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R.R. Donnelley & Sons: The Digital Division “My biggest worry,” said Barbara (Barb) Schetter, vice president and general manager of R. R. Donnelley’s Digital Division, “is that we don’t become an orphan. We could build up the division and even meet our revenue numbers, yet still not be embraced by the rest of the organization.” Indeed, by early June 1995, many group and division managers at the $4.9 billion printing giant had yet to sign on to the strategic potential of digital technology or accept the Digital Division as the most appropriate locale for the business. Some still saw digital printing as a technology in search of a market. Others had indicated that if they did decide to embrace digital printing, they might do so on their own. These concerns were very much on the minds of Schetter and Mary Lee Schneider, the division’s director of marketing, as they sat down for a meeting on June 7, 1995. In two weeks Schneider was scheduled to make a presentation to one of Donnelley’s business groups, Book Publishing Services, which was deciding whether to move into digital technology on its own or to bring its digital work to the division. Schetter and Schneider were hoping to craft a plan that would convince the Books Group to come to them. But they were still struggling to find convincing arguments and the right set of incentives. Company and Industry Background R. R. Donnelley & Sons was founded in 1864. By 1995, it had become the world’s largest commercial printer, with 41,000 employees in 22 countries. A privately held, family-run, Chicagobased company for almost a century, Donnelley went public in 1956; the first outsider was named chairman 20 years later. Donnelley had begun printing telephone directories and the Montgomery Ward catalog in the late 1800s and still generated 60% of its revenues from directories, catalogs, and magazines (see Exhibits 1 and 2). Its major customers were telephone

R.R. Donnelley & Sons: The Digital Division “My biggest worry,” said Barbara (Barb) Schetter, vice president and general manager of R. R. Donnelley’s Digital Division, “is that we don’t become an orphan. We could build up the division and even meet our revenue numbers, yet still not be embraced by the rest of the organization.” Indeed, by early June 1995, many group and division managers at the $4.9 billion printing giant had yet to sign on to the strategic potential of digital technology or accept the Digital Division as the most appropriate locale for the business. Some still saw digital printing as a technology in search of a market. Others had indicated that if they did decide to embrace digital printing, they might do so on their own. These concerns were very much on the minds of Schetter and Mary Lee Schneider, the division’s director of marketing, as they sat down for a meeting on June 7, 1995. In two weeks Schneider was scheduled to make a presentation to one of Donnelley’s business groups, Book Publishing Services, which was deciding whether to move into digital technology on its own or to bring its digital work to the division. Schetter and Schneider were hoping to craft a plan that would convince the Books Group to come to them. But they were still struggling to find convincing arguments and the right set of incentives.

Company and Industry Background R. R. Donnelley & Sons was founded in 1864. By 1995, it had become the world’s largest commercial printer, with 41,000 employees in 22 countries. A privately held, family-run, Chicagobased company for almost a century, Donnelley went public in 1956; the first outsider was named chairman 20 years later. Donnelley had begun printing telephone directories and the Montgomery Ward catalog in the late 1800s and still generated 60% of its revenues from directories, catalogs, and magazines (see Exhibits 1 and 2). Its major customers were telephone

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