Executive Q&A With Lexmark CEO Paul Curlander

Paul Curlander, chairman and CEO of Lexmark, met recently with Technology Solutions Group President Robert Faletra. Their discussion centered on several themes, including Lexmark's aspirations in the larger area of digital workflow and business processes. Following are excerpts.

Faletra: Our data shows that the average solution includes four different technologies and 40 different SKUs. If that's the case, does it change the way you have to think about the market and how you treat your solution providers, the programs you go to them with, even the way you brand your own company?

Curlander: The thing with Lexmark is that in the business marketplace, historically--I go back 15 years, 12 years when we started but whenever the company got in the laser business--we were always very focused on the fact that we were vertically integrated in our technology and we could develop things faster, quicker, put functions in, beat Hewlett-Packard on price/performance--this was always the stuff that we were out doing. And what we found is as we kept going through the years, and that worked well for us for a lot of years, we won a lot of deals that way. But what we found was we got to a point where we put so much functionality into these products and the software that was associated with it, that the customer could not grasp it.

In the end, printing is not on top of people's minds, and the customer is much more focused on their business and their initiatives and whatever you may have on that printer. ... So we came to the conclusion that we put so much technology in, we know all the things you can do with this, we need to start going to help our customers solve their problems utilizing the technology we see is available; some of it Lexmark, some of it not Lexmark. So we've been evolving our company that way.

And in our large account business--this is a little bit separate from the solution providers but I'll be back to that in a moment. We've been going in with our customers focusing on their processes and their business and what they do. And we focus by industry, and we go in and do things that we call discoveries where, we'll go in and take a look at somebody's process over a couple of day period and come back to them with a view of how they can go re-engineer that using technology we're familiar with, some of ours, some of it not ours. And actually we've gone in and done systems integration work for people to actually implement these kinds of things. This is a small piece of our business, but we think this is the future for Lexmark because ultimately you drive the cost out of the whole process.

You sit down with the customer. And now the conversation is very different. We're not talking to them about our printers. We're talking to them about processes, and the biggest problem for them in these work processes. And where do they use paper? And how can we get in there and take a look at it and see what we think is doable? And usually people are open to letting you take a look at some processes. Particularly when you focus by industry and you come in and say, 'I've been to see X, Y and Z and here's the kind of things we found and been able to help them with and I think we can do the same for you.'

So we go in. We're looking for point solutions.

Faletra: So what should solution providers be doing along these lines?

Curlander: What we're focused on right now--this is when I was going to bridge it back to a solution provider discussion --is we're doing this in large accounts, but we don't call on a large number of big accounts. What we want to do is we want to go engage in a solution provider channel and, again, we can't do thousands of solution providers, but we're looking for a finite number of the ones we think are best at potentially doing this; in the hundreds, not in the thousands. And we're putting together a certification process where we can go in and transfer some of this capability to these partners and work with them.

In addition, it would be a certification training process. We will go in and actually do some of these engagements with them to help them get started and then there would be a list of programs backing that whole thing up that relate to support... We share with them the experiences we've had with them in the large accounts and all that stuff translates directly into small and medium business. You see a lot of the same processes. But certainly all the tools that we utilize translate indirectly...

Here's an example of a process that we've done with a banking customer. It was a loan process. So we go out and talk to the customer and say, 'Tell me about your paper-intensive processes. Let's focus at your customer interface.' So we go look in the branches, and what we find is we're executing a loan process; a pretty straightforward loan process where they're sitting with the customer in the office, executing a loan document. They've copied the document, put it in their local file, sent it by courier to the main office. They would then take it and put it through some centralized scan capability. I used to do this very often in financial services companies. They would then store it in usually a FileNet system, as we find in most of these financial services companies. And they would then go execute the loan. They'd go through some probably electronic process and communicate back to the branch.

What we can do is basically take a look at that process and say, 'Look, you're moving paper, so you have a cycle time on something like this, you've got a processing cost on something like this, when you get here you get error rates, these kinds of things. [Instead,] what you could do is, sitting there at your PC, say you're arranging a loan for Mr. John Smith. You can sit there and key in his name and whatever index number you're using with him, and you can print out those loan documents that have the name but also bar codes that identify what that document is. So even before you execute it, you can utilize the technology to put a document that now you've primed for scanning.'

And then you can have the customer review the information and make sure it's right so you know it's right. They sign the documents, you go back to that same device, you can then put it through the scanner not to make a copy, but basically you're putting it right into an electronic workflow now. And it's already indexed, so it already has a bar code so you can recognize it; your software can recognize what it is, drop it right into your FileNet system.

And then we came back in this particular discovery to the customer and said look, 'We can take your processing cost for $22.50 per transaction down to $4.50 [per transaction]. We can take your processing time from 2.5 days down to half a day. And we can take the index error from 15 percent down to 3 percent. I'm puzzled why we couldn't get that to zero, actually, but 15 percent is just the mistakes people make here putting it into the FileNet system.' So that would be a typically point solution. We didn't go try to re-engineer the branch. We just said, 'Hey, you've got this loan process, and with a minor modification here we can deliver these savings to you and look at the impact in your customers as well as productivity and your cost.'

Faletra: So the certification part you're talking about right now, is that going to be specific verticals?

Curlander: Right now we're trying to find our way. We work in verticals. We would like six verticals right now. So what we've done is we've gone out and we've taken a few solution providers. We did not pick these by vertical. So in general we find that with exclusive buyers, there are ones in verticals, there are some ones that are what I would call a little more horizontal ... kinds of guys.

The ones we picked, I think, are horizontal to begin with, but this would work best with vertical people who are experienced because they will have the ins with the accounts that we're looking for. But we're going to start with some horizontal ones and see how this starts for us. But we're just getting started.

Faletra: So what does this mean for the future of your business? Is there more development work that needs to be done in software for a company like yours?

Curlander: When we look to the future, what we believe is the future is an information and document management future ... that ... includes computer electronic work flow. That's what we're talking about here. We're saying, 'Don't move paper. You don't want to move paper. Don't move paper. What you want to do is you want to eliminate pages, you want to minimize the number of pages that you have. This is where you want to go. This is the future.'

We believe, quite honestly, that long term there's enough content now coming to you in a distributed way that it's a good long term business for us. If I step back, if you take a look at the total amount of paper used in the world, you're talking 60 trillion pages. The amount that's printed out by people at home and at the office is only 5 percent of the 60 trillion pages. What we're talking about is of that 5 percent there's 3 trillion pages, a bunch of that stuff could be eliminated. It could be eliminated. But what we believe is that that other 57 trillion [page] since it's paper and it's not what you're printing out, it means that's coming to you, it's coming to somebody in paper form. It's being printed centrally and shipped in paper form. Much more of this stuff is going to come electronically to somebody.

So the future is it's going to come electronically and you'd get it and you'd print for your own productivity for whatever reason only when and where you need it. So we believe that, yes, as a printer company it seems kind counter-intuitive, yes, that you don't need to print that 3 trillion pages. But what we believe is even if you shorten the 3 trillion down to 2 trillion or 1.5 trillion, that the other 57 trillion is coming this way and a lot of that doesn't need to be printed but some of it will be printed. We think that that 3 trillion [number], actually, even with the kind of stuff we're doing, is going to grow at a 7 [percent] to 12 percent rate over time. ...

So we have three initiatives that we talk about as print, move and manage. These are the three initiatives we're driving.

In print, you could say that's the traditional initiative we're continuing to advance in technology. But we have a very different vision of technology. Our vision of technology is that what you need, since everything is going to be coming to you electronically, moving electronically, is you only print for your own personal productivity. So what you need is something that's very close to the user, a network device shared by some number of users--maybe four, five, six people--but you want it to be a low-cost distributed network device. But you want it to be modular, we believe, where you can drop a scanner on top of it; not necessarily to make it into a copier and a fax machine, although you obviously can do that.

Faletra: So from a solution provider's viewpoint, what should I be doing to kind of get myself in a position to be able to capture more dollars and sell more solutions around these kinds of things?

Curlander: The same thing that we're doing. It's a skill set. It's a very different skill set in terms of who we have go out and talk to the customer. It's a different mix between the number of salespeople you have now and the number of support people--still customer-facing support people but specialists. Specialists.

So what we did when we started moving to this is we actually reduced the number of salespeople to make room to put the special skills. So now we have what we call application consultants; people who can go out and do this workflow process analysis for the customer. I haven't talked about the managed piece of what we do, which is the services where we actually go out and help our customer. Once you do the analysis, you say: 'Look, you do this, this and this, and here's how you would re-engineer it, here's the business case.' Very often a customer will say to us, 'Gee, we don't have the resources to do this.' So now we come back in saying here's how we would re-engineer it, this is what we will save and here's our proposal to do it. We'll take this much time, we'll charge you this much money, here's the overall business case with that rolled in. It's a turnkey kind of thing. So I think what the solution provider would need is the ability to have salespeople who can talk about these kinds of things, and that's a little bit different sales role. It would need the application consultants to be able to do this type of analysis and then they would need that integration capability. Most of them probably have that integration capability already. But you've got to get them in the right mix.

In Part 2 of this interview, Curlander discusses bringing in partners with the large accounts, and Lexmark's deal with Dell.