Xerox PARC: Innovation without Profit?
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Case Details:
Case Code : BSTR150
Case Length : 16 Pages
Period : 1970-2004
Organization : Xerox PARC
Pub Date : 2005
Teaching Note :Not Available
Countries : United States
Industry : -
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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"[PARC] has an almost mystical connotation in the valley (The Silicon Valley) and worldwide as a place where wonderful things are created. People seem to think it exists for the good of mankind."
- Craig Cline, Vice President of Content, Seybold Consulting, in 2000.1
"Xerox PARC was very isolated from the rest of Xerox, people-wise and agenda-wise,"
- Paul Horn, Head of IBM Research, in 2001.2
"Look at the capacity of the people there. It was so bright we had to wear shades. But it had to explode."
- Charles Simonyi, Chief Architect, Microsoft, speaking about Xerox PARC3
PARC Spin-Off
In January 2002, the Palo Alto Research Center (PARC), set up by Xerox Corp. (Xerox; Refer Exhibit-I for a note on Xerox) in 1970, was formally separated from the parent organization and incorporated as a separate entity. The new organization, called PARC Inc, was a wholly owned subsidiary of Xerox and was expected to provide research services and innovation products to industry leaders in different fields.
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In an illustrious (if not profitable) life spanning a little over three decades, PARC had come up with a number of path-breaking innovations that reshaped the future of technology. While the work done by the scientists and engineers at PARC was often described in terms bordering on reverence, it was widely believed that Xerox had failed to exploit, or even recognize the commercial potential of many of the products and breakthroughs developed at the center. PARC was believed to have brought Xerox a lot of goodwill and prestige, but very little profit. In the late 1990s and the early 2000s, Xerox experienced a meltdown due to several corporate crises, which included a fired CEO (Rick Thoman was fired by Chairman Paul Allaire in 2000 after a mere 13 month term at the top), increasing competition and huge losses.
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After taking over as CEO, Allaire said "Clearly, actions beyond resolving our operational issues are required.... Aggressive actions to improve profitability in 2001 are being pursued."4 The company then undertook a massive restructuring program to streamline its operations and restore a semblance of stability.
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One of the areas for cost savings identified by the company was the $70 million a year that it spent on the maintenance of PARC. Initially the company announced that it would tie-up with strategic, non-competitive partners to help finance the research conducted at PARC (Microsoft, Adobe Systems and Sun Microsystems were some of the names considered). However, in late 2001 it was announced that PARC would be incorporated as a wholly owned subsidiary of Xerox, thus ensuring that the parent company would have access to all the technologies developed at the center. However, PARC would also be able to license its technologies to other companies. "The goal is to develop research that one day will be available for internal development and licensing," said Sophie Vandebroek, chief engineer at Xerox.5 |
Xerox PARC: Innovation without Profit?
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