P&P Experience Doesn't Always Equate to Business for Yourself

 

Wood is a biomaterial with exciting properties, from the log on down to the fibers, micro- and nano-fibers, and sugar molecules. A healthy niche industry making bioproducts has existed for many years alongside large-volume pulp, paper, and board products. We are in the midst of an explosion of research activity to develop new bioproducts, ranging from applications for nanofibers to lignin-based carbon fiber. New processes are being designed to extract hemicellulose as feedstock for sugars and chemical production while still keeping the cellulose parts of the wood chip for pulp products.

More and more of today's top researchers, engineers, and academics training our next generation of industry leaders have reached a consensus: Beginning hundreds of years ago (in the wesern world) the forest was for a low-efficiency fireplace, furniture, or building material source which in many places over the years have required proper attention.

 

But at McKinsey & Co, they believed wood-based products will find new ways to enlarge their footprint even more in a more sustainable global economy.

 

But the challenges are legion, particularly for finding cost-effective production methods that can withstand competition not only from oil-based materials but also from other biomaterials. Finding the right balance between developing the "new" and safeguarding the "old" will be a crucial undertaking for executives running companies with access to fresh fiber.

Finding growth in adjacent areas: Over the past decade or two we have seen the larger forest-products companies performing a focus adjustment. Most companies have moved from being fairly broad conglomerates present in various forest-products segments to focusing on a few core businesses. To find value-creating growth in the next two decades, we expect companies to start broadening their corporate portfolio again, but broadening it around the core businesses they have been working on, so as to create differentiated customer value propositions. Finding value-creating adjacencies to the core business will be a challenging exercise in creativity and business acumen for executive teams.

Finding new value-creating growth for forest products will also put the spotlight on a number of functional executive topics. We believe the following will be most important:

Innovation: The forest-products industry has not been known for a fast-paced innovation agenda. By and large it hasn’t been necessary, as markets and demand characteristics have changed relatively slowly. In the future, however, innovation in products, processes, organizational set-up, and business models will be imperative. For many companies, getting efficient innovation practices and the organization up to speed will be an important challenge.

Talent management: The different skills required over the next 10 to 15 years will put particular onus on the talent pool of forest-products companies. Installing an executive team that is able to understand new demands across customer businesses, digital, bioproducts that cater to completely different value chains, and cross-industry collaboration will be a major task for CEOs and boards.

Commercial excellence: Paper and forest-products companies will need to transform their commercial interface to stay relevant, particularly in packaging and downstream paper. They will need to put in place a more professionalized and skilled organization that focuses on value creation, instead of focusing primarily on sales volumes.

We believe the paper and forest-products industry is moving into an interesting decade, one that will see nothing less than a transformation of large parts of the industry. There will be many barriers to overcome and metaphorical cliffs to fall off. But the companies that are able to navigate through successfully can look forward to an industry that has a new sense of purpose and an increasingly vital role to play. The pulp and paper industry can play a key role through abundant choices being developed to reduce their CO2 emissions