13. Disruptions

Disruptions 13.

The rapid development of new and advanced technology has so far played a major role in our transformation toward the globalization of today. It also plays a big part in the disruption of business models and in the way how we do business together. Disruption affects the existing chains from A to Z, discharges the chain, and creates a new shorter chain with fewer links. Everything then becomes faster and cheaper. New opportunities are provided with many new possibilities and with increased profit. Use the gap to increase the margin with new added value for both you and your customer. Don’t start a new price rally – gain your margins instead. Competition will come and push everything to lower levels. You can stay still and do nothing, drop your prices and margins, again and again. Or you can grab the opportunity, change and add value.

Disruption to a new chain often comes from outside, never from inside of an existing chain structure. An example of this is Henry Ford in 1908 and the Ford Model T. Ford decided to develop the production of cars instead of giving customers what they thought they need at the time, a faster horse. The Ford Model T was not the first car developed in the world; the car itself was not a disruptive innovation but an expensive luxury development that added things that horses couldn’t do. When the Ford Model T came along it discharged the chain with mass production and the era of horses as a means of transportation was over.

This transformation was so big that we got a full industrial transformation, a paradigm shift into what we know as a part of the 2nd Industrial revolution. The existing and traditional chains will normally only develop from the outside, the ones active inside of the chain usually doesn’t change by default. Maybe they will evolve with small development of links in the existing chain, with a small impact on the whole value of the chain itself. As a result, there will be no need for a different way of thinking; no change, no disruption happens. Therefore, a disruption normally comes from outside of the existing chain. It’s made by the brave ones, brave enough to think from outside of the box (“rosh gadol” is Hebrew for “big head” and was a chapter in my previous book that dealt with this bravery). These companies normally include an entrepreneurship of passion and full focus in going from A to Z in a shorter, better, and more effective way than what is possible today. In addition, they usually have no legacy to consider. Using Tesla as an example, manufacturers that develop traditional fossil cars can’t easily turnaround fast enough as they carry too much old legacy that they must have time to pay off (ROI – return of investment) before they can change their investment according to the new demands. Those who refuse to change or change too late in a market that already has transformed will miss the window of opportunity and get less attention and less value to work with. They will be left behind and miss out the new added margin gap. The transformation level is normally pointed out by how many losers and how big of a loss it will generate as well as the level of profit and number of winners. Ford Model T versus horses, a transformation that really flipped a whole industry. An external factor is everything that can influence a transformation from outside of the chain. The impact can slow the process down or speed it up, reduce or increase its power. The political climate (Donald Trump) and the Chinese economy are two examples that will affect this transformation. External factors can also be the market legacy itself reducing the effect and speed of the process. I remember the Commercial printing transformation, where printing for generations had been done with a very small amount of development. In addition, this chain is hooked into another chain, the brand owner’s chain toward us consumers. Looking at a direct chain from A to Z, you’ll notice that B2C (business to consumer) normally goes much faster than B2B (business to business). This transformation of the packaging market is as the commercial printing market a B2B, with the same risks of including market legacy, but this time we’ll have more of the tools in place before we start transforming. Yes, we still have things to do when it comes to integrating, like the finishing part to be pack-ready and adapting it in all segments. Today, we see big demands, external and internal factors that are showing the green lights. We see suppliers and investors that are investing big money now, which alone can make this transformation to be a true flip of the hole market. It involves producing on

demand instead of producing to warehouses, personalization for global brands, localization for local brands. We also see a big and growing demand for new sustainable and recyclable media, where the market pushes away from fossilmade plastic, meaning many more different and shorter runs. The timing and trigger for this disruption is the upcoming low economy that by itself drives the need for a big change, will it FLIP?! Are you ready for this? You need to be on the right side after the market turns over and it will never resurface where it went down, I’m sorry. Some see this change entering as a dark cloud on the horizon even if they try to plan ahead, also in the graphic market. As for the newspaper sector, for example, some planned for change but made the wrong conclusions. A big Norwegian newspaper group told me in meetings almost 10 years ago that they could see the dark clouds coming, but they said that it was already too late for them to change. Now they have downscaled dramatically with no fuel left in the company-tank for a transform from where they are today. Newspapers overall have consolidated their business year after year with up to 20% annually and that market is still falling. If you don’t change in time you’ll most likely get badly hurt, it’s only a matter of time. The transformation that begins now in the packaging market will reach its full power in the incoming low economy and payback will arrive in the next high economy.

Culture also plays an important role in disruptions. Many regions, like Japan, have a culture of packaging everything, for instance bananas one by one. They don’t understand why we in the Western world insist on packing ours in a 10-pack when you only eat one at a time and we must throw too many away as waste. In addition, we see a general demand of more packaging for portions pack instead of big packs. Most experts today agree that this strategy can profoundly reduce our food waste, even if there will be more packages produced. With as much as 40% more packaging, it will lead to a sharp decline in food waste – that’s better for Planet Earth. Now, we also change our packaging media in this transformation toward more sustainable and recycling modes.

The last, but not least, level of transformation changes everything to a whole new chapter. This disruption also includes external factors like new bases of value, new and different views of how we assess values that closely relates with our way of behaving, our relationship to Mother Nature and how we handle culture and believe in religions, etc. This is not only a development, it’s a full new business transformation. Together with other transformations at the same time, maybe we are moving into a new super or mega cycle. We are moving closer toward our next paradigm shift (Thomas Kuhn), shifting toward the 4th Industrial revolution.