SMI Donnelley Group4 Upload

RR DONELLEY & SONSTHE DIGITAL DIVISION

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Company’s Background

Digital Vision

Reengineering the technology Development Process

From Vision to Reality

Building the division

Challenges of Internal Acceptance

•Org & Incentives , Business, Industry Shifts , Emerging Competition

•New Business Model•Economic and Technical Validation

•The existing process•The redesigned process

•Information Services Group

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

CASE FACTS

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R.R. DONNELLEY & SONSCOMPANY 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

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ORGANIZATION AND INCENTIVES

Manufacturing and sales were core functions

Three sector 8 business groups 38 divisions

• Commercial print, Networked Services, and Information Resources

Three sectors

• Division mangers were vice presidents• Held accountable for operating profit

Highly autonomous

• Its own sales force• Group’s P&L is aggregate of Divisions’ P&L

Business group contained plants (divisions)

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SALES FORCE

Sales force numbered nearly 500 people

Sold to print buyers

• Quite involved with customers• E.g. helped reduce inventory, shorten cycle times

Had considerable knowledge about customers

Upper management came through sales

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DIFFERENCES IN ORGANIZATIONS:

Traditional: -

long runs

Economies Of Scale

Price per page

Infrastructure setup

Plans built for specific clients/contract

Clear who is the customer

Digital: -

Short runs

System

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

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APRIL 94 - JAN 95

BUILD: - Pilot numbersSuppliersMarketingNeed a business planBuild relationships across organization

PRE '94 (PRIOR TO CHANGE) :

DREAM/VALIDATE: -Validate TechnologyBuild a team of people

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

DELIVER: -Deploy CustomersSomeone to sell to

APR 94 – JAN 95:

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 Donnelley’s leading customers showed little interest in the technology & new business didn’t 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 threatBut 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.

• Causing each unit to duplicate other functions with-in

• Adding high cost equipment to their own plants• Grudging on Sales for our particular unit

Incentive pay structure dividing the business units in themselves

• Some thought Digital division is still looking for a market

• Resisting changes for the traditional way of business

Another Reason: Digital Division not welcomed into the rest of the organization

Each business group was looking for its own profitability instead of organization’s profitability

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THE DIGITAL VISION : A NEW BUSINESS MODEL

Conceptualized by Cowan to link Donnelley with upstream “content owners” & downstream customers

DIGITAL DIVISION

Transaction Management System

Accounting system

Object Oriented Database

Manufacturing database

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ECONOMIC & TECHNICAL VALIDATION

FUNDING

FIELD OF DREAMS TEAM

Determine potential competitive advantageExplore economies of scaleConvinced staff & customers

Analyzing traditional approachAimed at more speed & Instilled checkpointsImproved financial data

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REDESIGNING TRADITIONAL PROCESS

• Decision to initiate formal program taken by VP and customers

• No limits to money required for proving conceptPROGRAM INITIATION

• Phase II review• Rigorous financial review requiring Sr. VP approvalPROOF OF CONCEPT

• Phase III review• Final financial review requiring Sr. VP approval before

deploymentDEPLOYMENT COMMITMENT

• 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 doesn’t 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 doesn’t seem transparent3. Lack of clearly articulated mission at each

level of operation4. Focused on current customer needs rather

creating long term customer relationship

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1. Restructure the organization such that each employee at all levels is clear about their roles & responsibilities and also their reporting authority

2. An HR system in place that aligns company’s goals with the individual goals

3. A clearly articulated mission for each team at all levels

4. Weekly/monthly/daily meeting should be conducted within the team depending on the criticality of the work

5. Divide the work among the teams in a manner such that there is no duplicity for the same work

6. Incentive mechanism needs to be improvised. Revenues should contribute to partial incentives, this will reduce tendency to work in autonomously

7. There is a need to build company rollout plans.

8. Induce transparency in the work culture . Employees should have right to ask questions and be answered.

AN ACTION PLAN.

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

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

Within Schetter Scope

15Thank You !