case3-7

1. TheThe
DigitDigit
alal
DivisDivis
ionion

2. Copyright © 2009 R. R. Donnelley & Sons Company.
All rights reserved.
RR Donnelley is the world’s largestRR Donnelley is the world’s largest
provider of printing and related businessprovider of printing and related business
services. We use our unparalleledservices. We use our unparalleled
capabilities to help our customerscapabilities to help our customers
Prepare, Produce, Deliver, and ProcessPrepare, Produce, Deliver, and Process
printed and digital content.printed and digital content.

3. Company & IndustryCompany & Industry
BackgroundBackground
 The company, originally known as R.R. Donnelley &
Sons Company, was founded in 1864 by Richard Robert
Donnelley, father of Reuben H. Donnelley.
 A privately held, Family run
 Went public in 1956
 Become the world’s largest commercial printer in 1995
 Generated 60% of its revenues from directories, catalogs, and magazines
 Organized into 38 divisions collected into 8 business group which were part of 3 sectors

4.  Church Goodman &
Donnelley building at 108-110
Dearborn Street, Chicago,
1868. Digital Reproduction.
R.R. Donnelley & Sons
Company Archive.

the ruins of the Lakeside
Building at Clark Street and
Adams Street, after the
Chicago Fire, [1871]. R.R.
Donnelley & Sons Company
Archive.
 Lakeside Building at Clark
Street and Adams Street, built
following the Chicago Fire, [ca.
1873]. R.R. Donnelley & Sons
Company Archive.

5.  The Evolution of a Graphic Identity: The R.R. Donnelley Indianhead
From the late nineteenth century onward, RR Donnelley's corporate identity was
associated with its distinctive Indianhead trademark.
 exterior decoration of the Plymouth Court
building, [20th century]. R.R. Donnelley & Sons
Company Archive.Joseph C. Leyendecker's
design first appeared as architectural decoration
on RR Donnelley's Plymouth Court building.

6.  Early Advances in Technology
RR Donnelley's position as the printing industry's leader depended on a continuous
program of research and development.
 printing press #D2, 1949. R.R.
Donnelley & Sons Company Archive.
Another of RR 
Donnelley's
specialty printing
technologies,
"Watercolor" printing
used rubber plates.

7. Financial highlights

9. Sales and Customers by Business Category (% of Consolidated Sales)
Catalogs
Land’s End
LL.Bean
Eddie Bauer
J.Crew
Magazine-18%
TV Guide
Family Circle
Time
Glamour
People
Reader’s Digest
Books-13%
Random House
Simon & Schuster
Harcount Brace
HarperCollins
Bantam Doubleday
Metromail-5%
Procter & Gambles
First Card
Mutual of Omaha
Whirlpool
Retailers
Wal-mart
JC Penny
Kmart
Service Merchandise
Toys “R” Us
Telephone Directories-21%
Sprint
Ameritech
Nynex
Bell Atlantic
Southwestern Bell
Us West
Financial-5%
Memill Lynch
Smith Barmey
Paine Webber
Goldman Sachs
Schwab & Co.
Software/Harware-16%
Microsoft
IBM
WordPerfect
Quicken

10. Organization &Organization &
IncentivesIncentives
 Most sales forces were aligned with business groups rather than divisions
 Division-level incentives became group wide in 1991
 And became sector-wide in 1993
 So, salespeople sell work to their business group only
The Traditional PrintThe Traditional Print
BusinessBusiness
 Used gravure and offset/web presses
 Cost about $12million for offset, and considerably more for gravure
 Considered long-term relationships
 High fixed cost and low variable cost

11. Industry Shifts & NewIndustry Shifts & New
TechnologiesTechnologies
 Change of customer’s wanted
 Largely become of the rapid spread of office computing
 Digital four-color and computer-to-plate were expected to have an even more profound
impact.
 In 1995, digital growth was forecast at around 16% annually
 Traditional printing was expected to grow by 3%
Digital four-colorDigital four-color
 Reduce cycle times
 Reduce chemical pollution
 Can print directly from computer files
 Infinitely customizable
 Could be delivered in variable quantities as often as desired
 Low cost and small size

12. Emerging CompetitionEmerging Competition
 In 1995, at least 55,000 printing companies operated worldwide. Most had fewer than
25 employees
 Donnelley was larger than its next 9 rivals combined.
 Smaller printing companies were building alliances, among themselves and with firm
that had high-capacity networks for transmitting files.

13. A New Business ModelA New Business Model
Need to developNeed to develop ::
 A transaction management system
 A system for royalty accounting and payment
 An object-oriented database
 A manufacturing database
ResultResult ::
 Cost would be higher than offset/web or gravure for long runs, but lower for short runs.
 On-demand printing would have an enormous effect on customer’s total system cost.
 Total cycle time would be reduced by orders of magnitude – from 20 days to 2 or 3 or
single day.
 More tailored marketing and better sales

14. So…A new division would beSo…A new division would be
required, rather than imply spreadingrequired, rather than imply spreading
digital technology throughout thedigital technology throughout the
company.company.

15. Economic & technicalEconomic & technical
validationvalidation
 Research the capabilities and costs of new imaging technologies by Technology Center
 Began by close contact with technology suppliers such as Xeikon
 Oversight and monitoring on Xeikon’s development work
 ผลวิจัยที่ได้ คือ costs were higher than expected แต่ว่า digital per unit costs were lower
than the costs of offset printing
 ในกรณีที่ cost สูง สามารถลด cost ได้จาก discount เสมือนว่า RRD เป็นบริษัทใหญ่ มี
ประสบการณ์ มีอำานาจต่อรองสูง

16. Reengineering theReengineering the
Technology DevelopmentTechnology Development
ProcessProcess
 The existing process
 cost ที่แต่ละ division ใช้สูงมาก ซึ่งมาจาก information systems technology and
incremental technology improvement
 The redesigned process
 วิธีแก้ปัญหานี้ กลุ่มวิจัยจึงคิด process ซึ่งมี phases IV เพื่อให้ช่วยกันคิด project ขึ้น
มาจัดกลุ่มทำาแบบ matrix

17. Technology Development Process

18. Deliverables for Phrase Reviews

19. From Vision to RealityFrom Vision to Reality
 In April 1994, Barb Schetter was named program manager with the objective of creating
a new digital color printing business. โดยต้องรายงานตรงต่อ Cowan ( ซึ่งอยู่ใน phase 3
ของ development process )
 ตั้งชื่อทีมว่า Trapeze Team ( แปลว่าชิงช้าสูงที่ใช้ในการแสดงกายกรรม เพื่อสื่อว่า
เป็นการทำางานแบบ working without net )
 ถ้าจะ review phase III ต้องระบุ existence of a market, possible applications, construct a
deployment schedule and funding plan, and define the scope of the business ภายใน 2
เดือน
 On July 1,1994 Schetter was named vice president and general manager of the Digital
Division. The Division would have its own P&L, with marketing and freestanding sales
force reporting to Schetter.

20.  ISG เป็นกรุ๊ปใหม่ ที่เน้นด้านเทคโนโลยี เป็นเพียงแค่การขายข้อมูลอย่างเดียว ไม่
สามารถทำารายได้จนเป็นธุรกิจที่เข้มแข็งได้ จึงต้องมีการตั้ง market ใหม่
 ด้วยเทคโนโลยีใหม่นี้สามารถ print at any scale, using any print technology, or deliver
the image in any other form the customer wants
 criteria ของ new business ประกอบด้วย
1. grow twice as fast as the corporation
2. reach at least $100 million in sales
3. achieve an above-average ROA
 ในกรุ๊ปนี้ไม่มีงานที่เป็นแบบ interchangeable work พวก incentive จะจ่ายตาม
performance ของแต่ละ division
 ISG ขายให้กับบริษัทนอกกรุ๊ปด้วย โดยขายให้พวกบริษัท Financial service,
Pharmaceuticals, Health care
 แต่ว่า แต่ละ division ในกรุ๊ปมี sales force น้อยมาก ดังนั้นจึงต้องสร้าง sales force ให้ได้
The InformationThe Information
Services GroupServices Group

21. Building the divisionBuilding the division
 เลือก Memphis, Tennessee เป็นที่ตั้งแห่งแรก เพราะมันเป็น central processing and
distribution point of Federal Express (Fed EX)
 จากการที่ตั้งอยู่ใกล้ Fed EX จึงได้ข้อดีคือ เหมือนกับว่ามันสะดวกขึ้น ส่งของได้เร็วและ
น่าเชื่อถือ Memphis เลยกลายเป็นจุดแข็งของบริษัท
 ทำาการทดลอง printer แบบดิจิตอล 11 ชนิด เพื่อใช้ในงานต่าง ๆ ที่หลากหลาย เหมือนว่า
ถ้าเลือกได้เหมาะกับงาน RRD ก็จะเป็น industry’s low-cost digital producer
 เริ่มจัด system โดย develop 3 software tools มี 1. Target-IT จะช่วยให้ลูกค้า pick, pull,
compose their own pages 2. Send-IT ช่วยให้ลูกค้าส่งคำาสั่งจากเครื่องคอมพิวเตอร์ของตัว
เองได้ และ 3. Order-IT ช่วยรวมงาน
Operations and TechnologyOperations and Technology

22. Organization, Reporting, Relationship and RolesOrganization, Reporting, Relationship and Roles
Partial Organization Chart, 1995

23.  Target markets
 ตั้งทีมวิจัยโดยสัมภาษณ์ลูกค้าและ Donnelley’s marketing directors
 ปรับ target อยู่เรื่อย ๆ ตามที่บอกว่า they were continually updated based on
experience in the marketplace
สรุปว่า target มี 1. magazine reprints, 2.corporate literature, 3.marketing and
product literature for pharmaceuticals and health care, and 4.advance, liquidation,
and prospecting catalogs
 Positioning
ที่สำาคัญก็คือที่พูดว่า “we sometimes say we’re not selling printing anymore, we’re
selling marketing tool” คือ สอนลูกค้าเรื่องการตลาด เรื่อง information ลูกค้าจะได้ราย
ได้เพิ่มขึ้นจาก by allowing greater market segmentation and more focus on selling
 Consultative Selling ซึ่งก็คล้าย ๆ กับ positioning
Marketing and Sales StrategyMarketing and Sales Strategy

24.  มี 3 ประเด็นคือ division’s own sales reps , the ISG sales force, sales force of other
business group
 business group leader, sales managers, sales representatives มัน did not always see eye to
eye.
Challenges of InternalChallenges of Internal
AcceptanceAcceptance
 เจอปัญหา expected sales had not yet materialized, and under intense financial pressure.
 ผู้บริหารต้องการ see profits by 4th quarter, and a breakeven year in 1996
 profit from our new business. It’s hard to be unprofitable around here for even a few
year แต่ระยะยาวมันไม่รู้
 ไม่ยอมขยายต่อ จนกว่าจะพิสูจน์ได้ว่า Memphis was working well
 ทาง Donnelley ไม่มั่นใจว่าจะ work ในระยะยาวหรือไม่ ในการประชุมก็พูดกันแค่ว่า let’s
see คือ ยังไม่เกิดขึ้น

25. The RR DonnelleyThe RR Donnelley
Today…Today…
 The world’s premier full-service provider of print and related services
 Serving organizations worldwide
 Doing business for more than 144 years
 Deep experience in meeting your market’s unique challenges
 2008 sales in millions: $11,581.6
 Stock trading symbol (NASDAQ): RRD
 Nearly 60,000 employees serving customers with locations across the globe

26. Building RR DonnelleyBuilding RR Donnelley
to Succeedto Succeed
May 2003
February 2004
June 2005
April 2006
Acquisitions(1)Divestitures
December 2005
October 2004Package Logistics
July 2005
Sept 2005 Poligrafia
January 2007
May 2007
December 2007
March 2008
January 2009 PROSA

27. Positioned toPositioned to
Serve You …Serve You …
Argentina
Austria
Australia
Barbados
Belgium
Brazil
Canada
Chile
China
Costa Rica
Italy
Japan
Korea
Luxembourg
Mexico
Philippines
Poland
Puerto Rico
Russia
Singapore
Czech Republic
El Salvador
France
Germany
Guatemala
Honduras
Hong Kong
Hungary
India
Ireland
Spain
Sri Lanka
St. Lucia
Switzerland
The Netherlands
Trinidad
United Arab
Emirates
United Kingdom
United States
Venezuela
Combined Worldwide Resources

30. An Unmatched PortfolioAn Unmatched Portfolio

31.  Serve over 50,000 customers
 Serve 100% of Fortune 100
and 93% of the Fortune 500,
and have approximately 15%
of their print spend
 Opportunity to continue to
grow our Fortune 500
Relationships
Blue Chip CustomerBlue Chip Customer
RelationshipsRelationships

32.  Asia
 Europe
 Latin America
 Canada
 Business Process
Outsourcing
 Global Turnkey Solutions
 Asia
 Europe
 Latin America
 Canada
 Business Process
Outsourcing
 Global Turnkey Solutions
 Printing operations in the
U.S.
 Magazines
 Catalogs
 Retail inserts
 Books
 Directories
 Commercial printing
 Financial printing
 Variable statement printing
 Forms
 Labels
 Office products, document
organization & storage
 Digital solutions
 Direct mail
 Printing operations in the
U.S.
 Magazines
 Catalogs
 Retail inserts
 Books
 Directories
 Commercial printing
 Financial printing
 Variable statement printing
 Forms
 Labels
 Office products, document
organization & storage
 Digital solutions
 Direct mail
U.S Print & Related ServicesInternational
U.S Print &
Related Services
74%
International
26%
RR DonnelleyRR Donnelley
Segment descriptionsSegment descriptions

33.  Over 50% of Chinese directories
and a significant portion of the
regional directories in Asia/Pacific
 Books for more than 30% of
global publishers
 Produces three of the top
consumer brand magazines in
China
RR Donnelley-AsiaRR Donnelley-Asia

34. Products
Commercial Print: magazines, catalogues, retail
Telephone Directories
In-box materials
Expertise
Production facilities located in or close to all
major markets
Flexible service platform geared to local needs and
languages
ISO certification (9001; 14001; OHSAS 18001)
Titles* Produced
Magazine: 472 titles
Catalogs: 245 titles
Retail Inserts: 65 titles
Volume of Copies
Magazines: 530m copies
Catalogs: 246m copies
Retail inserts: 438 copies
 RR Donnelley Bindery in Krakow, Poland
RR Donnelley GlobalRR Donnelley Global
Print Solutions - EuropePrint Solutions - Europe

35.  Largest Printing company in the region
 Locations in Mexico, El Salvador, Costa
Rica, Venezuela, Brazil, Chile, Argentina,
Puerto Rico, St. Lucia, Barbados and
Trinidad
 15 Manufacturing facilities
 Main product groups:
Magazines, Catalogs, Inserts, Books,
Premedia, Print/Forms, Labels, Variable
Print (Outsourcing), Direct Mail, and
Computer Print Out (CPO) paper
 RR Donnelley facility in Tambore, Brazil
RR Donnelley-LatinRR Donnelley-Latin
AmericaAmerica

36. ACROSS 14 DIFFERENT TIMEACROSS 14 DIFFERENT TIME
ZONES, ON FOURZONES, ON FOUR
CONTINENTS, AND IN NEARLYCONTINENTS, AND IN NEARLY
40 COUNTRIES, RR40 COUNTRIES, RR
DONNELLEY IS COMMITTED TODONNELLEY IS COMMITTED TO
DELIVERING EXCEPTIONALDELIVERING EXCEPTIONAL
VALUE.VALUE.