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Published: August 28, 2006

 
 

FedEx Delivers on the Deal

In acquiring Kinko’s, FedEx is testing its own mastery of the art of integrating new companies.

Illustration by Vern Evans
Fred Smith, the legendary chairman and CEO of FedEx Corporation, had done this before. Walking onstage at a Westin hotel in Dallas, Mr. Smith grinned before an audience of about 500 nervous Kinko’s employees assembled in a large ballroom. It was April 26, 2004, and Mr. Smith and his company had recently closed a $2.4 billion deal to buy the copy store chain. Dressed in a dark suit, with his silver hair brushed back, Mr. Smith had everyone’s attention. The Kinko’s rank and file were about to get a taste of Fred Smith’s leadership style.

FedEx had just acquired Kinko’s with the stated purpose of fueling its retail outlet expansion and driving growth of its transportation services. The combination “leverages the historical strengths of both companies, while powerfully redefining the future of the business services marketplace,” Mr. Smith explained to the group. Kinko’s would give FedEx access to those individuals and businesses lacking a regular pickup from a FedEx driver. FedEx would gain access to the copy chain’s mainstay — the high-margin, small and medium-sized businesses that FedEx had long coveted but could not reach. With Kinko’s as the front end, Mr. Smith could plug in FedEx’s massive back end and go after every business customer on the planet, large and small.

That’s the near-term plan, but as Mr. Smith’s message to the Kinko’s troops suggests, his vision for FedEx never ends with the near term. Although Mr. Smith and FedEx won’t confirm or deny (he was unable to speak to strategy+business for this article), it’s clear that FedEx Kinko’s can be much more than a copying and delivery service. Given its expanding web of storefronts linked by a super-high-speed digital network, FedEx Kinko’s is perfectly situated to take advantage of the rapidly developing 3D printing technologies that can already produce all sorts of small products. FedEx Kinko’s could become the pickup point for anything from print-on-demand books to parts for automotive engines and electronics. It’s the logical step for a company whose core business is getting stuff from here to there.

All in good time, but Mr. Smith’s first order of business when FedEx closed the Kinko’s deal was to convince the crowd staring him down in the Westin ballroom to come on board with him. Sitting in the front row that day, Tom Leverton, then a Kinko’s vice president, remembers how Mr. Smith and Kinko’s CEO at the time, Gary Kusin, stood side by side beneath digitally projected images of the two companies’ logos. “Today we move forward by unveiling a new brand,” said Mr. Kusin, who before coming to Kinko’s in 2001 had done stints as CEO of a cosmetics company, a software retailer, and HQ Global Workplaces. Then in a bit of corporate theater, the lights went down and the logos slid together to reveal the newly combined FedEx Kinko’s brand, as Mr. Smith, standing below the merging logos, draped his arm around Mr. Kusin’s shoulder. Mr. Leverton, who worked on the rebranding implementation and who is now senior vice president of products and services for FedEx Kinko’s, turned around in his seat to watch the reaction. There was a pause while people soaked in the message — Kinko’s would not be gutted as they had feared — and then the hall erupted in raucous clapping and relieved smiles, the biggest among them Mr. Leverton’s. “Once I heard it, I knew this merger was going to work,” he says. “We had the hard-core team members behind us, and without their support, no amount of planning at the top would make up for that.”

 
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Resources

  1. Gerald Adolph, “Mergers: Back to ‘Happily Ever After,’” s+b, Spring 2006: Why growth through acquisition is becoming popular again. Click here.
  2. Madan Birla, FedEx Delivers: How the World’s Leading Shipping Company Keeps Innovating and Outperforming the Competition (John Wiley & Sons, 2005): How FedEx became a leading global brand by tapping into the creativity of its employees.
  3. Nicholas G. Carr, “Top-Down Disruption,” s+b, Summer 2005: Epoch-making technologies, products, and business models don’t always come from industry newcomers. Sometimes they come from the established leaders. Click here.
  4. Geoffrey Colvin, “The FedEx Edge,” Fortune, March 20, 2006: CIO Rob Carter discusses how FedEx manages to ship 6 million packages a day. Click here.
  5. Charles Fishman, “Face Time with Fred Smith,” Fast Company, June 2001: Mr. Smith on what he learned in the Marines and why he’s obsessed with speed. Click here.
  6. Ellen Florian et al., “Special: CEOs on Innovation,” Fortune, March 8, 2004: Mr. Smith and others weigh in on the need for constant change and open-mindedness. Click here.
  7. Gary L. Neilson and Bruce A. Pasternack, Results: Keep What’s Good, Fix What’s Wrong, and Unlock Great Performance (Crown Business, 2005): Contains a section on FedEx’s culture as an example of a resilient company that learns from its customers’ complaints.
  8. Rob Norton, editor, CFO Thought Leaders: Advancing the Frontiers of Finance (strategy+business Books, 2005): Includes an interview with Cathy Ross, chief financial officer of FedEx Express, describing how culture and controls reinforce each other. Click here.
  9. C.K. Prahalad and Venkatram Ramaswamy, “The Co-Creation Connection,” s+b, Second Quarter 2002: Companies spent the 20th century managing efficiencies. They must spend the 21st century managing the consumer experience. Click here.
  10. Michael Sisk, editor, The Whole Deal: Fulfilling the Promise of Mergers and Acquisitions (strategy+business Books, 2006): Overall guide to world-class M&A strategy for those who would emulate — or surpass — Fred Smith. Click here.
  11. Fred Smith and Brian Dumaine, “How I Delivered the Goods,” Fortune Small Business, October 1, 2002: Mr. Smith explains his management philosophy. Click here.
  12. James C. Wetherbe, The World on Time: The 11 Management Principles That Made FedEx an Overnight Sensation (Knowledge Exchange, 1996): What managers can learn from Fred Smith.
  13. For more business thought leadership, sign up for s+b’s RSS feeds. Click here.