Case Study

When Jean-Pierre Remy became the CEO of Pages Jaunes in 2009, the company was in trouble. As the market leader in the fast-dying French Yellow Pages industry, the company saw its print revenues declining by more than 10 percent every year. After all, in an age of Google, Craigslist, and Yelp, who would look for companies in a thick yellow book? Pages Jaunes needed to adapt to the world of digital search, and it needed to do so quickly.

Remy tried to convince his employees that digital directory services were an opportunity. The company still had a trusted brand, strong relationships with its advertisers, and a small foothold in digital services. But employees in the hundred-year-old company were skeptical; Pages Jaunes had always been the industry leader, and there was little need to change the business. Many employees saw digital as a sideshow that was irrelevant to selling ads in thick paper books. The workers had lived through the creation of MinitelFrance's revolutionary online networking system of the 1980s and 1990swith no impact on the company's competitive position. They had lived through the dot-com bubble and bust of 1997 to 2002, and Pages Jaunes remained the industry leader. Even as revenues declined, some employees blamed poor management instead of a major industry shift. Very few saw digital as the danger and opportunity it truly was.

What the Pages Jaunes employees needed was clear: a transformative vision of the future that was more compelling than their current view of the business. Remy found one such vision: Pages Jaunes was not in the business of producing heavy yellow books. It never had been. It was in the business of connecting small businesses to local customers. Books were just an outdated technology; digital technology could do the job better. This vision was clear and compelling. It painted a distinct picture of the future while linking to the company's current capabilities. The vision made it plain that digital was the future and that paper books would disappear. It gave employees an idea about how their jobs and skills might fit in the new world, and how they might play a role in the digital future.

Remy also announced an audacious goal: Pages Jaunes would shift its business mix from having less than 30 percent digital revenues to more than 75 percent within five years. This explicit goal topped employees from debating about how much and how fast they needed to change. It also provided a clear waydigital revenues as a share of total revenuesto measure progress. Anything that increased digital revenues was good. Anything that increased paper revenues was less important.

Remy spent the next two years helping everyonefrom employees to customers to investorsunderstand the promise that digital could hold for the future of the business. He communicated honestly and repeatedly with his employees. Some of what had made the company great would still be valuable in the future. Other things would slowly need to disappear. The company's brand could still be strong in the digital world. The customer relationships that salespeople had built up over years were still valuable, but salespeople would need to learn to sell digital services instead of paper ads. Some book-oriented skills, such as printing and delivery, would be less useful in the future. But Pages Jaunes would remain in the paper business for several years longer time enough for people in the paper end to retire, retrain, or move to another company.

Pages Jaunes senior executives moved fast to realign the company's investments and skills. They hired senior people who had digital skills and the mind-set to work in the digital economy. They retrained salespeople to sell digital services, and retrained designers to create digital ads and webpages. They invested in prototypes for digital services, such as web page design and mobile apps, to show clients how they could reach their customers in new ways. They even inked a deal to partner with Google instead of competing with it. Finally, Remy sent a strong signal by freezing all nonessential investment in the traditional book business.

The transition was neither smooth nor immediate. In a country where firing employees is very difficult, some employees resisted the change. Remy convinced some to join in the transformation, while he found ways to work around those who did not. When digital revenue grew more slowly than planned and physical-book revenue declined faster because of the worldwide recession, executives had to restructure the company's debt. But customers began to see the value of digital services, and salespeople learned how to sell them.

By 2013, four years after Remy announced his new digital vision, and despite Europe's economic woes, Pages Jaunes had nearly met its transformation goals. Annual digital revenues were growing fast enough to replace most of the company's annual losses in the paperbased business. For the first time since he had joined the company, Remy projected overall revenue growth by 2015. While Yellow Pages companies around the world struggled to handle digital competition, Pages Jaunes has now become a company powered by digital, not paper, technology.

Explain the root of the problem Remy is facing (Why does the problem emerge):