The original copycat

Kinko's founder tells Kellogg audience how he overcame learning disabilities to create leading enterprise

By Romi Herron

Paul Orfalea is famous for his impact on the professional printing and copying industry, founding Kinko's Inc. in 1970 from a single machine on a college campus and expanding the venture to nearly 1,100 retail locations before selling it six years ago.

But during his lecture for the Distinguished Entrepreneur Speaker Series, Orfalea told an audience of Kellogg School of Management students and faculty that he's interested in copying more than high volumes of documents and photos.

He's prepared to copy great ideas and competitors' best practices and then create new business ventures.

At the event, held April 19 in the Louis Stern classroom at the Donald P. Jacobs Center, Orfalea explained that he has always known his strengths and limitations and how those traits fit into his lifelong entrepreneurial dreams. Intuition and observation skills, born from struggles with learning disabilities, became valuable tools that would eventually outweigh his string of academic failures, he said.

“I'm a lousy reader and I'm the poster boy of Attention Deficit Disorder,” Orfalea admitted. “And those qualities are why I'm here today.”

Indeed, the company he founded near the campus of the University of California at Santa Barbara has appeared among Fortune's 100 Best Companies to Work For several times, and both Forbes and Fortune have recognized the Kinko's chairperson emeritus as a leader, one who overcame learning challenges.

Dyslexic and unable to concentrate, Orfalea flunked 2nd grade, was expelled from junior high and graduated near the very bottom of his high school class. With his aversion to reading and traditional classroom education, however, Orfalea developed keen observation skills. His parents encouraged him to pursue his own creative ideas.

“You make money with ideas,” said Orfalea. “I was a student at USC and I noticed people making copies on campus, and I wondered why they didn't do that at the Santa Barbara campus.”

He discovered the site lacked a copy service and saw an opportunity. He rented a $100 space in a converted hamburger stand, set up a basic copy machine and dubbed the endeavor Kinko's, in honor of a nickname inspired by his curly hair.

Copies cost 3.5 cents, and the budding businessman also sold $2,000 per day in spiral notebooks and pens, at a 30 to 40 percent markup. ‘It was a pretty easy market to get into,” he recalled. “Don't allow yourself to become so busy that you fail to see the opportunities right in front of you.”

As the copies mounted, Orfalea realized he had found his niche. To grow the business, he contracted Xerox and paper vendors and hired “obsessive” manager types “who knew everything there was to know about the machines.” Throughout his career he resisted sitting behind a desk and preferred the “adventure” of the field, interacting with Kinko's customers and employees and also checking out the competition.

“You can find good [ideas] in every competitor. Look at the good things they do because if they didn't do something right, they wouldn't be there,” Orfalea said, noting an advantage Kinko's claims over its peers: employee enthusiasm.

“The goal of managers should be to remove obstacles for their employees. Your workers are everything,” he emphasized. In fact, Kinko's has offered on-site daycare, home down-payment assistance, and free-lunch Fridays over the years, and in 2001 appeared on Working Mother's 100 Best Companies list.

In addition to keeping staff happy, Orfalea recommends paying attention to signs that aren't always documented on paper.

For instance, when assessing Kinko's 24-hour service, consultants noted dismal sales during the midnight-to-early morning hours, so they pushed for an end to the round-the-clock schedule. That move led day sales to decline by half.

Orfalea explained that while customers did not frequent the store during the night, they did visit the stores more during the day and spent more money there when they knew Kinko's offered 24-hour service.

In 2000, nearing age 50 and fed up with stress-related neck pains and sleepless nights he associated with running Kinko's, Orfalea and 125 partners sold their 27.5 percent stake of the enterprise to Clayton, Dubilier and Rice, a New York City-based buyout firm.

“I didn't want to deal with the emerging competition of laser printers because I frankly wasn't interested enough in technology,” Orfalea said. “I mean, PC Magazine would never turn me on.”

Since his retirement, Orfalea co-authored Copy This!: Lessons from a Hyperactive Dyslexic who Turned a Bright Idea Into One of America's Best Companies, with Ann Marsh. The book expands on the founder's journey from bottom of the class to head of the copy center industry.

But even today the copy king is still not much interested in reading; fortunately for him he could identify and act on opportunities. This, Orfalea says, is an essential element of entrepreneurship.

“A good businessperson sees what's not there. As an entrepreneur you need to use your observation skills and know that this is what is artistic about business.”

The Distinguished Entrepreneur Speaker Series is sponsored by Jim Reynolds '82, CEO of Loop Capital Markets, and the Kellogg Private Equity & Entrepreneurship (PEEK) Club. Through the program, Kellogg invites prominent business leaders to share their expertise with students wishing to learn more about entrepreneurship. Previous guests this year included Jerry Greenfield, founder of Ben & Jerry's Homemade Inc., and Jeff Katz, founder of Orbitz.