RR DONELLEY & SONS

THE DIGITAL DIVISION

CASE FACTS
Companys Background

Org & Incentives , Business, Industry Shifts , Emerging Competition

Digital Vision

New Business Model Economic and Technical Validation

The existing process The redesigned process

Reengineering the technology Development Process

From Vision to Reality

Information Services Group

Building the division

Operations & Technology Org, Reporting relationships & roles Marketing & sales strategy

Challenges of Internal Acceptance

R.R. DONNELLEY & SONS

COMPANY BACKGROUND
Founded in 1864 By 1995; 41000 employees in 22 countries Went public in 1956 $4.9 billion printing giant Generated 60% of revenues from directories, catalogs, magazines Major customers Telephone operating companies Retail and direct-mail merchandisers Publishers of books, magazines, and software

ORGANIZATION AND INCENTIVES

Manufacturing and sales were core functions Three sector 8 business groups 38 divisions

Three sectors Commercial print, Networked Services, and Information Resources Highly autonomous Division mangers were vice presidents Held accountable for operating profit Business group contained plants (divisions) Its own sales force Groups P&L is aggregate of Divisions P&L

SALES FORCE
Sales force numbered nearly 500 people

Sold to print buyers

Had considerable knowledge about customers Quite involved with customers E.g. helped reduce inventory, shorten cycle times Upper management came through sales

DIFFERENCES IN ORGANIZATIONS:
Traditional: long runs Economies Of Scale Digital: Short runs System

Price per page

Infrastructure setup Plans built for specific clients/contract Clear who is the customer

Databases
Speed Use this as a marketing tool Unclear who is the customer

CRITICAL SUCCESS FACTORS FOR TRADITIONAL PRINT:

Long term relationship building Large print runs

PRE '94 (PRIOR TO CHANGE) :

DREAM/VALIDATE: Validate Technology Build a team of people

APR 94 JAN 95:

BUILD: Pilot numbers Suppliers Marketing Need a business plan Build relationships across organization

APRIL 94 - JAN 95

JAN 95 - JUNE 95 (DIVISION WITH P & L)

DELIVER: Deploy Customers Someone to sell to

RR DONNELLEY & DIGITAL PRINTING

RR Donnelley & Sons believed that Digital technology would change the economies of book publishing by allowing printers to publish short runs of books on demand. RR Donnelleys leading customers showed little interest in the technology & new business didnt perform well as it was expected. Key Executives started moving on: a clear threat to the core organization RR Donnelley framed the disruptive technology into singular term: As either a strong threat or as an independent opportunity The management did not play a significant role: when money & other resources were being allocated then they treated disruptive innovation as threat But when hard strategic work of discovering & responding new markets began they treated it as an sustainable opportunity ..but why this happened ??

RR DONNELLEY & DIGITAL PRINTING

The ability to manage the competing frames of threat and opportunity is not an easy skill to master. The major problem was internal related to the organizational structure of RRD. Incentive pay structure dividing the business units in themselves Causing each unit to duplicate other functions with-in Adding high cost equipment to their own plants Grudging on Sales for our particular unit Another Reason: Digital Division not welcomed into the rest of the organization Some thought Digital division is still looking for a market Resisting changes for the traditional way of business Each business group was looking for its own profitability instead of organizations profitability

THE DIGITAL VISION : A NEW BUSINESS MODEL

Conceptualized by Cowan to link Donnelley with upstream content owners & downstream customers
Transaction Management System

Accounting system

Object Oriented Database

DIGITAL DIVISION

Manufacturing database

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ECONOMIC & TECHNICAL VALIDATION

FUNDING
Venture Capital fund established

FIELD OF DREAMS TEAM REENGINEERING TECH. DEVELOPMENT PROCESS

Determine potential competitive advantage Explore economies of scale Convinced staff & customers Analyzing traditional approach Aimed at more speed & Instilled checkpoints Improved financial data

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REDESIGNING TRADITIONAL PROCESS

PROGRAM INITIATION
Decision to initiate formal program taken by VP and customers No limits to money required for proving concept

PROOF OF CONCEPT

Phase II review Rigorous financial review requiring Sr. VP approval

DEPLOYMENT COMMITMENT

Phase III review Final financial review requiring Sr. VP approval before deployment Actual metrics compared to the planned values Verification of process and roles & responsibility issues Only program manager has authority to take critical decisions

POST COMPARISON

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KEY STRATEGIC CHALLENGES

1. Hierarchy of roles & responsibilities is ambiguous Highly autonomous structure of the divisions in the organization Knowledge sharing made difficult Each division duplicates the same functions with other divisions Same work done at various levels in the existing hierarchy 2. Incentive pay structure dividing the business units in themselves Each group wanted to maximize profit Moving work around became difficult No coordination among each other Causing each unit to duplicate other functions with-in Adding high cost equipments to their own plants Grudging on sales for their particular unit

3. The process doesnt seem transparent 4. Lack of clearly articulated mission at each level of operation 5. Focused on current customer needs rather creating long term strategies 6. There was no companywide rollout plans. Individual team goal were not aligned to the organizational goal

Within Schetter Scope

1. Clarity in Roles & responsibilities 2. The process doesnt seem transparent 3. Lack of clearly articulated mission at each level of operation 4. Focused on current customer needs rather creating long term customer relationship

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AN ACTION PLAN.
1. 2. 3. Restructure the organization such that each employee at all levels is clear about their roles & responsibilities and also their reporting authority An HR system in place that aligns companys goals with the individual goals A clearly articulated mission for each team at all levels

4.
5. 6. 7. 8.

Weekly/monthly/daily meeting should be conducted within the team depending on the criticality of the work
Divide the work among the teams in a manner such that there is no duplicity for the same work Incentive mechanism needs to be improvised. Revenues should contribute to partial incentives, this will reduce tendency to work in autonomously There is a need to build company rollout plans. Induce transparency in the work culture . Employees should have right to ask questions and be answered.

1. A clearly articulated mission for each team at all level

Within Schetter Scope

2. Weekly/monthly/daily meetings
3. Divide the work among the teams in a manner such that there is no duplicity for the same work 4. Induce transparency in the work culture

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Thank You !

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