Last week the WSJ’s Katherine Rosman wrote a compelling piece that every CEO should study! The article explored the massive changes that large paper companies have had to embrace to survive the digital revolution. Read the article for yourself here. I’ve summarized one amazing example from the article – Mohawk Fine Papers. Change comes fast and it comes hard.
- 1996, Securities and Exchange Commission phases in an electronic platform to upload and publicize annual accounts, undermining the need for printed annual accounts – sales of Mohawk paper products decline.
- 1996, the company invests $6m in a machine to cut paper into smaller-than-standard batches. ROI – very uncertain! (10 years ahead of its time, the company was betting that the emerging digital print business would need this smaller batch size).
- 1998, sales of products to digital companies totals $10m, a small % of total sales.
- During the period from 1999 to 2004 – the 350,000 square foot mill shrank from a seven-day production week down to four days.
- Now it’s 2004 and the CEO makes a huge bet. He pivots into the fine stationery business. He puts in place over $100m in bank debt and buys seven fine paper businesses for $61m from International Paper. The play was to replace a quickly shrinking annual report business. As he states in the article. “We couldn’t just downside to survive.”
- By 2007 the annual report business collapsed fueled by the NYSE cancelling the need for companies to distribute paper copies to shareholders.
- By 2008 Mohawk had won business from a key player – Shutterfly, the leading digital photographic service.
- But to get Shutterfly to use their most expensive fine papers (acquired from International Paper) they had to experiment with personalized stationery and greeting cards. To do this they acquired a photography software company for $2m and launched Pinhole Press to create holiday cards using Superfine grade paper. A case was made to Shutterfly using the Pinhole experiment and it worked. 40% of the paper Mohawk sells to Shutterfly is Superfine.
- In 2012 sales of paper to digital companies reached $100m, around 40% of sales.
- The latest quarterly numbers reveal sales up 17% for Q4 2013, at $410m and mostly from holiday cards.
Stand back and look at the zooming out and the zooming in the management of Mohawk had to do over the last 20 years. It’s never too late to consider the business you are in! Mohawk were in the Annual Report business for a time. Want to hear more about Positioning? – my next presentation is at the District Hall. Book here.
Readers of the blog can email me at Ian.Smith@portfoliopartnership.com for a few discounted tickets.