Donnelley's Case Study

1. How do the critical success factors for Donnelley's traditional printing businesses compare for those for on-demand digital printing? How did these differences shape the agenda and tasks of Rory Cowan?

While thinking in terms of a traditional printing business, long-term relationships with customers being key is what Donnelley considered. Bearing in mind the possibility of multi-year ‘enabling contracts’ from said customers and the need to build a plant specifically for each one, with equipment dedicated to its needs, Donnelley was correct in thinking that way. The reason why Donnelley was correct in think that is because the longer the run length on the print machines, the lower the cost per page, therefore makes the traditional print business was one of best high fixed and low variable costs businesses. With the total cycle time being reduced by large customized orders, this gave the company a competitive advantage over other competitors.

On the contrary, as industry trends were heading more and more towards “mass communication”, customers required more versions, shorter runs, customized inserts and bigger and better use of color in their work. Since the commencement of desktop publishing, customers were able to create and print their own documents from the comforts of their home. As technological advances were made (ex. digital four colors, computer-to-plate, customizable prints), it would mean the traditional printing business would be going out of work. With on-demand printing (POD), there would be a lot of advances in the field of elimination of a range of costly steps, including warehouse and inventory. This style of printing has different economics and selling process when compared to traditional printing. Customers’ total costs would have be substantially reduced when warehousing, transportation, obsolescence, and destroys were factored in.

Rory Cowan, the executive of Donnelley, strongly believed in digital technology was the future of every business, and that it was the way for them to go. He even formed a digital division-to focus some of the company’s research and development funds on the opportunities of digital technology. However, in 1991, Cowan began thinking “the value was leaving the book” and began exploring how Donnelley’s traditional scale advantages could be saved in a digital future. As it was seen by Cowan, digital presses were a must in enabling technology, but were unlikely to give Donnelley with a competitive edge by themselves over competitors. Instead, Cowan believed that economies of scale would come from an information design that linked Donnelley with problematic “content owners” and simplistic customers. Donnelley would become an electronic distributor and warehouse, with the essential ability to print on a moment’s notice.

In the first part of the 1990s, Cowan began creating the general outlines for a new business model. This model was based