Bernstein’s Retirement Brings Changing of the Guard at PARC; Q&A with Incoming CEO Steve Hoover

The storied Palo Alto Research Center, birthplace of such fundamental information-technology advances as the personal computer, Ethernet, and the laser printer, has a new leader. The Xerox (NYSE: XRX) subsidiary announced today that Steve Hoover, formerly vice president of Xerox’s software and electronics development group, will take the place of current CEO Mark Bernstein, who is retiring effective February 1.

Hoover, pictured above right, will be only the second person to lead PARC since its transformation from Xerox’s flagship research laboratory into a contract R&D organization earlier this decade. Bernstein took the reins in 2001, and was one of the architects of a planned 2002 spinoff that would have made PARC into a fully independent company. That spinoff was never completed—Xerox couldn’t find a buyer—and today PARC remains a wholly owned subsidiary of the Norwalk, CT-based document management company.

But the 170-member lab does serve numerous outside customers, from big tech companies like Fujitsu, Motorola, NEC, and Samsung to government agencies such as the Department of Energy and the National Institutes of Health. In 2009, about 40 percent of PARC’s $60 million in revenues came from customers other than Xerox, and the organization also incubates its own spinoffs, such as Powerset, a semantic search company bought by Microsoft in 2008 for more than $100 million.

Bernstein’s retirement comes just a few months after the symbolic milestone of PARC’s 40th anniversary, celebrated in September at a half-day symposium on the PARC campus in pastoral west Palo Alto. Bernstein told Los Angeles Times writer Michael Hiltzik at the time that the lab has grown since 2002 by marrying engineering skill with business development expertise. “The left brain is now complemented by right-brain thinking about what our technology is really useful for,” Bernstein told Hiltzik.

A Carnegie Mellon-trained mechanical engineering PhD and a 17-year Xerox veteran, Hoover is no stranger to the product development mentality. As vice president of Xerox’s software and electronics development group since October 2009, he controlled a $175 million R&D effort aimed at improving technologies found in more than 30 Xerox products. Before that, he spent three years managing Xerox’s research center in Webster, NY, the oldest of the company’s global research centers and the seat of its pioneering work in electrophotography.

Hoover says there won’t be any big shakeups at PARC on his watch, at least not at first. Xerox benefits from the mix of internal and external R&D that goes on at the facility, and the company doesn’t want to mess with a winning formula, he says. “This idea that you can create a research center that does work for other clients, for other businesses as well as government, and also initiates startups, but where Xerox is the largest client—that is something that Xerox really likes,” he says.

In a brief phone conversation yesterday I asked Hoover to talk about his experiences at Xerox, and about the significance of the company’s decision to appoint an insider to lead the lab. Here’s an edited transcript of our conversation.

Xconomy: Tell me a bit about yourself and your history at Xerox.

Steve Hoover: I joined the research group in Rochester, New York [in 1994], and since that time have basically gone back and forth between research and engineering….I’ve done a lot of work on automated designs in computer engineering, and that evolved into what PARC calls “Smart Matter”—the idea of intelligent systems. I moved from that into Internet technologies: how do we catalyze our technologies using the distributed intelligence of the Web. And my last position was running pretty much a pure software and electronics group. So, I’ve been a bit of an integrator, crossing and bridging different fields. Oftentimes that is where innovation lies, in the white space between well understood technologies.

X: Was it a given that a Xerox insider would be tapped as Mark Bernstein’s successor? And if you’re the CEO of PARC, is it a big advantage to come from inside Xerox?

SH: I wasn’t picked for that reason. There were definitely other candidates who weren’t Xerox employees, so that was not a given. And I am not here because Xerox wants to put a Xerox person in charge. With a lot of startups, their business model evolves over time, when they figure out what really works. We started PARC as independent back in 2002, and we have evolved that over time into being a wholly owned subsidiary. We, meaning Xerox, really value this model…I am not here to change that in the least. It’s a successful business model, and Xerox gets a lot of benefits from being part of that vibrant economy of outside ideas and companies, and PARC is a great channel for that.

I’m here because I’ve got a strong history of innovation, of connecting technologies and businesses and customers. And most of that, yes, was at Xerox, so I’ve got a strong background of close collaborations with PARC over the years. I’m a known entity to most of the PARC people, because we’ve done great collaborations over the years. For example, when we started looking at this parallel printing work, I knew about the modular robotics work that Mark Yim, who is no longer at PARC, was doing, and we formed a collaboration in that area. So I understand the PARC environment and the value of this business model and I want to continue it.

X: Are you saying that you don’t see the need for any course corrections? Or do you think you’ll just spend some time first getting the lay of the land?

SH: I don’t see any big course corrections that are needed. But I do need to come in and get the lay of the land. I am here to run the business and continue its success and make it even more successful. I don’t come into this with the idea that there are any big changes needed—the models all seem to be working, and it’s a great set of people. Over time, will there be some things that we, as a senior team, come to the conclusion need some change and some minor corrections as a business? That’s what you do on an ongoing basis. But that is not the raison d’etre for me to be here.

X: How would you summarize Mark Bernstein’s legacy as PARC CEO?

SH: I think Mark was a key player in really navigating the successful creation of this new business model. When we started this, Mark was involved from the beginning, and then became the CEO. And under his leadership we’ve certainly broadened our research agenda. One of the things that excites me about this job is working with the people here and the broad set of technologies, like content-centric networking. He established the relationships with the key outside clients, and that’s led us to where we are today.

Wade Roush is the producer and host of the podcast Soonish and a contributing editor at Xconomy. Follow @soonishpodcast

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