Paper Industry Embraces Digital Shift
Doing so requires new thinking about business models, business processes and the nature of work. Embracing digital and green technologies lets innovative companies excel in a constantly changing marketplace.
Tough market outlook in traditional areas
While the global population climbs to near 10 billion, the demand for paper products is relatively flat. Some analysts predict paper consumption to grow by less than 1 percent annually.
This marginal global growth is driven by several forces. Stark reductions in volume in core segments like newsprint and paper advertising contribute. Mature markets in North America and Europe, growing environmental regulations, and growing energy and transportation costs also play a role.
Leaders expect change
A recent survey asked industry CEOs what the majors factors in deciding future success were. The annual survey also addressed shifting stakeholder expectations. Leaders were asked to identify where change is needed to respond to those new expectations.
A vast majority of CEOs (80 percent) said change is needed in using technology. CEOs want new ways to assess and deliver on expectations. Another area (94 percent) needing change is in deciding how and with whom to partner.
The top executives view customers and clients (93 percent) and supply chain partners (64 percent) have the most impact on company strategy.
New thinking embraces digital
The world today is hyperconnected. Consumers expect digital engagement with companies and in-the-moment or “live” responses. Smart products connect to each other, feeding information to complex platforms that analyze large data sets. Supercomputers and cloud computing create new opportunities for collaboration.
Traditional companies are not the only competitors in certain sectors. Take advertising, where Google’s digital solutions have shifted ad buys from print to social media and the web. Even Craigslist, a relatively simple website, has nearly erased most print classified ad pages. In 2016, digital mobile advertising is projected to hit $40 billion. Facebook and Google will account for more than $12 billion of that market.
To respond to rapidly shifting markets and expectations, print and paper companies need new ways of thinking.
New business models
Paper and packaging companies can consider new business models that use technology in new ways. New models will create different goods, like intelligent packaging or dissolving pulp.
Smaller lot sizes allow for individual product manufacturing. As customers demand personalization, orders can be completed and delivered quickly.
Value-added services will emerge with new models. Collaboration with customers will drive new products and revenue streams. Data insights allow companies to bundle and monetize services in addition to products.
Companies will look in all directions to find new markets and partners.
One example of new business models is UPM. The longtime forest products entity has shifted to a “biofore” company. UPM now makes bio and forest products. The company has begun manufacturing new products with higher growth potential. UPM now provides biofuels, biochemicals, and other products. It generates hydroelectricity to run conventional power plants and runs a nuclear power plant.
New business processes
With new business models come innovative business processes. Organizing differently fuels R&D opportunities to create new products or services.
Accurate information in real time opens up new possibilities. Access to this information drives better decisions by managers. Data analysis forges better predictions and simulations.
Wireless sensors measure energy usage and reduce costs. Customer service improves with transparency in order processing. Better onboarding and recruiting using new platforms create more confidence in new processes.
New ways of working
Paper and packaging companies are changing employee expectations. Many current and new jobs will require people with increasingly sophisticated IT skills, requiring the need to retrain or hire new types of workers.
Digital technology is and will continue to automate processes throughout the organization. Procurement, invoicing, product data collection, and packaging design all benefit from automation.
Data needed for real-time decisions is available to employees on any device. Data helps paint a clearer picture, too. Take sales orders—with better data, employees can see customer information, order history, or project details.
New software platforms can improve work and precision. Manual processes and decisions can be shifted to machines. Predictive systems can control or support shop floor processes. High levels of uniformity at low energy costs are achievable.
People will still be essential to success. But roles will change. Individual employee impact on business value will grow. (Read 6 Ways the Digital Economy Is Reshaping the Future of Work.)
Many predicted that the rise of digital would spell doom in the paper industry. In fact, the opposite is true.
By embracing the role technology plays, companies can emerge with new revenue streams. With an opportunity to change business models and processes, companies can forge new partnerships and create new services. The nature of work will change to adapt to new digital technologies.
Companies that see the digital transformation as opportunity are poised to capture additional market share in new business sectors. Companies that are responsive to customer needs will offer new services and new products. New revenue streams will make up for marginal growth in traditional markets.
To learn more about how digital transformation is affecting the paper and packaging industry, see How Digital Transformation Can Save Pulp, Paper, and Packaging.