Int. Journal of Business Science and Applied Management, Volume 7, Issue 2, 2012
Challenging the strategy paradigm within the paper packaging
industry
Malin Olander Roese
Lund University, Department of Design Sciences, Division of Packaging Logistics
Box 118, 221 00 Lund, Sweden
Telephone: +46 46 222 9701
Email: malin.olander@plog.lth.se
Annika Olsson
Lund University, Department of Design Sciences, Division of Packaging Logistics
Box 118, 221 00 Lund, Sweden
Telephone: +46 46 222 9734
Email: annika.olsson@plog.lth.se
Abstract
Formulating and implementing a new strategy may be a challenging task, especially if it alters the way in which
a company has operated and positioned itself before. This may be particularly true for companies within the
forest industry, like manufacturers of paper packaging products, pursuing differentiated customer value and
innovative solutions where, traditionally, success has been measured in volume and relative position on a cost
curve. In theory there are different schools of thought and approaches on how to go about formulating and
implementing strategy. In practice, going through strategic change may create a need to embrace new ways of
thinking and acting in order to close the gap between formulation and implementation, between knowing what
to do and doing it. This gap, particularly the interdependence between formulation and implementation in the
context of change between strategies of different schools and assumptions, merits more attention in literature.
The purpose of this paper is to contribute to the understanding of strategic change, illustrating a change process
of formulating and implementing a strategy through the lenses of schools of strategy and cognitive research. The
purpose is also to suggest areas for future research and practical guidance for organisations aiming to break
away from a reigning strategy paradigm in search for new ways to compete. Based on a longitudinal case study
of Billerud, a Swedish world-leading manufacturer of paper packaging material, two propositions are suggested
for future research and practical guidance for managers when formulating and implementing strategic change.
Firstly for an organisation going through strategic change, understanding the assumptions behind different
strategic intents and the link between a chosen strategy and critical core activities, capabilities and culture is a
prerequisite to enable a transition. Secondly, strategic change is enabled through an iterative and probing
approach between formulation and implementation which considers knowledge and learning of new concepts,
activity and culture as situated.
Keywords: strategic change, strategy implementation, customer orientation, innovation, paper packaging
industry
Acknowledgments: The authors would like to express their deep gratitude to Billerud: the interviewees and
those involved in facilitating this research, for sharing their experiences, giving feed-back and for allowing our
findings to be communicated. We would also like to extend a warm thank you to the anonymous reviewers for
their very constructive comments on how to improve earlier versions of this paper. Finally, we would like to
acknowledge the Bo Rydin Foundation for financing the research.
Int. Journal of Business Science and Applied Management / Business-and-Management.org
2
1 INTRODUCTION
Research shows that “…despite the enormous time and energy that goes into strategy development at most
companies, many have little to show for the effort” (Mankins & Steele, 2005, p. 66). The source of this shortfall
may lie in the actual planning and formulation of strategy, in the implementation and execution of strategy, or
both (Porter, 1996; Collins & Porras, 1996; Gadiesh & Gilbert, 2001; Kim & Mauborgne, 2004; Mankins &
Steele, 2005; Kaplan & Norton, 2007; Johnson, Christensen, & Kagermann, 2008; Neilson, Martin, & Powers,
2008; Porter, 2008). In order to address these shortfalls solutions may be found in literature on strategy and
management. However, knowing what to do is not the same thing as doing them.
In practice, setting out to formulate and implement a new strategy, particularly one that alters the way in
which a company has operated and positioned itself before, may be a daunting task. This may be especially true
for companies within traditional and primary industries, such as the forest industry, who have long competed on
the premises of an industrial economy where transformation, standardization and production has been at the
heart of business logic (Normann, 2001; Hayhurst, 2002). The transformation towards an economy where
knowledge, innovation and customer value are guiding principles question that inherent logic. In such an
endeavour, the strategy development process employed by many organisations may in itself be a deterrent for
new value creation and innovation (Dobni, 2010). Not understanding the link between the organisation’s
strategy, market orientation and new product development another hurdle, which in turn has received limited
attention in research (Frambach, Prabhu, & Verhallen, 2003).
In theory there are different schools of thought and approaches on how a company may go about
formulating and implementing strategy. A company can, according to Porter (1985), achieve a competitive
advantage through a distinctive way of competing, for example – through cost or through differentiation in
relation to its competitors. This notion is completely rejected by the authors behind Blue Ocean who discard
“…the fundamental tenet of conventional strategy: that a trade-off exists between value and cost...” (Kim &
Mauborgne, 2004, p 82). The proponents of the ambidextrous approach argue similarly the need and success of
companies who are able to exploit and explore at the same time (O'Reilly & Tushman, 2004; Sarkees, Hulland,
& Prescott, 2010). Where generic strategies have an external focus for leveraging competitive advantage and
position, the resource-based view emphasize internal capabilities and leveraging firm-specific (internal and
external) competencies to compete or achieve the strategic intent (Hamel & Prahalad, 1993; Herrmann, 2005).
Hence, the outcome of strategy and the process by which it is made will differ fundamentally depending on its’
underlying assumptions (Whittington, 1997).
Herrmann (2005) argues that whereas Porter’s models have helped firms analyse the industry and
streamline their strategies in the last decades, firms now need new ways and models of creating and preserving
knowledge and doing addressing the cognitive rather than analytical aspects of strategy. Normann (2001) calls
for the need for combining conceptual thinking and action orientation which can be related to Pfeffer and
Sutton’s notions of reducing the gap between the knowing and doing (Pfeffer & Sutton, 1999).
The separation, or gap, between formulation and implementation of strategy has long been addressed and
dismissed in literature (Mintzberg & Quinn, 1992; Cummings & Daellenbach, 2009). However, it remains an
issue in practice (Mankins & Steele, 2005). Furthermore, research on the interdependence between the two
(formulation and implementation), particularly in the context of change between strategies of different
assumptions, merits more attention (Johnson, 1992; Mankins & Steele, 2005; Sull, 2007; Melnyk, Hanson, &
Calantone, 2010). The Strategic change literature per se may provide the roadmap for the process (Kotter, 1995;
Mento, Jones, & Dirndorfer, 2002), but does not necessarily address the strategies involved.
With a reference to different schools of strategy within literature, and findings within cognitive research,
one company’s journey from a predominant generic paradigm of cost towards a more differentiated, blue ocean
or ambidextrous strategy is explored. The purpose of the study is to contribute to the understanding of strategic
change, illustrating a change process of formulating and implementing a strategy through the lenses of schools
of strategy and cognitive research. The purpose is further to suggest areas for future research and practical
guidance for organisations aiming to break away from a reigning strategy paradigm in search for new ways to
compete. The research is based on a longitudinal case study of Billerud, a Swedish world-leading manufacturer
of paper packaging material.
The Swedish Forest Industry
The forest industry, the pulp- and paper and the wood mechanical industry, is one of Sweden’s most
important primary industries representing approximately 12% of the nation’s GDP, export, and employment.
The pulp- and paper industry is in itself the third largest in Europe with manufacturers of newsprint, printing and
packaging paper, board and tissue. Manufacturers of pulp- and paper products such as Billerud are characterized
by its’ high-tech, capital intensive processes and products with a high knowledge content. Research and
development within production and process efficiency are key while the development of new products with high
value added have become increasingly important in meeting global changes of technology, competition from
Malin Olander Roese and Annika Olsson
3
emerging markets, and changing consumer demands. Structural development over the last three decades has
nearly halved the number of production facilities but doubled the capacity and production of paper (The
Swedish Forest Industries Federation, 2011; The Swedish Forest Industries Federation, 2012a; The Swedish
Forest Industries Federation, 2012b).
2 STRATEGY: FROM THEORY TO PRACTICE – A THEORETICAL FRAME OF REFERENCE
The forest industry has in recent years, like other primary industries, found themselves in search for new
ways to compete, challenging the conventional wisdom of its industry which in Porter’s terms has had a
homogenizing effect on competition (Porter, 1996). Industry experts have criticized the industry for its’ inability
to develop strategically in a new direction due to stiffening structures and a lack of market orientation and
entrepreneurship (Ottosson, 2008; Beckeman, 2008).
Different schools and different strategies
For an organisation in search for a new way to compete there may be different routes. Historically and still
today, Porter’s theory on strategy and the classical, or generic, approach has a strong hold both in literature and
practice (Whittington, 1997; Herrmann, 2005; Dobni, 2010). A company can according to Porter (1985) achieve
a competitive advantage through a distinctive way of competing, for example through cost or through
differentiation in relation to its competitors. Based on a unique and valuable position, strategy is then all about
making trade-offs and deliberately choosing a set of activities (different to competitors) and create fit between
all of them to deliver a unique mix of value. Different positions require different activities, hence the need for
trade-offs especially in choosing what not to do (Porter, 1996).
The need for trade-off is however rejected by the authors behind Blue Ocean (Kim & Mauborgne, 2004) as
“... the evidence shows that successful companies pursue differentiation and low cost simultaneously” (Ibid.
p.82). The problem argued by the authors of blue ocean strategies is being stuck in the old belief that trade-offs
are necessary. A blue ocean strategy is all about creating new uncontested market space, making rivals
irrelevant, through value innovation – simultaneously pursuing differentiation and low cost. This is in line with
the proponents of the ambidextrous approach who point at the need and success of companies who are able to
exploit what they have, through increased cost efficiency, and explore new areas for innovation and growth, at
the same time (O'Reilly & Tushman, 2004; Sarkees et al., 2010). Normann (2001) calls for a new business logic,
the ‘reconfiguration of value creating systems’ with the critical competence being ‘organisation of value
creation’ rather than production. Where the customer is a co-producer, and not the final destination at the end of
a value-chain, which was synonymous with the ‘industrial paradigm’. The resource-based view advocates a
move away from the traditional concepts of competitive advantage. From creating ‘strategic fit’, to that of
leveraging resources based on a ‘strategic intent’ (Hamel & Prahalad, 1989; Hamel & Prahalad, 1993).
For organisations who originate from the industrial era, changing logic implies a dramatic conceptual and
real change in how customers are viewed and how value is created (Hamel, 1996; Normann, 2001; Kim &
Mauborgne, 2005). This, in turn, might require a new understanding and implementation of new concepts,
competencies, tools and models. Research shows that for any organisation wishing to increase their customer
orientation and innovation it is important to understand the link between these two, and strategy, and to know
the relative impact of the actual strategy in relation to organisational values (Frambach et al., 2003; Dobni,
2010). “Understanding the links between a firm’s market orientation and its underlying business strategy is
critical to understanding how an organisations-wide commitment to markets can be created or, conversely, how
this commitment may fail to arise in a firm” (Frambach et al. 2003, p. 379). This is in line with Dobni (2010)
who argues that understanding the difference and the relationships between strategy and innovation is
foundational to becoming innovative.
Despite the views of different schools of thought there is an agreement that creating fit between core
activities and capabilities is the essence of strategy. Combining the ‘whole’ and not just focusing on one activity
or one capability is advocated by Porter (1996) as well as the authors of Blue Ocean (Kim & Mauborgne, 2005)
and Normann (2001). The more fit there is between company’s critical tasks, resources and competencies as
well as structure and culture, the more likely it is to achieve a competitive advantage (in Porter’s terms), create a
Blue Ocean, or be a prime mover (in Normann’s terms). Different strategies then require a different mix to
create fit. However, how these can be combined appears to be the issue.
With the aim to better understand the relationship and links between strategy and customer orientation and
innovation, along with archetypal tasks, competencies, organisational structure and culture, a theoretical strategy
landscape is proposed (see figure 1). Figure 1 is a summary of different schools of thought coupled with
inherent characteristics of different strategies (Porter, 1985; Porter, 1996; Frambach et al., 2003; O'Reilly &
Tushman, 2004; Kim & Mauborgne, 2005). Positioning dominant and contemporary schools of thought within
strategy and management on the same map is naturally to simplify respective theory. The point here however is
to visualize differences in theory and the potential challenges in practice. Without advocating one school or the
other, the authors’ proposed landscape aims to facilitate the understanding of relationships and links for an
Int. Journal of Business Science and Applied Management / Business-and-Management.org
4
organisation going through strategic change, moving from one end to the other, from cost to differentiation or
aiming to combine both.
Figure 1: A proposed strategy landscape based on different authors and schools of thought within
strategy (Porter 1985, Porter 1996, Frambach et al. 2003, O’Reilly & Tushman 2004, Kim & Mauborgne
2005
Strategy in practice – from knowing to doing through learning in context
For any organisation, and particularly for a company seeking to break-away from a reigning approach, it
may well be a necessary first step to question the assumptions behind the strategy, and the implementation
process rather than adhering to a set of suggestions deriving from one particular school or author. Such an
inquiry may be facilitated by an honest and fundamental questioning of the mental models or industry recipes
that govern the behaviour of any individual or organisation in order to think of new ways to compete (Argyris &
Schön, 1995; Markides, 1997; Jacobs & Heracleous, 2005).
Understanding the why before how is fundamental to closing the knowing doing gap (Pfeffer & Sutton,
1999), potentially more so when going through strategic change. From the perspective of learning and cognition
(Brown, Collins, & Newman, 1989), closing a similar knowing-doing gap would furthermore require that
individuals in an organisation learn, not just “learn about”, a new intended strategy and its’ prerequisites or
inherent characteristics as suggested in figure 1. The failure to do so can be viewed as an error, a mismatch
between what is intended and realized caused by individual and organisational defensive routines and theories in
use, hampering learning (Argyris, 1989). One such routine is the separation of knowing and doing which we are
taught from an early stage according to Brown et al. (1989). This can be compared with the criticism towards
the classical approach within strategy for having separated thought from action, and the formulation and
implementation of strategy (Mintzberg, 1994; Whittington, 1997; Harryson, 2000).
Brown et al. (1989) challenge the separation of what is learned from how it is learned and used through
pointing at learning and cognition as fundamentally situated, i.e. a product of the activity, context and culture in
which it is developed and used. Brown et al. (1989) propose three interdependent parts necessary for learning:
concept, activity and culture. The authors argue that a ‘concept’, like the meaning of a word is always under
construction and will continually evolve with each new occasion of use. They argue that knowledge can be
compared to tools which can only be fully understood through use, through authentic, real, ‘activities’ which in
turn are impossible to grasp unless they are viewed from within the ‘culture’ (Ibid. 1989).
Looking at strategy based on the notions of situated cognition one could view strategy as a tool (concept)
which can only be fully developed and understood through implementation (real work activity) which in turn is
dependent on the organisations culture (culture). Instead of focusing on what may hamper learning, the notions
put forward by Brown et al. (1989) offer an interesting perspective on the prerequisites for enabling learning. In
terms of formulation and implementation of strategy it is not only about the actual concept/-s of strategy ‘per se’
but also the way these concepts are understood and developed in ordinary activities and practices, in turn
influenced by the organisation’s culture. Hence, introducing a strategy of differentiation in an organisation
Formal organisational
structure
DIFFERENTIATION
greater value at higher average
unit price
Linked core activities and capabilities
Linked core activities and capabilities
Strategic intent
Innovation-
growth
Critical tasks:
Adaptability,
New products,
Breakthrough
innovation
Entrepreneurial
Competence
Adaptive organisational
structure
Measuring
Milestones,
growth
Culture of
Risk taking,
Speed,
Flexibility
Customer
orientation
Operational
competence
Critical tasks: Operations,
Efficiency, Incremental
innovation
Measuring margins,
productivity
Culture of
Efficiency,
Low risk,
Quality
Competitor
orientation
Strategic intent
Cost - profit
BLUE OCEAN
Simultaneous pursuit of
differentiation and low
cost
COST
comparable
value at
lower cost
Malin Olander Roese and Annika Olsson
5
previously focused on cost would require more than new definitions of, or tools for increased customer
orientation and innovation. To enable practitioners to act meaningfully and purposefully one needs to be
exposed to authentic activity, defined as the ordinary practices of a culture (Brown et al., 1989). In the face of
change, the process of learning and enculturation is dependent on new systems of behaviour and belief, or
cognitive apprenticeship as suggested by Brown et al (1989) .
3 METHOD
The theoretical framework and empirical findings presented here stem from a qualitative and longitudinal
case study from 2004 to the beginning of 2011 of one company within the Swedish forest industry named
Billerud. Billerud is a world-leading manufacturer of paper packaging material with three main business areas:
packaging and speciality paper, packaging boards, and pulp. The first two areas represent the main business with
approximately 75% of net sales. The four mills, three located in Sweden and one in the UK, and more than ten
sales offices serve 1000 customers in 100 countries. Europe is the core market, while emerging markets are
growing. The selection of the case was based on the aim to contribute to the understanding of strategic change
of a reigning paradigm why the type of industry, and particular company, proved suitable for the purpose
together with access over a period of time (Stuart, McCutcheon, Handfield, McLachlin, & Samson, 2002;
Gummesson, 2003). The unit of analysis is the strategic change under way and more specifically the managerial
actions and decisions (Kim & Mauborgne, 2005) involved in this particular case for implementing a strategic
change. The qualitative approach has allowed for capturing the individual perceptions of the studied change
(Voss, Tsikriktsis, & Frohlich, 2002).
During the first two years of the study (2004 to 2005) the aim was to identify the challenges of
implementing a new strategy (Olander-Roese & Olsson, 2007). In 2006, a new management team was put in
place, and the strategy revised. The findings presented here are based on a comparison between the initial
findings and the development within Billerud up to 2011 with the aim to contribute to the understanding of
strategic change.
The empirical findings collected between 2006 and 2011 (in order to be able to compare the initial
initiatives 2004 to 2005 reported on previously) are based on interviews, meetings/workshops and written
material. Nine (9) in-depth and semi-structured interviews were performed with six, out of eight, individuals in
the group management team and three individuals closely linked to prioritized strategic projects in the end of
2010. The interviewees in the group management team include the CEO as well as heads for packaging related
business areas, production and business functions such as HR and R&D. The three individuals outside the group
management were selected and interviewed based on their responsibility for technical development, business
analysis and development and service development respectively. The interview guide comprised of issues
covering: objectives and financial targets, strategy, customers/markets, products/services, innovation and
development, implementation and control systems. The interviews were aided by four images with copied
illustrations and text of the company’s: Business idea, Strategy, Organisational structure and Value chain, from
2004/2005 and 2009/2010 respectively. The images were used to contrast the differences and similarities
between the years and capture the interviewees’ experiences and reflections on the changes. The illustrations
and texts were collected from internal presentations and annual reports. Three meetings and workshops were
held 2008 to 2011 with members of the group management team to prepare and reflect on previous research and
new findings and propositions. Written material studied includes internal and external presentations, employee
magazines, annual reports, press releases and media articles.
Through an abductive approach, an iteration between theory and empirical findings has been allowed for
(Alvesson & Sköldberg, 1994; Dubois & Gadde, 2002; Olsson & Olander-Roese, 2005). In analysing the
empirical data from interviews and written material, qualitative content analysis has been applied (Patton, 2002).
The interviews were transcribed and summarized with findings in the written material. This was followed by
matching central events, decisions, actions, and experiences in relation to the themes identified in the initial
phases of the study when four main challenges to the implementation of the new strategy were identified. Firstly
“Dominant perspectives” referring to existing and predominant perspectives and ways of working with a strong
focus on production rather than customer and potential market needs. Secondly “Tools and Processes” referring
to a lack of definitions, tools and processes for market learning, new product development and innovation.
Thirdly “Strategy and strategic decisions” referring to assumptions and actions guiding strategy and strategic
decision not supporting the strategic intent. And last, the actual “Implementation approach” in itself which had
led to breakdowns in communication (Olander-Roese, 2008). The analysis of the interviews was complemented
with findings and content analysis of the written material on: particular events and focus areas, and descriptions
of targets, strategy, markets, business areas, and developments of internal programs, systems and processes.
Different sources of data were used to ensure the quality of the case study at hand (Benbasat, Goldstein, &
Mead, 1987; Yin, 2003). Furthermore a continuous dialogue with the case company has allowed for reflections
on preliminary outcomes and final propositions suggested in this article. This was an important step in order to
Int. Journal of Business Science and Applied Management / Business-and-Management.org
6
validate the findings, or rather demonstrate reasonableness, credibility and truthfulness in practice as well as in
relation to existing theory (Patel & Tebelius, 1987; Arbnor & Bjerke, 1994; Gummesson, 2000).
4 FINDINGS AND DISCUSSION: THE JOURNEY TOWARDS A NEW PARADIGM
Billerud was formed in 2001 through a merger of existing Swedish paper mills and introduced on the
Stockholm Stock exchange. During the first years, much work was spent on coordinating the activities of the
different mills. Synergies lead to increased production capacity and a significant rise in deliveries. In 2004 a
new strategy was developed where customer orientation and new product development were important
cornerstones. However, implementing the new strategy proved difficult due to the history and current strategy of
the company. To further complicate the situation, weakening of the market conditions, and rising costs for raw
materials and energy, brought the operating margin to negative levels in 2005.
Following the first attempt to institute the notions of ‘customer orientation’ and ‘innovation’, a new
management team was formed between 2005 and 2006. Together with external expertise Billerud’s objectives
and strategy were revised anew. In 2010 the financial target of operating margin was reached for the first time.
During the years in between, two issues of particular relevance to Billerud’s journey, contribute to the purpose
of this paper. Firstly, how to link and form new dominating ideas of customer orientation and innovation in
relation to the current paradigm guiding the firm and secondly, how to implement relevant tools and models for
innovation and business development.
Linking and forming new dominating ideas - Aiming to lead the future of packaging development
The central driving force for the new management team of Billerud was, and still is, to move away from a
traditional paper-pulp supplier to a customer focused, solution oriented company. Revising the strategy anew in
2006 aimed to clarify that intent and enable a move from a position of competing on price, volume and
‘receiving orders’, to taking a proactive lead in the development of future packaging and packaging solutions.
What was expressed as an aim to be ‘the customer's first choice when selecting packaging paper’ in 2004 has
evolved to the objective of leading ‘the development of future packaging with a focus on function, design and
sustainability’. The main aim was to, in parallel, establish the two cornerstones of strategy being world class
process efficiency and customer focused development.
Billerud’s point of departure, or rather that of the founding mills’, can be plotted to the left on the strategy
landscape where operations, efficiency and incremental innovation were key (see figure 1). When Billerud first
introduced the concepts of customer orientation and new product development in 2004, the link between these
and strategy as suggested by Frambach et al. (2003) was not established. Limited attention was paid to what
these terms actually entailed from the perspective of strategy, in addition to the practical and cultural
prerequisites (Olander-Roese & Olsson, 2007).
Revising the strategy in 2006 clarified the strategic intent through addressing the assumptions behind and
answering the ‘why’, before how, as suggested by Pfeffer and Sutton (1999). This was also coupled with
decisions based on a cultural view (as opposed to a behavioural view applied by Frambach et al. 2003), seeing
an organisation’s culture rather than only strategy as influencing the organisation’s market orientation and hence
new product activity and innovation (Deshpandé & Webster, 1989; Homburg & Pflesser, 2000; Frambach et al.,
2003). For Billerud the inherent ‘industrial view’ as phrased by Normann (2001) recognized by a culture in
favor of process efficiency, low risk, and quality did not promote the exploring culture of risk-taking and
flexibility sought for. As expressed by one interviewee “…we have decided to embark on a journey which
means we must maintain and increase our flexibility and our ability to respond to our customers in a way that is
much clearer now than it was before, that puts a lot of pressure on production. Historically the industry, and us,
have lived by the logic to produce as much as possible and sell what we produce, and it does not add up
anymore”.
One important decision to enable customer orientation, without reducing the focus on operational
excellence, was to re-structure the organisation much in line with the ambidexterity approach suggested by
Tushman and O’Reilly (2004) to enable exploiting and exploring simultaneously. In 2006 shortly after revising
the strategy three business areas were formed. The intent was to clarify the organisational responsibility for
customer focused development and sales on the one hand within the business areas, and the mills responsibility
for production efficiency and quality on the other. The commercial responsibility, which had previously been
with the mills, was placed with the business areas together with the development of new products and services.
In doing so, Billerud has allowed for a new exploring culture within the formed business areas, and a
strengthening of the existing culture of exploitation within the mills, of equal importance to ensure the quality
and development of the production processes. As Billerud’s strategy has evolved “culture, values and
employees” has been added as an important cornerstone of strategy to further emphasize the building blocks
paramount for achieving growth. However, fundamental challenges facing the new management team were that
of ‘back-selling’, a term connected with approaching the customers’ customer, and how to increase innovation.
Malin Olander Roese and Annika Olsson
7
The ring fight between operational excellence and customer development
When the decision was made to put more emphasis on ‘customer orientation’ already in 2004 it opened up
for a new perspective, extending the scope beyond the primary customer (the converters) to also include the
customers’ customers: brand owners and retailers. The intent was not to move forward in the value chain e.g.
through acquiring converting capacity. The intention was to move from a position of ‘receiving orders’ to taking
a more proactive stance, finding other meanings of value than price per square-meter. This is in line with
Normann (2001) who argue the need for a new business logic where ”…true customer orientation means that
one has to go beyond the direct relationship between oneself and one’s customer to understand the relationship
between the customers and the customers’ customer...” (Ibid. p.71). However, embracing the brand owners and
retailers, tapped on the deeply rooted taboo of ‘back-selling’ and was not regarded acceptable industry practice.
Managing the ring fight between “productivity focus” versus “customer-sales focus” created a need for steps,
solutions and a timeframe more suitable to Billerud’s organisations than initially foreseen. Revising the strategy
in 2006, giving new meaning to customer orientation and innovation has required learning, not just ‘learning
about’, in the relevant context and through ‘real’ activities to enable implementation in line with the suggestions
of Brown et al. (1989). For Billerud it was not only a matter of finding the right tools and processes for
identifying market needs and developing new product or services. Challenging ‘back-selling’ involved risk-
taking and a learning by doing approach much in line with the suggestions by Pfeffer and Sutton (1999). It also
involved enabling a new mind set as suggested by Normann (2001) – not only within the organisation but also
in the industry. Through intense communication in media and new innovative offerings, the image of Billerud
today is that of a ‘prime mover’ to use Normann’s terminology (Normann, 2001). That image may be stronger
outside than inside the company but has helped the company’s re-positioning on the market as well as in
strengthening the strategic intent internally.
Within the organisation, what in 2004 was perceived as a decision “put on top” of the regular tasks
performed, has become part of the daily activities within the business areas set up to work with customer
focused solutions. One of the contributing factors in this process was recruiting competence with experience
from working with brand owners and retailers. With support from the management team, and individuals in
charge, second customers were approached. The first attempts were by no means a success. However, through a
determined and yet tolerant trial and error approach, valuable market intelligence was gathered and relations
with new actors created. One of the interviewees recalled one of the first attempts to approach retailers “…we
met with retailer X, the heads and all, well prepared, presented our paper and our environmental approach and
their response was: ‘guys, we don’t buy rolls of paper, we buy packaging. So please come back when you have
thought this over and have something to offer.’ So we did that and realized it is the packaging solution that is
the key issue.” The reaction from primary customers, the converters, was not that of back-selling but rather a
positive response to the value that Billerud was able to contribute to them, in what has become a joint effort in
satisfying the needs and expectations of brand owners and retailers. For Billerud the feedback process from
talking to retailers and brand owners has become lead generators in the company’s own development of new
products and service solutions. Today, customer based solutions account for approximately five percent of the
turnover with the intention to be five folded.
Exploring and situating the concept of innovation
Introducing the idea of ‘innovative packaging solutions’ in 2004 led to a need for new tools and processes
which, at the time, were not familiar to the organisation. With the revised strategy in 2006 a number of potential
areas for innovation were identified and the achievements that followed can be understood through the
prerequisites for situated cognition, or enabling not only knowing but also doing (Brown et al., 1989; Pfeffer &
Sutton, 1999). Firstly, the term innovation itself was addressed in the context of Billerud with its’ overriding
strategic intent and different organisational cultures enabled through the new organisation. The term in itself
was found inhibiting for many years and extensive work was put into defining and putting in place an
interpretation and way of working suitable for Billerud, where previously development had been much tied to
the production processes improving efficiency and the quality of the paper. Similar to other interviewees one
explained the management’s work with innovation: ”I would like to say, or rather what we want innovation to
be…, we’ve struggled with the term, it is a rather intimidating concept, there are so many different views on
what innovation is. So we have chosen to describe it in three areas, where we believe we contribute, where we
aim to develop our strengths.”
Debating and testing resulted in three focus areas: radical business development, customer driven product
development and customer relations including events and workshops. In practice Billerud has worked with
parallel instead of sequential processes, developing and testing the same ideas and solutions on the market
simultaneously, with the result of launching innovative packaging solutions with registered trademarks. The
move would not have been possible without the fundamental and deep-seated knowledge of the paper within the
organisation, combined with a competent and flexible approach of test-runs and trial and error.
Int. Journal of Business Science and Applied Management / Business-and-Management.org
8
Today Billerud has arrived at an innovation model with two different processes and outcomes adapted to
the mills on the one hand, and the business areas on the other. While the mills have a process for improvements
and incremental development, the business areas have one for renewal and business development. In spite of the
different innovation processes, new product concepts have been tested in the mills and successfully launched, in
one particular case even without the consent of management. Billerud’s learning-by-doing approach allows for
new interpretations and action through ‘real activities’, hence enabling innovation in areas not foreseen. A closer
cooperation beyond existing customers to customers’ customers, has also included building a network with
suppliers, universities and interest organisations to support a more open arena for innovation.
Linking and situating – instead of formulating and implementing
From a theoretical perspective of strategy one could argue that it goes without saying that understanding
and making the link between strategy, core activities and capabilities (Porter, 1996; Normann, 2001; O'Reilly &
Tushman, 2004; Kim & Mauborgne, 2005) as well as customer orientation and innovation, is a prerequisite for
success. However, the limited research between strategy, customer orientation and new product development
identified by Frambach et al (2003), together with the empirical findings presented here, suggest that more
understanding is needed to facilitate such strategic change. We would argue that there is little consideration for
the actual outset of an organisation’s strategic endeavour, in relation to the process of linking. For Billerud, the
strategy paradigm that had formed the constituent parts of the company for decades, and its’ core activities and
capabilities, had little room for customer orientation and innovation in the way it was intended, when it was first
addressed. The actual progress made towards a new competitive position – aiming to move from a cost-focused
strategy to a strategy combining cost and differentiation in Porter’s terms, or a Blue Ocean, has been facilitated
by a deeper understanding of these links, not only from a behavioural view but also a cultural view (Deshpandé
& Webster, 1989; Homburg & Pflesser, 2000; Frambach et al., 2003). In practice, discussions within the
management team on the feasibility of the strategy and differences in view on the deadline for performance
output have been continuous, while at the same time a contributing factor to the changes. While on the one hand
clarifying the new strategic intent, the on-going journey to achieve this objective has required an equal share of
clarifying the assumptions behind the strategy to date. “It’s all about simplicity, a simple organisation, creating
trust and confidence between people. If you create a complexity in the communication and relations between
people you undermine that, from sales to the visionary stuff it’s all about the ability to concretize in all
simplicity what needs to be done, otherwise this journey will only be a power point-presentation” in the words
of one interviewee. The different actions and decisions taken between 2004 and 2011, has created a deeper
understanding of the links between strategies and core activities, capabilities and cultures. This in turn has
contributed to finding and developing new ways of working, recruit new competence, guide the allocation of
resources and structuring of the organisation as well as adapt the performance measures. “Today, we in the
management team talk exclusively about customers…no rather, we talk about business, innovation and
development. Volumes and production takes less space, if any.” as expressed by one person in the management
team. Based on the empirical findings and theoretical framework presented here we would therefore suggest the
following: (Proposition 1) for an organisation going through strategic change, understanding the assumptions
behind different strategic intents and the link between a chosen strategy and critical core activities, capabilities
and culture is a prerequisite to enable a transition. The proposed strategy landscape (see figure 1) may be one
starting point.
In order to overcome the formulation and implementation gap however, understanding the links is only the
first step. The main contributing factor to Billerud’s progress from 2006 and onward, is the way in which
management acknowledged and approached the differences in capabilities, tasks and culture needed. And
foremost, the iterative and interdependent process between new and existing concepts of the strategic intent,
work activities and culture. In the words of Argyris (1977), the new management violated the norms and games
respected and played in order to survive through challenging “back-selling” for example. However, this action
was coupled with establishing new “ordinary practices” both through approaching customers customer’s and
through doing test runs in the production facilitates, not common practice in the process and investment heavy
forest industry. Progress and projects have been allowed to flourish even if they have not always followed the
documented implementation routines or, for example, power point templates connected to new initiatives. The
recruitment of new managers have played a central part in setting a different, or rather complementary,
innovative culture, recognized by risk-taking, speed and flexibility through a process of joint interaction
between the “new” and the “existing”. As expressed by one interviewee: “This learning process we have entered
is so multifaceted. It’s about everything from our administrative systems to how we communicate, how we
should be organised, our control system and performance measures, about incentives for sales people; all this is
part of the journey that we are on. And what may seem very logic on the surface, and heading the direction we
are, is not trivial.” Billerud’s iterative implementation and learning approach for enabling strategic change,
moving towards differentiation while maintaining focus on cost, is illustrated in figure 2. The figure is
Malin Olander Roese and Annika Olsson
9
developed based on the suggestions by Brown et al. (1989) seeing learning for strategic change through the
lenses of situated cognition and different schools of strategy.
Figure 2: Implementing strategic change through the lenses of situated cognition. Figure developed based
on the suggestions by Brown et al. (1989) and authors within strategy (Porter 1985, Porter 1996,
Frambach et al. 2003, O’Reilly & Tushman 2004, Kim & Mauborgne 2005).
Hence, strategic change with the aim to create a new paradigm, linking new core activities and capabilities,
allowing for simultaneous exploitation and exploration has not only required linking or subsequent structural
measures as suggested by O'Reilly & Tushman (2004). To quote one interviewee: ”This is very much about
turning people’s heads around, to create the right attitudes is extremely important. And that journey, we have
certainly not reached the end of. Getting to the depth of the whole organisation, is a job not finished, if it is even
feasible…”. In their own words Billerud’s journey is still in an early phase. Issues of culture, organisation
structure and business models remain as well as finding new performance measures. Through the lenses of
situated cognition (Brown et al., 1989) and different schools of thought within strategy, Billerud’s journey from
2004 to 2011 is best described as an on-going movement and a process of knowledge and learning as situated –
much dependent on an interaction between the existing and wanted strategic ‘concepts’, ‘activity’ and ‘culture’.
Hence we propose that (Proposition 2): strategic change is enabled through an iterative and probing approach
between formulation and implementation which considers knowledge and learning of new concepts, activity and
culture as situated.
5 CONCLUSIONS AND SUGGESTIONS FOR FUTURE RESEARCH
The purpose of this paper is to contribute to the understanding of strategic change, especially for an
organisation challenging a reigning strategy paradigm. Through combining empirical research with different
schools of thought within strategy and a cognitive approach for learning we suggest two propositions
contributing to future research and practical guidance for managers when formulating and implementing
strategic change through: linking and situating.
Firstly we suggest that understanding the assumptions between different strategic intents and the link to and
between the subsequent core activities, capabilities and culture is a prerequisite for enabling a similar strategic
change. For theory we argue the need for further research on the link (or non-link) between assumptions of
current and intended strategy and particular activities, capabilities and cultural attributes of relevance for
enabling a viable strategic change. Future studies within the forest and paper packaging industry and similar
settings could aim to further identify, compare and develop frameworks for, for example, introducing
contemporary strategy concepts such as customer orientation and innovation. In the case reported here, the link
between strategy and these concepts was expressed to be particularly difficult due to the dynamics between the
productivity focus versus the customers-sales focus.
Secondly, and possibly more importantly in a similar situation, we suggest that a transition and
implementation is facilitated through an approach which considers knowledge and learning as situated. The case
DIFFERENTIATION
Linked core activities and capabilities
Linked core activities and capabilities
Strategic intent
Innovation-
growth
Critical tasks:
Adaptability,
New products
Customer
orientation
Critical tasks:
Operations,
Culture:
Low risk
Competitor
orientation
Strategic intent
Cost - profit
Billerud’s strategic intent to
take a leading position
through world class process
efficiency and customer
focused development
COST
The Culture/-s of the
Organisation
Authentic work
activities and
critical tasks –
forming and formed
by the Concepts
The Concept/-s
formulated as the
Strategic intent
and/or related
characteristics
EXISTING
NEW
Culture:
Risk taking,
Flexibility
Int. Journal of Business Science and Applied Management / Business-and-Management.org
10
study indicates that in spite of the outset with a revised strategy and plan, an iterative and probing approach of
formulation, interpretation and implementation coupled with purposeful activities acknowledging different
cultures, have been integral (but not always foreseen) parts of the journey. For theory we argue the need for
further research on the role of situated cognition in strategic change, and particularly the interdependency
between cognitive and behavioural aspects in formulating and implementing strategy. A study focusing on
identifying the content and relative impact between the interdependent parts of strategic ‘concept/-s’, ‘authentic
work activities’ and ‘culture/-s’ (see figure 2) could shed more light on the iterative process of strategy
formulation and implementation in strategic change. Furthermore it could be made more explicit what needs to
change and how, seeing that change takes time and may require more focus on the how compared to
implementing a strategy with no or limited change. Future research in this direction would require more in-depth
and longitudinal case studies beyond the management tier of an organisation.
An interesting aspect of the cognitive processes is also the role of language and particularly use of verbal
expression and their potential development during a change process when giving new meaning to new concepts,
tasks and capabilities. Further research is also suggested in the area of managing a dual focus, in terms of
strategy, exploring and exploiting through an ambidextrous approach, based on longitudinal studies.
For practice we argue that these findings are of high relevance for organisations, not least within primary
industries, facing the same or going through similar strategic change, questioning or challenging a strategy
paradigm. Adhering to calls for increased customer orientation and innovation is easy but making them
everyday practice, and strategically viable, may comprise more than adding them to the current strategy. The
propositions suggest that managers could benefit from acknowledging the strategic landscape suggested in this
paper as a means to prepare for strategic change. The findings also indicate that a strategic change process may
be facilitated through consciously applying an iterative process from the outset allowing for an effective
adaptation of strategic concepts such as value propositions, and development of capabilities and culture
considering ‘every day activities’.
On a final note the concluding propositions have limitations in that they have been derived from a single
case study and thus has not allowed for a cross-case analysis (Eisenhardt, 1989; Gummesson, 2000). However,
despite the empirical description being specific to one company, the resulting findings may be of general
relevance as studies of management and organisations benefit from longitudinal and in-depth qualitative
research (Gummesson, 2000; Gummesson, 2003). The aim to contribute to the understanding of strategic change
may benefit from even more explorative and patient research approaches within companies who are dipping
their toes in a new ocean without knowing what awaits below the surface.
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