Monday, December 6, 2010

Behind the decision to combine Lexmark's divisions

Lexmark International's recent decision to combine its laser and inkjet printer divisions was made to mirror the company's strategy of recent years, its chief executive said last week.

Paul Rooke is a firm believer that a company's management structure should follow its strategy, he said, and Lexington-based Lexmark's has been evolving to focus its inkjet division more on business customers, who are the core base for its laser division.

Lexmark has been radically realigning its inkjet division because the company found in recent years that the consumers who once bought their printers, which were sometimes bundled for free with computers, weren't buying enough of the highly profitable ink to meet profit expectations.

Since that time, the company has redesigned its inkjets to focus more on business customers, who print more than consumers. The printers now offer touchscreens and so-called "Smart Solutions" that allow companies to customize many settings and applications for individual users.

As the company evolved technologically to build those products, it already was consolidating technical functions because the laser and inkjet offerings were blending, Rooke said.

When the company began discussing the October retirement of CEO Paul Curlander and Rooke's elevation from inkjet leader to CEO, the latter said "it was a natural transition point, if you will ... to transition the rest of the organization."

"Structure follows strategy," he said. "I looked at our strategy and how it was evolving. As ... inkjet and laser's strategies were converging, it made sense to therefore converge the structure."

The combination of divisions didn't mean any job losses, the company has said, other than the position of inkjet leader, which wasn't filled after Rooke's promotion. Marty Canning, who led the laser division that was previously overseen by Rooke before he took over the troubled inkjet unit, leads the combined division.

The move will help Lexmark's salespeople, as the combined division will mean "a broader and better set" of offerings for customers as the development teams work united instead of as part of two divisions, Canning said.

"The sales organization was already representing both of these product portfolios," he noted. "They just didn't have a product development organization as aligned as we will be ...

"We can solve a larger set of their business problems because of this."

Rooke added that the combination of divisions also will mean "more consistency across the full breadth of technologies addressing business customers' needs."

"That will be a powerful statement for us," he said.

Employees have been receptive to the change, Rooke said, as many already had seen the shift coming since the inkjet strategy change in recent years.

One group of employees that will still be a standalone division, though, is Lexmark's recently acquired Perceptive Software unit. The Kansas-based company develops software that helps businesses manage content.

"We intentionally kept it separate because it's a smaller piece," Rooke said. "A lot of times if you try to combine a smaller piece with a bigger piece, it can get squashed, and we didn't want that to happen."

Perceptive Software CEO Scott Coons said the key is that Lexmark's reorganization hasn't changed its strategy.

"The goal is to grow Perceptive Software and leverage all the great things Lexmark brings to bear to grow our business," he said.

Reaction to the reorganization has been positive from the analyst community, Rooke said. Among those who find it encouraging is Ed Crowley, founder of Versailles-based printer industry research firm The Photizo Group.

"That's really going to be a big positive for them," Crowley said. "I think it's a smart move."

He said it didn't make sense at this point to have a full division and the infrastructure that comes with it to go after the business customers for inkjet.

"It really brings them to a singular focus," he said.


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