Chief Technology Officer Sophie Vandebroek tells how Xerox now helps other firms along a journey of innovation and renewal similar to the path it has been on for 15 years.

xerox_strategyFifteen years ago, some analysts believed Xerox Corp. was headed for bankruptcy. Instead it has managed to achieve what very few established enterprises can claim: a transformation from one type of company to another. Faced with a disruption and decline in its core copier and printer business, Xerox embarked on a difficult, long-term journey to become a major player in business process services, as detailed in “Two Routes Two Resilience,” an Innosight article in the Harvard Business Review.

As part of that shift into services, Xerox is now in the position of helping other companies transform by discovering their own new areas of growth. These efforts often begin in Xerox’s research lab with a gathering that the company calls a “dreaming session.”

Sophie Vandebroek recently visited Innosight to explain what a dreaming session is and how it fits into an overall plan of change and innovation. The company’s chief technology officer and president of the Xerox Innovation Group, Vandebroek is responsible for overseeing Xerox’s research labs in Asia, Europe and North America, including the legendary Palo Alto Research Center (PARC Inc).

For context, Vandebroek provided a picture of where Xerox’s own “dual transformation” stands. After surpassing 50% of total sales in 2012, Xerox Services now accounts for 57% of revenue. That’s forecast to grow to two-thirds of the company by 2017, she said.

What does the transformation of Xerox mean for the future of your traditional core business?

Sophie Vandebroek: Every quarter, a little bit less and less of the total Xerox revenue comes from copying and printing. But we will still be there with new products and new solutions all the way from the very low end through multifunctional devices in the office to very large digital production presses—because it’s actually very profitable. The operating margin of the Document Technology business last quarter was over 13%, which is high compared to the Services margins today.

Have you seen other companies, among your clients, face that same predicament, having a declining core and struggling to figure out what to do about it?

Yes, we are helping our clients in two major ways: we process work for them at massive scale and we also allow them to make every transaction for their client personal. This will allow them to grow both their top and bottom lines. In addition, part of the revenue at PARC Inc. today comes from innovation services for other clients helping them with that exact problem. Whether it’s in consumer products or healthcare or financial services or telecommunications, we help clients leverage advanced technologies to either move into adjacent markets or to build new solutions or services on top of their current products. This is critical especially when the base products become commoditized—just like what happened in our business.

What advice would you give to companies about how to think about something so big and challenging? What does the beginning of a transformation look like?

We’re 15 years into our journey now. But we started very small, by offering managed print services. So instead of just selling customers more boxes of inks and toner, we sold an annual service to our clients who need to manage a whole portfolio of devices that they have around the world. Then we got into managing documents for law firms and financial companies, and we acquired multiple smaller companies, and then we acquired ACS four and half years ago now. That helped get us up to what’s now a $12 billion business in business process outsourcing.

So how do you get them started?

The best way to create the future is to invent it, as Alan Kay used to say in the 70s, and that’s what Xerox continues to do today. Our number one way of doing that today is by co-innovating with clients and it all starts with what we call “dreaming sessions.”

What is a dreaming session and how does it work?

The process starts several weeks before the client shows up at the lab. We normally work with decision makers from multiple disciplines within the company. Well in advance, we need to understand their businesses, their workflows, what kinds of problems are they struggling with today. And then in the dreaming session itself, the client talks about their business, where they’d like to go, what they’ve envisioned. And then researchers will share some technologies we are working on in the labs. Maybe we share things we can do with data analytics or how to truly personalize a service. And then we show them possibilities for the future based on trends that we have expertise in. Often, we will have these A-ha moments: “Wow, is that really possible?” And then the researcher offers ideas on how to make that future a reality. This starts a fantastic exchange of ideas with the client responding: “Wow, if you can do that, could you do this?” And then researchers and the clients follow this interactive path, as the dreaming session continues.

Can you give us an example of a solution that came out of a dreaming session?

For one healthcare client, we did lot of work observing hospitals, understanding how nurses interact with patients and with databases. And in one hospital we found that the nurses spent about 75% of their time in administrative tasks such as tracking down medicine or trying to track down information. And so we built a virtual assistant that we call a digital nurse, and it turns out not only nurses find it valuable but also physicians and other people within the hospital. Now, it’s embedded in our Juvo Care performance mobile platform, which will be rolled out to about 2,000 hospitals over the next five years. So the nurse can just enter a room with a mobile device and all the information about the patient will show up.

Where is that technology heading next?

For next piece on the road map we’re also embedding remote sensing. So we use sensors and video cameras to remotely measure vitals like temperature, heartbeat, respiratory rate. In our labs we have thermal imaging technology to be able to look through the camera and sense whether somebody has cancer, diabetes, or atrial fibrillation (irregular heartbeat).

Could that even be used outside of hospitals?

Definitely, it will actually open up the market, because telemedicine kiosks, such as HealthSpot, are being deployed in many locations, and people take some of these handheld cameras into the villages or you can envision people using them at home. So we can have decentralization, and disruptive innovation to lower medical care costs.

What’s the takeaway lesson about innovation for other companies?

That we are living in a faster innovation culture which is all about diversity, inclusiveness, relationships, building a learning culture, and being very agile. Doing innovation now in a large company is like doing innovation in a startup. We must be very lean and agile and partner with the client along the way.

Evan I. Schwartz is Director of Storytelling at Innosight.