R.R. Donnelley & Sons

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8 Δεκ 2013 (πριν από 3 χρόνια και 4 μήνες)

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R.R. Donnelley & Sons

The Digital Division

Presented by James Grasty

Company & Background


Founded in 1864 printing catalogs for Montgomery
Ward, by 95’ they were the largest commercial printer
with 41k employees in 22 countries


Privately held chicago based company for almost a
century until they went public in 1956


Generated 60% of its revenues from; directories,
catalogs and magazines


Major customers included; telephone companies, retail
and direct mail, and publishers of books, magazines and
software


Organization & Incentives


Manufacturing & Sales were core functions “You either
make it or you sell it”


n 95’ they had 38 divisions, in 8 business groups, part of
3 sectors: Commercial Print, Networked Services, and
Information Resources


Due to pressures and incentive structure in a typical
group, the salesforce sold 80
-
95% of its volume to its
own plants


Changing of incentives “What is the most profitable way
to run this job for Donnelley?”

Organizational Chart

Traditional Print Business


Traditional Print business; “heavy iron” offset/web
(used film & plates, cost effective for 25k
-
500k runs),
and Gravure (Used Etched Copper Drums, Cost effective
for 500k plus) printing presses, $12 million+ per press,
Gravure even more


“You get an emergent strategy based on opportunities,
as opposed to selecting the right opportunity based on a
strategic assessment of alternatives”
-

Allen Cubell


Long term relationships with customers

o
70% based on contracts that ran 3
-
10 years worth
$10’s of millions, plants built for each contract



Major R.R. Donnelley
Customers

Industry Shifts & New
Technology


Digital in 95' was forecast at 16% growth, while traditional
printing was expected to grow at only 3%


Trends were moving increasingly towards local, targeted
communication, often called “mass customization”
-

they
printed 66k different versions of the farm journal


Filmless printing technology: digital four
-
color, and
computer
-
to
-
plate expected to have larger impact with
reduced cycle times and pollution


Digital allowed: shorter runs, four
-
color printing whose
image was infinitely customizable, and could be delivered in
variable quantities as often as desired.


$200k for a digital printer in 95 and it could be put anywhere


"Digital technology will atomize the printing industry the way
the microprocessor did the computer industry”
-

Rory Cowan


Emerging Competition


Desktop publishing emerged in the 1980’s


The company made big money on things like; stripping,
color correction, and etching for these customized jobs,
but now it has migrated to the hands of the document
creator


Threats started emerging from several directions, 55k
printing companies worldwide, most had less than 25
employees while Donnelley had 6% of the $80 billion
market, larger than its next 9 rivals combined


Now a much smaller digital printer could look like the
very large heavy iron Donnelley employed

The Digital Vision

A new Business Model


“To create a new business and have it drip on the culture”
-

Cowan



“Like IBM in 1983
-

PC’s are coming in, but management has
grown up in a mainframe world”
-

Cowan


Print on Demand (POD): publisher sends data files of books,
they retain them in a database, when the bookstores needed
copies Donnelley would print more, ship and then send the
publisher a royalty check.

Economic & technical validation


The new process eliminated a range of costly steps, including
warehousing and inventory, that represented roughly 60% of
book publishers costs. The approach also avoided the usual
mismatching of demand and inventory.



Reengineering the Technology
Development Process

The Existing Process


Senior managers with clout got their projects funded


"First pig to the trough" mentality


$1 million or more spent on just investigating new
technologies


No formal process or checks
-
and
-
balances

The Redesigned Process


4 Phase Process: Program Initiation, Proof of Concept,
Deployment Commitment, and Post Mortem


$100k cap put on investigating new technologies


Deming cycle; plan
-

do
-

check
-

get feedback


The New Process

Phases Review Process
Visual


From Vision to Reality

The Information Services Group (ISG)


Digital Division moved to new group, and after much
effort got their own P&L


Had their own separate sales force: targeted industries
such as financial services, pharmaceuticals, and
healthcare, places where the primary focus was not
publishing


ISG was unique and their plants did not produce
interchangeable work, division managers’ incentives
focused on divisional, rather than group, performance.


Building the Division


Memphis, TN chose as first sight because it was
close to FedEx central processing


Being close to the FedEx runway, the division
gained several hours of work time each day and
could offer rapid, reliable delivery “Virtually
distributed manufacturing”


11 presses chosen from different vendors for their
different strengths


Wanted to be industries low cost producer


Although the equipment was new and unproven



Operations & Technology


They began building the transaction system and database to
hold customers’ content. A customer’s order would trigger
the transaction system, which would then access the right
content, send it to the appropriate digital press, and pull
together the printed pieces for the customer.


Soon customers were able to modify data themselves from
their own offices
-

they could send orders with "Send
-
IT",
and assemble them with "Order
-
IT"


The Digital Division is an attempt to take three distinct value
creation devices; a content management system, a
transactions management system, and digital imaging
technology, and combine them to create a new product.

Organization, Reporting
Relationships, & Roles


ISG’s sales force formed into 3 teams: health care,
federal government, and the eastern US region (retail
banking, credit cards, and high
-
end consumer
marketing)


Initial customers were ones already using a digital
format, such as desktop publishing, but who were
encountering problems such as high physical
distribution costs or high information obsolescence.



Other potential candidates were those with unmet
printing needs such as a desire for overnight delivery to
multiple sites, increased customization of print
materials, or growing need for color.





Marketing & Sales Strategy

Target Markets


Magazine reprints, corporate literature, marketing and
product literature for pharmaceuticals and health care,
and advance, liquidation, and prospecting catalogs

Positioning


As Schneider put it “We sometimes say we're not selling
printing anymore; we're selling a marketing tool. we are
teaching people to do things differently”


By introducing new capabilities; the creation of short
-
run,
on
-
demand, customized materials
-

digital printing could
also increase customers’ revenues by allowing greater
market segmentation and more focused selling.

Consultative Selling


Taught the new customer to think of their information as
something that is alive and needs to be updated


”living document database” as opposed to “dead documents”
stashed in multiple cubby holes


The “literature management process” as management at Donnelley
had dubbed it, had not yet been identified as a process or a need by
most customers.


“We are selling to customers who sell to customers, rather than to
people whose business is publishing. In essence, we are providing
tools for marketing"
-

Clarke


Focused on consultative selling instead of just sales reps


Consulting and advertising agencies viewed "As an important
leverage point and planned to focus sales attention there."

Mobilizing Sales


The Digital Division had to motivate three overlapping
and potentially conflicting sales forces: the divisions
own sales reps, the ISG salesforce, and the sales forces
of other business groups.


Clarke stated that "It’s better to have sales conflict and
overcoverage than to be missing sales. the tension
keeps everybody on their toes. It can be a little messy,
but creation usually is."



They focused the incentives at the rep level because
they needed the support of the complete Donnelley sales
force.


Management proposed an aggressive commission's plan
to motivate other groups reps to sell work into Memphis

Challenges of Internal
Acceptance


Expected sales not coming in, Digital Division under
pressure


The company demanded profits by 4th quarter and
breakeven by 1996


The company didn't want to expand the unit until it was
profitable but the division believed it would take a
different outlook on investment to develop it


Schetter’s biggest concern was that "We have not, as a
company, stood up and said, “Short
-
run, on
-
demand,
color printing and the associated delivery systems are a
strategic initiative”
-

the company had the mindset of "Lets
wait and see"



Forward to Today


Four Divisions


o
Digital solutions

o
Print Solutions

o
Supply Chain Solutions


o
Industry Solutions


Operated at a loss in 2012


Print Falling at 5% per Year

2012

2011

2010

2009

2008

$10,221

$10,611

$10,018

$9,857

$11,581

Question #1

Which Group did the Digital Division
find a home in?


A.) Informative Services Group

B.) Information Services Gang

C.) Information Services Group

D.) Information Sources Group

E.) All of the Above

Question #2

What was the importance of digital
printing?

A.) It was pretty cool

B.) It was a disruptive technology

C.) It empowered the consumer to control their
own content

D.) It presented a threat and an opportunity for
RR Donnelley

E.) All of the Above

Question #3

What was RR Donnelley's Biggest
Problem in this case?


A.) They were too old to figure out that new
fangled technology

B.) They were too big to fail

C.) Entrenched infrastructure and people made
it hard to embrace the new technology

D.) Ink Cartridges are too expensive

E.) All of the Above

References

1.
R.R. Donnelley & Sons: The Digital Division
http://rolnitzky.com/iSchool_UC
-
Berkeley/iSchool
-
Fall
-
09/INFO_290_managing_info_cos/lec2/Donnelley_case
.pdf

2.
http://www.rrdonnelley.com/

3.
http://investor.rrd.com/secfiling.cfm?filingID=1193125
-
13
-
77082&CIK=29669

4.
http://en.wikipedia.org/wiki/RR_Donnelley