2. CASE FACTS
Company’s Background •Org & Incentives , Business, Industry
Shifts , Emerging Competition
Digital Vision •New Business Model
•Economic and Technical Validation
Reengineering the technology Development •The existing process
Process •The redesigned process
From Vision to Reality •Information Services Group
•Operations & Technology
Building the division •Org, Reporting relationships & roles
•Marketing & sales strategy
Challenges of Internal Acceptance
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3. 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
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4. 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
• Group’s P&L is aggregate of Divisions’ P&L
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5. 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
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6. DIFFERENCES IN ORGANIZATIONS:
Traditional: - Digital: -
long runs Short runs
Economies Of Scale System
Price per page Databases
Infrastructure setup Speed
Plans built for specific Use this as a marketing tool
clients/contract
Unclear who is the customer
Clear who is the customer
CRITICAL SUCCESS FACTORS FOR TRADITIONAL PRINT:
Long term relationship building Large print runs
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7. PRE '94 (PRIOR TO APR 94 – JAN 95:
CHANGE) : BUILD: -
Pilot numbers
DREAM/VALIDATE: - Suppliers
Marketing
Validate Technology Need a business plan
Build a team of people Build relationships across
organization
APRIL 94 - JAN 95
JAN 95 - JUNE 95
(DIVISION WITH P & L)
DELIVER: -
Deploy
Customers
Someone to sell to
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8. 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 threat
But when hard strategic work of discovering & responding new markets began they
treated it as an sustainable opportunity ……..but why this happened ??
9. 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
organization’s profitability
10. THE DIGITAL VISION : A NEW BUSINESS
MODEL
Conceptualized by Cowan to link Donnelley with upstream
“content owners” & downstream customers
Transaction Management
System
Accounting system
DIGITAL
Object Oriented DIVISION
Database
Manufacturing database
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11. ECONOMIC & TECHNICAL
VALIDATION
• Venture Capital fund
FUNDING established
• Determine potential
FIELD OF DREAMS competitive advantage
TEAM • Explore economies of scale
• Convinced staff & customers
REENGINEERING • Analyzing traditional
approach
TECH. • Aimed at more speed &
DEVELOPMENT Instilled checkpoints
PROCESS • Improved financial data
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12. REDESIGNING TRADITIONAL
PROCESS
• Decision to initiate formal program taken by VP and
PROGRAM INITIATION customers
• No limits to money required for proving concept
• Phase II review
PROOF OF CONCEPT • Rigorous financial review requiring Sr. VP approval
• Phase III review
DEPLOYMENT COMMITMENT • Final financial review requiring Sr. VP approval before
deployment
• Actual metrics compared to the planned values
• Verification of process and roles & responsibility issues
POST COMPARISON • Only program manager has authority to take critical
decisions
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13. KEY STRATEGIC CHALLENGES
1. Hierarchy of roles & responsibilities is 3. The process doesn’t seem transparent
ambiguous
Highly autonomous structure of the 4. Lack of clearly articulated mission at
divisions in the organization each level of operation
Knowledge sharing made difficult
Each division duplicates the same 5. Focused on current customer needs
functions with other divisions rather creating long term strategies
Same work done at various levels in the
existing hierarchy 6. There was no companywide rollout
plans. Individual team goal were not
2. Incentive pay structure dividing the aligned to the organizational goal
business units in themselves
Each group wanted to maximize profit Within Schetter
Moving work around became difficult Scope
No coordination among each other
Causing each unit to duplicate other 1. Clarity in Roles & responsibilities
functions with-in 2. The process doesn’t seem transparent
Adding high cost equipments to their own 3. Lack of clearly articulated mission at each
plants level of operation
Grudging on sales for their particular unit 4. Focused on current customer needs rather
creating long term customer relationship
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14. AN ACTION PLAN.
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.
1. A clearly articulated mission for each team at all level
Within Schetter 2. Weekly/monthly/daily meetings
Scope 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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