In recent weeks I have received emails and phone calls from packaging industry executives who are concerned about the future. While the industry has been branded as “laggard,” “slow to change” and other not-so-flattering descriptions by analysts in recent months, several industry executives have started to embrace new business models.
However, as these executives start to implement these new business models, they are already seeing these models failing at some of the early adopter companies. The recent demise of several business models that only a year or so ago were hailed as revolutionary is enough reason to cause serious doubts. To many senior-level executives in the packaging industry, this only means even more confusion regarding future steps.
I will try to address some of these concerns in a two-part article. In this article, I will try to put the recent events of the so-called “new economy” in perspective, and then next week I will analyze what it means to the packaging industry and what are some of the things that industry executives could do to meet these challenges.
Turbulence is permanent
During the past several months, mankind has witnessed changes that had not been seen so far. Certainly, the inventions of fire or the wheel and eventually electricity/automobile/telephone caused similar changes in the way humanity lived or how commerce was conducted, but a major difference is the timeframe. It took thousands of years before we could fully exploit the power of fire or the wheel. It took us decades to perfect the automobile or the telephone. But in the current environment we are starting to see revolutionary changes within weeks or, at the most, months. And it is not just the Internet — it also includes the changes in communication technology, relationships between companies, number of new products and their short lives — the list is long. If something does not change at similar speed, it appears that it is not worth talking about.
No wonder this is causing so much turbulence in our lives. Starting from the business world and the stock market, to how we are expected to perform our jobs, we are being exposed to changes at a rate that our generation is not accustomed to. Additionally, businesses today are structured in a manner in which they find it hard to respond to constantly changing market forces. Companies and executives that were organized and conditioned to develop multi-year plans and goals now realize that within months they have to revise their plans and rewrite their goals because new companies have emerged out of seemingly nowhere and have rewritten the rules of the game in their competitive space.
The reaction of the stock markets has been exactly similar. The degree of change has been so rapid that old rules no longer apply and new rules are not accepted yet by everybody. The result has been lots of confusion, nervousness and lack of direction.
Not too long ago, we saw some new rules emerge that made it more important, for instance, to attract eyeballs or create brand awareness or increase the number of transactions, but those rules are no longer valid. It appears that the wider base of investors did not feel comfortable with the new rules of the game and the stock market is now trying to figure out rules that would be fairer in evaluating new economy companies but still satisfy the basic principles of economics.
Impact on the packaging industry
Change of this magnitude has adversely impacted the packaging industry, too. While the stock market has severely battered several packaging companies, the demands on the industry to meet the needs of customers in the new economy has posed new challenges:
• The designs are different, and they change more frequently.
• Time pressures are intense.
• Supply chains are more complex.
• Competition is increasingly global.
• Most importantly, the future is so uncertain.
When packaging industry executives see companies with world-class, best practices struggling to meet market expectations, they do not see many successful models that they can follow for their own businesses. I will be addressing these issues next week based on my study of companies that are taking mature approaches to managing change.