Conduent Spin Off
thomasj113
Week5Conduent.pptxCase Study: Conduent
Spin-off Strategy and Best Practices
In the beginning, there was Xerox
Xerox, widely known brand associated with copiers
Came onto the market in 1938
Brand is synonymous with copiers
Launched an anti-genericide ad campaign
“When you use Xerox like you use aspirin, we get a headache.”
Expansion diluted core product
In 2010 Xerox acquired a company focused on business consulting
Didn’t integrate well with core offerings
Spun off “services business” division in January 2017
Challenges
Creating brand recognition from scratch
Creating new look and feel
Defining market niche
Creating shareholder value
Marketing opp for Xerox as well
“As the new Xerox, we are refocused on leading the industry with market-making and disruptive solutions that redefine “print” and change the way information is used and shared..”
Jeff Jacobson
Xerox CEO
Marketing opp for Xerox as well
“Of our revenue in 2016, 38 percent came from these growing areas, and we are now implementing a plan to expand that proportion through a focus on the following strategic growth areas:
Managed document services, especially managed print services in the SMB. We plan to extend our leadership in the vital services segment.
Entry products, where pages are moving from single-function A4 sized printers to higher value A4 multifunction printers, where we are better positioned.
The production cut-sheet color and emerging production inkjet markets, an area where we are historically strong and are making investments in newer technologies.
To pursue these opportunities, we have realigned our go-to-market model and we are expanding our channels to increase our reach and strengthen our relationships with our customers. Additionally, as the new Xerox, all of our investments will once again support our print technology and document services business. Our research, development and engineering efforts continue to be well-funded at approximately $1 billion, including Fuji Xerox, and drive innovation in automation, workflow and content management, graphic communications, analytics and printing.”
..”
Jeff Jacobson
Xerox CEO
Marketing opp for Xerox as well
“Xerox’s focus on growing its global leadership in digital print technology and services will help customers innovate how they communicate, connect and work more productively. The company’s financial model and revitalized business strategy will enable strong free cash flow generation and margin expansion, as well as targeted investments in attractive growth areas, such as document outsourcing and solutions for small- and medium-sized businesses.
Press release
January 3, 2017
Marketing opp for Xerox as well
ACS was never integrated under Xerox ownership, and the business was mismanaged such that poor contract execution and duplicative operating structures caused earnings before interest, taxes, depreciation and amortization (Ebitda) margins to decelerate from 16% in 2009 to 10% in 2016.
Source: Barrons
https://www.barrons.com/articles/why-conduent-shares-could-double-1500025638
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Marketing opp for Xerox as well
On Xerox, the team is focused on sharpening Xerox’s profile and messaging now that it’s part of the legacy portion of the business. Xerox hasn’t merchandised that aspect of the business too much, however it’s been doing incredible work continuing to innovate and redefine businesses. Reinvigorating excitement and interest in that part of the business is job number one.
John Kennedy Conduent CMO
https://www.forbes.com/sites/aaronkwittken/2016/09/16/a-split-decision-my-qa-with-xeroxs-john-kennedy/#569e43a53668
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Marketing opp for Xerox as well
Xerox has a very different challenge: a household name, one of the best known in business, with the challenge of repositioning itself that it’s back. They have to update and contemporize the way the world sees them.
John Kennedy Conduent CMO
https://www.brandchannel.com/2017/01/04/conduent-5-questions-john-kennedy-010417/
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What does Conduent do?
On 30 June 2016, Xerox announced that it would be spinning off its Xerox Business Services division into a wholly separate corporation, for which the name was yet to be determined.
The business scope of the new company was generally understood to be essentially identical to that of former business services company Affiliated Computer Services (ACS), which Xerox had acquired six years earlier in 2010.
What does Conduent do?
human resources services for healthcare companies
mobile parking apps for the city of Los Angeles
Background on Conduent
The division of Xerox came about after buying Affiliated Computer Services for nearly $6.4 billion in 2010.
The deal was supposed to help Xerox find another source of revenue beyond its core copier and printing business.
Background on Conduent
Xerox’s executives say that two smaller, more nimble businesses will be able to better adapt to a rapidly changing technology world.
The argument echoes that of Hewlett Packard, which split into two companies last year.
Background on Conduent
“If you go back six to seven years when Xerox acquired a company called ACS [Affiliated Computer Services] in 2010, the thesis of that acquisition was that Xerox was a hardware manufacturing company. This was during a recession, and management thought the best would be to serve your clients soup-to-nuts, if you will, by acquiring a services company.”
Ashok Vemuri
Conduent CEO
http://fortune.com/2017/01/03/xerox-spinoff-conduent-ashok-vemuri/
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What does Conduent do?
Conduent helps other companies get their financial house in order in the field known as business process outsourcing.
The company offers digital platforms for businesses and governments
handles such services for businesses as state Medicaid payments, tollbooth collections, and other transactions.
What does Conduent do?
We serve two broad segments. One is the public sector. We work with all 50 U.S. states and over 500 government entities worldwide. We do a lot of work in transportation. Think about parking: You use a parking app pay over the phone, and the phone reminds you after 45 minutes to pay more We are now handling road tolls—so think EasyPass in California and SunPass in Florida.
We are the world’s largest prepaid card processor. We do things like welfare, Social Security, Food Stamps.
The other part of the business is commercial. We work with 74 of the top Fortune 100 companies. We support them on mission-critical systems.
What does Conduent do?
The company focuses on transaction-intensive processing, analytics and automation in areas such as healthcare, transportation solutions, customer care and digital processing.
The company's business benefits roughly two-thirds of all insured patients in the United States and nearly nine million people travelling through toll systems daily.
What does Conduent do?
BPO businesses are essentially outsourced back offices. BPO business services offer transaction-intensive processing, analytics, and automation to government and commercial customers in the U.S. and internationally.
Conduent is the former BPO business of Xerox. Xerox paid $8.3 billion for this business (then known as ACS) in 2010, and, after five years of mismanagement, activist investor Carl Icahn took a 10% stake in Xerox, and pushed for a spin-off that commenced in December 2016.
Conduent offers expertise and scale in labor-intensive processes that clients do not have the scale or capability to profitably operate themselves. Contracts are three to five years in duration, and Conduent utilizes learning-curve advantages to increase efficiency every year to maintain or increase unit margins.
What does Conduent do?
Segment Breakdown
Commercial Industries (59% of sales, 3.1% segment margin)
The Commercial Industries segment provides business-to-business (B2B) and business-to-consumer (B2C) services such as customer care (call centers), human resource management, marketing, training and finance and accounting services. A $320 billion market, growing 6%, annually.
What does Conduent do?
Segment Breakdown
Public Sector (35% of sales, 11.1% segment margin)
The Public Sector segment provides services processing for transportation, public assistance, program administration, transaction, and payments to foreign and U.S. federal, state, and local governments. Additionally, this segment offers prepaid cards, health-savings accounts, child-support payments, customer-care services, legal-business services, and applied automation and analytics solutions. $40 billion market that is growing at 5%, annually.
What does Conduent do?
Segment Breakdown
Other (5% of 2016 sales, $84 million in losses on $301 million in sales)
The Other segment consists of student-loan servicing and health-enterprise services. This segment lost $84 million in 2016, and is in runoff mode. Conduent anticipates getting to breakeven by 2018.
Competitive Landscape
Competitors: BPO leaders, such as Accenture (ACN), IBM (IBM) or Genpact (G), Convergys (CVG), ExlService (EXLS) and WNS Holdings (WNS), as well as large multinational tech service providers including Automatic Data Processing (ADP), Cap Gemini (CGEMY), and the new DXC Technology.
What does Conduent mean?
On 6 October 2016, Xerox announced the identity of the new business services company as Conduent.
"coined name" was "inspired by the company's expertise in managing transactional relationships between their clients and their constituents".[8]
corporate blog posted by chief marketing officer John Kennedy described the name as "derived with inspiration from several places".
Kennedy wrote that when trying to summarize what the new company does, "words like conduit, confluence and constituent come to mind."
considered nearly 6,000 possible names before choosing Conduent
What does Conduent mean?
name that reflected its expertise in connecting clients and their constituents through seamless transactions at a massive scale.
What steps were taken to refine Value Prop?
divest/sell portions of the business that are either 'noncore' or less profitable
Overcome investor objections and restore a strong but mismanaged business that is underearning and undervalued.
Newly articluated tagline:“Advancing the Everyday.” The idea is that a lot of what we do may seem like everyday interaction—using a prepaid card, handling a question on a customer care line, going through a toll—but to us and our clients, they’re more than that. They’re actually critical touch points in a relationship. We don’t just manage them; we make them better, modernizing the constituent experience.
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What steps were taken to refine Value Prop?
Conduent’s turnaround is focused on three key goals:
1) Revenue goals: increase new business signings, sustain renewal rates, drive growth over time.
2) Margin goals: reduce margin volatility, deliver cost transformation, fund investments and drive margin expansion.
3) Free cash flow (FCF) goals: Consistent FCF generation and reinvestment opportunity.
Conduent Growth Strategy
aims to provide multiple services to customers rather than spread out too thinly.
"The thing we have to work on is to take various service capabilities, find the common thread between them, and sell (services) as a bundled solution.”
Ashok Vemuri
Conduent CEO
https://www.investors.com/research/the-new-america/conduent-a-buyer-or-seller-post-xerox-spin-off/
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Conduent Growth Strategy
August 2018 completed the spin-off of its HR consulting, actuarial and outsourcing business formerly known as Buck Consultants.
Conduent keeps its technology platform business, including HR outsourcing, total benefits outsourcing, BenefitWallet and RightOpt.
https://www.investors.com/research/the-new-america/conduent-a-buyer-or-seller-post-xerox-spin-off/
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Conduent Growth Strategy
The sales structure is shifting towards go to market verticals. This entails selling a full portfolio of solutions to clients, rather than through product silos.
With 76 of the Fortune 100 companies currently clients of Conduent, there is a vast untapped opportunity to upsell clients and cross-sell the portfolio.
Management has a stated goal of 1.6 services per client, as compared to 1.1 services per client currently.
https://www.barrons.com/articles/why-conduent-shares-could-double-1500025638
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Conduent is well positioned
90% of revenue is recurring under long-term contracts. The client list contains 76 of the Fortune 100 businesses. Over 500 government entities in over 23 countries are clients.
Customer concentration is low. The largest customer represents only 4% of revenue. The top 10 customers in aggregate represent 20% of revenue.
In health-care end-markets, Conduent serves 18 of the top 20 managed health-care plans.
In transportation end-markets, Conduent is the largest commercial vehicle operations service provider, and the second-largest toll-collection-service provider.
https://www.barrons.com/articles/why-conduent-shares-could-double-1500025638
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Conduent is well positioned
The BPO industry is highly fragmented and is likely entering a consolidation phase.
As a pure player in BPO, Conduent is an ideal takeover target.
https://www.barrons.com/articles/why-conduent-shares-could-double-1500025638
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Hiccups
Darwin Deason, one of Xerox's largest shareholders, owning 6.1 percent of shares, sued the company in October in a U.S. district court over the spinoff. In late October, the company said it had settled with Deason, with the settlement terms calling for the award of 180,000 shares of Xerox's preferred stock and 120,000 preferred stock of Conduent.
Conduent's business includes the operations of Affiliated Computer Services founded by Deason and bought by Xerox for $6.4 billion in 2010.
Branding
the three parallelograms logo was fashioned by Chermayeff & Geismar & Haviv, the design firm behind NBC’s iconic peacock logo.
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Branding
the three parallelograms logo was fashioned by Chermayeff & Geismar & Haviv, the design firm behind NBC’s iconic peacock logo.
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What’s in a name?
What’s the story behind the name “Conduent” and the new identity?
Both the name as well as the branding strategy were intended to be vessels for story creation. Conduent obviously is a coined word, but in Catalan it actually means “leader.” Our intent was to find a phrase or word that evoked characteristics of companies.
We compete in business-process services but we do a very particular type of work. All of it is essentially a part of a business or government operation that involves connecting it with some person on the other end: a patient, employee, citizen, or benefit recipient. And where these entities are partnering with us, we manage consequential parts of their operation: millions of transactions that typically happen every day, all day.
So we were looking for a word or phrase that helped us evoke that—connect, conduct, conduit, which includes a channel and a level of connection and flow—all of which evokes the work that we do. And with “ent” on the end, it’s “enterprise,” “entering.” We landed on Conduent because we thought it does a good job of evoking the characteristics of who we are and what we do and what we create. It’s a little interesting. It invites a bit of explanation, but that’s exactly what we wanted—to strike up a conversation.
John Kennedy As told to Brand Channel
https://www.brandchannel.com/2017/01/04/conduent-5-questions-john-kennedy-010417/
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Branding
The logo — which uses three orange parallelograms surrounding a negative-space triangle, along with the company’s name in bold, black font (and connected N and T at the end) — is intended to convey strength, motion and innovation, Kennedy says. “We’re using Conduent as a [representation] for what the company is and what it does,” he says.
the three parallelograms logo was fashioned by Chermayeff & Geismar & Haviv, the design firm behind NBC’s iconic peacock logo.
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Branding
“[Brand building] doesn’t happen overnight,” John Kennedy, Conduent’s chief marketing officer, tells Marketing Daily. “It took 100 years to build a brand as recognizable as Xerox. We want to build something that’s as substantial as that.”
https://www.mediapost.com/publications/article/286285/xerox-spin-off-conduent-cmo-explains-its-orange-pa.html
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Branding
The orange color is relatively unique in the global business services category
The connected parallelograms represent the three stakeholders of the company: clients, employees and investors.
The parallelograms are also meant to evoke motion, while the connected “N” and “T” in the company name signify “stability, trust and continuity,” Kennedy says.
https://www.mediapost.com/publications/article/286285/xerox-spin-off-conduent-cmo-explains-its-orange-pa.html
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Investor Relations Strategy
Articulate value of spin off for both Xerox and Conduent
Campaign Objective
CMO hopes Conduent becomes the brand everyone knows without even thinking about it.
Source:PR Week
The challenge for Conduent, our BPO company, will be to introduce it in a way that is differentiating and drives client and prospect interest to attract growth opportunities.
Source: Forbes
https://www.forbes.com/sites/aaronkwittken/2016/09/16/a-split-decision-my-qa-with-xeroxs-john-kennedy/#569e43a53668
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Campaign Objective
Reach buyers where they are today: on their phones and computers.
People are consuming information electronically, but they are still going to events, which remains part of the marketing mix.
Companies that are savviest in using those techniques and engaging in a personalized way through thoughtful content will position themselves well in the market.
John Kennedy Conduent CMO
https://www.forbes.com/sites/aaronkwittken/2016/09/16/a-split-decision-my-qa-with-xeroxs-john-kennedy/#569e43a53668
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Campaign Objective
Build brand awareness from scratch.
Target different audiences: Whereas Xerox has products for the average consumer, Conduent is a pure business-to-business company. That means its marketing execution will be very targeted toward governments and businesses, rather than individuals
Advertising Strategy
To announce its arrival, Conduent will advertise on television and in print through Xerox’s AOR Young & Rubicam, but Kennedy admits "it won’t go for long" and will only be used "to create buzz."
https://www.prweek.com/article/1419738/xerox-spinoff-conduent-plans-stay-invisible-marketing-itself-aggressively
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Advertising Strategy
Advertising on business and financial TV networks, and print advertising in newspapers, as well as digital takeovers of some business and news sites.
https://www.prweek.com/article/1419738/xerox-spinoff-conduent-plans-stay-invisible-marketing-itself-aggressively
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PR Strategy
“Stay invisible”
While Xerox has become synonymous with photocopying, chief marketing officer John Kennedy said he wants Conduent "to be synonymous with creating terrific experiences between businesses and governments and the people they serve." But what he doesn’t want is the average consumer to know the brand exists.
PR Week
https://www.prweek.com/article/1419738/xerox-spinoff-conduent-plans-stay-invisible-marketing-itself-aggressively
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PR Strategy
"We touch almost every consumer. The question, as a marketer, is whether we want them to know it is us. We're happy to be invisible. If we're invisible, that means that interaction went terrific.“
John Kennedy Conduent CMO
Medical benefits for 15 states, which means that 67% of insured Americans have interacted with the company without knowing it.
Likewise, 40% of worker’s compensation recipients come in contact with Conduent
large percentage of those who give and receive child support.
Nearly half of the nation’s highway toll booths are operated by Conduent.
PR Week
https://www.prweek.com/article/1419738/xerox-spinoff-conduent-plans-stay-invisible-marketing-itself-aggressively
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PR Strategy
Marketing Strategy
B2B marketing
60 marketers scattered across the U.S. and Europe who commute virtually to work. They’re tasked with making sure business leaders and government officials know Conduent’s name while keeping the brand out of the general public’s eye.
To do this, they’ll use content marketing, in the form of infographics, video, and white papers, that explains not only the brand’s capabilities but also focuses on the evolution of the 19 industries that Conduent serves (and subsequently how Conduent can help them adapt to the changing environment).
https://www.prweek.com/article/1419738/xerox-spinoff-conduent-plans-stay-invisible-marketing-itself-aggressively
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Homework: Think about what you have learned about the situation leading up to Conduent’s spin off. How does this video leverage elements of communication theory to support a successful spin off for the publicly traded company?
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Marketing Strategy
From display, paid search, content marketing to social media, digital is at the heart of Conduent’s marketing strategy.
mobile-first company website.
Kennedy believes content marketing is one of the most efficient ways to develop brand awareness.
His team at Conduent will do so in the form of infographics, video and white papers.
This year, Kennedy also hopes that Conduent sellers can learn to sell on social.
Homework: Think about what you have learned about the situation leading up to Conduent’s spin off. How does this video leverage elements of communication theory to support a successful spin off for the publicly traded company?
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Marketing Strategy
Search
There’s also a search component as Kennedy acknowledges that decision-makers are looking to Google, rather than committee, when choosing which BPO company to sign
https://www.prweek.com/article/1419738/xerox-spinoff-conduent-plans-stay-invisible-marketing-itself-aggressively
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Marketing Strategy
Tradeshows
But nothing beats meeting clients in person, Kennedy adds, so his team will attend industry events like this year’s healthcare conference HIMSS in Orlando, Florida, and the Intelligent Transportation Systems World Congress in Montreal.
https://www.prweek.com/article/1419738/xerox-spinoff-conduent-plans-stay-invisible-marketing-itself-aggressively
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Social Media Strategy
fairly heavy social effort, leveraging employees with an extensive employee-engagement program right out of the chute.
Captured the content for social from the mini-events held at 500 locations around the world on January 3.
When the invisibility cloak wears off…
https://www.lohud.com/story/news/transit/2018/01/25/conduent-cashless-tolling/1061583001/
Issues with toll collection on Tappan Zee Bridge created a PR issue
State of NY stood behind Conduent
Conduent declined to comment
Good or bad idea?
What is reach of lohud? USA Today property covering Lower Hudson County NY – low impact, limited reach. B2B focus upheld – not concerned with public, more concerned with customers/clients
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Homework
Think about what you have learned about the situation leading up to Conduent’s spin off. How does this video leverage elements of communication theory to support a successful spin off for the publicly traded company?
https://www.youtube.com/watch?time_continue=124&v=e-t4XaROMwk
Case Study Analysis
What was the problem?
List any outside concepts/theories that can be applied.
Qualitative data
Quantitative data
What is your analysis?
What alternative measures, actions, approaches could have been used?
How would you have approached this problem?
