Kinko's has been on a roller coaster ride since the mid to late 90's. In the early days, Kinko's used local college campuses as hubs and the prime reason for entering a market. Today, the company is more keen on targeting corporate accounts. In both cases, the retail customer has always been a major source of income. In 1996 Clayton, Dubilier & Rice, Inc. (CD&R), a New York based private equity investment firm, invested $219 million for a minority equity stake in Kinko's. It was a chance for early shareholders to cash out and proceed with plans to become a publicly traded company.

Since then, CD&R and the founding partners have battled over numerous items, including the timing of a public offering, management performance and liquidity. But in January, CD&R initiated a $460 million recapitalization of Kinko's which provided cash to founder Paul Orfalea and other partners. This move effectively ended the background noise that was usually louder than all the positive changes occurring at Kinko's recently.

No one should be happier than Gary Kusin. He joined Kinko's in 2001 and has been rearranging the $2 billion company with several bold initiatives. A seasoned executive (see sidebar), Kusin acted quickly to restore employee morale and customer loyalty. He led the move of the company's headquarters from Ventura to Dallas, which allowed executives to reexamine their field support structure "from the ground up." He has a mostly new senior staff, and local managers and sales reps are empowered to do whatever it takes to get work into the store. Kusin has attempted all this while trying to maintain much of the culture Kinko's is known for, including aggressive action to protect the environment.

If Kusin has his way, Kinko's will shake the retail-only perception and capitalize on web workflow, outsourcing, and digital & on-demand trends within the printing and publishing industry. With the wind at his back, Kusin has positioned Kinko's to be a serious contender for Corporate America's printing business and an even more formidable threat to commercial printers.


WTT: Gary, thanks for taking the time to speak with WhatTheyThink.com. I think a lot of industry watchers were surprised when Kinko’s decided to move its headquarters from Ventura, California to Dallas. Is that move complete now, and how did the transition go?

GK: For the most part, the transition is complete. Establishing our main field support office in Dallas has surpassed our goals. We set out to move critical support functions to a more centralized location, achieve a lower total cost of doing business, and decrease travel costs and time. The associated savings contributed a great deal toward 2002 being among our most profitable years in recent history.


WTT: About how many employees made the move with you?

GK: Approximately 70 team members made the move from our Ventura office to Dallas during the course of the transition. Another 400 finance and technology positions have remained in Ventura as planned.


WTT: Did you use the move as an opportunity to implement any significant restructuring other than the obvious people changes a move of that magnitude implies?

GK: The move was part of an overall strategic plan implemented during the same timeframe. In conjunction with the headquarters move, other changes included re-examining our field support structure, increasing our strategic use of 24-hour locations and better leveraging our nationwide network.

One comment on the people portion of the move: It’s not often that companies reexamine their field support structure from the ground up. We did just that, including hiring a mostly new senior management team. A fringe benefit was the resulting diversity among that new group. For example, Kinko’s senior management team now includes a higher percentage of women in top spots than most major companies. Our female executives include executive vice president of operations, an area senior vice president/general manager, four sales and marketing VPs and a range of others.


WTT: While Kinko’s doesn’t disclose specific financials, can you comment on the overall health of the organization, its profitability and what you are seeing in terms of year-over-year revenue growth in this tight economic climate?

GK: I don’t have to tell you that the last couple of years have been tough for the printing industry. I don’t think the economic outlook includes rapid growth for the printing industry anytime soon. I can say that Kinko’s held its ground and continues to invest in new locations, products and people. We are also fortunate to have a diverse business that touches many different customer segments and their needs. Overall, I’m very pleased with the progress we’ve made financially in the past year in the areas of cost control and overall profitability. We are currently focused on maintaining that progress while aggressively growing our revenue and market share.

WTT: John McDonald recently joined your team as Sr. VP of Sales. Tell us a little more about his role.

GK: I was thrilled to add John to Kinko’s senior management team. He brings more than 20 years of experience leading large-scale sales teams, has great industry experience, and has shown a consistent ability to achieve sales goals. In his role at Kinko’s, he oversees Kinko’s Commercial Solutions, our nationwide sales force dedicated to business customers.


WTT: Kinko’s seems to be accelerating its corporate accounts program. How many sales people do you have focused on that effort and what percent of your revenues are generated by corporate accounts versus walk-in retail traffic?

GK: As a private company, we do not release detailed information about sales or our sales force. What I can tell you is that we continue to invest in people and solutions for corporate customers, and that we currently do business with 370 of the Fortune 500. Bottom line results matter most to these customers, and Kinko's can make that happen.


WTT: What’s the primary value proposition you offer to these customers? Or put another way, when you win corporate deals, what are the primary drivers?

GK: Our value to business-to-business customers falls in two categories, the Kinko’s network and our ability to cut costs while increasing productivity.

Today’s Kinko’s is a digitally connected network of more than 1,100 company-owned locations. We are where our customers need us, whether that’s at one of our retail locations or at an on-site or near-site facility. This network also delivers unparalleled flexibility, capacity, and scalability versus rigid equipment contracts. That means Kinko’s can develop a solution uniquely suited to a company’s needs while leveraging the power of every other Kinko’s in the world.


WTT: What would you say is the most common reason companies choose a different supplier?

GK: First, I think to a certain extent we are victims of our own brand recognition. Many of today’s business people grew up with Kinko’s, and their perceptions may have been set back when they were in college. An important part of our business is still focused on that consumer need. At the same time, today’s Kinko’s is much more competitive in the B2B space. Obviously, we’re working very hard to update that perception through our marketing and sales efforts.

I’d also say that in the past, Kinko’s was sometimes perceived as the high-priced industry leader when it came to volume copying jobs. We’ve done a lot of work around that over the last year. For example, we empowered branches and sales team members to bid much more aggressively.


WTT: Kinko’s has been offering outsourced facilities management services for some time now. How are those offerings structured and how is that piece of the business going for you?

GK: This end of our business is continuing to grow. Our Outsourcing Services move most or all of a company’s document production off-site, to a nearby Kinko's production facility while moving customer service on-site. Doing this allows our customers to leverage our size, capacity, equipment and 24/7 operations, with service that is as good, and often better, than on-site production centers provide. It also liberates them from rigid contracts and obsolete machines and allows them to better utilize their office space.


See part two