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RISI CONFERENCE 1 MARCH 2016
Chief Executive Officer
Berry Wiersum
Sappi Europe
Transformation
TRANSFORMATION
What every Industry CEO should be thinking about:
o Stock market turbulence, currencies, oil and shifting growth patternso “Goodbye cool: hello practical” – Las Vegas Consumer Electronics
showo Artificial Intelligence (AI) and new materials – a new accelerator?o COP21 and its consequences for the European paper industryo Infinite connectivity versus closing borderso Violence in our midsto Quo Vadis imprimatur?o Humanism and the next generation
2
Source picture: Internet – yieldedlover.wordpress.com
Currency moves vs USD Data from European Central Bank
3
Oil price reduction in local currency
0
20
40
60
80
100
120
140
160
Jan-
08Fe
b-08
Apr
-08
Jun-
08Ju
l-08
Sep
-08
Nov
-08
Dec
-08
Feb-
09M
ar-0
9M
ay-0
9Ju
l-09
Aug
-09
Oct
-09
Dec
-09
Jan-
10M
ar-1
0M
ay-1
0Ju
n-10
Aug
-10
Oct
-10
Nov
-10
Jan-
11Fe
b-11
Apr
-11
Jun-
11A
ug-1
1S
ep-1
1N
ov-1
1Ja
n-12
Feb-
12A
pr-1
2Ju
n-12
Jul-1
2S
ep-1
2O
ct-1
2D
ec-1
2Fe
b-13
Mar
-13
May
-13
Jul-1
3A
ug-1
3O
ct-1
3D
ec-1
3Ja
n-14
Mar
-14
May
-14
Jun-
14A
ug-1
4S
ep-1
4N
ov-1
4Ja
n-15
Feb-
15A
pr-1
5Ju
n-15
Jul-1
5S
ep-1
5N
ov-1
5D
ec-1
5
USD
EUR
GBP
4
Real GDP annual growth ratePercentage change on previous yearData from: (2008 – 2014) The World Bank; (2015 – 2016) Goldman Sachs
0.50%
-4.40%
2.10% 1.80%
-0.50%0.20%
1.40% 1.50% 1.70%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
2008 2009 2010 2011 2012 2013 2014 2015 2016
EU (28 countries)
-0.30%
-2.80%
2.50%
1.60%2.30% 2.20% 2.40% 2.40% 2.20%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
2008 2009 2010 2011 2012 2013 2014 2015 2016
USA
9.60%9.20%
10.60%
9.50%
7.80% 7.70%7.30%
6.90%6.40%
6%
7%
8%
9%
10%
11%
2008 2009 2010 2011 2012 2013 2014 2015 2016
China
5
Unemployment rate (% of labor force)Data from OECD (EU, USA) and The World Bank (China)
7.44%
9.48%
10.07% 10.12%
11.29%
11.93%11.60%
5.78%
9.27% 9.62%8.95%
8.07%7.38%
6.17%5.29%
4.40% 4.40% 4.20% 4.30% 4.50% 4.60% 4.70%4%
5%
6%
7%
8%
9%
10%
11%
12%
2008 2009 2010 2011 2012 2013 2014 2015
EU (28 countries)
USA
China
Linear ( EU (28 countries))
Linear ( USA)
Linear ( China)
6
Aging population – median ageData from Eurostat (EU) and U.S. Census Bureau (USA)
40.440.7
41.041.3
41.641.9
42.2
37.2 37.337.5 37.6 37.7
37.0
38.0
39.0
40.0
41.0
42.0
2008 2009 2010 2011 2012 2013 2014
EU-28
USA
0.0
7
8
Europe’s Consumers Shifting GearLabor Force
EU demographic age composition Consumption of Different Age Groups
Europe’s low birth rate effect will be amplified by decreasing spent of elders US with significantly better demographics, Millennial age cohort
now constituting the largest population group
retire
General government debt, % of GDPData from OECD (EU and USA) and Trading Economics (China)
5969 73 76
87 899492
106116
122 125 124 123
32 36 37 36 37 39 41
0
20
40
60
80
100
120
140
2008 2009 2010 2011 2012 2013 2014
EU (21 countries;except: Bulgaria,Croatia, Cyprus,Latvia, Lithuania,Malta, Romania)
USA
China
9
But Chinese private sector debt increases fourfold!
Incidents of Coincidence
10
Source: Angus Madisson, The Conference Board, FT calculations
11
Economic Machine Lacks LubricantProductivity GrowthFor the past half century, the twin engines of rapid population growth and a brisk increase in labor productivity powered the expansion of gross domestic product.Labor’s contribution to GDP growth is disappearing, so productivity must pick up the slack. But can it?
“Goodbye cool: Hello practical” Las Vegas Consumer Electronics Show
Previous shows hyped glamour or new devices (3D, 4K TV, etc); 2015 shift towards useful functions
Source picture: San Francisco Cronicle
12
Accenture survey of 28.000 consumers shows sluggish demand for new techy devices:
2014 (%) 2015 (%)Buy new Smartphone 54 48Buy new TV or tablet 38 30Buy Smart watch 0 13Wearable health monitors, etc. 0 9
* Falling orders from Apple to Chinese factories
Useful functions are scary …o Wearables move from fashion item to services enabledo More than 150 health, wellness and fitness companies pitch services
to show wearers how to live healthyo BUT 47% of consumers worry about privacy and security of both
devices and serviceso 69% know that hackers can steal their data or infect ito 24% have postponed purchase and 18% stopped using device
Big opportunity for cyber security providers: 82 companies exhibit!o Biggest device hype at the show was the self-driving car!
“Goodbye cool: Hello practical” Las Vegas Consumer Electronics Show
Source picture: Internet / mixstuff.ru
13
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Artificial Intelligence and new materials -a new accelerator?
o Next generation’s workmates will be robots with emotions!o Will enable further development of Industry 4.0o Big Data creates new golden triangle of CEO, CMO and CIOo Moore’s Law: Density (=effectiveness) of computer chips doubles every
2 yearso Speed, capacity and size become limited by wafer material – currently
silicono The search for the next generation is on…
15
Source picture: Internet – nanogalaxy.org
Is Graphene the answer?
16
Potential uses include:
o Ultra-long life batteries, bendablecomputer screens, better solar cells, superfast micro computers
o Graphene oxide bonds withradioactive elements; now in use at Fukushima
o Quantum dots – high fluorescent nano particle for improved imaging –derived from coal
o UK Patent office: Graphene relatedpatent grew from 3018 in 2011 to8417 in 2013
Source picture: Internet rpi.edu
Back to Moore’s Law …
o Silicon now supports 4 billion transistors on a fingernail size wafer o Graphene could increase current speed x100o But Graphene is not a semi conductor, so mobility cannot be turned offo Currently no technology to solve that obstacle
17
Source pictures: Internet – chipfiles.ru thedetroitbureau.com
Cautionary tale about Disruptive Technology
o Aluminium discovered in tiny quantities in 1820’s, known as “Silver from Clay”o 1850’s – process found to make a few grammes at a time. Used in expensive
jewelryo 1880’s – Industrial process discovered using electricity; price collapse; still no
volume useo 1920’s – Transformative use finally found in airplanes
Source picture: Internet – aluminiumleader.com
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Industry 4.0 (IoT) Transformative Power
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Employment Impact Of IoTIoT is relatively more disruptive to Printing & Publishing vs Pulp & Paper
Source: BCG Group, Man and Machine in Industry 4.0
COP21 and its consequences for the European Pulp and Paper Industry
o The most important target is that global warming must be “well below 2 degrees”
o India and China start imposing environmental measureso Europe’s commitments far more ambitious than other parts of the
worldo Radical new technology required and governments need to be
educatedo Massive opportunity, but need extraordinary funding and patient
moneyo New role for finance houses, state, Commission, Treasuries and
ETS
21
Source: Picture: Financial Times
Infinite connectivity …
22
23
Global Retail E-Commerce
Source: A.T. Kearney
Walls between pure Online and Brick-and-Mortar are already coming down
24
Retailers Going Global
Top 10 Global Ecommerce Sales
Online is in many fast-growing emerging markets the safest, fastest way to get products from international brands
“Bricks and Clicks" strategy
of Marks and Spencer: opening
physical stores in a few
markets while expanding
online in many more
Localizing the online presence while maintaining a unified global brand as a key success factor
Source: A.T. Kearney, remarkety.com
25
Continuous Connectivity
Interpersonal Connection
Self-expression
Exploration
Convenience
Source: A.T. Kearney
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Ubiquitous Consumer
Moving across channelsMany retail and product options at fingertips, with demand to full visibility into inventory and pricingSoon a futile exercise to pinpoint the share of online sales
Digital technologies enhance in-store experiencePOS Technology, Beacons, Wearables, Augmented Reality, 3D Printing
One-stop-shopping experience Turning stores into distribution centers, pickup sites, and return locations Amazon opening physical locations
Demographics & MobilityMillennials change mobility concept - away from green field shopping centers principleGrowing number of elders looking for local shop suppliesCity center retailers before a new renaissance?
Omnichannel shopping
Source: PWC, 2015 retail trends, et al
27
Total Price Transparency
Online research preceding purchase – multi-channel sale Retailers’ price matching guarantees…BUT…consumers set online price
reference point based on high rated online retailers – not (necessarily) by lowest price
Source: E&Y, Digital Retail / concordia.ca / birdseyevieweu
… and closing borders
o Migrant crisis, amazingly, took European politicians by surpriseo No preparationo No political consensus among EU leaderso Reactive policies made on the runo Incompetent government and the Peace Dividend under threat
The end of open borders and free movement of people?
Source: Internet / www.theguardian.com (T Schwarz, Reuters)
28
Source: Internet/dailymail.co.uk (Getty Images) Source: Internet / thebarentsobserver.com
Growth of conservative nationalism in – or close to -government
o Hungary develops efficient fences to close borderso Denmark announces policy to dispossess migrantso Poland refuses to take migrants and brings media under state controlo UK wants policy to pay no benefits to EU migrants in first 4 years; Brexit?o LePen (F), Wilders (NL) and Trump (USA) gain popularity with anti migrant
policieso Sarkozy 06.01.2016: “Schengen est mort! ”o Growth of trade barriers and disputeso Oil, Saudi Arabia and Iran
Source:businessnews.com.ng
29
Source:Die Presse.K Pempel, Reuters
Source: Larensbehoud.nl
Source: YoutubeSource: Youtube
Source: sueddeutsche .de Source: wikiwand.com
Source: foxbusiness.com
Source: demorgen.be
Source: thearabdailynews.com
Violence in our midst
Europe has the most violent history of all continentsSome say it’s because of the length of the coastline (!)Terror based violence is not newIsfahan 1388; 100-200.000 people massacred by Timur-I-LengBuilds 28 towers of 1500 skulls each to discourage debate
30
Source: Internet / naidunia.jagran.com
31
Quo Vadis Imprematur
Source: Internet / nl.123rf.com
Global Advertising Growth
32
Regional Advertising Development
33
Ad Spend Growth How much is being spent
0
7500
15000
22500
30000
France Germany Italy Spain UK
2014 2015 2016 2017
Source: ZenithOptimedia, September 2015
US$
milli
on
34
Google On The Demise Of Print Advertising
Chief business officer of Google Nikesh Arora in 2013:
“…50 percent of all ad spend will switch online in five years…”
Chief business officer of Google Nikesh Arora in 2013:
“…50 percent of all ad spend will switch online in five years…”
Source: www.businessinsider.com/google-just-described-its-incredibly-simple-plan-to-kill-print-advertising-2013-2
Print is hurting but still very much alive!
28%37%
0
20,000
40,000
60,000
80,000
100,000
120,000
2013 2014 2015 2016 2017
InternetOutdoorCinemaRadioTVMagazinesNewspapers
Western European Advertising Expenditure
US$ mio
Source: ZenithOptimedia, September 2015
35
Print Keeps Grabbing A Big ShareOver-indexed Spending On Print Ad Relative To Time Spent
36
Demographics Against Print…What form of media people of different age would miss
Source: Ofcom, Benedict Adams, Businessinsider.com
37
… Or Digital Fatigue?
o Boomerang effect in the US:Millennials behave closer to Boomers
o The lag on digital adoption in Europe also reflected in European Millenials behavior towards digital (more similar to US Gen Xers)
o … will the next European generation imitate the US behavior sooner or later (again)?
o Growth stalls - people are growing bored with new smartphones, laptops and tablets. And new gadgets don’t fill the gap.
Source: Accenture 2015
38
…And Digital Ad Blockers Go Viral
o ...despite mobile add blocking just in its infancyo 45 million US citizen installed ad blocking software. Even more people
did so in Europe, over privacy concerns. o In the UK ad blockers grew by 82% in the 12 months to June 2015
Source: PageFair, CEB Global
39
Pendulum swinging back?
Martin Sorrell, Chairman of WPP and probably the most important ad man around made a very interesting point last week during a breakfast session at the Broadcasting Press Guild. He said:
"There's an argument at the moment going on about the effectiveness of newspapers and magazines, even in their traditional form, and maybe they are more effective than people give them credit (for)".
Sorrell now states that he has seen some "interesting data" that shows higher consumer engagement levels with newspapers and magazines, as well as their ability to generate more attention and focus, which means readers are likely to retain information.
Source: Print Power
40
Make Or Break For Digital Magazines
o Drop in numbers for eight of the top 12 UK digital titles in 2015o Readers are still not migrating over to the vast majority of mobile
editions
Source: FIPP, fipp.com/news/features/2016-its-make-or-break-time-for-digital-magaziness
41
From Digital To Print
o Print acquires a higher return on investment (ROI) in campaigns than television, and magazines specifically deliver the highest ROI of all media.
o Long-term impact of print - print demands more engagement and attention
o Many online brands, such as Net-A-Porter, Uber, Airbnb and various blogs, have been starting to invest in print magazines as a part of their marketing strategies integrating interactive technology
o Incorporation of print into their digital strategy multiplies the effectiveness of each campaign significantly
Martyn Eustace, Managing Director of Print Power
Source: futuremedialab.info
42
Neuroscience
o Digital ads were processed more quicklyo Paper ads engaged viewers for more timeo Subjects reported no preference for either
mediumo Subjects absorbed about the same amount of
information from both media
A week later, subjects showed greater emotional response and memory for physical media ads
Physical ads caused more activity in brain areas associated with value and desire
Effective print ads will drive digital purchases
Source: pri.org/stories/2014-09-18/your-paper-brain-and-your-kindle-brain-arent-same-thing, academia.edu
43
Print Spurs Learning And Memory
o Dense text that we really want to understand requires deep reading, and on the internet we don’t do that
o Results show that print readers performed better than Kindle readers
o Most subjects also showed an overwhelming preference for print
Research
Source: pri.org/stories/2014-09-18/your-paper-brain-and-your-kindle-brain-arent-same-thing, academia.edu
DACH Region
2014 2023
44
Online Printers Will DominateShare of Online Printers in Printing Market
Source: infotrends.com, zipcon consulting
45
Online Print Mass CustomizationCustomer Value
Mass Customized
Mass Produced
CustomMade
UnitCost
Volume Produced of a Given Product
Producing, with the reliability, quality and affordability of mass production, small individual orders where each and every one embodies the personal relevance inherent to customized physical products
Source: Cimpress 2015
46
Economic MoatOnline Printers becoming tech firms
$178MSoftware & Technology Investments by Cimpress(2014)
Source: www.beyond-print.de
Platform BuildingCreation of dominating platforms, opening up opportunities for partnersNew power of balances and dependencies similar to Amazon, VW, Booking.com?
The Winner takes it all?
47
Print Is Here To Stay….
Source: theawkwardyeti.com
Humanism and the next generation
Manufacturing is about to take a giant leap forward
o Really successful production systems are profoundly humanisto Combine mechanistic breakthrough with emphasis on innovating shop
floor teams o Empowered shop floor teams will take Industrie 4.0 much furthero Prevailing obsolete philosophy: white collars think, blue collars do
(Taylor, early 1900’s)o Cooperation becomes the most sought after value (IBM Global C-suite
study)o Combination of Big Data, AI, new materials, low carbon technology and
humanist innovation o Will revolutionize manufacturing
48
Source picture: pinterest.com
Our children are changing the rules
o React to time pressure by creating the “Last Minute” Societyo Demand patterns – substitution and the Age of the Customero Brand loyalty declines due to infinite choice and customers are
confusedo Reduce risk by consulting Big Data (and dating!) siteso Customer Experience becomes the differentiatoro The retail cull has only just beguno Real environmental performance is top of the agendao The Bowie legacy: Don’t worry about politics and concentrate on the
personal
Source pictures: Internet / youtube.com and cagle.com
49
CONCLUSIONS
World is transforming quickly
o New device hype gives way to useful functionso Intense innovation based on need and availabilityo Government and politics continue to lag behind industryo Violent break up of prevailing geo-political systemso The return of humanism and the birth of advanced manufacturingo Our industry has a great, but challenging, opportunity
We are witnessing the end of an era and the start of a second Renaissance!
Source picture: Internet / emaze.com
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Thank you
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