Unfolding the Benefits of Digital in Paper and Packaging
There’s no question that the rise of digital technology poses threats to the paper and packaging industries. Demand for paper has fallen as business and transactions move online, particularly in more developed markets where Bain estimates that consumption may decline by 3% to 5% per year. Contracts, invoices and everyday communication flow without paper, and consumers are switching from print magazines and newspapers to online and mobile versions.
There is, however, another side of the digital story in paper and packaging, one that creates opportunities for cost savings and product innovations with new revenue streams. As in other industries, leading paper and packaging companies are showing how to harness this new potential to gain competitive advantage, particularly in three areas (see Figure 1):
But as these leaders can attest, success in digital doesn’t come easily. Established firms, some with operating models that have served them well for decades, need to discover and develop new ways of working—digital operating models—as they adopt new technologies. Disruption isn’t easy in this industry, due to high entry barriers, and that has led established companies to move less aggressively into digital than their peers in other industries. That could change as more incumbents recognize the growing threat from digital innovators and new attackers—and come to realize that digital is a must-have to achieve the next level in productivity and customer service.
To get up to speed, most paper and packaging companies will need to invest significant time and effort developing the digital capabilities needed to capture the potential. The first step is getting a clear view of the areas undergoing the most rapid and significant changes. With that knowledge in hand, executives can then look to their own organizations to determine where they should begin their own digital transformations.
Digital customer relationships. Thank Amazon, Uber and hundreds of other consumer companies for raising business customers’ expectations about transparency and efficiency. Customers now ask: “If I can easily order and track a taxi on my mobile, why can’t I do the same for a large commercial order?” With the bar raised, paper and packaging companies have to step up to deliver better transparency along with more efficient online ordering and billing capabilities—or they risk losing share to someone who can. Of course, digital’s potential goes beyond improving existing transactions to enabling new ones.
The most advanced packaging companies now make it easier for customers to collaborate with them, uploading personalized designs or ordering small-batch runs for special promotions. Some of these online systems are easier to use than others, and with competitors only a click away, companies need to make the user experience easy and enjoyable to keep from losing business to their more digitally savvy competitors. At first, newcomers may capture only small orders, but are likely to take on larger volumes as their businesses grow.
Beyond these customer-facing capabilities, the data collected through digital transactions can allow paper and packaging companies to develop deeper insight into their customers’ purchase history and preferences. A better understanding of customers and their purchasing patterns can shape upstream production to reduce lead times and identify new opportunities for cross sales and innovation. Digital products and services.
One of the most promising top-line opportunities in digital technology is intelligent packaging. RFID tags in packages and labels have been in development for more than a decade, but so far their costs have limited their placement to luxury or other high-margin goods, where the need to verify authenticity justifies the costs.
