To replicate the results from the initial study of Billerud, one delimited case study was performed regarding the identified challenges or themes of strategic change. This study was reported in the author’s licentiate thesis (Olander-Roese, 2008). However, given that the study serves to support and contrast the findings in Paper I (representing the integral findings of the licentiate) it is briefly summarised here. The study was performed in a company referred to as BETA, at the request of the company interviewees. BETA, a leading European paper, board and packaging company was selected having initiated a strategic change effort similar to the one of Billerud, but ten years earlier, defending the industry against plastics which were then becoming a threat.
The study supported and contrasted the identified challenges Billerud faced, in an effort to increase customer orientation and innovation in the paper packaging industry. With regard to the themes and challenges of dominant perspectives and tools and processes, BETA’s antidote had been to extend the boundaries (downstream) the supply chain, including customers (brand owners) and customers’
customers (the retailers) in their scope. The new scope was tightly coupled with tools and processes for market learning and product development. As expressed by one interviewee “...it is one of the most important factors for our industry: study the retailer and study the consequences and have business chain models available to handle that”. Hence, extending the boundaries, as was Billerud’s intention, appeared to be a step in the right direction. However, the fact that BETA was an integrated company (i.e. offers converting capacity) appeared to have eased their contacts with, and learning from actors downstream the value chain. There was simply more experience in BETA from working in a ‘market oriented’ way by having the brand owners as customers. Billerud’s position further upstream and the limited experience of working with brand owners (customers’ customers) posed a greater challenge (Paper I).
With regard to the challenge of strategy and strategic decisions, BETA’s strategy had a similar dual focus on costs and customers’ differentiated needs, albeit from a different
position in the supply/value chain. Without decreasing their efforts to increase productivity, similar to Billerud, BETA allocated substantial resources to R&D and product development. Resources were also spent to improve sales process and customer relationships. Hence, the strategic decisions taken supported the intended strategy, or were in line with the intended strategy, which initially did not appear to be the case at Billerud. Furthermore, the implementation approach in BETA differed from that of Billerud. Where Billerud relied on communication and the segment structure, BETA’s management team selected a team of individuals from different departments who were part of planning and implementing the new strategy at the time. In the continuous process, one plant was selected at a time to accomplish the changes aimed for.
However, at the time of the study, BETA had just merged with another European firm, becoming a world leader in paper-based packaging: A few months later the R&D budget was heavily reduced, putting a hold on the customer development studies. A new strategy was to be developed, which at the outset did not support the ongoing activities in BETA. At the end of the study one question was left unanswered: Was BETA’s previous effort just a temporary exception to the forest and paper packaging industry paradigm, which according to industry expert Beckeman, is
“…indisputably supply driven with a production oriented business philosophy”
(Olander-Roese, 2008; p. 34).
The challenges identified and replicated in the study of BETA indicated benefits of extending the scope beyond a company’s first (transaction) customer to the customer’s customer: the second customer as stated by Normann (2001). However, more interestingly, the findings pointed to the inherent nature of the strategy paradigm in a firm, in relation to the intended, contrasting the aim towards increased customer orientation and innovation in relation to a “production oriented business philosophy”. Hence, the question of how a similar strategic change process can be understood through different perspectives of strategy and schools of thought emerged in the empirical inquiry. The assumptions guiding strategy, irrespective of the different positions in the supply and value chain of BETA and Billerud, further emphasised the previously identified link. This was particularly interesting because Billerud continued emphasising the focus on customers and innovation, beyond new product development whilst also pushing further for increased productivity and process efficiency.
Towards a dual strategy 5.3
In March 2005 the forming CEO left Billerud and a new CEO was in place a few months later. The same year, weakening of the market conditions and rising costs for raw materials and energy brought down the operating margin from 11% (2004) to 3% (2005). The CEO’s statement in the Annual Report of 2005 read: “Billerud’s
results were disappointing. Continued weak economic conditions and the dramatic rise in costs for energy, raw materials and chemicals affected us negatively. We have now implemented strong measures to transform our results and build a more modern, more efficient company” (Billerud, 2006, p. 4).
A new management team was formed around the new CEO between 2005 and 2006.
Together with external expertise, Billerud’s financial objectives and strategy were revised anew, focusing on two parallel cornerstones of: world class process efficiency and customer focused development (Figure 5.3).
Figure 5.3. The strategy of 2006 with culture, values and human resources added in 2009 (Billerud, 2010).
The business concept was revised to:
Billerud offers demanding customers packaging material and solutions that promote and protect their products – packaging that is attractive, strong and made of renewable material (Billerud, 2007).
This placed more emphasis on the end-product packaging and customer value as opposed to the former business concepts that were based on first customers and the efficiency of operations providing the packaging material.
The central driving force for Billerud was to continue to move away from being a traditional paper-pulp supplier to a customer focused, solution oriented company;
from a position of competing on price, volume and receiving orders, to taking a proactive lead in the development of future packaging and packaging solutions. As stated by the CEO in the annual report of 2006: “We must adopt new approaches in our markets, work with completely new customer groups and develop new solutions based on the strong positions we already possess in a number of segments”. After Billerud’s Capital Markets Meeting at the end of 2006 the message in the news was:
“There is no doubt Billerud wants to move forward in the packaging industries value chain” (author’s translation), further explaining the company’s aim to redefine its position rather than integrate forward (MH, 2006).
The new strategy introduced in 2006 indicated the ambition to concentrate on customer focused development and production efficiency, in parallel, and as expressed by one senior manager: “It is becoming a blue ocean strategy, we are finding new oceans where no one is” (referring to the efforts to develop and find new applications for paper and packaging where other materials, and other industries, have had the monopoly). In real terms this has entailed a new view of the customer to also include second customers, brand owners and even the third: retailers. Product development has moved beyond new offerings of new paper qualities (which up until 2005, for example, featured lower-grammage/m2, technical performance and runnability) to a broader concept of innovation of products and service solutions in co-operation with external partners: second customers and others.
Given the new strategy, the issues of a seemingly dual approach, combining ‘cost leadership’ with that of ‘differentiation’ were identified. In Papers II to IV, the findings of the continued empirical inquiry until the beginning of 2011 are presented.
Building on the initial themes and challenges, the continued study contrasts differences and similarities between the years, capturing the interviewees’ experiences and reflections on the journey. This resulted in a proposed landscape for strategic change along with ways and mechanisms for managing and measuring the same.
Paper IV takes into account the first three years by use of quantitative methods to illustrate the strategic change through the semantic development from 2001 to 2010.
5.3.1 Paper II. Challenging the Strategy Paradigm within the Paper