How Strong Are Your Capabilities?

Jerry Van de Water, outgoing president of the Paperboard Packaging Council (PPC), the association for the U.S. folding carton industry, recently decided to turn over his association responsibilities to folding carton industry veteran Ben Markens. However, he will be working with the organization throughout the next 18 months on meeting agendas and a variety of other projects.
Shortly before he started his role as a PPC consultant, he developed a “Top 10” list of capabilities for competitive success.
“Technology has been a distinct source of competitive advantage for converters,” he says. “However, our industry tends to equate the word ‘capability’ with technology. That can bring about a kind of blindness to other capacities or qualities that ensure competitiveness. If we limit the view of ourselves to equipment or process capabilities lists, then we as individual companies do not stand out.”
Van de Water kicks off his list (in no particular order of importance) by stressing the importance of finding and keeping the right talent.
“The difficulty is in making the choice between finding experienced people versus building the right skills,” he says. “There is no ‘silver bullet’ or one best, easy way to solve the shortages. External forces make the job more difficult. These include higher turnover, less immediately usable skill sets, and the increasing costs of performance incentives.”
He recommends developing source pipelines for the long-term. Sources might be your customer segment for marketing professionals, schools for entry-level employees, or suppliers for technical assistance.
The lack of plant manager talent may be lessened these days as a result of industry consolidation, he notes. Because staffing reductions during consolidation are often affected by skills redundancy or change of strategic direction, folding carton executives should view this pool as “surplus” and not “rejects.”
“I think we all need to change our mindset from filling an immediate need, a vacant job, to a mindset of building a long-term advantage in an agile, change-oriented culture,” he states.
The second capability is eliminating waste.
“We all know that there are fewer people doing more with less in the carton converting industry,” says Van de Water. “It used to be 10 people for every $1 million in sales and now it’s seven or less, plus more tasks. It’s easy to become impatient and move on when results aren’t immediate or satisfying from the first go round.
“Happily, most PPC members have in place some form of continuous improvement. The growth of ISO 9000 and other standards in vendor qualification processes means that continuous improvements are indeed table stakes for the valued business of branded product producers. But often the measures that are audited are traditional product quality controls and ‘improvements’ boil down to lowering rejects, returns and the like.
“The new emphasis on waste reduction in the broadest sense of sustainability may very well change the dynamic in this area and what is regarded as competency. If the Walmart Packaging Scorecard gains traction, as we think it will, waste eliminating practices will extend well beyond the shop floor to externals of the value chain.”
The third capability is offering differentiated products and services through innovation. Van de Water points to a survey conducted by the consulting firm futurethink that concluded most companies equate innovation with “ideation.”
“But how many of us can claim a well thought-out process for ideation, separate from the job order or outside prompting?,” he asks. “The best of the best have an embedded process in place for coming up with the next customer breakthrough. When measuring competitive success, you need to get the word out to the world that you are innovative. A well-established brand image is reality and a competitive advantage.”
The fourth key capability is targeting opportunities.
“Focusing on trying to keep current customers is no road to success,” says Van de Water. “If we want to move up the value identification scale to consultative sales, where higher margins are earned, then we must think beyond the product and focus on the account or market served.
“Large numbers of converters in our industry have a job shop mentality about the business—‘Show me the job and I’ll tell you if I want to run it. Some converters are now specialists and don’t even know it. It’s pretty simple to take a current book of business and characterize it by segment using the PPC Trends Report classes. Rank order them by volume and profit and you are on your way to competency in this capability.
“Another thought is to determine the ‘share of customer’ (SOC) that you have with current accounts. SOC is the amount of sales you have as a fraction of total customer packaging purchases for the division and the customer as a whole.”
Selling on value to customer marketers is the fifth key capability. Van de Water notes that if you are simply selling a carton, there’s nothing that the buyer can’t handle; all cartons can be assigned numbers.
“The folding carton industry is attempting to achieve higher margins by selling a premium product with more ‘value added’ features,” he says. “But there’s a world of difference between ‘value-added’ and ‘selling on value.’ To achieve breakthrough success we must be able to sell the corner office or the marketing suite on what the package can do in terms of market lift, product positioning, and utilities of use. The most important positioning principle, in my view, is to see our packaging format first, last and always as an advertising medium.”
The sixth capability is found in establishing strong customer relationships. The customer is buying the sales rep as the source of advice and solutions. So that rep has to be engaged across the board in all aspects of the customer’s business so that the sales/marketing team understands business impact and not just specs or personalities.
Assessing risks and rewards is the seventh capability.
“The first thing I learned when I first entered the industry was a lesson from the then chairman of [press manufacturer] Planeta,” says Van de Water. “We were about to sit down to lunch in a fancy restaurant when the chairman started checking out the size of the room, which was immense. He told me his family was in the greeting card business and, by habit, whenever he entered a room he would try to figure how many skids he could get in to fill the cube to the ceiling.
“’There’s your first lesson on the industry,’ he said. ‘Printers/converters think volume first and not profit. The carton industry mantra is go for volume. Lose a little on every order and make it up on volume.’
“The rub is when we don’t see the new sales we need to grow the business, or important volume gets threatened by competition, we forget that we need profits to grow the business.”
Measuring what matters comes in as the eighth capability.
“In my view, the most important information you can tap is historical trends on your own business,” he states. “What gets measured gets improved. Benchmarking comes in where you want confirmation of where you stand in relation to the industry. That’s where PPC surveys can help.
“Are your improvement goals aggressive enough? Say you have inventory turns of five. ‘Not bad, since we improved over last year’s four turns,’ you say. But this is below par of eight for the industry, and well below the 32 times reached by some converters.”
Visionary leadership is the ninth capability. Van de Water says there’s no question that top performers are where they are because they have a well-organized and functioning team. Though teamwork is key, that doesn’t excuse senior management, notably the ceo, from his (or her) role as company visionary.
“The ceo’s visioning acuity is a source of competitive advantage,” he states. “It’s the difference between doing the right things and doing things right. By visioning I mean the capacity for thinking through and defining a business model for the organization. What business do you want to be in? How will you differentiate your offering? How do you define the future state of your business and how will you get there?”
Finally, there’s the “the X factor.”
“If you ever get the feeling that competitive advantages are always short-lived because of copycat competitors, then you will be interested in the X factor,” Van de Water states. “What I am talking about is the kind of advantage that either can’t easily be matched or outdone by competitors, or, in some cases, can’t even be replicated.”
How can this be achieved? It comes down to everyone in a company, from the top man down, knowing what generates profits and hammering away incessantly at those profit levers.
For more information, email Van de Water at van@ppcnet.org.OBM