Amid disruptive change, Lexmark pivots from hardware to software, services

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Why would a company that made its name selling printers tell customers to stop and consider before they hit that copy button?

That was the intriguing intro to a discussion led by Carlos Bretos, vice president and general manager at Lexmark Latin America, pictured above, at WorldCity’s CEO Club meeting March 6.

The answer illustrates how a company reacts creatively to the kind of disruptive change sweeping through the economy, raising the fortunes of social media businesses like Facebook and devastating veterans such as Kodak.

Printer maker Lexmark now is transitioning from a hardware company to a software and services venture that helps customers with printing needs. It assist businesses in managing the data contained on paper as part of an overall doument strategy, said Bretos.

The key direction for the transition has to come from the top, Bretos explained.

Lexmark’s vision lies in one “simple and powerful statement: Customers for Life,” said Bretos, who came to the company seven years ago from Hewlett Packard.

Part of that involves telling customers to consider less printing. “It was a very compelling message but from the customer perspective, difficult to understand,” he said. “The vision of the company was about helping the customer print what they have to print and avoid what they simply don’t have to print.”

Changing Times

Five years ago, explained Bretos, Lexmark stopped selling printers for the consumer market and began to buying software companies – 13 to date. The focus was on bringing in technology and know-how and on honing the ability to develop information management software.

The next CEO Club is April 10.

The next CEO Club is April 10.

“The common element there is paper,” he said. Eighty percent of information that companies use remains on paper, despite the digital revolution. While corporate policies favors electronic communications, individual employees still find they need to print out documents, and paper use has actually increased, said Bretos.

Lexmark’s approach is to find out, in consultation with customers, how paper can best be used.

“Everything has to do with the work-flow,” Bretos said. “We have the ability to follow the process, to review the process that they need, and understand the process in a digital way,” which means tailoring the approach to fulfill customers’ needs.

The new approach can mean working with banks, which print out lots of forms when someone opens an account, or working with health care and insurance companies that both receive and generate reams of documents.

Lexmark does not try to sell customers hardware or specific software, but instead, works with what that company already owns. “It has nothing to do with selling a suite of software or telling customers they have to eliminate all the investments they have done in the past…Our software solutions are hardware agnostic as well.”

Bretos compared it to constructing with Legos. “We are very focused on preserving their investments in order to facilitate and speed up the process of reaching the goal they have,” he said.

Vision is Key

Bretos emphasized that Lexmark’s vision flowed from CEO Paul Rooke.

Yet some participants at the CEO Club event wondered how Lexmark was able to make a place for itself in a field attractive to other heavy hitters.

Olivier Bouclier, associate dean of executive education in graduate business programs at the University of Miami’s School of Business Administration.

Olivier Bouclier, associate dean of executive education in graduate business programs at the University of Miami’s School of Business Administration.

“What is your competitive advantage compared to Xerox and Ricoh?” asked Olivier Bouclier, associate dean of executive education in graduate business programs at the University of Miami’s School of Business Administration.

“We have this portfolio and customer base already using our solutions,” said Bretos, adding that at the end of the day, while message matters, execution is what counts.

Another question was how the Lexmark sales team operated under the new vision.

“A salesperson approaching a client: Does one handle hardware and one handle software?” asked Alfredo Fuchs, vice president of client services at Right Management, a talent and career management consulting firm.

“We have everybody selling solutions,” replied Bretos. The company is aiming for 50 percent of sales to be solutions within the next several years.

Sean Cummings, vice president and managing director for Latin America at Harley-Davidson Motor Co., wondered how sales in Latin America fit in.

Sean Cummings, vice president and managing director for Latin America at Harley-Davidson Motor Co.

Sean Cummings, vice president and managing director for Latin America at Harley-Davidson Motor Co.

“Latin America has always been considered a center of innovation,” said Bretos, who spent five years of his Lexmark tenure in Brazil. And, he added, companies in developing nations often prove more open and nimble to try something new than businesses in developed economies.

The CEO Club is one of five event series that WorldCity offers to bring together executives in greater Miami on international business topics. The CEO series is sponsored by the University of Miami School of Business Administration and commercial real estate firm CBRE.

The next CEO Club event meets April 10.