The Wizard of POS ... As in point-of-sale, the battleground on which NCR CEO Mark Hurd is fighting to transform his venerable but creaking company into a modern-day technological powerhouse.
By Erick Schonfeld

(Business 2.0) – The future of how we buy things may be lurking in Room 504 of a gleaming new building in the remote industrial village of Dundee, Scotland--and judging by the goings-on here, a strangely disembodied future it may turn out to be. This is the main automated teller machine manufacturing and research facility of NCR, the world's largest maker of ATMs. In Room 504, the 120-year-old company--inventor of the cash register, the sales receipt, and other tools that forever transformed the interaction between seller and buyer--nurtures some of its most imaginative notions for doing it again.

Timmy, a cheery young thing with a welcoming smile, greets visitors to Room 504. She flicks her hair as she explains what waits within: ATMs that can accept cash and checks directly, without envelopes. A solar-powered ATM that can be protected by antitheft technology that stains bills with ink if anyone tampers with it. Another model with a radio frequency identification system that can turn a cell phone into an electronic wallet by loading it with money.

Then there's Timmy herself. She is an avatar--a computer-generated character flashed on a glass door--that NCR plans to put on ATMs as a kind of digital salesperson. She can speak any language, greet customers by name, offer promotions customized on the fly to fit their individual profiles, and demonstrate new features of the machines. "I can be whatever and whoever you want me to be," she says in a voice that still carries a hint of the robotic. But her text-to-speech software will get better over time, and it seems inevitable that Timmy or one of her avatar friends will be appearing soon on an ATM screen near you.

Or so Mark Hurd hopes. A 24-year NCR veteran, Hurd became CEO in March 2003, at a time when the company was reeling from the drop in corporate tech spending and lackluster leadership. He slashed costs, laid off 1,500 workers, and converted an executive parking lot into an ATM training center. He also traded in his luxurious office for a cubicle. But he has placed a larger strategic bet on what might be called the coming of the self-service economy, in which machines--preferably those made by NCR--will all but eliminate the cashiers, bank tellers, and others who currently are a company's final human interface with its customers.

The trend toward self-service has been going on for years--think of how we used to buy gas before we could just swipe a credit card at the pump and drive on. But Hurd and other self-service believers envision a not-too-distant time when we will buy almost everything in similar fashion. Bleak though that prospect may be for cashiers and clerks, the self-service world appeals mightily to companies: Not only can they cut costs, but all those point-of-sale machines will collect mountains of fresh consumer data that can be wielded as another competitive weapon. And Hurd believes that NCR is uniquely positioned to help companies find their way in this world: In addition to ATMs and automatic cash registers, NCR, under Hurd's direction, has quietly become a market leader in the ultrahigh-end data-warehousing software that companies need to crunch all that POS and other customer data. "There will be a continual drive to get consumers to do more of the work--and enjoy it--at places where we shop," Hurd predicts. With it will come a cascade of new information. And NCR, he says, will "help companies ingest and dispatch that data very quickly."

Of course, other companies are targeting the same opportunities. NCR faces formidable competitors, from Diebold in ATMs to Dell in computerized cash registers to IBM and Oracle in data warehousing. But Wal-Mart, SBC Communications, and even the Air Force already swear by NCR's data-warehousing software. Albertsons, Home Depot, and other retail giants are beginning to roll out automatic checkout systems based on NCR machines. NCR's stock has doubled since Hurd took the helm. If he can execute his strategy, NCR has a chance to return to the front ranks of the technology industry for the first time since--well, pretty much since the mechanical cash register was still considered a high-tech marvel.

Bluntness works for Mark Hurd. On a recent day at NCR headquarters in Dayton, Ohio, Hurd is strategizing with a lieutenant about shoving his 2,000-person sales force into higher gear. The CEO's first words to a guest invited to sit in on the meeting? "So you are just going to shut up, right? Because we are doing business here."

That aggressive, no-nonsense style has served Hurd well through the years. In college he was the top-ranked tennis player at Baylor University in Texas. At Teradata, NCR's data-warehousing arm, which Hurd ran for four years on his way to the top job, he beat IBM and Oracle on their own court. Recalls Bob Fair, the new chief marketing officer at Teradata, who was a top salesman under Hurd, "I would frequently get calls from him at 2 in the morning, asking about my deals." Hurd, 47, will fly anywhere to help close a big sale. He rarely takes notes during presentations, but "if you don't want him to remember something, don't tell him," suggests Bob Tramontano, head of marketing and business development for the ATM unit.

At the most basic level, Hurd is trying to modernize NCR by restoring some of its past practices: primarily, its record of innovation and unrelenting salesmanship. NCR is among the most influential companies in American business history, though its more recent performance has obscured its proud legacy. Founded in 1884 by John H. Patterson as the National Cash Register Co., it introduced a then-new technology (the cash register) that helped merchants spend more time making money instead of trying to keep track of it. (See "Making Change," page 105.) Patterson was a mixture of crank and genius: He required executives to parade before him on horseback and sit in rapt attention while he educated them using a flip chart (one of his inventions). He was renowned for firing even some of his best employees on a seeming whim. (One victim was Thomas J. Watson Sr., who took NCR's "Think" slogan and sales practices and made them famous at IBM.) But Patterson's overriding obsession was perfecting his product--and selling it.

Patterson believed that sales could be systematized into a science. He developed many of the sales concepts taken for granted today: the sales territory, the sales quota, the corporate training school, and many others. Salesmen were given primers to memorize. One, from 1893, instructs them, "Do not talk like a parrot. Emphasize the important parts." A later manual sounds almost Zen-like: "Do not intrude your personality on the [customer], but try to make him forget you and become absorbed in studying the register. To do this you must forget yourself." The manual was updated through the years but remained "the bible," recalls 85-year-old Bill Anderson, the company's CEO in the 1970s. "We believed in what we were telling our customers, and the customer believed us," he says. "The other guy was just a peddler."

NCR, of course, is very different from the company it was in Patterson's day or even Anderson's, when it stopped making electromechanical cash registers and got into computers and ATMs. In 1991, NCR was bought by AT&T for $7.4 billion--one of the worst acquisitions in recent business history, as it turned out. Five years later NCR was spun off; AT&T lost $4 billion on the deal. NCR had abandoned the computer business but was still staggering when Hurd took over. It had been late to capitalize on the boom in mini ATMs in convenience stores and resisted adopting standardized technologies. Moreover, it was bloated. As Tramontano puts it, "When you are in business for a hundred years, a lot of little things grow up like mushrooms." In 2002, NCR lost $220 million.

Hurd's slashing--he's well on his way to reaching his cost-cutting goal of $250 million by 2006--defibrillated the company and helped swing it back to a $58 million profit on $5.6 billion in revenue last year. But it's his belief in the power of self-service and data mining that underpins his vision for reshaping the company. Most companies, Hurd believes, have little clue what his technology can allow them to do. Take retailers. "The bulk of their cost is labor," he says, "and the bulk of their labor is in the store. The way to change profitability is to get the shopper to do more of the work in the store." Nor are companies taking advantage of their customer data or the ability of point-of-sale devices to generate more. "Banks are the worst," Hurd says. "They know more about us than anyone but do less with it."

Thus one of Hurd's biggest pushes is to ensure that the ATM keeps evolving and to encourage banks and other users to connect their machines to NCR data-warehousing software, the biggest component of NCR's revenue at about $1.2 billion last year. In Room 504, NCR is showcasing ATMs that go way beyond simply dispensing cash. The move is well-timed, because America's ATM networks are about to get a major upgrade. Thanks to a new federal law known as Check 21, the image of a check will soon be as legally binding as the check itself. In most cases new or upgraded ATMs will be necessary to take advantage of the change. Instead of stuffing checks into envelopes and waiting three days for them to clear, people can simply deposit endorsed checks directly into the ATM, where they will be scanned and credited to an account immediately. An image of the check will appear on the receipt. Customers will also be able to insert a wad of bills, and the ATM will count them. This will enable banks to digitize what remains one of the most labor-intensive parts of their business.

Analysts expect the ATM upgrade cycle and strong overseas demand to account for most of NCR's revenue growth in the next couple of years. But ATM markets beyond traditional banking are opening up as well. In the United States, 7-Eleven stores annually sell about $4 billion worth of money orders over the counter. The chain has rolled out 1,000 customized NCR machines branded "Vcom" that let people without bank accounts cash checks and wire money overseas. It will soon begin a pilot project to sell lottery tickets through the machines. And it's exploring how to use avatars like Timmy to explain the Vcom's various features.

John Patterson would hardly recognize them, but cash registers and related checkout systems remain a cornerstone of NCR's business. Selling commodity cash registers to penny-pinching retailers is a cutthroat business. After five quarters of losing money, NCR's retail division finally returned to the black last June. Hurd's bet is that cost pressures will force retailers to move to self-checkout systems that let consumers scan, weigh, and pay for their own items, eliminating cashiers and speeding the checkout process.

NCR's self-service checkout systems go for about $100,000 for a set of four machines. Big retailers like Home Depot and Wal-Mart are deploying self-checkout aisles, but overall sales of the higher-margin systems are not yet large enough to do anything but nudge NCR's profit meter. Hurd is also selling self-service to other industries, such as bill payment kiosks in Sprint stores and a pilot automated food-ordering and payment terminal for a Burger King franchisee.

NCR is also preparing for the day a few years down the road when radio frequency identification (RFID) tags start to replace bar codes. The company is developing checkouts with both bar-code and radio-tag readers; when every household product comes with an RFID tag, consumers will be able to roll their shopping carts through a checkout lane without even unloading. NCR already offers a related technology, called the electronic shelf label, that allows retailers to instantaneously change prices throughout a store or department. Kohl's, for instance, uses the labels in its shoe department, where prices change frequently.

Almost all the ATM and retail systems Hurd is pushing are meant to also spur sales of data-warehousing software, which centralizes massive amounts of customer information from dozens of individual databases and manipulates it at lightning speed. One such product is a unit with an 8-inch screen that a retailer can place throughout a store. When consumers scan their loyalty cards, promotions targeted specifically for them appear on the screen; each customer can get an offer based on previous buying habits or other factors.

Teradata was acquired shortly after AT&T bought NCR. It struggled until Hurd was put in charge of it in 1999. He streamlined operations and poured money into research. For companies with lots of transactions, customers, and questions--retailers, airlines, telecoms--Teradata quickly became the gold standard. The business finally became profitable in 2002, and now every incremental dollar of revenue it brings adds 50 cents to NCR's operating income. Its customer list is a who's who of industry leaders: Continental Airlines, Dell, FedEx, Harrah's, Wal-Mart. The Air Force uses Teradata to track its planes, parts, and pilots so they're "able to fight at a moment's notice," says Mike Riley, an Air Force data-warehousing program manager.

Wal-Mart famously uses its data warehouse to match supply and demand across hundreds of thousands of products. Saks is taking another approach: It's rolling out an NCR data-warehousing project to identify and reward its most loyal customers. Its so-called Wow program identifies the retailer's most profitable customers; they're given gifts, ranging from a pair of Ferragamo shoes to a box of pralines, at the checkout stand or by a sales agent. "These random acts of kindness are very positively received," Saks CIO Bill Franks reports. Indeed, he says, some customers who have been Wowed have subsequently increased their purchases at Saks by double-digit rates.

Another big user of Teradata is NCR itself. Hurd trains it on his own business--and makes sure everyone knows he's watching. NCR's data warehouse contains minute details on the performance of every salesperson. Poring over a ranking of his sales staff on a recent morning, he zeros in on some troubling metrics. "Here is my optimal headcount," he says, pointing to a number on the report. "I want to get these guys threatened to a degree by the depth of the analytics." In other words, they'd better shape up, or heads will roll.

Sound a little ruthless? Well, plenty of the 1,500 people Hurd has fired during his year as CEO would doubtless agree. "None of those cuts were fun," Hurd says. "But I believe the pain would have gotten worse if I didn't make them." In any case, the pain appears to be subsiding. Merrill Lynch expects NCR's net income to rise 69 percent in 2004 to $98 million and then more than double to $223 million by 2005, on flattish revenues.

Still, not everyone is certain that NCR's three basic businesses add up to anything special in the long run. "We are fairly skeptical on the synergies," says Merrill Lynch analyst Richard Farmer. He likes the data-warehousing and ATM businesses, but points to the entry of Dell--a proven killer of rivals' profit margins--in the checkout device market as worrisome for NCR.

A larger concern is whether Hurd's faith in the rise of self-service will be borne out anytime soon. In retail "the rate of adoption has been fairly slow," Farmer observes. Despite the appeal to companies of shuttling consumers to automated service, the faceless "pay up, move on" approach may not play well everywhere. Just visit any airport and see how many airline employees it takes to guide travelers through the menus on the self-ticketing kiosks. Home Depot began a nationwide rollout of automated checkout systems featuring NCR technologies more than a year ago, but some customers still say occasional malfunctions can make the process slower and more annoying than ever.

Hurd is unperturbed by critics. He thinks self-service is inevitable, but insists that his plan for NCR will work regardless of how long it takes to spread. For now, he's focused on three things: "Get the superfluous costs out of the business, sell more stuff, and service it more efficiently." Do that, he says, and "a bunch of money shows up."

Then Hurd recalls one of his earliest business lessons. It came in 1980, on his second day on the job as an NCR computer salesman. He returned from his first sales call with an order for a printer paper tray, only to be told by a clerk that a form had the "wrong hierarchy" and would have to go back to the customers for revision. When his manager asked him how it felt to bag his first order, Hurd replied dejectedly, "Wrong hierarchy." The manager called the clerk and yelled, "Anytime my man comes down there, you are to jump out of your seat and shake his hand because he is keeping you employed! If there's anything wrong with the order, you fix it." The lesson reverberates today. "We are here to do one thing," Hurd declares. To sell. "Everybody's job is to get in line to get that done." Old John Patterson couldn't have said it any better himself.

Erick Schonfeld ( is editor-at-large at Business 2.0.