to be more of a service company than actually providing a physical product. In fact, they are involved with outsourcing business processes such as payroll accounting, etc. They also have dedicated servers for clients for cloud computing applications. In this day in age when the world is becoming increasingly paperless, Xerox has morphed and adapted to the world around them.

This idea reminded me of the Hedgehog Principal from Good to Great. Xerox successfully made it so that their core competency was aligned with what they could be best at even though it was what the company has been doing for years and years before. Also, by making the shift they are not deviating from being the ultimate document company, they are just changing the way they are being the best. Consequently, the passion that their company has for documents always had still remains even in shift. Lastly, Xerox realized that the thing that will drive their economic engine in the future would be virtual documents rather than physical documents. Therefore, the shift to dominating the virtual document world was a clear choice to drive their profits in the future.

By far one of the more interesting points of the article was a quote by economist Joseph Schumpeter:

“Every piece of business strategy acquires its true significance only against the background of that process and within the situation created by it. It must be seen in its role in the perennial gale of creative destruction; it cannot be understood irrespective of it or, in fact, on the hypothesis that there is a perennial lull.”

In other words, the way companies do business now will not be the same way that they will be conducted in the future. There will always be the “perennial gale of creative destruction” that destroys the old way of doing things with the new more innovative way.

Facebook’s Strategy in Asia

Facebook has been eager to enter the Chinese market for a long time and it is obvious why they would want to do it. China is the most populous country with over 500 million internet users, but Facebook has not been able to enter their market because of the strict censorship laws in China. Just recently, in Facebook’s IPO filing they once again relayed the message that they are eager to enter China, but, “We do not know if we will be able to find an approach to managing content and information that will be acceptable to us and to the Chinese government.” Facebook goes on and explain that they will also face strong competition from existing social media companies such as Renren, Sina, and Tencent.

Facebook still continues to assess China as a possibility. In fact, Zuckerberg is learning Mandrin Chinese . In the end, Facebook wants to ensure that they execute their plan in a way that will provided them with significant flexibility. Facebook management said regarding this topic, “this market has substantial legal and regulatory complexities that have prevented our entry into China to date. If we fail to deploy or manage our operations in international markets successfully, our business may suffer.”

Instead, Facebook is instead focusing their efforts on India, Russia, South Korea, and Japan. They believe they will be successful in these countries because of increases in broadband networks and mobile devices. Despite the positive talk, Facebook may be facing an uphill battle in these countries because their current penetration is rather shallow. India’s is the highest, at between 20-30%, and Russia, South Korea, and Japan’s penetration rate is less that 15% each. Facebook will also be confronting rivalry pressures from existing social media companies that are more established in those countries.