Xerox 2006 Annual Report Download - page 8

CHAIRMAN’S LETTER
XEROX ANNUAL REPORT 2006
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growth strategy. With a lot of heavy lifting behind us, our operations are in good shape.
We’re now well positioned – with the best people and best products and services – to
build on our momentum in the marketplace both in the near term and for your long-term
investment in Xerox.
Our innovation
Including our partner Fuji Xerox, we invested a combined $1.4 billion last year in research
and development, with a similar amount planned for 2007. Our returns on that investment
are excellent. Last year we launched 14 products that together earned 208 industry
awards. We expect to more than double the number of product announcements this year.
We measure the success of our R&D investments through a metric called “Time to Revenue”
– how long it takes for new ideas to become new revenue. We believe our progress in this
area is among the best in the industry. About two-thirds of Xerox’s equipment sales come
from products launched in the past two years.
Thanks to our scientists and engineers, the future is bright as well. Last year, the Xerox
innovation community received nearly 560 U.S. utility patents. That’s up 24 percent over the
previous year. With our research partner, Fuji Xerox, the total was over 800. We hold more
than 8,000 active patents, many that are the foundation of breakthrough technology like:
•Self-erasable paper that uses a combination of light and ink to automatically erase marks
on a page about 16-24 hours after the page is printed.
•E-Agent, a special chemical ingredient that reduces the amount of energy needed to make
certain Xerox toners by up to 22 percent.
•Advancements in natural language search technology which uses familiar phrases and
sentences to simplify search results.
Our customers
One of the hallmarks of the new Xerox is deep relationships with our customers.
Increasingly, we are strategic partners. One of them recently referred to Xerox as
a combination painkiller and steroid. We’ve been called lots of things, but never
that, so I asked him what he meant. His answer went something like this:
“Before Xerox came along, document management was a huge headache. We had no idea
what we were spending. We had lots of vendors but no partners. We kept investing in the
promise that the next new thing would be the right thing. Xerox has made my life simpler.
I talk to one person who saves me money and boosts my productivity. That’s the painkiller.
The steroid part comes from leveraging documents to reach customers more effectively, to
make it easier for customers to do business with us and to grow our business. That’s the
steroid part. Xerox gives me both in ways no one else can.”
That’s music to my ears. It’s also a novel way to express our value proposition – painkiller
and steroid, streamlining document processes to reduce costs and leveraging documents
to grow revenue. No one does that better than Xerox – no one.
Our operations
We also have a business model that works – in part because it’s flexible. We react quickly
and decisively to marketplace challenges and opportunities. In today’s world, every quarter
seems to present its own unique dynamics. Pricing pressures may put pressures on our
margins. Economic slowdowns may slow our revenue pipeline. Competitive threats may
cause us to bulk up our investments in marketing.
Whatever the circumstances, we adjust. We do it quickly. And we do it in a way that keeps
our business model aligned with our financial objectives. As a result, we are a company that
is known for consistency. We know that’s important to you so it’s critical to us.