Eight Ways Xerox OperationalizesInnovation In Document Outsourcing Services

Portrait of an Innovation-Powered Company

Gartner Q&A for ’How Do IDrive Innovation and GetMy Real Work Done?’

OperationalizingInnovation inOutsourcingIn a world where markets can literally change overnight and

when the lifespan of products, services and businesses isshorter than ever, it’s essential to keep finding new and better ways to get work done.

That’s why business leaders around the globe are stressing the critical importance of innovation. It’s adynamic way to generate new sources of revenue, increase productivity and efficiency, reduce costs, andadvance the cause of environmental responsibility.

But innovation is easier said than done. And manyorganizations struggle to justify the investments neededfor effective innovation at a time when every line item inthe budget is coming under increasing scrutiny.

In addition, many organizations have not yet developed the culture, discipline and infrastructurenecessary to turn innovation into a true core competency.

As a result, change agents at every level are turning to outside experts for innovative services andsolutions that will help them improve business processes, achieve strategic goals and facilitate businesstransformation by creating new markets and even new business models.

The need for innovation drives the outsourcing revolution

Through the strategic use of outsourcing, organizations sharpen their focus on their core competenciesand take advantage of best practices and the latest technological innovations – all of which help themoperate more efficiently and effectively.

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Innovation Insights

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July 2008

“Innovation is sustainable when it becomesembedded in the culture of organizations.”

-Gartner Core Research G00155947

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But once an outsourcing partnership has been developed,it’s important to make sure that there is a continuingcommitment to innovation that will raise the level ofperformance beyond the initial scope. That’s essential formaximizing the value of the partnership and ensuring itslong-term success.

Of course, it can be challenging for both client companiesand outsourcing partners to establish innovation as a keydeliverable, since it is difficult – if not impossible – toenvision the exact nature of future breakthroughs orpredict their ultimate impact and value.

Nevertheless, experience shows that it is possible tooperationalize innovation in an outsourcing relationshipand turn it into a continuous source of added value if bothparties work to develop the right framework to support it.

When that happens, outsourcing becomes a powerful toolfor process innovation and business transformation on anongoing basis.

Defining innovation in an outsourcing context

In the world of expert outsourcing services, there are twobasic forms of innovation that a conscientious providershould deliver:

Continuous innovations bring a steady stream of newideas to the relationship to improve all of the keyoperational components: people, products and technology,processes, and the services themselves.

Transformative innovations, which typically come fromoutsourcing providers with access to an extensive portfolioof new and emerging technologies, deliver step-changeimprovements that help clients reinvent businessprocesses and achieve new levels of performance. Insome cases, these breakthrough innovations can even beused to create new business models and revenue streams.

Together, these two forms of innovation help clientsmaximize the value of an outsourcing partnership – in theshort term and the long run.

Building a strong foundation forinnovation in outsourcing

Once you have determined that continuous andtransformative innovations are realistic goals for anoutsourcing partnership, it’s essential to make sure that theproper foundation is in place to support and produce them.

Here are some of the keys to success.

• Make a joint commitment to innovation with clear-cut accountability.

To be successful, innovation has to be a sharedresponsibility for both the client and the outsourcingprovider. Partners need to work hand-in-hand to definegoals and expectations, allocate the necessary resources,overcome barriers, and make sure that innovation is anintegral part of the operational process at every level.

It’s also important to assign accountability for “innovationco-creation” to leaders and managers of bothorganizations. Without clear-cut accountability, it will bedifficult to maintain progress, given the pressing demandsof day-to-day business.

• Expect your outsourcing partner to implementan effective continuous innovation process.

In a well-managed continuous innovation process, the fourkey components of the outsourcing operation should bethoroughly evaluated on a regular basis to identifyopportunities to raise the level of performance with newideas and initiatives.

The people involved in service delivery should beassessed through skillful, metric-based performancemanagement techniques to make sure they have theexperience, expertise, training, and creativity to deliverinnovation to the client.

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In addition, innovation should be a formal job performancerequirement for everyone involved in service delivery andthe management of the account. Services Academies, e-learning and Communities of Practice can also be used toenhance the innovative capabilities of the service deliveryteam.

The products and technology that support the serviceshould be analyzed to make sure that they are easy toconfigure and integrate, that they automate workflowswhenever possible, and that they are the best availablesolution for the client’s needs. In addition, the outsourcingpartner should explore the possibility of adding newcapabilities to existing technology that will bring new valueto the client.

Outsourcing partners with a deep “bench strength” interms of their technological resources naturally have anadvantage over competitors in their ability to keep bringingin innovative technology to meet the client’s changingneeds and boost operational performance.

Business processes should be regularly reviewed toidentify business problems that cannot be solved withexisting capabilities and capacity. In some cases, theseproblems may occur due to recent changes in thecompetitive environment or changes in the client’sorganizational structure due to mergers, acquisitions anddivestitures. Disruptive technologymay also enter the marketplace,creating new problems oropportunities for clients.

In addition, the availability of newtechnology or best practices maysuddenly provide the opportunity to re-engineer or transform document-driven processes. All of these factors

A Working Definition Of Innovation“The design, invention, development

and/or implementation of new or altered products, services, processes, systems, organizational structure

or business models for the purpose of creating new value for customers and financial returns for the firm.”

– The Advisory Committee on Measuring Innovation in the 21st Century Economy, Department of Commerce, January, 2008

should be taken into consideration on a regular basis toevaluate the need and potential for business processinnovation.

The service should also be frequently assessed andbenchmarked against industry best practices to see if itcan be dramatically improved through “best-shoring,”integrated account management, the use of SharedService Centers that operate as Centers of Excellence,and other service delivery innovations.

The outsourcing partner should also continuously monitorrelevant industries and service areas to identify paradigmshifts in service delivery that will benefit the client andpotentially provide a competitive advantage.

As stated before, this disciplined approach to continuousinnovation addresses all of the critical elements involved inan outsourced service: the people, products andtechnology, business processes, and the services andservice delivery processes themselves.

When this approach to innovation management isimplemented and maintained, it will generate new ideasand advancements that will help boost operationalefficiency and effectiveness month after month, year afteryear.

• Participate in the development of transformativeinnovations designed to meet your present andfuture needs.

Outsourcing providers committed to the development of“next gen” services often invite their clients to visitresearch centers and participate in research fairs,technology trials, alpha and beta testing, and other R&Dactivities. These opportunities not only provide an advancelook at transformative innovations that may soon be on themarket, they actively engage clients in the developmentprocess so that future services will be closely aligned withtheir emerging, real-world needs.

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transformative innovations that result in business processbreakthroughs and step-change improvements.

Key Metrics provide the concrete data managers need toturn the innovation process into a high-performancesystem based on the principle of continuous improvement.Expertise in data-driven management methodologies likeLean Six Sigma can help outsourcing partners establishthe right metrics to gauge the effectiveness of theircollaborative innovation efforts. These metrics are typicallyincluded in the Innovation Scorecard.

Continuous innovation drives business transformation and improvement

Given the critical importance of innovation to the future ofevery organization, it’s essential to find ways to turn it froma popular topic of conversation into a concrete catalyst forbusiness transformation and improvement.

Of course, outsourcing is one way to bring in innovation.But to deliver full value in a fast-changing world,outsourcing services must continue to evolve byincorporating innovation – like improvement – as acontinuous process.

That’s why both partners need to work together toestablish a co-managed innovation process that willwithstand the challenges and distractions of day-to-daybusiness.

After all, a reliable and productive innovation process willgenerate the steady operational improvements andprocess breakthroughs you need to achieve many of yourtop-priority objectives.

Increased efficiency and effectiveness…costreduction…sustainability…new sources of revenuegeneration…improved compliance and informationsecurity…the relentless search for a competitiveadvantage…the superior agility that comes from businesstransformation…

You can speed up your progress toward all of these goalswhen you operationalize innovation through outsourcing.

Source: Xerox Global Services

The open dialogue and brainstorming between clients anddevelopment teams can also generate unexpected ideasthat deserve future exploration. In some cases, theseideas may eventually result in game-changingbreakthroughs and disruptive technology that can giveclients a powerful competitive advantage in their industriesand markets.

• Develop a disciplined approach for co-managinginnovation.

To make innovation work in an outsourcing context, it’simportant to apply the same disciplined approach tomanagement that would be devoted to any other strategicinitiative.

Here are some of the management tools that can be usedto foster innovation in an outsourcing partnership.

Innovation Workshops bring high-level representatives ofboth the client company and the outsourcing providertogether to discuss the client’s emerging businessproblems and opportunities and engage in brainstormingsessions designed to “dream up” innovative solutions.

Innovation Scorecards provide innovation leaders andmanagers with the critical information and performancemetrics they need to manage and maintain a productiveinnovation process. The scorecards should provide adashboard for both the continuous innovations thatimprove operational efficiency and effectiveness and the

“This is a company that thrives on innovation.”– Anne M. Mulcahy, Chairman and Chief Executive Officer, Xerox

Source: 2007 Global Citizenship Report

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Eight Ways Xerox OperationalizesInnovation In Document Outsourcing ServicesWhen a client entrusts a keybusiness process or operation toXerox, we make a promise to bringinnovation to the partnership on acontinuous basis.

We also promise to leverage thecreative firepower of our world-famous Xerox Innovation Group tohelp our clients take advantage ofemerging technologicalbreakthroughs that have the potentialto transform business processes andcreate new business models.

These are ambitious goals. And theonly way to achieve them is to take adisciplined approach tooperationalizing innovation in everyDocument Outsourcing engagement.

Here are some of the ways we do that.

1. Building a strongfoundation for innovation

with disciplined, data-drivenanalysis and assessment

Xerox Lean Six Sigma is a rigorous,data-driven approach to processimprovement that combines the toolsand processes of two well-knownmanagement methodologies: Leanand Six Sigma.

Our Lean Six Sigma experts use theiranalytical expertise to find innovativeways to help clients save up to 35%of their total document costs andmaximize their investments in IT andtheir infrastructure.

Their disciplined, fact-basedapproach to consulting, analysis andassessment plays a key role indesigning and implementing servicesthat bring innovation to our clients’document-driven business processes.

2. Bringing innovation to ourclients with our best-in-classDocument Outsourcing services

The innovative services we delivergive our clients new ways to get workdone with documents. And that helpsthem reduce costs, operate moreefficiently, take full advantage of thepower of automation, and focus moreattention on what they do best.

Take the office environment, forexample. Our Xerox Office Servicescan turn a costly, hard-to-managecollection of printers, copiers, faxmachines and scanners into anoptimized utility that delivers state-of-the-art document services to endusers while reducing costs on a year-over-year basis.

These benchmark services alsoreduce the critical employee-to-device ratio, eliminate the need toengage multiple vendors for serviceand supplies, and free up preciouscorporate capital and resources forother purposes. It’s a classic exampleof how Document Outsourcingservices can have a transformativeimpact on traditional business modelsand operations.

Other innovative services in ourportfolio help clients engineerdramatic improvements in document-driven business processes, high-volume printing and imagingoperations, and even the design ofmarketing and customercommunications. These services allrepresent important breakthroughs intheir categories.

Source: Xerox Global Services

Xerox Lean Six Sigma brings innovation and value to our clients’ documentdriven processes

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3. Adding innovative capabilities to existing technology

Multifunctional printing is a coretechnology in the business worldtoday. It holds the key to improvedefficiency in the office. And it canhelp build the infrastructure tosupport Enterprise ContentManagement in the future.

At Xerox, our award-winningMultifunction Printers (MFPs) set thestandard for performance in theirclass. But our approach to thedevelopment of future-proofmultifunction technology pushesbeyond the limits of printing, copying,faxing and scanning to facilitate thedevelopment of new applications thatwill provide even more value to ourclients in the future.

That’s why we now incorporate ourinnovative Extensible InterfacePlatform™ (EIP) in many of ourMFPs. Based on Web standards, thisflexible technology allowsindependent software developers toinvent exciting new applications andcustomized workflows that streamlinethe conversion of hard copydocuments into digital files.

The Wilkes-Barre School District inPennsylvania took advantage of thisbreakthrough application to automateits enrollment system, reducing theper-child registration process fromtwo weeks to 30 minutes.

Scan-to-email and all of the otherEIP-based applications that will comein the months and years ahead willplay a key role in the development ofthe next generation of industry-focused Document OutsourcingServices.

4. Establishing acommon plat-form to facilitate innovation and transformation

Our XeroxDocument LinksSM

Services Platformestablishes acommontechnologicalfoundation forDocumentOutsourcing servicesthat streamlines deploymentthroughout the enterprise.

Links also integrates all of our serviceofferings and provides immediateaccess to comprehensiveperformance data and informationthrough a user-friendly, online portal.

Thanks to these capabilities,Document Links improvesmanagement, speeds up thecontinuous improvement process, andoptimizes service delivery on anenterprise-wide basis.

It is a powerful tool for bringingcontinuous and transformationalinnovations to our DocumentOutsourcing clients.

5. Engineering high-efficiency workflows

We use our expertise in Lean SixSigma to help clients design highlyefficient workflows for their document-driven business processes. Byeliminating unnecessary steps,reducing variability and improvingquality, we help them dramaticallyincrease productivity, speed upturnaround times and reduce theiroverall costs.

Source: Xerox Global Services

In high-volume print productionenvironments, for example, we offeran innovative consulting programcalled Lean Document ProductionSM

(LDP) that helps clients re-engineertheir workflows and achieve newlevels of performance.

The program begins with anintensive, data-driven assessment ofthe current state. Then our efficiencyexperts develop mathematicalmodels of the operation and simulateoptional workflow designs todetermine the most efficient solution.

We then implement wireless bar codescanning and tracking technology tooptimize job scheduling, routing,batching, sequencing and othertasks. This disciplined approach toprocess innovation helps our clientsturn their operations into Centers ofExcellence and dramatically lowertheir production costs.

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6. Investigating opportunitiesfor business process innovation

At Xerox, we use KnowledgeExchange Workshops to engageclients in productive discussionsabout document-related problems andopportunities in specific businessprocesses and lines of business.These workshops – led by expertXerox facilitators – dig deep into thespecific issues that can be addressedwith innovative ideas and services.

Many of our clients also ask us toassess their document-drivenprocesses with a formal BusinessImpact Analysis that utilizes LeanSix Sigma tools and processes.

The insights we gain from thesehighly focused, information-gatheringmethodologies speed up thedevelopment of process innovationsdesigned for our clients.

7. Letting customers play a leading role in the development of future breakthroughs

Since the value of innovation at Xeroxis measured by the value it willultimately deliver to the people weserve, our customers are intimatelyinvolved in the research anddevelopment process.

Xerox scientists study our customers’problems and pain points andcarefully analyze their document-driven work processes. And this“living lab” research often leads tostunning breakthroughs.

Our Innovation Workshops bringsenior leaders from clientorganizations together with ourgroundbreaking researchers todiscuss emerging problems, trendsand opportunities in their industriesand organizations.

We also invite customers to ourtechnology showrooms to engage in

Dreaming Sessions that oftengenerate interesting ideas thatdeserve further exploration.

We send teams of Xerox scientistsand researchers to client sites tostudy the way they work withdocuments. These Work PracticeStudies can be very productive. Takereusable paper, for example. A Xeroxresearcher observed that almost 40%of the pages printed on a customersite were soon thrown away orrecycled. The solution? Invent aspecial paper that can be reusedagain and again as a way to helpclients save money and reduce theirenvironmental impact.

We also use communication tools likeInnovation Workshop Reports,internal Online Blogs and DocumentRepositories to keep the innovationconversation going and help us usethe insights we gain from ourcustomers to fuel the next generationof breakthrough Xerox Innovations.

It’s all part of a formal process atXerox we call Customer LedInnovation.

8. Making everyone at Xerox accountable for innovation

All of these efforts help us bring newinnovations to our clients on anongoing basis. But perhaps the mosteffective way we operationalizeinnovation is this: We makeeveryone at Xerox responsible forcontributing to the innovationprocess.

That’s why innovation is listed as animportant item on everyone’sperformance review. We alsoestablish quotas for new ideas andsuggestions. And during thequarterly account reviews we holdwith our Document Outsourcingclients, we thoroughly evaluate all theideas we have brought to the table toachieve operational excellence andhelp our clients improve theirorganizational efficiency andeffectiveness.

In other words, we have a disciplinedmanagement process to ensure thatwe bring continuous innovations andtransformative innovations to ourclients on a never-ending basis.

When you combine that formalizedprocess for operationalizinginnovation with the remarkableproductivity of our renowned XeroxInnovation Group, it’s easy to seethat innovation is everyone’s job atXerox today.

Source: Xerox Global Services

“Innovation only counts if it makes a real different for our customers. That’s why our mission

is to deliver innovations that solve the problems our customers face today while creating

visionary technologies for tomorrow and beyond.”– Sophie Vandebroek

Chief Technology OfficerXerox Corporation

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Innovation In Action:Three examples of operationalizinginnovation through outsourcing

Turning costly, hard-to-manage assets into anoptimized “utility”

A global leader in information storageand management wanted to improvethe way it managed nearly 5,000networked printers, copiers and otherdocument management devices toreduce costs and lower itsenvironmental impact.

Since the company was a firm believerin outsourcing non-core operations, itdecided to turn management of itsdocument device infrastructure over toXerox, its strategic documentmanagement partner.

Xerox conducted a rigorous, Lean SixSigma-based analysis of the situationand implemented a series ofrecommendations to right-size thefleet, upgrade the quality of servicesavailable to end users, reduce wasteand energy usage, and lower theclient’s operating costs.

The outsourcing solution decreased per-page printing costs by 55% and loweredthe overall operating costs by 30%. Theimprovements produced annual savingsof approximately $7 million.

In addition, Xerox brought inenvironmentally friendly newtechnology and implementedimproved recycling procedures thatreduced landfill wastes by 20 tons.

As a result of these achievements,the client initiated plans to expandthe innovative outsourcing solution toits operations in Europe and Asia.

Transforming a key business process

A leading financial services companywanted to make dramaticimprovements in its process foropening accounts for high-net-worthclients. The process – whichdepended on paper documents,manual workflows and overnightshipping – was expensive, time-consuming and error-prone.

To improve this critical process, thecompany outsourced scanning andindexing of the documents to Xerox.The solution significantly reducedcycle times and costs. But thepartners continued to look foropportunities for innovation andimprovement.

Following a disciplined, Lean SixSigma analysis of the situation, theclient decided to establish adistributed image capture network inits branch offices using state-of-the-art multifunction devices provided andmanaged by Xerox.

The new solution reduced the time ittakes to open a new account fromseveral days to just a few hours. It alsoreduced error rates, increasedemployee productivity and virtuallyeliminated the need for overnightshipping. As a result, the clientimproved customer satisfaction andlowered its operating costs even more.

As a result of these measurable gainsin efficiency and effectiveness, theclient is now exploring otheropportunities to improve its approachto document management throughinnovative outsourcing.

Transforming abusiness process andcreating new revenuestreams for a client

A division of one of the world’sleading information services providersneeded to transform a key businessprocess that supported valuableservices marketed to the constructionindustry in North America.

At the time, the division operated fivein-house imaging centers that captureddrawings and data which were thensold to clients in different forms. But theorganization’s leaders were concernedabout the inefficiency of the in-houseoperation which resulted from outdatedtechnology, excessive staff turnover,and other problems.

To transform the process, the divisionoutsourced its imaging operations toXerox. By consolidating the fiveimaging centers into a singleoutsourced operation based at aworld-renowned Center ofExcellence, Xerox reduced theclient’s costs by 20% and shortenedturnaround times. The outsourcedservice also improved the quality ofmore than 30 million images capturedeach year.

While operating the benchmarkservice, Xerox continued to look forways to add value through innovation.By providing new software tools formining and packaging the scanneddata, Xerox helped the client expandits portfolio of information services andcreate new revenue streams.

Thanks to the success of theseinnovations, Xerox was invited toexplore additional outsourcingopportunities in other divisions of theparent company.

Source: Xerox Global Services

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Gartner R

esearch

Gartner Note: Q&A for ‘How Do I Drive Innovation

and Get My Real Work Done?’

Creativity and innovation are overshadowed bypressing day-to-day work priorities, unlessorganizations face significant stress. Engineerhealthy "stress" to foster creative responses andboost innovation.

ANALYSISIntroductionInnovation is a hot topic for IT and business leaders.Innovation is simply the introduction of a new idea in theform of a product, process or service. For organizations,innovation is the enabler of organic growth and thestepping stone to the new frontiers of business on theWeb, across the globe and in a variety of partnershipsand relationships. But many organizations areoverwhelmed with work and face a talent shortage in keyaspects of their business. The leaders and managers inthese organizations are expected to deliver operationalexcellence every day and to continually innovate to renewthe business. So, how do employees get the "real" workdone and also make time for innovation? Do they evenhave the time to innovate?

Question: As an IT leader, how do Idrive innovation and get my real workdone?Answer: Business executives and investors expect IT toplay a central role in driving innovation, regardless ofwhether technology is a strategic weapon or a basiccommodity in the strategy. It is equally important forconservative technology adopters to unleash creativity todrive innovative solutions for operational problems as it isfor aggressive organizations to pursue differentiationthrough innovation. Many CIOs and IT leaders report thattheir teams are so bogged-down in day-to-day activitiesthat creativity and innovation are stifled.

Organizations can take two actions to build creativity andcompetence in innovation.

Action 1: Get innovation on your agenda andinto your culture

Innovation is sustainable when it becomes embedded inthe culture of organizations. This occurs on two levels: • Routine work: One aspect of every job is continuous

improvement and "incremental innovation" in the workdone every day. Organizations accomplish incrementalinnovation in some fashion. When you think about it,you probably participate in many efforts to redesign,improve or update your methodologies, standards,business processes, applications, architecture orworkplace. However, the best organizations call outincremental innovation as a specific accountability. Theyhold people accountable for performance andproductivity improvements. They have metrics andmeasures of results. These organizations areintentional about expecting innovation as a part of everymanager’s (and often, every team member’s) job.

• Innovation work: Beyond incremental innovation,organizations also need step change or disruptiveinnovation. The drivers may vary widely – for example,the organization is facing a crisis (losing market share,declining revenue, competitive threats, emerging trendsor technologies) or there is an organizational imperativefor organic business growth. In these cases, anorganization identifies innovation initiatives that areconsidered imperatives that must be funded, prioritizedand ranked among other key initiatives.

• Step-change innovations aimed at resolving a crisis willrequire that resources be shifted (moved from the day-to-day improvements to innovation initiatives) or newresources allocated to the crisis point. Why continue toenhance a product that is being made obsolete by newmarket entrants? Why continue to build exceptionalhandling in a dysfunctional application instead ofretiring the application (and, perhaps, its customers)altogether? Organizations must make choices of wherethe resources for innovation come from (either throughnew funding or by re-prioritizing established initiatives).

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impossible to achieve. To stoke creativity, drive aninnovative culture and fuel higher levels of innovation,organizations must learn to emulate the attributes andbehaviors of organizations at the extremes of crisis orsuccess (see Figure 1).

If your organization is somewhere between the twoextremes, then you can foster higher levels of innovationby fabricating the extreme conditions: the uniting power ofurgency or unleashed imagination. • Emulate "distress" by creating tension, focusing on key

targets for innovation (new products or services, valuedisciplines of the organization or persistent businessissues, such as customer productivity) and instigatinghealthy competition among teams and individuals.

• Emulate "success" by walling-off dedicated "think" timeor making innovation a key component of every-daywork, rather than a special occurrence.

Here, we examine two organizations that have exploitedthe circumstances of distress and success in drivinginnovation. Each example reveals techniques that can beapplied by organizations in the trough between crisis andsuccess.

Distress Example: Xerox"I think I am more motivated by fear of failure than a desireto succeed. My experience at Xerox has taught me thatcrisis is a very powerful motivator. It forces you to makechoices that you probably wouldn’t have made otherwise."Anne M. Mulcahy, Xerox Chairman and CEO

Action 2: Know where innovation comesfrom and how to drive creativity

To inspire and channel innovation toward any area of fo-cus, organizations need a ready workforce with intrinsiccreative capabilities. It is difficult to foster creativity anddrive innovation, while also attending to near-termpriorities, yet some organizations are clearly able to riseabove those challenges. Two opposing perspectivesreveal how these and other organizations are able toelevate their creative capabilities. These can be illustratedby two prominent thinkers:• Plato recognized the creative fuel of distress when he

coined the phrase, "Necessity is the mother ofinvention." When an individual or group is in crisis, theurgency of finding a solution unleashes creativity andinnovation that would not have arisen otherwise. Thereare various situations that put organizations in severedistress – serious product malfunctions and recalls,fraud or strategic mis-steps – and put companies onthe brink of bankruptcy or insolvency. Despite, orperhaps Plato would say "inspired by," such distress,some organizations’ reactions are highly creative, andthe resulting innovation propels the organization intorecovery and success.

• Agatha Christy recognized an alternate perspectiveand disagreed with Plato when she said, "I don’t thinknecessity is the mother of invention – invention, in myopinion, arises directly from idleness, possibly alsofrom laziness." People need the freedom and time toimagine unforeseen possibilities. In business, examplesexist where creativity and innovation surge whenorganizations have achieved ahigh level of success, areseeking new frontiers andcreate situations for just suchimaginative exploration.

These perspectives eachrepresent a situation of extremestress. The velocity and quality ofinnovation is often higher fororganizations facing stress,whether it stems from a crisisand the prospect of failure orfrom past success and theuncertainty of the next move.The problem is that mostorganizations find themselvessomewhere between the twoextremes most of the time –neither in a dire crisis norexceptional success. It is in thisvast middle ground wherecomplacency sets in andinnovation is difficult or

High

Low

Failure (crisis) FrontierClimate

InnovationVelocity and

Quality

Elevate innovation byemulating extreme

conditions

Source: Gartner (March 2008)

Figure 1. Innovation at the Extremes

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Xerox is the epitome of a post dot-com turnaroundsuccess story. In October 2000, the company facedshrinking revenue and margins, a plummeting stock price,and its investment rating was cut from A- to BBB. Xeroxneeded to urgently address the imperatives at hand –resolving liquidity issues, cutting expenses and reducingdebt. In parallel, the company put an emphasis oninnovation of their core business as the foundation forlonger-term success. Xerox exemplifies an organizationthat was at the failing extreme, and its "perfect storm" wasa call to action. Beyond the urgency of the turnaround,Xerox leveraged the crisis circumstance to fostersustained creativity, collaboration and innovation.

Most instructive here are the steps Xerox took toreinvigorate the culture, and what it does today to sustainhigh levels of creativity now that it has successfullymoved from one extreme to the other. In creating aculture for innovation, Xerox has focused on four criticalsuccess factors: • Intense customer focus and intelligence• Creativity and leverage within its core technology

competencies (and jettisoning business activities thatwere outside these competencies)

• Adopting a disciplined innovation process• Creating a climate that embraces and manages risk

The vital threads that enable sustained innovation werethe processes and the people. The organization andculture has been reoriented to actively listen tocustomers, employees and partners to drive continuouscreativity and innovation through disciplined processes.

Success Example: Google"We aspire to innovate as much on the people side as wedo on the product side." Google Founders’ Letter, AnnualReport, 2006

Google is widely viewed as the corporate prodigy forcreativity and innovation. Most organizations are not, andwill never be, a Google – few can afford to subsidizeemployee benefits such as free gourmet meals, on-site

services (such as laundry) and entertainment. There ismuch to learn from Google about fostering workforcecreativity. Three critical success factors are trust, time andtalent. • The founders and CEO collaboratively run the company

and their relationship of mutual trust permeatesthroughout the culture.

• Google treats time as a precious commodity, andpeople in technology roles are expected to spend 20%of their time on innovation – this innovation time isallocated as 70% on the core business, 20% on corebusiness adjacencies to the core business and 10% infree-form boundary-less creativity.

• Creativity features strongly in the recruiting process,where the goal is to hire talent, rather than to fill specificpositions or skills.

Google was one of four companies that appeared onFortune’s 2007 list of top 10 companies, and in the 2006top-10 list of most-admired companies in the innovationcategory that also appeared in the people managementcategory. Google’s practices, with respect to workforcemanagement, creativity and innovation, provide goodinsight for organizations aspiring to elevate their innovativecapabilities. Mature management of human resources is aprerequisite: people who do not feel empowered orprotected will not feel confident suggesting risky ideas orhave the courage to confront the status-quo.

Bottom LineFor incremental innovation, make it more visible in yourorganization and take credit for accomplishments. Forstep-change innovation, boost creativity by fabricatingelements of the extremes. Emulate "distress" by creatingtension and instigating healthy competition. Emulate"success" by walling-off dedicated "think" time, makinginnovation a key component of every-day work, rather thana special occurrence.

Source: Gartner RAS Core Research Note G00155947, Susan Landry, Kathy Harris, 19 March 2008

Innovation Insights is published by Xerox Global Services. Editorial supplied by Xerox Global Services is inde-pendent of Gartner analysis. All Gartner research is © 2008 by Gartner, Inc. and/or its Affiliates. All rights reserved.All Gartner materials are used with Gartner’s permission and in no way does the use or publication of Gartnerresearch indicate Gartner’s endorsement of Xerox Global Services’ products and/or strategies. Reproduction anddistribution of this publication in any form without prior written permission is forbidden. The information containedherein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy,completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequa-cies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility forthe selection of these materials to achieve its intended results. The opinions expressed herein are subject tochange without notice.

Portrait of an Innovation-Powered Company

In 2007, Xerox received the U.S. National Medal ofTechnology, the highest honor for technological achievementgiven by the President of the United States. The awardrecognized Xerox for 50 years of successful innovation.

This rich history of technological achievement began with thefirst analog copier, an invention that literally revolutionized the

way the world works with documents. Ever since that time,innovation has been the lifeblood of Xerox.

Today we are working hard to bring the next generation of document managementsolutions and services to clients around the world.

Some of the “coming attractions” from our dedicated innovation centers will speed upthe flow of information and make it easier for people to work with both paper anddigital documents. And some will protect information, improve compliance andadvance the cause of sustainability.

Other breakthroughs will bring new structure to the vast stores of unstructureddocuments that play a dynamic role in virtually every organizational activity. Andsome will even make paper and digital documents “smart enough” to automaticallyorganize, route and update themselves.

“Our services research is focused on providing documents with their ownintelligence,” explains Sophie Vandebroek, our inspiring Chief Technology Officer.“This way you can eliminate many error-prone manual processes, automatebusiness processes, and allow customers to capture the cost savings and revenuegrowth opportunities.”

For more information, visit www.xerox.com/innovation.

About Xerox Global Services. Enterprise Document ServicesSM is our strategicapproach to transform your documents to help reduce costs, achieve operationalexcellence and grow revenue. Through our unique combination of experience,resources and technology, we help integrate and optimize your office environment,high-volume print production and business processes. And it all begins by workingwith a proven partner.

Innovation @Xerox:

A few fast facts.

• Four dedicated innovationcenters

• 500 scientists & engineers • More than $1 billion

invested annually in R&D(with Fuji Xerox)

• Ongoing research in colorscience, computing, digitalimaging, work practiceanalysis, linguistics, novelmaterials, nanotechnologyand other fields related todocument management &printing

• More than 8,600 activeU.S. patents

• Approximately 800 newpatents added each year

• Named “OutstandingCorporate Innovator” bythe Product Developmentand ManagementAssociation (2006)

• Winner of the U.S.National Medal ofTechnology (2007)

“Xerox hasbecome an innovation power again…”

- Fortune magazine