Rr Donnelley Sons the Digital Division free essay sample

The gravure print was more expensive and used etched copper cylinders and would run 500,000 or more. The digital presses were more expensive and required skilled and dedicated operators. Donnelley felt they would need to develop and control four database systems to make their model work, adding extra costs. At the same time, Donnelley anticipated savings by eliminating inventory and warehousing costs. The cost per unit for print jobs with run lengths of 2,000 or less would be lower than the costs of the traditional offset print. What do you have to do well to succeed in the two businesses? What do customers want? Manufacturing and sales were the core functions of Donnelley. The traditional print business succeeded by employing a superior sales force of over 500 people. The salespeople had considerable customer knowledge to the point they were able to reduce inventory and shorten cycle time for the customer. They developed long term relationships with their customers. We will write a custom essay sample on Rr Donnelley Sons: the Digital Division or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Donnelley was founded in 1864; being an early entrant company gave them a competitive advantaged, and allowed them to maintain a loyal customer base. Their strategy was to secure multi-year contracts worth tens of millions of dollars. 0% of business was from long term contracts of 3 to 10 years. Donnelley would build plants specific to the needs of their long term customers. A large segment of their print business was directories, catalogs, and magazines. Donnelley was profitable and competitive in the traditional press business until the mid-1990s. â€Å"By 1995, at least 55,000 printing companies operated worldwide. Most had fewer than 25 employees. Donnelley, with 6% of the $80 billion print markets, was larger than its next nine rivals combined. Threats, however, were emerging from several directions, largely because of new technologies and new entrants to the business. As new technology emerged and shifts in the industry were occurring, customer demands were changing. Customers now wanted to produce a variety of versions of the job, use of a variety of inserts, use of great color, and wanted to have the ability to quickly make revisions to the job. They now placed a premium on speed and global distribution. Donnelly already had the capability to assemble multiple versions of the same job with traditional printing, but they needed to meet customer production expectations. The introduction and push of desktop publishing in the 1980s changed how jobs were assembled and edited. Customers now had the ability to do editorial and prepress tasks that were done by the publisher. â€Å"The craft side of the business that we made big money on-stripping, color correction, and etching – has migrated to the hands of the document creator. † (Donnelley p. 4) As Donnelley introduced the digital press, they had to make sure their systems were compatible with PCs and MACs. The digital press business housed the print jobs in a database allowing Donnelley to print and send on demand. This process cut the processing time from upward of 20 days to 2-3 days. It saved publishers close to 60% of the overall cost because it eliminated on- hand inventory and warehousing costs. How do these differences affect the agenda and tasks of Rory Cowan? What posture must he take toward the rest of the company? Why does he feel that a separate division is necessary? The digital press division was developed to compete with industry shifts, new technologies, and shifts in customer demands. Donnelley’s Vice President, Rory Cowan’s vision was to lead the effort of imploring digital presses. In order for Cowan and the digital press to succeed there needed to be buy-in from all areas of the organization. It needed to be a top-down initiative and infused within the strategic direction of each unit of the organization. The digital press division needed to meet the new demands of customers and the sales division having the knowledge to educate the customer on these new services. Cowan was afraid digital presses would get lost in the plants if he were to infuse them throughout the organization. Instead he created a cross-functional team to evaluate the use, cost, and return on investment of the digital press. He slow pulled other department heads into the mix and re-structure the Information Services Group. He educated his sales staff and customers on the benefits of using the digital press. II. Stages in New Business Creation What were the critical challenges and tasks that faced the Digital Division in each period: prior to April 1994, between April 1994 and January 1995 and between January and July 1995? RR Donnelley amp; Sons had many challenges as they were trying to come to grips with a changing technological world where the print medium was moving toward digital printing on personal computers and with it the pricing, scales of economy, and old business strategy of print by the page. In the early 1990s, Rory Cowen, SVP of the Technology Centers began searching for a new business model with distributed digital print at its core. Prior to April 1994, there were several challenges to meet. The company needed to research if it could keep its traditional competitive advantage with print economies of scale (it was found that they could). â€Å"Costs were higher than expected: the presses were expensive, required skilled and dedicated operators, and used more toner than anticipated. † Finally, there were issues with selling the idea of digital print medium to internal divisions. Internally, people thought digital was a good idea but no one wanted it because it was outside their core business. They all had some potential digital work, but didn’t know enough about the markets and were scared of an unproven technology. Customers, on the other hand, almost jumped up and down, even though they too didn’t know what to do with the new technology, or were t hemselves just starting to convert to digital format. † In other words, there were challenges moving the leadership from the old business model thinking into the new tech future. The basic task was to find out if the new model could work and still keep the competitive advantage and then sell the divisional leadership on adopting the new technology and the new business model. â€Å"Between January and April 1994, seven teams worked to reengineer the processes of the corporate center† and there were a new set of challenges and issues to overcome. The reengineer group quickly discovered that â€Å"all the tech processes were adhoc and projects were no chosen on the basis of customer needs, nor were their economics fully screened. Instead, senior managers with clout got their projects funded, particularly when they were identified and championed early in the budget cycle. † This was the â€Å"first pig to the trough mentality. † Also, tech projects â€Å"seldom had financial gatekeepers and there were no formal reviews on how the money was spent. † Divisions and marketing managers played a very small role in helping to guide the technology development. There were basically no spending limits, no deliverables and you could spend a lot of money investigating technology. There were also issues with lag time between rolling out technology to different plants. The process was one plant would use the technology and refine it working out the bugs and then it would roll out to the next plant. The firm had 38 plants which took a long time. There was no technology that worked or was shared across the company. The new tasks were to build a new process guided by speed, improved financial data, checkpoints, and better connections with divisions. Divisions were â€Å"offered incentives to take a broader, shared approach†¦ all projects were assigned to cross-functional teams with representatives from marketing, manufacturing, and development. Teams operated through a matrix,† and although team members reported to their individual divisions they also reported to the project manager. At each completion of a phase there was a thorough review. Between April 1994 and January 1995, Barbara Schetter became program manager with the task of creating the digital color printing side of the business. She needed to â€Å"establish the existence of the market, identify possible applications, construct a deployment schedule and funding plan and define the scope of the business in only two months. Every week, the team held meetings, defined cost estimates and generated IRR. It was during this time that Barbara made the case for a separate business unit / division concentrated on digital. In July 1994, Barbara got her wish and became VP of the new Digital Division with its own resources. The unit was defined as creating a â€Å"scaleable digital architecture. † To sell the new division, there were several more criteria for t he Schetter to achieve. The division needed to grow twice as fast as the corporation, reach $100M in sales, and achieve above average ROA. This put additional pressure on the sales teams who were challenged to generate business as well. Barbara chose the date of November 11th 1994 to be up and running but the budget was not finalized and the new date was set for January 1995. Between January and July 1995 Memphis, TN was chosen as the location for the new Digital Division because it offered â€Å"virtually distributed manufacturing from a single location† as it was located close to FedEx. The challenge was to get the operation up and running. As Manufacturing Director Lew Waltman noted, â€Å"There are very few pieces of this model anchored in any way†¦ the equipment is new and most of it is unproven. † They had to build a transaction system which would access the right content and pull the right pieces for the customer. New functional capabilities were needed and added as well. â€Å"By mid 1995, the system could accommodate Macintoshes as well as the original PC based machines and would soon be reconfigured so customers could do their own invoicing. In addition, the division developed three software tools that allowed customers to manipulate and vary the content in Memphis’s database without ever leaving their offices. Target IT allowed customers to pick, pull, and compose their own pages, depending on what they wanted to promote in a particular week. † What this allowed was to allow the Digital Division to take â€Å"three distinct value creation devices a content management system, a transaction management system, and a digital imaging technology system and combine them to create a new product. † What was Barbara Schetters role in each period? How did her responsibilities change as the project evolved? What were the critical tasks and activities? What relationships did she have to have to manage? What were her biggest concerns? What were the differences (if any) between her early responsibilities as program manager and her later responsibilities as division general manager? Prior to 1993, Barbara Schetter ran the Financial Services printing division. In 1993, Cowen asked that she join the Tech Center division. In April 1994, Barbara was named program manager â€Å"with the objective of creating a new igital color printing business. † It was during this time that Schetter began making the case for a digital division to Cowen as a stand-alone business unit so they could get more resources. In July 1994, Barbara was named the VP of the new Digital Division. It is clear that Barbara’s responsibilities certainly evolved during this period. As program manager her responsibilities were to provide a framework for suc cess by defining the scope, coordinating the team, controlling the projects finances and keeping the general program on track. As VP, her responsibilities moved to the success of the division by setting up and creating value. As stated before the new division needed to achieve growth twice as fast as the corporation, reach $100M in sales, and achieve above average ROA. Also as program manager, Barbara had to manage the relationships between her team and the division where the individual team members belonged. This tied her to representatives in marketing, tech centers and finance and probably to a PMO (Project Management Office) and the divisional leadership as a subordinate. As VP, Barbara her relationships are now centered on all of her associates as resources, HR, senior leadership (SVP, CIO, CEO) and other divisional leadership as peers. Her relationships are now also centered on the customer. Not managing the customer relationship as a program manager from the periphery but involved in the customer / business relationship as directing resources to service the customer for profit. Finally, Barbara’s critical concerns of resources and finance as program manager were what led to her petitioning for the Digital to be moved from a project to a division. As project manager, resources are given to you and distributed from many places. Concerns over how finances are done and ROI is generated is generally handed to the project manager. Barbara wanted to solidify her resources into one place and be able to work with divisional heads and HR and Finance to have her own budget, headcount and control over how the resources are used. III. The Technology Development Process What is your evaluation of the new, reengineered technology development process? The new process was focused on greater speed from idea to implementation, improved financial data and checkpoints to limit wasted investment, and etter connections with divisions to ensure the final project was implementable across divisions and sectors and met the needs of those division and marketing managers. The process includes four structured phases that requires a formal review with specified deliverables before movement into the next phase. It offered incentives for projects that had po tential to benefit the company as a whole versus a single division and it created a point of power and responsibility for each projects-the program manager. What problems in the old process was it designed to solve? The process that existed in January of 1994, was completely ad hoc, meaning that is was a solution designed for a specific problem or task, non-generalizable, and not intended to be able to be adapted to other purposes. Projects were not chosen based on merit or value, but rather, were chosen based on sponsors and clout within the company. Politics had too much influence in the funding and initiation of projects. The existing process did not have a method that set goals or budgets, and there were no financial gatekeepers to limit the amount of funds could be sunk into a new project regardless of its value to the company. There were no limits to the spending, no set deliverables, and no accountability for a projects success. This process left the door open to allow bad or useless projects to be developed using valuable resources of the company. In addition, the roll-out process of completed projects was inefficient and could take several years to be embraced by all the plants. Lastly, each division was spending additional dollars altering the new technology to their specific needs, thus making it incapable of transfer to other divisions. This meant that there was no one technology that worked across the company, across groups in a sector, or even across closely related divisions. These inefficiencies and lack of central control were costing RR Donnelley amp; Sons tremendous amounts of money, and little could be shown for improvement other than a first mover advantage. The new system was designed to address these issues. Despite these problems, the old technology development process did produce the Digital Division. Was it really that badly flawed? Although the Digital Division was created under the existing process, the formation was slow and arduous. The Magazine Group’s digital program was terminated prior to the formation of this new division, and Cowan spent two years trying to sell his vision for the Digital Divisoin within the firm. The digital project only moved forward because Cowan was promoted to Donnolley’s sole executive VP, the number two person in the company. Under the existing process, this kind of clout is what accelerated projects through the company. Without this type of champion, the Digital Division may not have ever seen the light of day. In addition, it is important to note that not all great ideas come from the top. In this case, Donnolley was fortunate enough to have a forward thinker in its top ranks. What are the general qualities of organic and mechanistic types of processes? Under what conditions do you think organic processes are preferable? Mechanistic processes? Organic Process: This form of fluid, loosely managed decision making process is most closely associated with superior performance in organizations pursuing entrepreneurial as opposed to conservative strategies. This type of decision process is intended to provide flexibility for change that can be initiated by employees. This type of structure is typically seen in very flat organizations and promotes feedback from employee’s and workers. Organic processes are intended to distribute information faster and create an increased ability to respond or react to change, however, for Donnolley, the divisions and hierarchy that existed in the organizational structure prohibited the organic process from working. This processes typically fosters innovation and the exchange of ideas, however there are several disadvantages of this model: * A Lack of Boundaries: because the members of this type of process make the rules and set the standards, processes could continually change and will depend on the influence of the team members, which may lead to greed or selfish motives instead of what is best for the company. * Ineffective Leadership: Once divisions and mangers are used to governing themselves, an attempt to implement change from senior management may be seen as intrusive and will thus not be embraced by the plant or division. This is the reason the digital division was having so many issues with the technology customization and division-specific digital services. * Communication Barriers: organic processes create barriers between divisions, which has lead to the various versions of software and the lack of shared resources throughout Donnolley. Mechanistic Processes: This process form is characterized as tightly specified and structured. It works will in stable environments and provides centralized and formal decision-making. This process carefully documents policies and procedures for close employee adherence. Mechanistic processes involve very rigid management control, and limit employee involvement in decisions. This process helps control employee output but also limit mobility and the exchange of information between divisions. What impact did the redesigned mechanical process have on the digital project? The formal process allowed the Digital Division to have structure, goals, and creditability within the organization. It was able to establish dates for the various phases as well as to schedule meetings with necessary general management and senior management. This process also allowed the division to have it own Pamp;L with marketing and a freestanding sales force. The Digital Division was given a chance to develop as its own standalone business unit. Do you think the Digital Division would have emerged if it had to follow the reengineered technology development process from start to finish? Why or why not? Seeing as though it withstood the Phase III review process, we would need to look back to see if the division would make it out of phase I and II. Given the growth that had been seen in the competitors of this market, I believe that the initial market assessment would have been a given for this project, however, the financial benefits compared to the capital requirements were not clear given the newness of the market. A solid revenue stream had not yet been established, however, given the importance of customer relationships within the company’s culture, the need for this product was evident and would generate cost savings in the future for both the firm and the client. IV. The Roles of Clarke and Schetter How do Clarke and Schetters jobs compare? Do you agree with the current division of responsibility? Why or why not? Why was Clarke appointed to her position? If you were Clarke, would you want the job? Under what conditions? If you were Schetter, how do you feel about the appointment? What is the message to you? As Schetter, what do you need from Clarke? Has Clarke made the transition from senior vice president of sales to general manager? Has Schetter made the transition from program manager to general manager? What advice would you offer them? In July 1994, Barb Schetter was named Vice President and General Manager of the Digital Division, with a direct reporting line to Bart Faber, who headed the Information Services group, where the Digital Division resided. In August 1994, Janet Clarke, a Donnelly Senior Vice President, was brought in to head the Digital Division, as well as oversee a portion of the overall Information Services group sales force. Schetter reported to Clarke, who in turn reported directly to Faber. Discussing their roles and responsibilities Schetter said of Clarke, â€Å"She is building the business from a customer base†, and â€Å"Right now the issue is revenues, but once we get them, it will be our ability to deliver. The delivery of the Digital Division – that is my responsibility and not anyone else’s. † Clarke described their roles in a similar manner, noting â€Å"I have a weekly conference call with Barb and her direct reports, and I go to Chicago fairly often. But my focus is on external sales, on things outside our radar scope, and for that, the best place is New York. † In the words of Bart Faber, â€Å"By adding a sales animal like Janet to the mix, we covered the major weakness of a strong and seasoned team, added some capabilities we didn’t have, and ensured our getting better sale performance. † Faber realized that the two biggest challenges facing the Digital Division were driving sales to become profitable as quickly as possible and gaining acceptance across the organization. Regarding profitability, Faber noted â€Å"We at Donnelley demand early profits from our new businesses. It’s hard to be unprofitable around here for even a few years, unless you are making clear process and its part of a long-term plan. † Regarding acceptance throughout the company, Schetter had significant concerns, â€Å"We have not, as a company, stood up and said, â€Å"Short-run, on-demand, color printing and the associated delivery systems are a strategic initiative. There is no companywide roll-out plan. Schetter feared that the Management Committee’s wait and see approach and lack of support for a centralized Digital Division could result in the division’s failure, feeling that management would support other divisions creating digital subdivisions under their purview. Clarke’s hiring can been seen as a direct response to both of these challenges, as both her responsibilities and skillset align to the major challenges faced by the Digital Division. As noted by each of the major players in the Digital Division, Clarke’s role as head of the division is external and sales focused. First and foremost, Clarke is responsible for driving sales for the Digital Division. Additionally, she is seeking to be an ambassador for the Digital Division to the rest of the company, noting â€Å"I see the division as an incubator, from which we can figure out the opportunities for proliferating the technology and can then integrate them into the business. † Conversely, Schetter’s role was internally focused, with her major focus being the operational issues facing the Digital Division. At this time, the biggest challenge facing Schetter was making sure that the first digital printing facility in Memphis, Tennessee up and running. As Schetter noted above, her role is to deliver on the sales being made by the various sales groups within the Digital Division. Considering the different skill sets of Clarke and Schetter, having Clarke focus on driving sales, and Schetter focuses on internal delivery appears to be a solid approach. It is worth noting that while Clark leads approximately half of the Information Services Group sales force, there is a small Digital Division sales force that reports directly to Schetter. Given Clarke’s greater expertise in the sales area, it would make sense to shift this group under her purview, and allow Schetter to focus solely on internal operations. Under Clarke, this group could still focus exclusively on sales for the Digital Division, as opposed to the rest of the Information Services Group sales team, and could potentially benefit from Clarke’s sales expertise in knowledge. That said, it is common throughout the company for small sales teams to report to the General Manager of a division, and the current departmental division is in line with common practices across the company. One of the most important factors in the future success of the Digital Division is the relationship between Clarke and Schetter. Given the Schetter was originally appointed to run the division with a direct reporting line to Faber, and that Clarke was brought in above Schetter, the potential exists for some resentment to exist, with Schetter feeling that the hiring of Clarke was a message from management implying that her ability to drive sales was inadequate. The first major step that the two need to take is ensuring that their strategies are aligned within areas where they share joint responsibility. Given the need for early profitability, this is especially crucial with the sales force, as both Clarke and Schetter have their own sales groups. If their strategies are not properly aligned, the teams may be going to market with a divergent message, or could be targeting the same areas while other areas are not being adequately covered. As Schetter reports to Clarke, and lacks Clarke’s sales background, Schetter needs Clarke to take the lead in this area, and drive the coordination of sales efforts. Conversely, Schetter has a much better operational grasp on the Digital Division, and as they attempt to prioritize sales targets, Clarke will rely on Schetter to keep her informed on both the overall ability to deliver content, and the internal cost of content delivery (which would in turn drive the types of sales being prioritized). To maximize the chances of success in both of their roles, Clark and Schetter need to ensure that they fully understand their responsibilities and expectations for each other. This will reduce the risk that the sales and operational components become distant from each other, and the decisions they make do not prioritize what is best for the Digital Division and Donnelley overall. V. Dealing with the Books Group What is the nature of the challenge Schetter now faces with the Books Group? How significant is it? Since it’s clear that the corporate offices of RR Donnelley will not make digital printing a main initiative or a flagship of the company, at least until the opportunity shows more promise, the task of getting the Books Group on board falls on Schetter and Schneider. The Books Group may feel that it has a leg up on the digital division, since they are one of the portions of Donnelley that already have a digital press up and running, but there are certainly a few benefits that the Digital Division has to offer. For most of the groups and divisions of Donnelley, digital presses are a side item or an afterthought that receives secondary attention. The Books Group is considering whether they should develop the technology on their own, or seek involvement with the Digital Division. How should Schetter and Schneider convince the Books Group to bring its work to the Digital Division? What incentives/ arguments should they offer? How, if at all, should they involve Clarke, Faber, and Cowan? Is this the right way for Schetter to be spending her time? Why or why not? One of the primary benefits Schetter and Schneider could use to persuade the Books Group to work with the Digital Division is that they have done extensive research on digital presses. The division has worked through many cost estimates across a variety of presses – 11 machines from three different manufacturers to be exact. The Digital Division also has some rough cost estimates of what different print runs will cost and can compare that information with what the run would cost using an offset process or a gravure process, though it’s very unlikely a smaller run would be run using a gravure process. Without this wealth of knowledge the Books Group runs the risk of missing out on potential revenue, or even losing money, by underestimating costs, picking the wrong machine, or using the wrong print process. The Digital Division also already has an excellent distribution network even though there is only one location. The reason that their distribution network is so strong is because of the close proximity to FedEx in Memphis, Tennessee. The case does not specifically mention where the digital press used by the Books Group is located, nor does it detail where the new presses will be located if the group were to move forward with digital presses on a larger scale. No matter where these presses are located, they will likely be behind the curve, since Digital already has a press running in a very strategic location. There is also a much more customer-friendly infrastructure in the process that the Digital Division uses versus what other groups and divisions are using throughout Donnelley. As mentioned in the case, there are four distinct parts to the process: data handling and warehousing, a transaction system, printing capabilities, and a royalties payment system. The Books Group could save time, effort, and money by joining up with the Digital Division. Customer retention could also be increased since customers will not have to go through the frustration of dealing with an infrastructure-in-progress, like they would if the Books Group invested in digital on their own. The work done by the Digital Division also deals with a different level of the customer’s organization than most typical sales processes do. Short print runs are more likely to be associated with companies that do not publish or print as their main product. Corporations making sales brochures or manuals could be examples of this. Though the Books Group is more likely to work with companies that do partake in publishing as a main service, there are undoubtedly many companies that will print books in small runs that may not currently be served by Donnelley, or the Books Group in particular. The Books Group stands to increase revenue overall by reaching this segment of prospects and serving their needs. The salesforce in the Books Group undoubtedly was not as familiar with the digital presses themselves, the processes they used to quickly and efficiently make smaller print runs, and perhaps the type of customer or project that could practically utilize a digital four color press. It would be simple to say that the Books Group should join up with the Digital Division and the sales people from Digital and ISG do the selling for small, four color runs. However, this presents an issue, since the existing sales people in the Books Group want to keep their customers and opportunities, and certainly don’t want other sales people infringing on their territory. However, a simple solution would be to have the ISG and Digital sales people pursue accounts that are not in the Books Group book of business or pipeline, and mention that existing sales people in the Books Group will get a special incentive for selling a digital job in addition to their normal incentives and commission. This will not only allow current sales people to increase their pay, but will allow the Books Group to pursue previously untouched prospects and increase their revenue stream. The leaders of the Books Group also have a personal stake in the success or failure of their area in that their incentives rely on profit and revenue maximization. There is no doubt that working with Digital could be a headache because the Books Group people can’t do everything the exact way they want. However, if Schetter and Schneider can demonstrate that there will be a cost savings and a revenue increase, the decision makers will very likely be willing to consider the option seriously since it will increase their incentives. Schetter and Schneider are also very determined to make their new division a success, so they will no doubt be completely dedicated to sales excellence and cost cutting, which all lead to a better scenario for the Books Group as a whole and also for the incentives of the leaders of the group.