PAPRICAN’S RESEARCH OPENS THE DOOR to opportunities and growth for its Member Companies and Industry Partners
By Pulp & Paper Canada
It's safe to say that the Pulp and Paper Research Institute of Canada (Paprican) has seen more changes in the past five years than the previous 70. As Paprican celebrates its 75th anniversary, this er...
By Pulp & Paper Canada
It’s safe to say that the Pulp and Paper Research Institute of Canada (Paprican) has seen more changes in the past five years than the previous 70. As Paprican celebrates its 75th anniversary, this era of change and this scope of change show no signs of abating.
Words like business plan, globalization, return on investment and value are not just for privately held manufacturing concerns. These issues are the facts of life for anyone wanting to succeed in the forest products industry today. Paprican itself has a new business plan. Its president, Joseph Wright, explained the basics behind it. “To move forward, the most critical thing for business success these days is for companies to have really good strategic business plans.” One component of any plan must be a technology piece.
He noted that a business plan in the absence of technology is “unlikely to be successful. The reverse also holds true, perhaps more so,” Wright added. “It is guaranteed to fail. You cannot survive on technology alone.”
In tracing Paprican’s history, Wright said that the Institute focused on deep fundamental science in its first 50 years or more of existence. This was important for the industry at the time.
Then, the industry had a good technical capability. What it needed was a deeper understanding of fundamental physical and chemical properties, e.g., fibre physics and how they influence the products the mills were making.
It has been well documented how that technical capability now has been lost to most mills. Mill technical people are focused on operations, Wright said, “not on deep science or what’s going on in a fundamental sense. So there’s a change in the receptor capacity and a change in the interface between institutes/universities and the industry.”
Globalization is another issue that the industry has embraced (or has had thrust upon it). The institutes must keep up. “I don’t think in the long term very small companies will be terribly successful,” Wright said. “Some will survive and fill in niche or local markets, but the drivers for the industry will be the big global companies.”
Wright said that Canadian pulp and paper companies have moved from a position where they were relatively large vis-a-vis their international competitors to a point where they are relatively small on a world scale. Abitibi-Consolidated, the world’s largest newsprint producer, “is perhaps an exception but on a world scale of companies is still not terribly big if you compare it to International Paper or Stora Enso. But, its product dominance is large so that helps a lot.”
The global companies are the ones that have a vision of how to run their business to achieve market dominance. “They’re trying to consolidate the volumes so they can make more efficient and more effective use of their manufacturing capacity.”
What does all this have to do with a research institute like Paprican? According to Wright, wedded to all this is the need for technology. “Technology plays into this global picture on a number of fronts.”
Companies, generally, should be focused on the product. Their major suppliers will be focused on the equipment. “What the companies are faced with,” Wright explained, “is if they have enough money, or if they run their business properly, is that everybody can buy the same manufacturing equipment.”
If this is the case, from where will the differentiation come? “Partly from the product side,” answered Wright, and partly from a “developed ability to use common equipment more effectively to do the special things that the companies want to provide for their customers.”
Hand in hand with growth in the current economic model is cost cutting/minimization. Looking at the return on investment model as a ratio, Wright said that growth is the numerator and reduced cost is the denominator. “You can improve the return on investment by looking at either one. Long-term, however, costs become irrelevant. Everyone must become low-cost producers with state-of-the-art equipment or,” Wright added, “They won’t be there in the long-term.” The exception being niche market companies. Wright emphasized that long-term future success for companies will come by focusing on the opportunity, rather than the cost side of the equation. “The real opportunity is in growth, derived from a better set of new and innovative products. The question is, how can you lever your investments to make this happen?”
Opportunity is knocking
Opportunities exist for more effective use of overall capacity and a “much more sophisticated” view of how to develop new products and add product attributes. “It’s in that context that the research and technology picture has to be viewed.”
Companies focused on the product side may not spend a lot of time on how to develop new processes. “But when they map out their product ideas, you can use different features of equipment to optimize the products, to give them special properties or minimize the variances.
“When you look at the research picture from outside the company, you need to think about technology platforms, which are manufacturing platforms and the deep science of the elements of the components of what makes up the products. So it’s the materials science. That takes us back to fibre physics, to chemicals, additives, the chemistry of additives, surface effects, the quality of surfaces, all those kinds of things. There’s the link into deep science.”
Looking at the science side from that perspective opens the door for institutes and universities. Wright said the more effective place to do “very deep” fundamental science is in an academic milieu. Curiosity-driven research, an ability to focus deeply on narrow topics is best done in the university. “The individual researchers who focus on those deep science problems probably don’t have the ability to do the technology integration that’s needed across areas of science, across the range from what are the fundamental physics properties of a fibre to how does that fibre interact with a chemical additive or a binder.”
That’s where the institutes come into play, as an integrator. Their strength will come from their ability to integrate across the disciplines, more effectively than university groups can do. Wright continued, “That’s what I think the focus of the science side of Paprican should be on when it comes to the fundamentals for our industry. Also, the translation of these fundamental science ideas and understanding into what does this mean for product property attributes. It’s that translation that’s really important.”
With their focus on the product side, companies do not have as much deep technical expertise as they need to understand how to do the translation Wright spoke about. “If it’s done properly through strategic technology platforms and ideas, you can share some of those investment costs effectively, and jointly with other companies, have the work done at research institutes like Paprican because the research is not necessarily proprietary. The results are pre-competitive or are platform technology. It’s the translation from those platform technology ideas and the systems integration thinking into the particular product attributes that a company wants that brings individual competitive advantage.”
Another important component is how the processes operate. “You can look at systems ideas for common technology platforms that get into process operation,” Wright said. “Some of the available technologies that Paprican has developed are, in fact, the implementation of process operation ideas and how you can run standard processes differently and more effectively. Some of these ideas map into cost reduction.
“But they also have process efficiencies and attributes of running the process that can enhance product properties, by virtue of running the processes in novel ways and that’s not necessarily cost driven; that’s more on the opportunity side.”
Wright offered an analogy with the sport of car racing. In Formula 1, there is very little difference between the cars themselves. The difference between a world class team and those that follow is the
system performance. “It’s the performance of the mechanics, the performance of the driver, as well as the car itself.”
Different but the same
It is the same within the industry. Every company potentially has access to the same manufacturing equipment. One of Paprican’s challenges is to participate in partnerships with a variety of companies that have quite different technical capabilities.
Is it a tough sell to convince this range of companies that they will receive great value working with you? “If you just look at it from a cost cutting point of view, we can demonstrate that we provide real value for our Member Companies. But cost-cutting doesn’t necessarily play easily into what is the opportunity side where it is much more difficult to be persuasive about costs, especially with companies that do not have good product innovation capabilities. I really think that that drives the long-term future and we have to make sure we’re positioned to help our Member Companies and our business partners. There has to be a value equation in the discussion. I’m encouraged by those opportunities because we can see lots of evidence where we can contribute to revenue growth. That’s a necessary component for our long-term success.”
Going back to cost cutting, Wright said that the belief that some companies have that they must be in the lower quartile to be successful needs to be challenged. Particularly for commodity production, the cost curves are going flatter relentlessly, so there is no real advantage aiming for the bottom quartile. “You have to be there by definition or you’ll be out of business. You have to be in a competitive position to grow revenue.”
The real opportunity and advantage will be in the specific product attributes a company can take to the market and how they satisfy customer needs. Customer satisfaction also relates to service and reliable supply. “But certainly a component of it relates to technology,” Wright added.
The general positioning of Paprican and of institutes generally will be between the fundamental science of the universities and the product innovation side, which should be the focus of the companies. “Within that spectrum the suppliers make massive investments in research for their own technologies. But there is no unique value-added for an individual customer of a big supplier because the same equipment, and often the same materials, are available to the next company down the road. For Paprican, there is a link to individual company value because we understand the fundamental side of the components that are put through these processes, differently from the suppliers.” (See text on Paprican’s Industry Partners.)
The transition from science to applied and mill-level technologies, is not something that started yesterday at Paprican, nor is it something for the future. It has been underway for some time. As the pulp and paper companies themselves have moved from the era where they had deep expertise in science in the mills, to now where a leaner staff focus on mill operations and cost cutting, Paprican is sensitive to mill level opportunities and issues. It has also been sensitized to what technology/science means to a Member Company. “The transition that has happened over the past decade or two has been strongly dependent on a deep understanding of mill level issues. This has been coupled with the retention of world-class scientific research, and a comprehension of required product attributes in a generic sense from a host of Member Companies with different products.”
To satisfy its customers, Wright said that Paprican staff has been “repositioned”. A few years back, about 45% of staff work dealt with environmental work, particularly during the dioxin crisis. Now, only 25% of staff activities deal with environmental issues including system closure, which is a “big chunk” of it, Wright noted, and which has broader implications than just the environment. Meanwhile, 50% of the research is focused on product quality and value (product attributes/performance).
Wright stressed that Paprican works on product attributes and performance not on specific product development. However, it will do that on a proprietary basis in partnership with a Member Company.
Paprican focuses on technology platform ideas. These include, for example, quality of surfaces, how to produce surfaces with desired attributes, and how a set of attributes translates into value that customers perceive. That is, are color images perceived to have quality when seen by the customer, and are they different from those where a technical measurement implies that they are good? There is a difference between perception and an absolute measure of color. Again, Wright said, the focus is on the platform side rather than on the product side.
“We’ve repositioned the staff. We’ve evolved with our growing understanding of business value to a new process of really developing our interactions with Member Company personnel.” The Paprican Liaison Representatives are the prime links with each Member Company and, in some cases, to individual mills of a Member Company. Liaison is a two-way street. Wright expects a Member Company Liaison Representative to provide an interface so the two are the point contacts to ensure that Paprican focuses on strategic needs and technology issues that are relevant to Member Companies. “We have a real intense focus to understand what the companies would like us to do and how they would like it to happen. Our challenge is to be persuasive as to why some of these ideas can be leveraged from the platform technologies as opposed to doing one-off individual specific tasks.”
If companies only wanted individual proprietary research from an institute, then they would not realize an advantage from leveraged investment. The Institute would be no more than a collection of individual research groups, which, Wright said, would be the same as a company having its own small research force.
Does Wright see this evolution in Paprican as something that would have happened anyway? He said that if one looks at it from an historical perspective, the factors become more complex. For virtually all of its 75-year history, Paprican focused on Canada. For the most part, its Member Companies operated solely in Canada.
However, the global changes driving the industry today will require that in the long-term, the successful large companies will have operations in more than one country (allowing for the smaller niche companies). “That’s been the second force that’s been very significant and where I have really focused since I came to Paprican (in 1994).” Wright came to Paprican from global powerhouse Xerox. “My view coming to Paprican was that consolidation was a necessary transition for our industry. I came into Paprican with a strongly held view that Paprican needed to be much more than just a Canadian research institute. We needed to be a partner with our Member Companies on a global basis.”
Paprican’s transition over the past couple of years in particular has been driven by the strong belief it needs to be a strategic technology partner with its Member Companies for their entire operations. This contrasts with Paprican’s early business model, which constrained it to Canadian mills. “You can’t stop technology at the border. You shouldn’t try. We still do it and part of our history says that is what we do. And we have some of our Member Companies that do not choose to bring their non-Canadian assets into membership. We’ve tried to make it easier for that to happen.”
It’s a challenge for Paprican, for Wright in particular, to think how Paprican can be really successful with a Member Company when only some of its mills are in membership. The company needs to be the partner, not two or three mills. If the company has a truly integrated strategy, that’s the only path that makes sense to Wright.
He said that Paprican has tried to expand its business model to include both strategic and mill-level technologies, the change from the past being that it wants to be a global partner with its Member Companies and provide techn
ology input for all their operations. “That doesn’t mean we are going to do mill visits in South America or Indonesia. Most mill level technology will be local, perhaps extending for us throughout NAFTA. But when we consider global technology platforms, I think these should be relevant to corporate strategies on a global basis. I think that companies should be investing this way.”
The companies are receptive, based on logic. “It’s hard to say how you can stop technology at the border when you have an integrated strategy.” The challenge comes in having the corporate executives look at Paprican as a strategic partner, as opposed to a supplier of cost-cutting technologies to some local mills.
The new business plan reflects this. It looks at Paprican as a global player in the technology business. It will be implemented by growing the membership base from its domestic roots to include the mills of members outside Canada, as well as non-Canadian companies. It will also play out as foreign multi-nationals acquire Canadian mills. There are cases like this already, including Weyerhaeuser, Bowater, and Stora Enso. More recently International Paper and Norske Scog have joined this class. This, added Wright, gives Paprican the opportunity to talk with the “whole” company.
Paprican has a valuable, world-class reputation. It is a known entity to foreign multi-nationals. This view was recently reinforced by a major benchmarking study done by Jaakko Poyry Consulting.
According to the study, Paprican is “best in class” at providing mill level assistance. It also rates best at relating fundamental science to mill applications/products. Its members give it high marks for effective communications. The study also found that its research program is aligned well and balanced with its diverse membership needs. Wright noted that the Institute has a range of programs covering products such as fine papers, packaging and board to go along with the familiar newsprint, and chemical and mechanical pulps.
However, until a year and a half ago, the Institute was constrained to working for Canadian mills of its Member Companies. Now, under the new business model, there are no constraints. This good reputation makes it a credible business partner.
The new challenge that accompanies its expanded mandate is that Paprican’s counterpart organizations around the world also play on this global field. Often they provide service and are contributors to the technology strategies of the companies coming from outside Canada. “The challenge for institutes around the world is to learn how to collaborate, participate and work together. On the one hand, you respect the proprietary investments of an Institute’s individual Member Company. On the other, when institutes have common member companies by virtue of these global players, you learn how to be effective together for the benefit of a particular company. We’re in the early days of understanding how to do that.” Issues like the costs of the business partnership and how to handle joint membership where there are multiple institutes involved are complex.
Membership growth for Paprican is being looked at in a number of ways. The traditional route has been to invite membership of all Canadian producers, big or small, no matter the product. ‘We can provide major advantages on a cost basis to these operations. That’s one of the things we excel at, doing that translation of technology to value.” Paprican has broadened the ways it offers “partnerships”. “We are more flexible than we used to be in how companies can interface with Paprican as a partner.” The new growth opportunity is in existing members that have mills outside Canada. “We’ve been working with this group of companies to try and persuade them that a global strategy is more powerful than a mill strategy. These discussions are ongoing and continue to be a challenge because if our message is perceived as one that will only increase costs, it is not an ‘easy’ discussion,” Wright added. For companies outside Canada, many have long wanted to work with Paprican but were stymied because of the rules under which Paprican operated. The new-found flexibility allows Paprican to talk with just about anybody and find ways to develop partnerships.
Looking at membership from a global perspective, Wright said that current Canadian production is about 30 million tonnes. Of this, Paprican’s membership accounts for about 22 million tonnes. Three or four mid-size US companies alone would equal that volume. It would not take the addition of many new members to greatly increase potential revenues. “If we can persuade them that there is enough investment value, we could generate revenue that would significantly change our cash flow,” Wright explained. This would allow Paprican to reduce the individual company costs across the board. “If we double tonnage, it would halve membership costs because we don’t need to be a lot bigger than we are.”
In the past, almost all of Paprican’s revenue — over 90% — came from Member Company fees — based on tonnage. The rest came from Allied Industry partners and other sources. Recently, the Member Company share has dropped, but only slightly. It still accounts for more than 80% of revenue. The Member Company fee base was really the only way for pulp and paper producers to benefit from the Paprican research programs.
To move ahead, new membership classes have been created. Besides Full Members, there are:
Associate Plus Membership: This class recognizes that companies outside Canada may wish to participate in the research programs, but because of proximity limitations may not derive full benefits from all the services. A substantial contribution towards the basic infrastructure and operations of the institute, including pilot plants and laboratories, library and technical services, and a portion of the full research costs is rewarded with access to, and royalty-free use of, intellectual property. Other services including contract research are available but at a “different cost structure” than full members, Wright explained. Canadian mills are not eligible.
Associate Members: This class is designed for mills (outside Canada) affiliated with Member Companies but not wanting full privileges. They pay nominal fees and have access to but not royalty-free use of the Institute’s intellectual property. Contracts and other services are available at higher rates than Members or Associate Plus Membership.
Program Element Partners: A new feature of the Paprican Business Plan is to allow Member Companies, as well as others to direct the research activities by allocating money to individual segments of the overall program. The unit sizes encompass groups of projects of a nominal size of about $1.5 million per year. Several Program Elements together comprise our more traditional research programs like chemical or mechanical pulping, fibres, papermaking, or paper and board quality.
These program elements are available to anyone who wants to join them individually. “If you’re a full Member, you get very low-cost access. If you’re a non-member but still want to join only for a specific set of research results, we’ll allow you to do that but you pay a fully-loaded fee.” Those choosing this option must sign up for at least three years.
Another difference with the “new” Paprican is contract work. Proprietary work was done only for Member Companies for a contract fee. Contract research is now open to non-members as well, but with a “significantly” different fee. “We won’t do proprietary contract research on mainline platform technologies, but we can work in areas that relate to products, product development, and generic technology where we have excellent expertise.”
The opportunities presented by the new categories will also serve as an invitation to those thinking about Full Member status. Companies can make small investments and assess the Paprican capabilities. “If you like what you see, there’s an opportunity to grow the base. It is a common sense approach to how to make ourselves more flexible,” Wright sa
One major opportunity for research institutes to contribute to our industry through the collaborative research programs is in areas of threats from other technologies. Similarly, opportunities for synergies with new technologies can offer whole new growth areas. Wright mentioned two specifically – packaging and electronic communications. The former deals with the threat from plastics. The industry needs to show consumers/customers what can be done with paper that can’t be done with plastics. The latter new growth area reaches more toward the future. Wright noted that the interface between electronic communications and paper is changing and that it represents a whole new area of opportunity. He mentioned things such as intelligent packages and inks. “Can we invest in new ways to make paper functional by linking to new ideas enabled by electronics and communications.”
These threats and opportunities are areas where the Institute can “play very well”, Wright added. “Individual companies will probably not be able to afford all the necessary technologies and can benefit from the leverage of shared investments.”
Awards to Paprican Staff: 1998-1999
John S. Bates Memorial Gold Medal: Richard Kerekes 1998 PAPTAC
John S. Bates Award: Tom Browne, Jean Hamel, Dave McDonald 1998 PAPTAC
J. H. Weldon Medal: Joe Dorica, Jean Paris 1998 PAPTAC
Certificate of Appreciation: John Wood l998 PAPTAC
Best Research Paper Award: Ho Fan Jang, Raj Seth 1998 TAPPI Board Research Committee
W.A.E. McBryde Medal: Bruce Sithol 1998 Canadian Society for Chemistry
Fellow of the Royal Society of Canada: Theo van de Ven 1998
Certificate of Recognition: Sylvie Deschtelets, Norayr Gurnagul, Xuejun Zou 1998 American Institute of Conservation
Killam Prize: Martha Salcudean 1998 Canadian Council for the Arts
Fellow of the International Academy of Wood Sciences: Dimitris Argyropoulos 1998
Fellow of the Institute of Electrical and Electronics Engineers: Guy Dumont 1998
<>Central Systems Technology Award: Guy Dumont 1998 Institute of Electrical and Electronics Engineers
University-Industry Synergy R&D Partnerships Award: Andy Garner, Richard Kerekes, James Olson, in partnership with OpTest Equipment Inc. 1998
Marcus Wallenberg Prize: Don May, Keith Miles 1998 Marcus Wallenberg Foundation
Dave Wetherhorn Award: Gilles Dorris, Vic Uloth 1998 TAPPI Pulp Manufacturing Division
John S. Bates Memorial Gold Medal: Richard Kerekes 1999 PAPTAC
Honorary Doctorate: Jim Rogers 1999 Memorial University
Technical Award and Johan CFC Richter Award: Barbara van Lierop 1999 TAPPI Pulp Manufacture Division
University-Industry Synergy R&D Partnerships Award: Guy Dumont, in partnership with Universal Dynamics 1999
Technical Award and Richard S. Hunter Prize: Raj Seth 1999 TAPPI Process and Product Quality Division
Raimbault de Montigny Award of Excellence: Jean-Nol Cloutier, Mike Paleologou 1999 PAPTAC
Chemical Institute of Canada Medal: Brian James 1999