VIEWPOINT: The Value Manifesto, Solutions!, July 2005, Vol. 88(7)

ALAN ROOKS
Editorial Director

Contact Alan at
+1 847 998-8093,
or by e-mail at:
arooks@tappi.org

Fresh perspectives should always be welcome, particularly in an industry facing multiple challenges—such as our good old paper industry. That’s why it was highly instructive to hear the thoughts of Ronee Hagen, president of Sappi Fine Paper North America. She is a newcomer to the paper industry and served as the keynote speaker for the Pulp and Paper General Session at the American Forest & Paper Association’s Paper Week meeting, held at the Waldorf-Astoria this past April.

At the time, Hagen noted that she had spent exactly five months and 11 days in the paper industry, having joined Sappi on Nov. 1, 2004. Prior to that, she was chief customer officer for Alcoa. She compared the metals industry to the paper industry, finding many similarities. She also noted that in a “mature” industry (does that sound familiar?), Alcoa had managed to grow from a $7 billion company to a $25 billion company by providing value for customers. It is a strategy the paper industry should imitate, she suggested.

“Organic growth is all about providing value,” said Hagen. “At Alcoa it is about adding value from mining raw materials to putting Reynolds Wrap on the supermarket shelf. Is the paper industry like the metals industry? It’s very much the same. The challenges and opportunities are the same. The question that always resonates with me, for a variety of industries is, ‘Do we have a value chain that will allow us to respond to customers and what they want?’ Adding value leads to growth, not just cost shifting.”

In an industry like the paper industry that is obsessed with cutting costs, those are revolutionary ideas indeed. Globalization, commoditization, and government regulatory requirements are challenges faced by all industries. The paper industry is not unique.

“If you expect that markets will erode and go only to the low cost providers, you are engaging in capitulation and abdication,” she said. “True leaders don’t capitulate to these challenges. Understand what consumers want and develop a great value chain.”

Hagen stressed that companies must engage in collaborative efforts with other companies in the value chain to better understand what the ultimate consumer wants. Yet when those collaborative relationships get bigger and more complex, they can become battles of purchasing departments and lawyers over intellectual properties, which tear the collaborative process apart.

“The fundamentals are still the same,” she said. “The companies that win are the ones that develop collegial relationships and believe that ‘this is a good industry where we can create value for our customers, who will pay for it.’ Toyota doesn’t discount, and yet they sell more and more cars. The Toyota system is about elimination of waste, creating value, and expecting to get paid for it.”

Hagen noted that the print media has been on a roller coaster recently but that it retains a great deal of promise. “There are sexier alternatives to print advertising, but there is a lot more (to print) than meets the eye,” she said. “Print has many competitive advantages and remains highly regarded.” She cited a Yankelovich Research study that revealed that print does a better job capturing emotions and is less intrusive than radio, TV, or pop-up ads. “It moves people to action quicker, and translates into higher brand awareness,” said Hagen. “Broadcast- only advertising campaigns are simply not as effective as a combination of broadcast and print.”

Sappi North America has invested in this proposition through its “Life in print” advertising campaign (in print of course), which extols the virtues of paper as a communications medium. “I’m proud to say that we launched the campaign delivering the industry’s value propositions,” said Hagen. “It’s ironic that the paper industry hasn’t told its message better in print.”

“Life in print” has resonated with customers and end users, according to Hagen. Sappi examined how agencies and media decision makers look at paper and found that 80% of media decision makers had a favorable image of paper, finding it portable, persuasive and effective. She noted that other organizations, including the Magazine Publishers Association, Conde Nast, and The Print Council are supporting the printed word with their own campaigns. “Paper producers must help sustain the power that print has every day,” she concluded.

The paper industry must avoid succumbing to the “Stockholm Syndrome,” in which captives begin sympathizing with their captors, cautioned Hagen. “When you constantly hear ‘you are done, your prices are too high, you don’t have a future,’ there’s a tendency to believe that. But there is a lot of evidence that that is not the case. There clearly is value to be delivered in the paper industry, and we need industry leaders who will step up to the plate and deliver it.” Amen to that.