Learning from the pulp and paper industry: companies that address these six challenges will not only survive in the 21st century, they will flourish.
“An engineer is a man who knows a lot about a few things. He keeps learning more and more about less and less until he knows everything about nothing. A salesman is a man who knows very little about many things. He keeps learning less and less about more and more until he knows nothing about everything. A Papermaker is a man who knows a lot about everything, but winds up knowing nothing about anything because of his association with engineers and salesmen.”
In the pulp and paper business, I’ve seen hostile takeovers create confusion over what kind of business to be in or not be in. Whether to be global or regional. Whether to spend money on capital or not even spend depreciation. The result: economic consequences that covered the costs of capital exactly one time since 1990 and lost 180,000 jobs in this country at the same time.
Overcoming tough times like these requires a business excellence that is only acquired by meeting six major challenges.
1. Do More with Less
Every industry is under constant pressure to supply more intellect with less resources. We’re all challenged to get to the future first, to get there and be the best – and get there with less.
One significant caution here about downsizing and doing more with less. If not carefully handled, downsizing can equate to corporate anorexia. It makes you thinner, but not necessarily healthier, because one inevitable result is plummeting employee morale. When downsizing is perceived as indiscriminate cutting, comments such as “if you aren’t more efficient, you’ll lose your job,” or “if you are more efficient, you’ll lose your job” create a true lose-lose climate. Employees hear they are the most valuable asset, but they really know they are the most expendable asset. Think about it.
While not universally true, downsizing often points to another truth that we must admit: the bottle neck is usually at the top of the bottle!
2. Rapid Utilization
We must all rapidly utilize changing technology – then survive the competition that it brings.
For example, part of my responsibilities with Union Camp Corporation was our Savannah, GA facility. At one time, 5,600 people that worked there – the second largest employer in the state. During the 1960s and 70s, two thousand of those people at our plant made 20 million paper bags a day to satisfy needs related to food and groceries. As grocery stores gradually shifted from paper to plastic, those jobs vanished due to the changing technology.
Changing technology requires significant realignment. We got into the plastic bag business because our customers demanded it.
Information technology reminds us that this whole technology thing is part “gee-whiz” and part “uh-oh.” ENIAC, the first computer (built in 1944), took up more space than an 18-wheeler’s trailer, weighed more than 17 automobiles, consumed 140,000-W of electricity, and executed 5,000 basic arithmetic operations per second. Today’s popular microprocessors are over 90 percent silicon and the size of a dime, weigh about the same as a pack of Sweet-N-Low, use 2-W of electricity, and execute hundreds of millions of arithmetic operations per second.
As our economy rapidly shifts to more services, the Department of Labor now estimates that half of all workers are in data service: gathering, processing, retrieving, and analyzing data. That’s quite a change from the 1960s, when half of all workers were involved in making something.
As change accelerates around us, we must remember that doing more things faster is no substitute for doing the right things. Organizations cannot stop the world from changing; the best they can do is adapt. The smart ones change before they have to. The lucky ones change enough to get by.
I’m convinced that the greatest impediment to our success is not ignorance, but the illusion of knowledge.
3. Play Globally
We must now win a global game against more minimal competitors. That’s a big challenge for someone like me, whose life was spent in packaging. 95 percent of everything you’ve ever touched spends some of its life in a corrugated box. The corrugated box has even joined 34 other inductees into the Toy Hall of Fame.
Now, the All-American girl, Barbie, is made in China. Barbie made her debut in 1959 – the idea Ruth Handler, one of the founders of Mattel, Inc., got by watching her daughter Barbara play with paper dolls. Ms. Handler created a teen fashion model, and the rest, as they say, is history.
A year after her introduction, Barbie was the highest selling doll of all time. By 1965, only the Girl Scouts of America had membership exceeding the Barbie Fan Club, where little girls were concerned. In 1968, Barbie spoke for the first time, both in English and Spanish, if you pulled the string on her back. In 1976, Barbie was elected the Doll of the Century. In 1980, Barbie’s Doll of the World collection appeared, featuring various nations and styles of influence, meaning parents worldwide could buy a Canadian Barbie, a Nigerian Barbie, a Brazilian Barbie, even a Czechoslovakian Barbie. In 1997, Mattel introduced the Harley-Davidson Barbie. In 1999, they recognized rednecks like me with a NASCAR Barbie.
That’s not all. Mattel has over 25,000 employees worldwide. Their mission statement is “The world’s premiere toy brand for today’s market.” They play to win a global game.
In my industry, we had to move from being selling-focused to being marketing-focused, because the Chinese paper industry has been remarkable. The most modern packaging machines on earth are in China. The Chinese plan to spend $24 billion over the next four years to continue growing that industrial sector. I used to ship 250,000 tons of boxes each year to China so that electronics firms could ship their packaged products back to the States. That’s all gone. The Chinese make their own boxes.
By 2010, 90 percent of all scientists and engineers will be Asians, working in Asia. Foreign-owned companies and investors account for nearly half of all U.S. patents right now, and China overtook the U.S. in 2003 as the top global recipient of direct foreign investment. Only six of the world’s 25 most competitive IT companies are based in the U.S., 14 are based in Asia. These same trends run across all of the top markets.
Clearly, the message here is that we cannot ignore them. Either get in or get out.
4. Environmental Stewardship
More business models now target sustainable economic benefits from improved environmental and social opportunities. This challenges us to look differently at the way we make our products so that we can all get into recycling big time.
When I was in the Savannah plant, I drove back and forth between Savannah and Atlanta to meet with environmental regulators and government officials, continually trying to figure out what we could do to make that plant as environmentally “invisible” as possible. We succeeded, but the price tag was enormous.
I later moved to Rome, GA, where my assignment going in was to figure out what to do with a 45-year-old paper mill that had outdated technology, old equipment, strained labor/management relations, unable to compete cost-wise globally. But my single greatest mountain to climb there in Rome was environmental stewardship: how to rebuild an old mill that operated under the umbrella of air-quality standards in greater Atlanta.
Today, we must look forward and know that environmental responsibility is literally a part of everything we do. We must continually ask, “Is that enough?”
5. Give 'em What They Want
In all of this, we must determine how we can provide the public with what they want – and still make a dollar or two.
The financial acrobatics we’re dealing with here involve highly emotional issues that must be related to people in a mature manner so everyone can focus on needs, not states or conditions. This requires striking a balance between what society wants, what technology can deliver, and what the stockholder expects.
For the last 25 years of my career, Wall Street had me on the infamous 90-day reporting cycle. The impact of how this singular phenomenon counseled the spending in my industry has been incredible. With virtually all spending and investments chained to short-term profits, our mills are losing ground and our industry has lost competitiveness. Some kind of balance must be reached or else our own sustainability is in question.
People watch the leaders of our industry try, with much difficulty, to balance short-term profits against long-term sustainability. Others watch those leaders to see how they react, what’s important to them as leaders. They know that leaders demonstrate all of their personal beliefs through the use of time, appointment of staff, the allocation of budget, and display of their own personal interests.
People watch these things. If you, as a leader, don’t display these properly, they’ll understand that you say one thing, but mean another. When people want to know what’s important in your life, they watch only two things: your calendar (where you spend your time) and your checkbook (where you spend your money). These two items tell people, with 90 percent accuracy, what’s important in your life.
There’s one thing about leadership: people see you straight and clearly. That’s the importance of having a message and sticking to it.
6. Exploit Change
The final challenge is to grow by exploiting change itself. How do you get people to accept all this stuff? The older I get, the more I realize that my greater fear is not that I’ll succeed, but that I’ll succeed at doing the wrong thing.
Here’s a view of growth in the tomorrow that must be created at this moment: we understand the way things have been, but that’s not what’s required in the 21st century. It’s the discomfort that leads us to grow.
The significant problems we face today cannot be solved with the same level of thinking that created them. We harbor illusions that things are better off than they really are. We assume that potential problems won’t actually materialize, and that the consequences won’t be as bad as they might have been. We put great weight into evidence that supports our preconceptions, and we discount evidence that calls our preconceptions into question.
All of these things have one thing in common: they are self-serving, because we still don’t like change. We see the world as we would like to see it, rather than as it truly is. We constantly hear about competitiveness and game plans and winning, yet we are falling behind in a game where we were once the dominant player in the pulp and paper industry.
In the world of non-stop change, the competition can skew wise decisions. I think a long-term advantage lies in those organizations that focus on the environment as a whole, not just the competition. It’s not about the competitors, it’s about capitalizing on change for today’s organizations to survive.
Business is undergoing some profound transformations, and hardly anyone out there is not feeling it today. Competition blinds people to the real challenge, like being in change paralysis. True change – true growth – begins with letting something go. Maybe short-sightedness is a good place to start.
Pumps & Systems, December 2006