Espe, Matthew J. 1959–
Matthew J. Espe
Chairman, president, and chief executive officer, IKON Office Solutions
Education: University of Idaho, bachelor's degree; Whittier College, MBA, 1984.
Family: Married; children: four.
Career: General Electric, 1980–1992, sales and marketing management; 1993, general manager, marketing, GE Plastics-America; 1994, sales and marketing management and general management assignments, Europe; 1996–1997, director, commercial operations, GE Plastics-Europe; 1998–1999, president, GE Plastics-Asia; 1999–2000, president, GE Plastics-Europe; 2000–2002, president and chief executive officer, GE Lighting; IKON Office Solutions, 2002–, president and chief executive officer; 2003–, president, chief executive officer, and chairman.
Awards: Received the Partnership Award from Ricoh Corporation, 2004.
Address: IKON, 70 Valley Stream Parkway, Malvern, Pennsylvania 19355-0989.
■ During his successful 22-year career with General Electric (GE) in Europe, Asia, and the United States, Matthew J. Espe developed effective management and product-implementation skills and a strong customer-oriented perspective. These qualities led to his being chosen in 2002 to head up IKON Office Solutions, a business that provided a channel to connect customers and suppliers in the total-business-solutions industry. IKON could continue to grow as a leader in the industry only if customers on both ends of the channel were satisfied. IKON board members saw Espe as the perfect candidate to lead their company into the future.
MANAGEMENT STRATEGY AT GE
Espe began with GE in 1980 and worked on his master's degree while working his way through progressively more responsible positions in sales and marketing management. After several years with the company's plastics operations in Europe, he was made president of plastics in Asia and, a year later, of plastics in Europe. In 2000 he was appointed president and CEO of GE's entire lighting operations, which at the time had $2.7 billion in annual sales. Shortly after his appointment, the U.S. and world economies took a plunge. GE Lighting's sales dropped 6 percent and profits declined 32 percent in 2001. "You have to go back 20 years to see this kind of softness," Espe was quoted as saying by Jim Lucy (Electrical Wholesaling, June 1, 2002).
Experience had taught Espe that in tough times it was important to return to the basics. He instituted a cleanup of inefficiencies and paid particular attention to customers' feedback. By June 2002 Espe had led GE into its largest-ever new-product launch with a multimillion-dollar marketing campaign to promote the Reveal light bulb. The lamp produced a crisp white light that was more appealing than the yellowish light produced by all previous light bulbs. Espe was quoted in a GE press release as commenting that people would now be able to see their world in a "whole new light" (press release, June 2001). He also noted that 85 percent of trial users preferred the new bulb, which filtered out the yellowish tint through a natural-earth element, neodymium, that GE added to the glass. Improvements in efficiency and color of halogen and fluorescent lamps were predicted to encourage growth in GE's industrial and commercial lighting sector.
Espe's 13 years in supply and sales management were important in helping him define his strategy. "I have a lot of empathy for inside salespeople and outside salespeople. We are always soliciting advice from our distributors. Just like anything else, it starts with listening to the voice of the customer," he said (Electrical Wholesaling, June 1, 2002). After listening to requests from GE's distributor-advisory council, Espe focused on improving GE's digitized online-sales tools to help sales-people audit customers' existing lighting systems and suggest cost-efficient alternatives. One such tool was the GE Lighting Auditor (GELA), which Espe used—among other applications—to target the relatively untapped education market. The tool would help teachers and students measure the efficiency of a school's energy use and calculate potential savings. In a kickoff to the program with Vanguard Middle School in Los Angeles late in 2001, GE Lighting retrofitted the school's entire lighting system, changing it from fluorescent T12s to the new T8 product. Over the life of the new product, the school would save $75,000 in energy costs. Customers could also access online a virtual-design tool that would allow them to compare the effect various lamp types would give to a room. At the same time, Espe was focusing on LED lighting technology that he believed would become the holy grail of the lighting arena due to its increasing capacity to replace almost any white-light application in industry, business, or residential settings. GE Lighting applied for a patent after developing a special phosphor for its LED lamps, which improved the life span by more than 100,000 hours over a conventional bulb life, increased durability, and dramatically decreased energy consumption.
Espe, however, would not see the results of his strategy come to fruition as the head of GE Lighting. After Jeffrey Immelt took over as GE's new CEO in 2001, he came under pressure from investors to simplify GE's structure. Because the lighting and appliance arms were growing more slowly than other GE divisions, primarily due to a sluggish economy and competition, Immelt merged them. "Both of these product lines have had pretty tough pricing environments," Jonathan Berr quoted analyst Mark Demos of Fifth Third Investment Advisors as saying (Detroit Free Press, August 30, 2002). The day the two divisions were merged, Espe announced he would leave GE and become head of IKON Office Solutions effective September 9, 2002.
FROM BULBS TO BUSINESS SOLUTIONS
IKON, based in Malvern, Pennsylvania, was the world's largest independent-distribution channel for printers, copiers, faxes, and other office-equipment technologies, with two of its largest brands being Ricoh and Canon. As well, IKON represented the broadest document-management service in the entire industry. As a total-business-solutions provider for offices of all sizes, it provided production and outsourcing requirements, facilities management, legal-document solutions, network integration, and similar services. The company also provided complete support through seven thousand service professionals worldwide. In fiscal year 2003 revenues reached $4.7 billion and IKON employed more than thirty thousand people in six hundred locations.
THE BEST MAN FOR THE JOB
When Espe was chosen to replace 67-year-old James J. Forese as IKON's CEO, the company had already undergone several years of restructuring and layoffs. Between 1999 and 2001 revenues and profits declined, and between April 1998 and early 2001 shares fell from $35 to below $5. Following the announcement of Espe's instatement, shares rose 6¢ to $9.11. He traveled to company offices to assure employees that IKON would not change its direction and would retain its centralized structure with support from its large branch-office network, which he believed was an excellent model through which to solicit business worldwide. He said Forese had done a commendable job and he would build on that foundation.
Lead independent director of IKON, Richard A. Jalkut, said the board searched for a leader with discipline, talent, proven skills, appropriate experience, integrity, and dedication to the highest principles of IKON's governance. After a comprehensive internal and external search, they chose Espe. "As a rising star at one of the most successful companies in America today, Matt has proven again and again, at a variety of GE business units, that he has an outstanding ability to build and lead great businesses," Jalkut said. Forese explained that their six-month, methodical search for the ideal person followed a plan to execute a smooth transition to maintain stability and continuity. He was impressed with Espe's range of operational experience and exceptional background in sales, marketing, and global distribution. "He is customer-focused and adept at introducing and building on new products and services. His success in increasing revenue and controlling costs while growing a variety of different businesses fits precisely with IKON's strategy of establishing sustained growth for this Company," he said (Business Wire, August 29, 2002).
Five months after Espe joined IKON, directors remained impressed. New lead director Thomas R. Gibson said Espe's experience, ability, energy, innovation, and integrity were boons to the company, and he expressed confidence that Espe would lead the organization to further successes: "Matthew Espe is an executive of exceptional caliber. He is a strong leader dedicated to the highest principles of corporate governance, ethics, and organizational development that are essential to this critical role and to building long-term value for our shareholders" (press release, February 25, 2003).
A WINNING STRATEGY
Enhancing IKON's niche in bringing the service provider and the customer together remained the major focus for Espe. As 2003 drew to a close, Espe assessed IKON's position. He said in an interview with CNNfn that, as document management was clearly in the early stages of its maturity, the "channel" to the customer was of utmost importance. He said IKON was well positioned to offer both productivity to customers and to suppliers of their key services as well. He noted that IKON was Canon's leading independent channel in North America, generating more than 40 percent of their revenue, and that they generated more than 20 percent of Ricoh's revenue. In June 2004 Ricoh honored Espe with its Partnership Award. "Over the past year and a half Matt Espe has helped define the word partnership," said Tom Salierno, president of RICOH U.S., a division of Ricoh Corporation. "Our 2004 Partnership Award depicts the mutually beneficial relationship of IKON and Ricoh working as teammates" (PRNewswire, June 2, 2004.) Combine that success with having become HP's exclusive distributor, and IKON was able to provide an extensive suite of products that could facilitate customers from the smallest office to Fortune 500 companies. Espe noted that because distribution was IKON's business, their suppliers could therefore focus their investments on research, development, and manufacturing productivity.
In December 2003 IKON sold IOS Capital, IKON's profitable Georgia-based financing arm, to GE in what Espe called "a hell of a deal." GE acquired approximately $1.9 billion in assets and liabilities and took over the function of financing IKON's customers. "We never considered ourself a finance company. We were a document-management firm that provided financing as a service," Espe commented (Knight Ridder/Tribune Business Wire, December 12, 2003). He noted that IOS was getting large and loading up its balance sheet with debt. Under the deal, GE agreed to hire all four hundred IOS employees, IKON would keep a portion of the lease portfolio, and the companies signed a five-year agreement that could be renewed for a further three or five years in which IKON would continue to earn fees on leased copiers financed by GE. This would provide a positive income stream for IKON. Espe noted that GE would "have the motivation to run the business as we did." Creating an income source while eliminating debt load was especially favorable for IKON, since the weak economy created a drop in revenue in the entire document-management industry of 10 percent over the year and another 5 percent in early 2004. The strategic move created an immediate 20 percent increase in IKON's stock prices, taking them to a 52-week high.
FOCUSES ON THE FUTURE
Going forward, Espe saw affordable color copying becoming a prime generator of revenue from the equipment side and, on the services side, felt document work-flow solutions and onsite and offsite document outsourcing would produce increasingly greater returns: IKON was already the second-largest provider of document-outsourcing services in North America. At the 2004 annual shareholder's meeting, Espe said the market was at the point where service and support quality was as important as product quality. Drawing on his extensive customer-service experience, he added: "Utilizing a consultative approach that blends best-in-class technologies with value-added services provides IKON a tremendous advantage in our ability to offer customers a choice of cost-effective, reliable solutions that help create efficiencies at every phase of the document lifecycle" (Business Wire, February 24, 2004).
In May 2004 Espe outlined the company's strategic priori-ties to drive long-term growth: expanded product and customer opportunities; the emergence of IKON Enterprise Services, which combined its professional services, managed services (onsite and offsite outsourcing), and customer-service operations; and opportunities in Europe, which the company estimated as a $35 billion market. Espe said the company's refined business model would focus more on customers' requirements for "immediate and longer term document management services. With an improved revenue mix emphasizing services, we have also enhanced our cash profile and continue to create operational leverage within our infrastructure. As we look ahead, we are optimistic about IKON's future as an industry leader" (Business Wire, May 26, 2004).
See also entries on General Electric Company and IKON Office Solutions, Inc. in International Directory of Company Histories.
sources for further information
Berr, Jonathan, "GE Set to Combine Appliance, Lighting. Move Under Pressure Expected to Cut Costs," Detroit Free Press, August 30, 2002.
"CNNfn 'The Money Gang' Stock of the Day Interview with Matthew J. Espe," http://www.ikon.com/about/ir/financial_info/downloads/transcript_stockoftheday.pdf.
Fernandez, Bob, "Chester County, Pa., Copier Firm to Sell Financing Arm for $1.5 Billion," Knight Ridder/Tribune Business News, December 12, 2003, p. 1.
"GE Lighting Reveals a Light That Will Change the Way People See Their World. GE Reveal Represents Largest Light Bulb Launch In Its History," press release, June 2001, http://www.gelighting.com/na/pressroom/pr_reveal.html.
"IKON Leadership Highlights Strategy for Investors: Matthew J. Espe and Other Senior Executives Discuss IKON's Strategic Priorities to Drive Long-Term Growth," Business Wire, May 26, 2004, p. 5484.
"IKON Names Matthew J. Espe President and Chief Executive Officer," Business Wire, August 29, 2002, http://www.businesswire.com/webbox/bw.082902/222412059.htm.
"IKON Office Solutions Names Matthew J. Espe Chairman of the Board," press release, February 25, 2003, http://www.shareholder.com/ikon/releaseDetail.cfm?ReleaseID=122272.
"IKON's Chairman, Matthew J. Espe, Recaps Company's Strategy at 2004 Annual Shareholders Meeting," Business Wire, February 24, 2004, p. 5920.
Lucy, Jim, "Lighting The Way—GE Lighting's CEO Matt Espe Discusses Management Strategies," Electrical Wholesaling, June 1, 2002, http://articles.findarticles.com/p/articles/mi_m3720/is_2002_June_1/ai_88681899.
"Ricoh Honors Matt Espe of IKON Office Solutions With Partnership Award," PRNewswire, June 2, 2004, http://news.corporate.findlaw.com/prnewswire/20040602/02jun2004135147.html.
—Marie L. Thompson