Memoirs of a Forest Industry Consultant E-Book

Pekka Niku

• Herausgeber: Books on Demand
• Kategorie: Sachliteratur, Reportagen, Biografien
• Sprache: Englisch

Seitenzahl: 134

Veröffentlichungsjahr: 2022

Beschreibung

Memoirs of a forest industry consultant, based on 40 years experience in over 100 countries. The focus is on interesting and challenging projects in emerging markets. The dark side of the projects is discussed, too. A lot happened in the projects and global travels, which makes the book interesting also for those outside the industry.

Leseprobe

This book is dedicated to my wife Kaija

TABLE OF CONTENTS

Introduction

Log floating in Finland

United Paper Mills

Indonesia

Gabon

Ghana

Angola

Nigeria

Germany

Austria

France

Georgia

Ukraine

Bosnia-Herzegovina

New York

Brazil

Argentina

Jamaica

Bangladesh

India

Pakistan

Myanmar (Burma)

Russia

Kyrgyztan

Uzbekistan

Kazakhstan

Azerbaijan

Turkmenistan

Iran

Jordan

Egypt

Lebanon

United Arab Emirates

Saudi Arabia

Oman

Shanghai

Philippines

Korea

New Zealand

Jump to the unknown

Family and hobbies

Postscript

Annex

Introduction

“Forest industry needs more gladiators than plagiators” Esko Joro

In 105 Chinese Tsai Lun invented paper, which Internet started to crush in the 1990s. Today’s paper industry resembles “Wounded Angel”, the famous Finnish painting by Hugo Simberg.

Wounded Angel by Hugo Simberg

The following chart illustrates the impact of Internet on the Finnish paper industry. Graphic papers started to decline in 2006, whereas cartonboards and packaging grades (and tissue) in general have grown. Pulp is also doing well.

After Helsinki Business School I worked over 40 years in the forest industry. First in the marketing departments of Enso-Gutzeit (now Stora Enso) and United Paper mills, and then as a consultant in Pöyry and Ekono in Finland and the USA. I have travelled in over 100 countries and prepared over 300 feasibility and strategic studies, due diligence work, bank reports, etc. For this reason, I have been in an excellent position to follow up the development and trends in the industry and markets. For the last seven years I have worked as an independent consultant in my own company.

Most of the projects, which I have been involved in, were successful, starting on time within the planned budget limits. For this book, I have selected projects, which have been more challenging. Most of them are in the developing economies, which I consider more interesting than the developed, well organized societies. Many things happened in these projects, and around them. Some of them also had an interesting dark side. I hope these examples give readers some lessons to be learned and are helpful for future project development.

Forest has been in a key role in my family. My father and grandfather worked for the forest industry. My brother Jukka and sister Maija are forester. My son Antti followed in my steps as a consultant in PwC and Accenture.

The world is changing faster than ever before. We now need gladiators, innovators, and the re-evaluation of all things. There is nothing wrong in copying ideas from the world, if they can be processed further to suit companies’ particular needs.

Many things have happened in the forest industry in five decades - structural change towards bigger papermachines and units, internationalization, declining demand for graphic papers due to the Internet. Industry 4.0 (Internet of Things), robotics, 3D and digital printing are recent growth areas. Big data, augmented reality and remote machine maintenance have found their way into assembly shops and machine fleets. This has been interesting development to follow. It is clear that a big number of jobs, as we now know them, will be lost.

It was not a surprise that at the time of writing this book, UPM sold its Shotton paper mill in England to a Turkish company, which is converting the production to packaging board and tissue paper. Stora Enso announced the sale of four graphical papers making mills (Anjala in Finland, two in Sweden and one in Germany) - if a buyer can be found. In the future, the company will focus on packaging, bioproducts and construction solutions. The feasibility of changing Stora’s Langerbrugge mill (newsprint, SC paper) to containerboards is under evaluation.

As the previous chart shows, the forest industry is cyclical in terms of production volumes. It is even more sensitive to prices. It is typical that investment decisions are made in an economic upturn at a time of high prices, and then the new capacity will start up after about two years in recession, in overcapacity situation and low prices. If profitability calculations have been made with the peak prices, there will be problems. This pattern has been repeated for over 40 years. As one client said: “Paper industry is a roller coaster – enjoy the ride!”

The consulting organization is ‘flat’, career opportunities are limited, and motivating employees is challenging. Companies often end up ‘playing’ with titles which create artificial hierarchy. At the same time they try to hold back on salary raises. My titles changed at a rapid pace, examples of a few of my name cards are in the annex. A customer once said to me, “I met at least dozen vice presidents in your office”. Today, the title of Principal seems to be popular. No one knows what it really means.

Several American business methods were introduced in the 1980s and 1990s: Management by objectives, matrix organizations, McKinsey 7S, 4e, deep leadership, value based leadership, scorecards, sales force, etc. My experience is, that almost all of these methodsd led to the same result. “Silos” were created inside the company, which focused only on their own unit's results, competing with others and spending a lot of time in filling various measurement forms. At the same time they forgot the common good. Companies focused on the quarterly results and forgot the long term.

Much has happened in the consulting in the forest industry. Ekono already merged with Pöyry in 1993. The two major engineering firms, ÅF and Pöyry, merged. The new name is AFRY. It seems that customers are gradually getting used to the new name and interesting growth areas such as the mining industry and bio products are opening up. Forest industry is no longer the main focus area of the Pöyry/AFRY.

New, vibrant consulting firms have been established with the help of former Pöryry employees: Rainer Häggblom’s and Markku Tynkkysen's (UPM) Vision Hunters (led by Teija Konttori), Indufor (led by Jarno Seppälä) and most recently Jay-Partners (Outi Juntti, Petri Jokinen, Jaakko Jokinen). The move of the sharpest consultants to competitors is, of course, a worrying trend - watch out AFRY!

I have travelled a lot during my career. Much has happened. It’s almost a miracle that I’ve survived all these trips healthy and without major injuries. Kristofos, the saint of travellers, has clearly been at the level of his duties. On the other hand, it has been said that many people have died at home. Many thanks go to Pöyry's physician Antero Kokkonen, who has been taking care of vaccinations, tests and even tropical diseases for decades, and to physician Kirsti Pakkala for the good care after my retirement.

Photography is one of my hobbies; that’s why there are a lot of photos in this book. As I went through my photo archive, I felt almost obligated to write about stories associated with them. Digital images are convenient, but they easily disappear into the digisphere. The photographs were also useful when factories were evaluated later on.

In this context, I would like to particularly thank my colleagues, partners and clients who have made these memoirs possible. Special thanks to my wife Kaija for her continuous support, patience, and the idea to write this book. Thanks also to my children Maria, Anna and Antti, and son-in-law Eetu Hiltunen, who proofread the text at different stages. This book is also available in Finnish, and as an e-book from Amazon and other leading publishers.

Muurame, Finland, August 2022

www.pniku.com

Visas are needed

Log floating in Finland

My first contact with the forest industry came from the roots, floating of logs in Möhkö, Eastern Finland in 1967. Möhkö is located close to the Russian border.

Log floating has already been stopped a long time ago. Floating logs was, in itself an environmentally friendly mode of transport compared to truck transport, and a good way of storing the logs. It is still practiced to some extent, e.g. on the Lake Saimaa.

My brother Jukka and I started as summer trainees in Möhkö in 1967. In essence, the work was to separate the logs floated from Russia into big logs and small logs (smaller logs were used to make woodpulp). The separation was made with long sticks with a blade at the end. It was a two-shift job. The accommodation was a log cabin with eight “loggers” living there. The salary was paid in cash in brown envelopes every two weeks. For some loggers, this interval was too long, and they had to take advance payments.

There were only few activities in a small village like Möhkö. The thickest birch in Finland was the main tourist attraction. Log floating competition was the main event in the summer. On the weekends, the highlight was to go dancing.

In order to float logs, the wood density has to be less than the density of water. This is typical for trees like pine and spruce. If the wood density is higher, the logs will sink. This happened in one unfortunate project in Africa.

Log floating and separation in Finland in 1965

Log floating competition in Finland in 1965

United Paper Mills

"Can you shoot?" was asked by Lieutenant Colonel (retired) Pekka Artto, who was, at that thime the Marketing Director of United Paper Mills in Valkeakoski, Finland. I was at a recruitment interview and Artto was organizing a shooting competition for amateurs. Well, that wasn’t the deciding factor when I started working in the Head Office’s marketing department in 1975. Later, I heard that in order to succeed in UPM, you had to attend shooting practices, go to church on Sundays, and participate in military reserve activities. I was interested in other things.

I lived on Kenraalintie in Valkeakoski, a couple of minutes walk from the Head Office. In addition to salary the company provided free running water and heating.

The Head Office was a good working place, where marketing and business development surveys were conducted for all UPM‘s business units.

When I looked at UPM’s old business documents, the most important thing to follow was the paper mills‘ production records in tons, not the profitability of production, products, or customers. These analyses came with the new MD Niilo Hakkarainen, as well as the popular "Sober February" campaign. Fortunately, the shortest month of the year was chosen as the scope of the campaign.

Niilo Hakkarainen had taken on the responsibility of new MD, but the spirit of the old MD Juuso Walden was still strongly present. Juuso did not like saunas and for this reason there were no saunas in the employees' houses either. Not even in the company's villa by the lake side, where the sauna was built afterwards.

Another principle of Juuso was that after marriage, the woman's place was at home. For this reason, a large proportion of the men at work were married and all the women in UPM were unmarried, causing certain tensions in a small town. The situation changed during Hakkarainen's time.

There was an energy crisis in 1975 and a recession in the paper industry. At the beginning of the year, the sales association Finnpap organized a crisis meeting for the directors of their member companies. “We have no orders!”. Savings campaign was launched. Pencil extension holders were distributed to all employees. In addition, employees were not allowed to drive to Helsinki with their own car, but to go to Toijala and take the train. There was a travel ban for salesmen until it was noticed that orders declined even faster. The company’s guest house menu became so simple that Finnpap avoided sending foreign customers to Valkeakoski. Hakkarainen was called „Stingy Niilo“

Living in a small town has its own special characteristics. The factory dominates life, air quality, and people.

At the same time, in the late 1970s, a discussion began about the difficult, centralized role of sales associations (Finnpap, Finncell, Converta), largely by Juha Niemelä. Later on, the associations were dissolved and every company had their own sales organization.

There were a lot of development projects going on inside the UPM group in the 1970s:

The potential of pressure sensitive labels and silicone papers was investigated for Tesoma and Paperituote. Today, pressure sensitive labels comprise an important business area for UPM.

The potential of pulp by-products such as lignosulfonates was investigated. Today, this is a strong growth area for UPM.

The Chief Administrative Officer, Professor Matti Peltonen, supervised the preparation of dissertations in the company. The topic of one dissertation was “Adverse effects of three-shift work on employees”. The final conclusion was that there are no significant adverse effects. He was also a big fan of horn music.

Then there was an interesting project: “Harmonization of title policy between business units”. I don't know how it ended up.

In 1977, a good friend of mine, the late Jarmo Myllyrinne, recommended Pöyry to me. After a meeting with Risto Eklund and Kari Rämö, I started my career as a consultant at Pöyry.

The next time I met Niilo Hakkarainen at Pöyry, where he worked as a free lancer for some time after retiring. Jaakko often invited industry leaders to Pöyry after retirement - Nils Osara (FAO, Metsähallitus), Heikki A. Klemetti (Tampella), Aarno Esilä (Marimekko), Topi Heikkerö (Tehdaspuu), Aarne Hilden (Enso) and others. The leaders brought experience and movement to the organization, but at the same time they sometimes hindered the internal career development. Becoming familiar with consulting methods took some time from them. The company offered these former leaders interesting projects, a lunch benefit and a good company health service. At that time the office building also had its own travel agency, Onni Syrjänen's excellent car service, an affordable barber shop and, finally, a dentist. Jaakko wanted the employees to stay in the office and not go to the city to look for services.

I met Niilo Hakkarainen at Pöyry's health station in 2010. He was in a good mood and asked me again, “Will you come to my funeral?” Unfortunately, I was unable to attend.

When Valkeakoski was left behind, I remembered Jukka Virtanen's song "It was different in Juuso Walden's time, how I could forget it”.

Indonesia

“An intelligent man is sometimes forced to be drunk to spend time with his fools”

Hemingway

Indonesia was an interesting market in the 1980s - a large and growing population and third largest forest resources in the world. A Master Plan for the forest industry was needed to guide the use of resources. The factories were still small, but the potential was huge. For example, APP Sinar Mas Group’s factories Indah Kiat, Tjiwi Kimia, Lontar and Pindo Deli were established in the 1970s. Now APP's production is more than 20 million tons, including operations in China. Jouko Virta opened a local office in Jakarta, where I went to start the project.

During the weekend I had an opportunity to visit Bali, which I think is an overrated place. Already in the 1980s, crowds of tourists gathered in large numbers to watch the sunset at the Kuta Beach. A big mistake was to go to see Balinese dance and drum performance. 15 minutes of that noise was enough. However, I couldn’t get out of my seat because the auditorium was so crowded.

In Indonesia, I learned that it is polite to leave a little food a little on your plate at the dinner. Then the host feels that there was enough food and no more is offered.

Sunset at Kuta Beach, Bali in Indonesia

Sauna also feels good in the tropics, especially if there is a swimming pool available. My hotel only had a steam room, but one Finnish friend had a traditional sauna with a Finnish stove in his house. "The stove became a bit expensive when I accidentally also ordered the stove stones with air freight from Finland," he said.