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The R&D debate.

In my "Nip Impressions" column of February 15th in TAPPI Over-the-Wire, TAPPI's electronic newsletter, I challenged the conventional wisdom of research and development activities in the pulp and paper industry. Introducing the concept of "what" we make as a distinction from "how" we make it, the column suggested the responsibility for the two types of R & D lie in different sectors of the pulp and paper industry


"What" we make is a vital subject that is the responsibility of pulp and paper manufacturers. As an industry, we can only achieve vitality by introducing new or improved products that successfully compete with products made from other materials Examples are the corrugated container replacing wooden barrels the disposable diaper replacing cloth diapers, and the paper cup replacing common water glasses in public facilities. "What," or for short, W-R&D, is solely the responsibility of pulp and paper companies. Individual companies--at great cost and in secrecy--take the risks needed to invent these products.

"How" we make pulp and paper products can be largely the responsibility of suppliers to the industry, although enlightened paper companies will seek proprietary "hows" in order to solidify their competitive edge. Let us call this H-R&D. Done correctly, H-R&D gives them a competitive edge over other suppliers if they can successfully prepare and defend patents. However, H-R&D does not give pulp and paper manufacturers a particular edge, unless they choose to spend the money to procure the supplier's machines, products, or processes on an exclusive basis--an extremely expensive proposition.


The paper industry is currently involved in Agenda 2020, an initiative that involves the Department of Energy and key forest industry partners (including TAPPI). While honorable in its own right, Agenda 2020 is not about improving the vitality of the industry and will not do so. Go to the website and see if you can find anything about improving the vitality of the pulp and paper industry. The third sentence on the home page of this site succinctly says what Agenda 2020 concerns: "... These technologies are aimed at cutting energy use, minimizing environmental impacts, and improving productivity in industry ..." There is nothing here about improving paper company profitability because Agenda 2020 is H-R&D. Again, H-R&D does not improve the returns of entities making the "what" of an industry unless obtained on an exclusive basis.

Now, before all of you currently involved in Agenda 2020 initiatives overload my email, please understand I am not finding fault with Agenda 2020. Cutting energy use and minimizing environmental impact are certainly noble goals Improving productivity (which really means doing more with fewer employees) is also inevitable. My point is simply this: Agenda 2020 will not revitalize the industry improve return on investment (ROI), or in any other fashion be the "Holy Grail" we are seeking.

For example, take the subject of improving return on investment. If H R & D conducted under the auspices of Agenda 2020 is widely available to the industry, all will adopt it. Thus, all will receive the gains in operating cost savings. In a matter of months, those savings will be given up through lower finished product prices, for each company will be willing to do so to seek a larger market share. The consumer will receive an advantage by paying less for the paper products they buy, but the industry--once this process makes a full cycle--will not improve its t401.


We need to take a lesson from the automobile industry. On a worldwide basis, the industry makes cars essentially the same way. Their manufacturing methods are much more efficient and technologically advanced than they were 50 years ago. Nevertheless, successful, high margin, "hit" products do not come from the "how" they are made, but from "what" is made. Hits are very lucrative, but also very fleeting. You may have bought some of these: the '57 Chevy, '65 Mustang, '86 Taurus, '92 Explorer, '00 PT Cruiser. Neither the government nor suppliers to the automobile industry developed any of these. In every case, a manufacturer took risks and received large rewards.

The pulp and paper industry has not had a real "hit" since the disposable diaper debuted in the mid-1960s-almost 40 years ago! Who will accept the challenge, take the risks, and show us that this industry can still be vital and relevant in the 21st century?

ABOUT THE AUTHOR: James R. Thompson is Chairman and CEO of Talo Analytic International, Inc., art Atlanta-based consulting company. He is also a member of TAPPI Editorial Board, Contact him at
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Title Annotation:Spotlight
Author:Thompson, James R.
Publication:Solutions - for People, Processes and Paper
Date:Apr 1, 2002
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