R.R. Donnelley & Sons

1. R.R. Donnelley & Sons The Digital Division William “Trey” Dockery, III

2. Presentation Outline • Company Background • Industry Overview • Digital Integration Issues • Technology Development Process • Transitioning the Vision into Reality

3. Company BackgroundOverview • Founded in 1864 • Initially, 60% of revenues from directories, catalogs, and magazines • Privately held until 1956 when the company went public • By 1995, was the world’s largest commercial printer with 41,000 in 22 countries • Organized into 38 divisions, collected into 8 business groups, as part of 3 Main Sectors • Commercial Print • Network Services • Information Resources

4. Company BackgroundCore Functions (Traditional) Sales • Personnel worked solely on commission • Allowed to sell work printed at any sister plant, but incentives were tied directly to the profitability of their particular group. • Between 80 to 95% of sales volume in a typical group was linked to its own plants. Manufacturing • Division Managers could choose printing jobs they wanted to run and the equipment they wanted to buy. • Until 1991, Division Manager’s incentive compensation was tied to division’s profit performance.

5. Company BackgroundCorporate Culture (Traditional) • Management was divided focusing only on profits for individual business groups and divisions • Highly incentivized to focus on individual plants, rather than the company as a whole. • Focus on high profits vs. high efficiency

6. Industry OverviewCompetitive Forces • In 1995, approx. 55,000 printing companies world wide. • RRD&S had 6% of the $80 Billion Market; was larger than next 9 rivals combined. • New technologies led to the rise of threats in several areas • Online Service Providers and software packagers making images available electronically • Color printer technology was improving quality and proliferating in homes and small businesses.

7. Industry OverviewEffect of New Technologies • Office computing on the rise, printing companies no longer the artisans. The “craft” side of the business could increasingly be done by software document creators. • Rise and integration of filmless printing technologies • Digital printing eliminates the need for plant-based manufacturing process. Printing could be done at any distribution center or at customer's property.

8. Industry OverviewTrends Current State • Moving towards mass customization. (local, more targeted communications) • Shorter runs, more versions and tailored inserts • Speed, simultaneous global distribution, and instantaneous content revision. • Rising postal rates and paper prices. • High incentives to develop alternative electronic media and new distribution channels. Future Forecasts • Mass customization will be the new normal. • In 1995, digital growth was forecast at 16% annually, traditional printing expectations were 3%. • Digital Technology will dominate once it is developed further and overcomes fear from publishing traditionalists.

9. Digital Integration Issues The Challenge: Innovators must overcome organizational biases and cultural apprehension towards moving outside RRD&S core business strategy to gain acceptance for the digital transition Organizational Roadblocks: • External Pressure • Internal Pressure • Inefficient decision process • Fragmentation, too much segmentation Cultural Roadblocks: • Focus on the Individual vice Organizational health • Poor internal cooperation

10. The Digital Vision • Rather than make direct challenges to traditional values, employ a stealth approach “…to create a new business and have it drip into the culture.” – Cowan • Print-On-Demand Concept eliminated costly steps, like warehousing and inventory, that represented 60% of publisher costs. • New approach to Technology Development Process Status Quo: • No limits / Reviews • New Tech never realized full market potential • Too much segmentation Future State: • Redesigned Process • “Discipline does not have to mean bureaucracy • 4 phase process with toll gates

11. Technology Development Process New process focused on greater speed, improved financial data, checkpoints & communication

12. Technology Development Process 4 Phase process with toll gate reviews and specific deliverables for entry into the next phase

13. Transitioning the Vision into Reality • The Digital Project was the first to use the newly revised technology development process. • Digital Division moved to the Information Services Group. • Picked initial digital facility sight close to FedEx central processing in Memphis, TN to maximize daily work time and offer rapid delivery. • Built infrastructure to house customer content and make transactions that allowed customer orders to trigger the process. • Digital Division created and consolidated value in 3 main areas: a content management system, a transactions management system and digital imaging technology.

14. Partial Organization Chart, 1995

15. Questions • The Digital Project was the first to use the newly revised technology development process. True/False • The Digital Division created value from: • a content management system • a transactions management system • digital imaging technology • All of the above. • In 1995, the company was organized into 38 divisions, collected into 8 business groups, as part of what Sector(s) • Commercial Print • Network Services • Information Resource • All of the above.

16. Referenes • R.R. Donnelley & Sons: The Digital Division. Harvard Business School. March 13, 2000. • www.wikipedia.com