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 !
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