Kinko's - The Free-Agent Home Office

Sure, this fast-growing company makes copies — 12 billion copies in 1997 alone. But its real mission is to help the growing population of self-employed professionals remake how they work and live.

Paul Orfalea, founder and chairman of Kinko's Inc., hates his office. The problem isn't what the place looks like. It's what happens when he's there. The phone rings too much. Trouble knocks too often. "If I stick around that office long enough, I guarantee that every problem in the world will come to me," says the lanky, 49-year-old Californian, whose kinky red hair inspired the company's offbeat name. "Having an 'open door' doesn't mean people can lay a mess on my desk."

In one sense, it's a strange attitude. Orfalea is a genuine business mogul with a huge company to run. The first Kinko's opened 27 years ago in a converted hamburger stand. Ten years later Kinko's was a funky, mid-sized, anticorporate company, with 80 stores located primarily near college campuses and staffed mostly by part-time student workers. Today it is a global juggernaut. The company has 865 locations in six countries, 23,000 employees, and estimated annual revenues of $800 million. Talk about a copying machine! In 1997 Kinko's bought 90 million pounds of paper and made more than 12 billion copies. (That's two copies for every man, woman, and child in the world.) All this growth has created lots of wealth. In 1996 Clayton, Dubilier & Rice, the Wall Street merchant bankers, made an investment in Kinko's that valued the company at more than $600 million which puts Orfalea's personal wealth at an estimated $225 million.

In another sense, Orfalea's disdain for his office is perfectly appropriate. Kinko's began as a low-price copy shop for college kids. But it has become a business powerhouse, a state-of-the-art service center for self-employed professionals for people who, like Orfalea, hate the headaches that come with working in an office. Better and sooner than their rivals, Orfalea and his colleagues figured out who these people were, how they worked, what they needed and reinvented the company around this new population. Kinko's became the home office of Free Agent Nation.

Today Kinko's is to self-employed artists, accountants, and consultants what Starbucks is to coffee fanatics or what Nike is to sports-crazed teens. It is a mass-market enterprise that has prospered not by cutting costs but by redefining standards. And it is as much a cultural phenomenon as a business phenomenona place that customers look to for great service and a sense of community.

Kinko's feels that sense of community too. "Our coworkers believe that they are contributing to something larger than Kinko's," says Orfalea. "They are helping people find jobs and advance their careers. They are having an impact on how things work out for people. And that's extremely important."

Focus on Free Agents

No one had heard of free agents not in business, not even in baseball when Paul Orfalea opened his first copy shop outside the campus of the University of California, Santa Barbara. A tall, skinny college kid with a knack for peddling things to other students, he'd built up a small school-supply business when, during a trip to the library, he encountered a big opportunity: the copy machine. The price10 cents per page seemed absurdly high. Orfalea figured he could cut it in half and still make money.

He was right. His first shop was so small that he had to wheel its one machine onto the sidewalk to make copies. But it quickly made money, and Orfalea, along with friends, relatives, and business partners, began spreading the gospel of cheap copies across the country. By the end of the decade, the company's 80 stores had an average size of 400 square feet. And as bizarre as its name first seemed ("Some landlords didn't like the name and wouldn't rent to us," Orfalea recalls), it became part of the language: "Kinko's" is to copy centers what "Xerox" is to copy machines.

From the start, Kinko's was a funky sort of place. Students were the target customers, the main pool of workers, the driving source behind both store atmosphere and corporate culture. Even its corporate structure was slightly offbeat. The operation was neither a series of franchises nor a chain. As Kinko's grew, Orfalea shared ownership of the stores with local investors in different regions nearly 130 partners in all. Organizing as a loose confederation brought real benefits. Local ownership meant more grassroots innovation and less bureaucracy. And Kinko's was able to expand without assuming lots of debt; the partners financed growth. By the end of the 1980s, there were 420 Kinko's outlets, and their average size had grown to 1,500 square feet.

But there were also disadvantages. Inventory and services weren't consistent from one city to the next. Retail operations didn't even look alike. If a hardware store had a sale on pink paint, company veterans joke, the Kinko's nearby would be pink. "I used to build the furniture for my stores in my basement and install it myself," recalls Brad Krause, 49, a surfer and Vietnam veteran who in 1971 became Orfalea's first partner and who eventually became a 50% owner of a 65-store division. "We all did it that way back then."

There were also problems with the core business: increasing competition, shrinking margins, copyright-infringement lawsuits brought by textbook companies. By the mid-1980s, Orfalea says, "We realized we would have to be more than just a campus copy center. And we knew there had to be lots of other people who needed our services." What Kinko's didn't know was who those people were or how it could attract them to its stores.

Until, that is, they started showing up. Just as Kinko's began searching for new customers, corporate America began shedding millions of its employees: downsizing them into unemployment, outsourcing them into self-employed consultants, "virtualizing" them into full-time telecommuters. Suddenly unemployed middle managers needed well-crafted resumes and portfolios. Suddenly self-employed designers needed access to scanners, color printers, and other hardware that they couldn't buy on their own. Suddenly at-home sales reps needed help with brochures and marketing collateral. Everyone needed a place to send and receive faxes and to burn the midnight oil.

Indeed, across the country, stressed-out refugees from big companies many trying to piece together new careers while holding down temporary jobs begged the Kinko's staff to let them stay late so they could keep working. So in 1985 a Kinko's in Chicago made a startling announcement: it would stay open 24 hours a day, 7 days a week. Other stores copied the idea. "I'd like to say we invented our strategic approach from scratch," jokes Karen Sophiea, 43, vice president of marketing, who arrived at Kinko's in 1989. "But we just built on what our early-adopter customers were already doing. Customers told us what they wanted. We had the good sense to listen."

And to look around. As Kinko's explored the free-agent movement more deeply, it discovered a gold mine of unmet needs. Hundreds of thousands of self-employed professionals were equipping their home offices with personal computers but not with high-speed fax machines or high-quality printers. Tens of thousands of entrepreneurs were starting small companies with complex document-management challenges but without the resources to buy industrial-strength copy machines. A new breed of Road Warriors (like the always-in-motion Orfalea) needed administrative support wherever they traveled.

These customers had different problems and priorities. But they all shared a common outlook. They wanted to do in their new lives what corporate America had done to them to outsource activities best left to others and to concentrate on work that creates real value. Wendell Wilson, 50, vice president of operations and product management, says the company realized its job was to "let these people act like CEOs, delegating everything they didn't want to do to someone else." Namely, to Kinko's.

In 1992 Kinko's formally signaled its new focus on free agents with a marketing campaign called "Your Branch Office." In 1996 it announced the $214-million investment by Clayton, Dubilier & Rice. This "roll-up" transaction transformed Kinko's from a decentralized confederation into a unified global enterprise. The transaction "was a hard decision, but the right decision," says Krause, whose 50% stake in a regional operation became a 5% stake in the new Kinko's. "Lots of partners closed up shop on every holiday they could think of. But we were an international business; our customers were demanding that we stay open on holidays. A lot of partners and coworkers were not thrilled."

The company's transformation was stunning. Gone was the regional hodgepodge of store decor and marketing themes. In its place, customers found uniform and attractive environments rife with entrepreneurial possibility. Today the typical Kinko's outlet is huge about 7,000 square feet and stuffed with cutting-edge technology. A store can take digital text files and graphics in virtually any form, and transform them into presentations, full-color brochures, posters, transparencies even books. Road Warriors can rent computers, check email, and make last-minute alterations to business materials. Or they can skip travel altogether, since 140 outlets now offer real-time videoconferencing. There are lots of how-to pamphlets on the little tasks that make a big difference to free agents (from designing a resume to paying taxes) and nice touches that make customers feel more at home: scissors and paste, tables and telephones. (In some stores, phone use is free.)

Lloyd Greif, a Los Angeles investment banker who tracks the company, still marvels at the transformation. "The bottom line," he says, "is that Kinko's gives the small operator access to facilities that used to be available only to huge conglomerates. It is saying, 'You, a self-employed professional, can go toe-to-toe with the big guys.'"

What Do Free Agents Want?

Few companies have explored free agent nation as thoroughly as Kinko's has done. Its rise to prominence has paralleled the rise of the self-employment phenomenon. Through surveys, focus groups, and millions of customer interactions, Kinko's has studied what makes free agents tick and how they work. The questions it is asking reflect its evolving strategy and service offerings. The answers provide an intriguing glimpse into where free agency stands and where it's heading.

Who are these people, and what are they like? According to Kinko's, the free agents who frequent its stores are mostly college-educated, mainly between the ages of 30 and 50, and relatively high on the income scale. Most of them volunteered for their status. They chose the free-agent lifestyle before mass layoffs made it necessary or pop culture made it cool. They come from lots of different industries and backgrounds. But they share a certain outlook: optimistic, enterprising, confident. No surprises thus far.

How do free agents feel about the career choices they've made? Here, Kinko's offers a more surprising answer: many don't feel as free as they thought they would. "The media has romanticized being self-employed," says Karen Sophiea. "You know the image: Set your own hours. Be your own boss. Get rich." If only reality were so inviting.

Free agents don't punch a time clock or bother with office politics. They decide where and how they work, and with whom. But free agents also face tough customer demands; they often juggle multiple clients, each of whom expects top-priority treatment. And in areas ranging from health insurance to computer hardware, they still operate at a cost disadvantage relative to their old employers. The net result: free agents often work longer hours and under greater pressure than their colleagues inside companies. In the new world of business, it seems, freedom's just another word for something else to do.

Which is why time is a free agent's most precious commodity. "One of the strengths that free agents have is their ability to move faster than big companies," says Sophiea. "Free agents sell speed. Success is about using resources wisely and time is one of the most valuable resources that free agents have."

How do free agents use technology? These days business is as much about performance as production. Free agents are expected to create reports, presentations, and marketing proposals (even Web sites) that are every bit as elegant as those created at giant organizations like IBM or McKinsey. "No longer can you present low-budget, spartan materials and appear frugal," warns a Kinko's newsletter. "Instead, you simply look out of touch."

That's where technology comes in. True, solo practitioners can tap the power of PCs, scanners, color printers, and digital cameras to create stunning documents and high-impact presentations. Yet here's the dirty little secret at the core of Kinko's business strategy: few people do so on their own. In fact, the money and time required to master these digital tools keep most people from even trying.

"Let's say I own [Microsoft] Office," says Sophiea, who loves playing the "typical" free agent. "That means I've got Word, PowerPoint, Excel. But what I really need is Adobe PageMaker, which costs hundreds of dollars. And how often do I use it? Once a year? Four times a year? I can't afford the software or the upgrades."

Indeed, Sophiea says, every hardware or software innovation that raises the performance standards for free agents makes them less likely to use technology. She calls Kinko's "a soup kitchen for the technologically homeless." Wendell Wilson uses different language to make the same point: "Technology lets free agents start small but compete big. And although technology is much easier to use than ever before, it's still difficult to stay abreast of it unless it's your core competence. Buying is easier than learning."

Are free agents "Made in America"? In a word, yes. Businesspeople everywhere are rejecting the confines of corporate life and striking out on their own. But almost nowhere has the commitment to personal independence approached what's happening in the United States. In one form or another, says Mazen Safadi, 38, vice president of Kinko's International, 30% of the U.S. workforce is on its own. Millions of people now work as self-employed free agents. Millions more hold full-time jobs but telecommute. Millions more are Road Warriors with little support from their company. Small wonder that 834 of Kinko's 865 stores are in its home market.

What country comes closest to the U.S. trend? Kinko's points to the Netherlands, where its research estimates that 29% of all workers are on their own. The figure is less than 15% for the rest of Europe. Over the long term, Safadi says, Kinko's is enthusiastic about free agency in China, where the company just opened its first store. "Asia's long-term prospects are absolutely phenomenal," Safadi says.

Copies and Community

It's late afternoon at a Kinko's in Seattle, less than an hour before the FedEx deadline. A tall man with unruly hair and a wild look pushes open the door and rushes to the counter. "Can you read this disk?" he asks, thrusting it at a clerk. The guy needs a resume for his portfolio. And he needs it now, so he can overnight it to a prospective client. He says the resume looks great on his computer screen at home but comes out screwy on the printer: "I have no idea what I'm doing wrong."

Thirty minutes later, the Kinko's clerk has not only printed out the resume but also made several clever suggestions to improve its content and layout. After the once-flustered customer expresses his utter delight "Whoa! Cool!" he leaves with a stack of new resumes, matching envelopes, and seriously positive feelings about his Kinko's experience. "There is nothing better for us," says Paul Orfalea, "than some guy who comes into the shop feeling angry and confused."

Why does Kinko's welcome angry customers? Because what distinguishes it from its rivals is not the speed with which it prints resumes or the knowledge it has about life as a free agent. What distinguishes Kinko's is the nature of the in-store experience. Its staffers don't just operate machines; they provide counseling for frazzled professionals. They don't just do what customers ask them to do. They help customers figure out what needs doing. Lots of customers "come in without knowing what they want or need," says Wendell Wilson. "They use our people to discover the solutions available to them."

Kinko's customers are tough customers. Early on, staffers learn to size up who's in the store and to provide the appropriate level of service. Some customers like the guy in Seattle with the resume are in full-panic mode. And they get the full treatment: step-by-step assistance with transferring files, selecting paper stock, making choices about design, color, presentation style. Customers who are at the other extreme "the totally confident ones who know exactly what they want and act like they own the store," jokes Sophiea often require nothing more than directions to the self-service area. Whatever their specific needs, though, Kinko's customers are all "taking care of business," Sophiea says. "We can break down customers demographically all we want, but what unifies them is that they are all business-minded."

And more than anything else, business-minded people want results. That's why everything about Kinko's projects an aesthetic of crisp functionality and an ethic of expertise, of getting things done. Staffers (80% of whom are full-time employees) move up a hierarchy of competence. After two weeks of basic training, new employees become apprentices. Over time, and with more training, these apprentices become operators. Roughly a third of all operators then go on to become specialists highly skilled staffers with know-how in everything from color theory to Internet technology to the store's business operations. All Kinko's staffers wear name badges that announce their length of service another sign of their expertise, another source of confidence for customers.

"We look at our coworkers as consultants for the 'digital-on-demand' era," says Susan Moore, director of corporate training. "We want to hire people with a service orientation, people who have a positive attitude toward what they're doing."

But this "consulting" relationship, however robust, also has its limits. Sophiea recalls a series of focus groups in which Kinko's tested a new marketing campaign: "We were talking about, 'We're with you; we're helping you close the deal; you and Kinko's make a winning team.' People said, 'It's me, not us. You helped bring my ideas to life, but I did the work. My butt is on the line.' That was a good thing for us to learn."

Kinko's has also learned that there's more to business than crisp transactions. Its stores play an increasingly social role in Free Agent Nation. Kinko's has become a '90s version of the neighborhood watering hole, a place where free agents swap war stories, share gossip, learn from others. Time and again, focus groups report that one of the most satisfying aspects of the Kinko's experience is not what customers learn from staffers it's what they learn from other customers.

"Big companies do some things right," says Sophiea, herself a refugee from H.J. Heinz Co., the consumer products conglomerate. "Health benefits. Social benefits. Friends. Free agents can feel lonely, isolated, abandoned. They come in and say, 'I need copies and a fax.' But then they hang around and chat. Customers help one another out at the computer. They see what someone else is doing and say, 'Hey, that's cool.' We function as a business connection and a social connection. You get the strokes here that you used to get at the office."

It's not uncommon for Kinko's customers to stop by the store and celebrate with the staff (and whoever else is there) when they land a big client or a great job. Kinko's founder Orfalea finds the trend moving and a bit worrisome. "This whole [free-agent] thing started with salespeople working out of their homes," he says. "But even salespeople like to chat with one another. They need the reinforcement of talking to people with similar interests and backgrounds. Sometimes I think we've gone overboard with this work-at-home thing. People don't go to a corporate office just to collect a paycheck or to move up the corporate ladder," Orfalea adds. "They go because they don't like talking just to their neighbors."

Paul Roberts proberts@nwi.net is a frequent contributor to Fast Company. His most recent article was "Group Genius" (October: November 1997).0

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