Archive for June, 2010

How Xerox Monetizes Non-Core Innovation

Monetize non-core innovation rather than pruning it.

Ursula Burns, CEO of Xerox, discussed innovation at her company in an interview at the World Innovation Forum June 9, 2010. She described initiatives to improve the return on innovation at Xerox’s  research centers such as PARC (Palo Alto Research Center). PARC’s ground-breaking inventions like the graphical user interface, ethernet, and postscript as inventions  had a large impact on the world but didn’t contribute enough to Xerox’s bottom line.  Let’s look at why that happened and what Xerox is doing now.

Unpredictability lies at the core of the innovation process.  Not only do innovators not know if an early-stage innovation will succeed or fail, they also can’t know all the possible applications or value latent in that innovation.  Thus, it’s far too easy for an exciting innovation to stray outside the bounds of the company’s core competence.

At some level, reaping the greatest value from a research organization means allowing researchers the freedom to explore.  Burns noted that innovators love working on interesting projects — it’s hard to stop them from doing it.  Rather than fetter its folk, Xerox found three ways to give them freedom while still reaping the value of innovations that fall outside the company’s core.

First, Xerox expanded its definition of what is core to the company.  Previously, Xerox defined itself as a copier company, looking for innovations in how to “reproduce images on paper.” That narrow definition meant that many of the early PARC inventions were not pursued. Since then, Xerox expanded to document management and is moving toward being a more general office information process company.  Rather than fear the paperless office, Xerox wants to help customers implement the paperless office.  Xerox’s recent acquisition of ACS positions Xerox in business process outsourcing — managing the non-paperless back office functions of customers and clients.  The expanding vision of Xerox brings more innovations within the scope of the company’s core. For example, the company now has a use for its smart document innovations that can automate some of the labor-intensive discovery process in legal proceedings.

Second, rather than discarding innovations that don’t fit inside the company, Xerox now looks for partners or buyers for whom the innovation does provide value.  For example, some of Xerox’s innovations in precision printing can apply to the low-cost manufacturing of solar panels.  Xerox isn’t going to become a solar panel manufacturer — that’s too far outside its core. But rather than dismissing the innovation, Xerox partnered with a West Coast firm to incubate a new company that can leverage the value of those innovations.

Third, outside companies can now hire PARC and its portfolio of specialists to tackle tough R&D problems.  CEO Burns said that most PARC’s activities remain focused on Xerox, but the option to sell non-core innovations lets the company maintain the innovative culture of PARC while monetizing its researchers’ outputs.  In short, Xerox is expanding how it leverages the fruits of innovation rather than pruning the innovation funnel.


  • When evaluating innovation projects, don’t immediately rule out ideas outside the company’s current strategies, customers, or core
  • Instead, also ask if an innovation might be more valuable to a non-competing outsider
  • Find complementary partners who can license or buy non-core innovations or innovation expertise to reap the greatest total value from the innovation process.
  • Allow innovators enough freedom to enable breakthroughs.
  • Expand or reenvision the core of the company to leverage innovation.

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MinuteClinic’s Service Design Innovation

Point: Take the customer’s perspective when designing a new service model.

Story: Some of the best innovations are brilliant in their after-the-fact simplicity. Take MinuteClinic.  We all know “an ounce of prevention…” yet most of us still don’t go to the doctor for preventative care because of the cumbersome process of a office visit: scheduling an appointment, taking time off work, waiting in the doctor’s office for unknown amounts of time, sitting in the midst of other hacking/sneezing people, and being unsure how much the visit will cost.  Worse, the doctor’s advice is often the standard nostrums of “take two aspirin, eat right, drink plenty of fluids, get some rest” that didn’t require the costs and hassles of the office visit.

Michael Howe, former CEO of MinuteClinic, became known as one of the top 10 innovators of the last decade by tackling those problems and designing a straightforward solution.  Howe applied the retail concept to healthcare, putting a mini medical clinic inside a pharmacy.  All the elements of his new service model focused on the customer:

  • Pharmacy locations are easy to get to and are easily integrated into the customer’s day
  • The clinics are open nights and weekends, expanding convenience for time-pressed customers
  • Customer wait time is no more than 15 minutes, and no appointments are necessary.
  • MinuteClinic posts all its services on a “menu” with the prices listed for each service

The key behind Howe’s innovation is realizing that the old model of healthcare delivery focused on delivering healthcare to people born 1925-44. But the values of this “Greatest Generation” aren’t the same as the Boomer generation. Boomers don’t want to be directed — they want to be engaged in the healthcare process.  Likewise, Gen-X’ers (born 1965-1984) want self-sufficiency, convenience and immediate access. They, along with Boomers, constitute MinuteClinic’s target customers.
MinuteClinic focuses on providing a standardized set of services that can be provided by nurse practitioners, thus lowering the overall costs of the services.  The company doesn’t claim to compete with the expertise of Mayo Clinic. Rather, it focuses on minor illness exams, minor injury exams, skin condition exams, wellness & prevention, vaccinations, and health condition monitoring. If customers have a serious or unusual ailment, MinuteClinic will recommend that they seek more in-depth medical attention.

In 2006, CVS acquired MinuteClinic. I asked Howe if the acquisition meant there could be more data integration between the two merged companies. His answer was that although the regulatory statutes prevent the sharing of information like prescriptions without patient approval, it was possible to educate patients. “We can use the retail environment to inform patients of alternatives to use for preventative medicine,” Howe said. For example, during the cold and flu season, MinuteClinic could help patients by producing a list of suggested treatments to make it through flu season.

What will be the next healthcare delivery innovation? Using Howe’s model of generations and the different values which each generation has, Howe sees that Millennials (born 1985-2004) are just beginning to understand their needs and that they want technology-based connections. In that future, the mantra will move from the Boomers’ “Engage Me” to the Millennials’ “Connect Me” demand for technology-based connections to their cell phones, laptops and the digitized world of social networks.


  • Look for products and services that have become costly and underutilized due to years of accumulated complexities
  • Look for generational differences in expectations, tolerances, and preferences
  • Create a solution that increases convenience and certainty
  • Create a solution that reduces complexity and cost
  • Address 80% of the problem with something simple rather than 100% of the problem with something complex

Michael Howe spoke at the World Innovation Forum, held June 8-9, 2010 at the Nokia Theater in New York City. He also presented an online seminar in the HSMAmericas series, which can be accessed here.
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