On the problems facing the world's growing population, the challenges of M&A, and the one thing people don't understand about Xerox.
FORTUNE — Ahead of her keynote at her company’s inaugural Simple@Work conference in New York City, Xerox XRX chief executive Ursula Burns sat down with Fortune senior editor Andrew Nusca for a wide-ranging discussion on the motivation of overpopulation, popular perception of Xerox, and her biggest business challenge for 2014. Below are her words, edited and condensed for clarity.
We have 7 billion people in the world. We got from 5 to 7 billion faster than anyone thought. The most aggressive estimates would have had us at 7 billion people by 2017. So we’re there — we passed by it. The reason why is because things are getting better, even though you don’t necessarily see it. We have higher food safety. We have more dispersed energy. Health care is prolonging lives. War is not killing as many people as it did in the past. We’re living longer. More people are being born all over the world.
For all of my roles at Xerox, I’ve had to travel around the world. One of the things that has always struck me, even to this day, is how, everywhere you go, there are probably 10 times more cars on the road than the road can handle. You go to Mumbai, you go to Delhi, you go anywhere, and you say to yourself, “Come on now.” New York City, Mexico City, Paris. Think about that.
Today, everybody that has one of these mobile devices, and while people don’t know it, it has to be powered by something. Where does it come from? We now have seven-and-a-half billion people. They need water that’s potable. They need education — we don’t have enough teachers, or the right kind of teachers, and we don’t have them in the rural areas. To address everything that you need with more and more people, we can’t just do more and more of what we did before. It’s just not going to be possible. You run out of space. You run out of patience. You run out of everything. So what you have to do is inject scalability, efficiency, and cost savings. So how do you create platforms that can help many people? How do you drive efficiency in a system? How do you drive cost out of a system? And how do you allow people who need things to actually not have to create them all themselves?
This is a big thing. It’s really a big deal. We’re creating a whole bunch of opportunity and future, but we’re not necessarily creating the infrastructure to house it all efficiently and effectively. One of the things Xerox can help do — and we’re not the people who do it all — but we can allow more goodness to be spread around the world easily. And that’s what, fundamentally, our business is about.
I happen to be one of the intellectual snobs. I don’t think I’m actually an intellectual snob, because I don’t think I’m that intellectual. But what I mean by that is, I always look at things and ask the question, Why not? Why is it that I got a great education and the vast majority of my neighbors didn’t? Why is it that I went to a great college [the Polytechnic Institute of New York, now part of New York University] and a lot of people didn’t? Why? Part of it is having the fluke, the good luck, of having a great mother. Why did I become an engineer? That was luck. So early in my life, I tried to figure out a way to give people more purposed outcomes than just luck and chance. Because most of the people who are considered my cohort, in my [Lower East Side, New York] neighborhood, are still there or dead. Why is it that more people don’t have?
Transport that to business. We started by looking at just our basic business — changing the business process of communicating via page-based documents. Instead of just perfecting that — and we did — and stopping there, we asked the same set of questions: Why is it that we can do break/fix service and manage an office infrastructure with document technology for Xerox devices, but not everybody else’s devices? It’s the same device — so why can’t we manage that infrastructure? Instead of having every business around the world do something that is inefficient, and therefore is something that they won’t do very well, why not platform it and do it?
So basically, it started with this approach that I have of, “There’s gotta be a better way.” There’s got to be a better way to get an education. There has to be a better way of managing the roads out here. There has to be a better way, and let’s try to figure out a way to lower the barriers. Because I know for a fact that if we could provide a reasonable education — I’m not even saying a great education; just an average, good education — to more people, the world would be better. We would have fewer dependent people, we’d have fewer people incarcerated, we’d have fewer people needing health care, we’d have less of everything bad. So why not just do that?
That’s why I got into technology and engineering. Engineers have this reputation for believing that everything has a fix. Once it’s fixed, we can make it even better — so we’ll just keep working on it. You told me the car was perfect? We said, “Well, you know, not quite. Why does it only go 60 miles per hour? Why can’t it go 400 miles per hour?” So engineers have this never-ending quest for: There’s got to be a better way.
I don’t necessarily believe the world should be run like a business. I believe the world should be run like a good business. A good business takes care of lots of different constituents. When you say the word “business” today — particularly in America — people actually think about shareholders and rich executives. That’s not business. A good business has a community, customers, employees, shareholders as part of its customer set. A good business has to balance, over time, excellent results for all of them — not just one. The world should run like that — with efficiency and the future in mind.
How do I get that in our company? You’ll hear us talk about the status quo. If only I could have a sign that had the word “status quo” with an X through it. I say to my team all the time that this is how I grew up: Always thinking that, at any minute, I could be unemployed. You have to scramble. You have to work hard and get ahead of things. Understanding the status quo and being impatient about the way things are is something that I ask my team to think about. I was not the first person to demand this at Xerox; the CEO before me [Anne Mulcahy] was excellent at this as well. As soon as you become really, really good at something, there’s somebody right behind you. It means you’ve perfected it, and all they have to do is copy it at a reasonable pace and for a little bit less, and they can put you out of business. So this idea that there’s always somebody there to usurp you? That’s going to make you work a little bit harder and take a little bit less margin. That disdain of the status quo is what keeps our company going. It’s the personality of our company.
We have fallen into an external view that Xerox went into services because other tech companies went into services. I wish that we were that clever! We didn’t think about it that way at all. We said, Okay, we work with a whole bunch of clients. We have really good relationships with them. Because of those relationships — let’s say 95% of them thought we were great — they said, “Because you’re so great, why don’t you do this next thing for us?”
The first question they asked us was, after they put in our technology, “I have your technology over here, and I have some other guy’s technology over there. All of it is managing printing and copying and faxing. Can’t you just manage it all for us?” That was literally our first foray into services. We started to realize that our skillset of using technology to solve problems — our brand — gives us the trust we need to do this. So we said, “Okay, we can do that.” And we went back to the lab to invent it. So this lack of fear around the idea that our smart people can solve this problem actually kept dragging us toward using the assets that we had in a broader way.
We have a great brand — people don’t just know our name; with it, they associate great things — around innovation, around being global, around — and this is the most important thing — staying with customers. We’re not perfect, but we’re not going to leave them hanging. We’ll work with them. We’ll make sure that they actually shine, even if it means some skin off of our hide. So these assets that we have — people that are amazing, and have been at our company from their first job, and not because they’re stranded there, but because we have that team perspective — those assets should be able to be used close to our core business in more ways.
So after we got into this document outsourcing business, we just kept looking around. Customers kept saying, “You do that really well for me, but I have all this stuff in filing cabinets, and I couldn’t tell you how to find anything. Can you help us with that?” And we say, of course we can! And we go back to our labs to work it. Basically, we got dragged into services by our customers. It was a very safe and positive way to start.
We tried to build every business process service ourselves. Then we found out that we couldn’t do that. So we had to buy smaller companies that were underutilized, underscaled, under-resourced, everything. And we found a big one [Affiliated Computer Services] that actually basically did in B.P.O. [business process optimization] what we wanted to do, which is buy up all these small companies, take them in and expand them. They were also limited to the United States.
M&A is hard. I’ve come to the conclusion that small M&A is equally as complicated and equally as risky as big M&A. Buy five $100 million companies to get to $500 million, you’re going to live five times through what you live through — complexity, people, etc. — buying one $500 million company. M&A is like a new child every time. Having triplets may be better than having one kid at a time.
Since the ACS acquisition, our company is fundamentally different in some ways but very much the same in others. The ways that we are different is that we are engaged with clients in a broader and more sticky set of services. We manage the finance and accounting infrastructure, customer engagement — complaints and requests and dreams come through our call centers — and health care [systems]. We’re a company that’s still making work simpler.
That about what Chester Carlson did when he created the copying machine: He was just pissed off that he had to write the thing seven times. He didn’t say, “Well, I’m going to create an industry.” That business process was not what he did for a living. He was a friggin’ patent attorney! So all of his time was involved in the attorney-ing around patents. But he found out that he was spending a disproportionate amount of time on this thing that was literally, for him, very low value-added — but required. Not his expertise. So he created this technology, and the rest is history.
What we do today is exactly that — we just do it around many more things than copying. We do it around finance and accounting, for example. Every company big and small in America that has a finance and accounting system? They all create their own. Some of them actually should. But many of them just want to get information about what they bought, what they sold, how many people they have — a platform does that. Customer care is another example. Businesses set up their own. Boeing has a call center. Boeing doesn’t do call centers; Boeing does planes! Ford has a call center; they don’t do call centers either. They’ll look around and ask, “Well how many people do I have doing call centers?” “Five thousand.” “How many engineers do I have?” “Three thousand.” And they’ll think, “Wow! Why am I even doing that? And I’m doing it for myself — it’s not scaled.”
A call center is a call center is a call center. The actual fundamentals are the same — the infrastructure, and the telephones, and the computers, and how you actually log data, and how you train all these people, and how you continue to up-skill, and how you bring people on board, and how you actually manage them for efficiency. Boeing has zero idea on how to do that. But they’re going to learn, because they need to have customer care.
So what we do is, we actually say, “You don’t have to learn that.” Once we learn something about you — what’s valuable to you, what’s the personality of your company — we will be able to give you a scaled customer infrastructure so you can stick to your core competency. That’s what Chester Carlson tried to do: “I want to stick to my core competency, which is patent attorney-ing and not copying. So I’m going to create a process that makes it possible.”
When you think about Xerox’s business from that perspective, you ask, Why aren’t we doing more things that require technology, that are document-intensive, that can be repeated? And why aren’t we more global? Most of our process-outsourcing business is from U.S. customers doing business in the U.S. or U.S. customers that have dragged us into international markets. Our B.P.O. and I.T.O. [information technology outsourcing] businesses are still weighted very heavily toward the United States. It’s because of the history of ACS.
We want to diversify revenue, risk, cycles in the economy. It’s an opportunity we haven’t tapped and it’s a way to run the business in a better way. Today, there’s a need for customer care in European clients. It’s the same thing, so why wouldn’t we do it for them? The reason why ACS didn’t is because they had no business presence, footprint, or knowledge — they had enough things to tackle in the U.S. The reason we bought them is because we can charge behind them with a presence. So it’s about diversifying our business for risk mitigation and cycle protection. But it’s more importantly about diversifying our business around, “Why the hell not?” If you can do it well here, why not do it everywhere else? Clients need the same thing. It’s not like the U.S. clients have a higher need and deserve more attention — not at all.
The biggest business challenge we have is between growth and margin expansion. Individually, they have their own challenges. Growth is around capability — for example, we couldn’t do a health care solution in the U.K. today because the laws are different and we have to develop, off of a similar platform, a specific solution. The services business is one where you have to be really good at contracting with the client and platforming, so that you don’t recreate something 50 times. If you can do that, margins should be able to expand. I don’t want to grow too far ahead of our ability to contract well and platform well. That’s the balance that we have to do. It’s going to be a challenge this year.
Because we have such a strong brand that is associated with something historic, the thing that people most misunderstand about Xerox is what we actually do today. If you ride around New York City and you get a ticket from one of those little flashing things in the road, or if you have an E-ZPass transponder, or if you live in the state of California or Indiana or Texas or Florida or use public transit in Philly — guess who is behind all of the stuff you see? That’s Xerox. So we’re the people behind all that. If you fly on a plane, and it comes from the biggest plane-maker in the world, the documentation for that plane and the tracking of the configuration of that plane — we do it. People don’t know that.
The business community is starting to understand more and more. We can actually have an effect on the business community — that’s one of the reasons we have an event like this. We have over 800 customers here. But consumer knowledge is something that we’re going to have to be pretty careful about. It’s important to have consumer knowledge because we employ people every day — because we have pride in our company and in people knowing what the hell we do for a living. We’re going to have to figure out a way to really supercharge our presence in the consumer’s mind based on what we actually do.
The best correlation I can draw is Intel. They’re doing all these chips; nobody knows about this company. Advanced Micro Devices — who the heck knows what they do? ADM [Archer Daniels Midland Co.] — you don’t know them! You know peanut butter, but you don’t know ADM. So we’re going to have to put out, over time, a more consumer-facing set of communications.
But that’s number two, not number one. Before we do that, we have to knock the ball out of the park on business-facing communications. We’re getting closer every single day. We do commercials and that stuff, and that’s really important. Now our commercials are about our customers — we don’t do commercials about Xerox. The best advocates we have are our customers. It’s a really small community, and they all kind of herd in their like tribes. So if you can do something really good in transportation in Alabama, you can actually probably sell transportation in Mississippi — unless it was a Republican-Democrat thing, that kind of ridiculousness. The best communicators of what we can do are other business people; our customers talking to other customers. It really is amazing.
After we get that pretty well settled down, we’re going to have to really think of our branding. Not the brand name, but our messaging for regular consumers, and have a little bit more consistent and pointed communication to them. Because I do want our employees to be proud. I want people to know that we do this. We have to hire people all the time, and I don’t want them to say, “Xerox? What the hell do they do?” I want them to say, “Yeah, these guys do a lot on analytics and a lot on …” Because they understand. It’s not for the buying in the short term that we need consumers to understand. It’s for the respect and longevity of the company.