'We saw the opportunity'
CEO Anne Mulcahy: How Xerox is preparing for tomorrow

NEW YORK (Fortune) -- Fortune interviews Anne Mulcahy, CEO, Xerox Corporation (Charts):

As we think about our future at Xerox, it's becoming less valuable to be able to predict it and more valuable to be able to adapt. That's not to say you don't develop multiple scenarios. You do. But the point is that the strategic choices you make can be roughly right. The real precision comes from your ability to adapt.

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For example, in 2002 we decided to create a global services group. When I think back, those were not the most positive times for Xerox. But there's never a good time to take on strategic change. The key is to do it when the market is sending you signals instead of waiting until your back is against the wall.

Our customers told us what their problems were and what they needed. They wanted us to show them how they could cut costs - from which printers to buy to the most cost-effective way to service them. They also wanted a combination of software and hardware for document-intensive jobs, whether it was banks creating personalized client statements or law firms sorting and printing massive amounts of electronic documents for litigation. By listening, we saw the opportunity to focus on services.

We're four years into this shift to a services- led approach, and we're making good progress. You're at your best when you're changing from a position of strength - when you have viable core businesses that become, quite frankly, funding sources for new thrusts. But it's tough.

This kind of change forces you to rethink a lot of the characteristics that made you successful in the first place. The hardware business is all about per-unit manufacturing cost and functionality. The services business is less asset-intensive and more dependent on people.

The skill is to stay connected to customers and to move quickly to capture the opportunity or avoid a risk. --Interviewed by Eugenia Levenson

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