RR Donnelley CEO Tom Quinlan Speaks with WhatTheyThink
Putting the Customer First
By Cary Sherburne
October 15, 2007 -- In a rare exclusive interview, RR Donnelley President and CEO Tom Quinlan spoke with WhatTheyThink recently about the state of the company and its rebranding, the state of the industry and RR Donnelley’s strategies moving forward.
RR Donnelley, the world’s largest printer, reported revenues of $9.3 billion in 2006, with $5.7 billion attributed to Global Print Solutions and $3.6 billion to Global Services, which includes forms, labels and financial print. The company generated $7.2 billion of those sales in North America and delivered a 10.5% year-over-year revenue growth, with full-year net earnings from continuing operations of $402.6 million, significantly higher than the prior year ($95.6 million). The Q42006/full-year earnings report included a positive full-year operating margin despite restructuring and other charges, many of which were associated with recent acquisitions.
The company also announced, on June 21, 2007, that it has unified its printing and related services offerings under the single RR Donnelley brand. Moore Wallace, Moore Canada, Moore Response Marketing Services, Moore (in Latin America), OfficeTiger and the company’s network of North American commercial printing facilities have been re-branded as RR Donnelley.
WTT: Tom, thank you for taking time to speak with us at WhatTheyThink. Can you give us a brief update on RR Donnelley, in light of all of your acquisitions and your transition to One RR Donnelley? How many countries are you in now, how many plants, how many employees?
TQ: RR Donnelley now serves more than 90% of the Fortune 500, and we account for about 15% of their total print spend. We count more than 40,000 customers in our base, and operate from more than 600 locations in 35+ countries. We have about 65,000 employees.
I have been fortunate to have people around me who have done a superb job of quickly integrating our acquisitions without taking their eyes off of meeting everyday goals and objectives. We recently announced our rebranding, reflecting one company with one brand. This is more than cosmetic; it is a clear signal that we intend to leverage the substantial benefits of One RR Donnelley on behalf of our customers. We believe this delivers more operating efficiency, with a streamlined and responsive customer-facing organization. It also increases our platform utilization, and allows us to provide better customer service. We offer customers substantial scale advantages, but we can provide the customer intimacy usually more characteristic of a smaller provider. We believe this platform will offer unparalleled opportunity for all of our customers, large and small.
WTT: What are the criteria you look for in acquisitions?
TQ: As you know, in our industry, you need to be the lowest cost provider. But the first synergies that we look for in an acquisition are around our ability to use new products, services and capacity to increase our flexibility. The strategic acquisitions that we made at the beginning of the year allowed us to increase our position with customers and to win more of what they produce. We have moved to eliminate redundancy, take advantage of procurement synergies and leverage administrative functions. But our principal goal has been to quickly create selling synergies. This model has brought new capabilities online faster than if we had to build them, and we have lessened our capital requirements going forward. The acquisitions also bring new customers that we believe can benefit from the broader RR Donnelley platform, including an increased geographic reach. It is a business that rewards scale. At the end of the day, no matter what we do it is all about the customer. If we don’t continue to put them first, none of our other stakeholders are going to be rewarded.
WTT: The integration challenges over the last several years must have been interesting. Do you believe you have accomplished most of the integration?
TQ: I would tell you that integrations never end, but we are pretty far along in integrating these acquisitions into our platform and defining our go-to-market strategies. There are three things we look for in an acquisition. First, does it help our customers? Is it a product or service that will enable our customers to enjoy enhanced benefits from RR Donnelley, or does it get us into a new product or service that we are not currently in, which we believe our customers need? Secondly, we look at the cost structure; can we impact that favorably because of our scale? And third, does it have capacity? If those three criteria are hit, we believe we can have a successful relationship with that particular property and it will be a successful acquisition.
WTT: Are you still looking to acquire?
TQ: We will continue to be acquisitive. The industry is still consolidating, and we will continue to play an appropriate role where it fits those three criteria, with the customer at the forefront.
WTT: In recent investor presentations, you have indicated that your acquisition focus is on core print opportunities as opposed to expanded capabilities such as OfficeTiger. Are you still looking for acquisitions in both areas?
TQ: I would say that our current focus on core print opportunities is a fair statement. We feel that we have the capabilities on the service side to support our customers, from the perspective of both knowledge-based analytical work as well as other business process outsourcing (BPO), from financial analysis to litigation support.
WTT: What parts of the business will continue to operate relatively independently, if any? Or has everything moved to the RR Donnelley brand as a result of your rebranding?
TQ: The majority of our businesses have moved to the RR Donnelley brand. I do encourage independence throughout the organization to the extent that it encourages innovation and responsiveness to our customers. But I believe that by going to One RR Donnelley, we can knock down the silos and build a common culture that will give customers access to the entire platform. You need to move quickly to ensure that the systems, sales organization and operations are all aligned around common goals, and we have done that.
WTT: How about on the web press side of the business? How are your magazine and directory businesses doing?
TQ: We really look at our business from a customer perspective rather than a production silo perspective. We are seeing publishers turning to a variety of communications methods to reach audiences and support advertisers. PRIMIR did a magazine study in 2006 that reported that the number of different magazine titles in print reached an all-time high and projected continued growth, but at the same time, ad budgets are including more Internet exposure. As publishers use more web-based content, we can support them with direct mail. Others are turning to channels such as event marketing, especially B2B publishers, which we can support through direct mail, commercial print, program graphics and more. The beauty of having this platform and the assets we have is that we can leverage the whole to meet dynamically changing customer needs. John Paloian and I joke that the presses really don’t know what they will be printing when they wake up in the morning. It is a different way to think about the business than people have in the past. We utilize those presses as best we can to be able to print for the customer and again, breaking down silos so you are not looking at books, directories, magazines, catalogs, etc., but rather at the overall customer business communications need. You simply apply the production method that best meets business objectives at any given time.
WTT: I am assuming you include digital printing in that same mental model, then.
TQ: Digital printing, to us, is creating fresh opportunity as well as integrating with traditional print. As an example, we are including digital content in catalogs to allow merchants to tailor offers based on previous buying behavior. With TransPromo billing statements, we help customers create eye-catching promotional messages on their statement platform, taking advantage of the fact that statements are opened and read more consistently that promotional direct mail, with people often looking at statements multiple times before they file them away. We have developed high-speed printing platforms that can lay down variable data and high quality variable color, and that offer our customers a superb service. We have co-located digital printing with our logistics facilities, and that allows us to include preprinted, on demand and non-printed items in one fulfillment workflow. To make print speak in a one-to-one voice, you need exceptional logistics capabilities, which we have because of our footprint. Advance reader copies of books, signage for events, or commingling digital print with preprinted materials are just a few examples of how we are using digital print to create innovative solutions.
WTT: You have quite a range of BPO services in the UK; are you doing a similar thing in North America?
TQ: We serve customers in North America with a variety of BPO services, ranging from financial analysis to litigation support, and in every geographic region we serve, we work to provide customers with more than mere commodity products. We have developed integrated solutions that help them improve workflow efficiency, cycle dynamics, and logistics, keeping an eye on lowering their total cost of ownership for print. Our asset base, the diverse manufacturing platform we offer, is integral to offering these solutions, and that includes premedia, logistics, and ecommerce tools to help customers achieve their print management objectives.
WTT: What kinds of things are you doing in ecommerce?
TQ: We have a portal solution called Custom Point, and that is a good example of how we leverage the Internet. When I am seeing investors or talking to customers, I tell them that about once every five seconds, a customer enters a self-service order for preprinted materials, digitally printed materials, targeted direct mail etc., through Custom Point. We offer comprehensive solutions and have stickier relationships when they include things like Custom Point. There are a wealth of other options, as well, such as digital asset management and premedia workflow management. In fact, using our web-based solutions, art directors can even supervise a photo shoot without leaving their offices by doing online viewing of proofs and more. We are also tightly integrated with USPS systems to add more value to our mailing services. The USPS recently recognized our Logistics operation for its work in advancing the use of mail services and its commitment to the notion of mail as a viable business solution. That was specifically in reference to our unique OneSite reporting system, extensive co-mailing resources and track-and-trace capability that lets us track print distribution through our logistics network and right into the USPS mail stream.
From a sales standpoint, we want people to know we are the largest small printer in the world. Our platform is structured to meet diverse customer needs on an individual basis, assuring that we have the right team in place to support each of them. Many of our customers are large themselves, but we also serve medium and small businesses. On the magazine side, even though run lengths are smaller in some cases, the number of titles is growing, as I mentioned earlier, and many of those titles are highly specialized to certain audiences, and advertisers love to be in these types of publications. If there is a magazine for a specific audience, there is a good chance we are printing it. The same thing applies to specialty catalogs. We can bring solutions to smaller and mid-sized companies with these types of services because of the capabilities of our platform and its scalability.
WTT: As you think about visiting drupa next year, what will you and your team be looking for?
TQ: We are always looking to match emerging technology with customer needs. You won’t see us pursuing technology for its own sake. Rather, we link our technology acquisitions to business requirements and incorporate them into a framework that offers value-added solutions. People talk about inkjet technology at drupa, and we are already heavily invested in that space. We have inkjet in press rooms and binderies, and we personalize hundreds of millions of pieces of direct mail. We also use high speed high quality inkjet for TransPromo applications, as well as for marketing and merchandising materials.
We have been able to serve customers in three different centuries. If anything, we have been able to demonstrate our ability to adapt. I will continue to monitor technology to make sure our platform reflects the right mix. As we look at that, we will continue to adapt as a way to enhance value to our customers.
WTT: What is RR Donnelley's approach to the customer with this vast empire? Do you have processes and/or practices in place to unify the face to the customer, or are the units divergent enough that there is little overlap?
TQ: Our objective is to make customers aware of all of our products and capabilities through their primary sales relationship. We say to them, if you trust me with your magazine, catalog, or direct mail piece, you can trust us with these other services as well. As far as we are concerned, there are no commodities in terms of what we print. Each of those items is important to that particular customer, and that lends itself to not being a commodity provider. We are being asked on an increasing basis by customers to assist them in their own efforts to compress costs by taking on 100% of the print management responsibilities. Having direct access to the customer,coupled with our vast platform of products and services, is a major differentiator for RR Donnelley.
WTT: What can suppliers to the industry do to better support a printer the size of RR Donnelley?
TQ: They need to do the same thing we are doing for our customers. Our customers ask us for high quality, cost effective products and services. They want us to listen to their needs and provide innovative solutions. Those are the same elements I need from our supply chain partners. As we integrate acquisitions, we look to leverage the supply chain and make it as efficient as possible. We are an important link between our customers and our suppliers. As we work with our customers, we share information with suppliers so they can help us be responsive to our customers. This is a role RR Donnelley takes very seriously—continuing to be the voice of the customer to our global supply chain partners. Many times, companies internalize things and the customer is forgotten. What we preach every day is that if we take care of customers, all of our stakeholders, including employees, shareholders and suppliers, will be taken care of as well. Our suppliers should be preaching the same thing.
Cary can be reached via email at cary@sherburneassociates.com, online at www.sherburneassociates.com and by telephone at 603-430-5463.
Prior to launching her consulting practice, Ms. Cary Sherburne was the Vice President of Marketing Communications and Outsourcing Solutions at IKON Office Solutions. In that capacity, she developed and implemented a branding campaign to build brand awareness for IKON in the marketplace as well as enhance employee pride in the organization, and was responsible for all internal and external communications, including trade shows and events, corporate newsletters, and industry and press relations. In the outsourcing role, she set strategic objectives and priorities for IKON's product and services portfolio in its Outsourcing businesses, including development of programs and sales support materials for that environment.
Sherburne was a Director at CAP Ventures, an internationally known firm specializing in market research and strategic consulting for the digital document and print on demand industry, before joining IKON, where she launched and managed the company's Document Outsourcing Consulting Service.
Her tenure in the printing and publishing industry has also included sales and marketing positions at Xerox Corporation, Indigo America and Bitstream. She is a frequent speaker at industry events and a recognized author.
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