Comment Column

A look outside the box

The balance of production, supply, and demand has changed. The basic structures under which we operate have changed-through consolidation, divestitures, and so on. The challenge to the industry from electronic media-although we've all seen it coming-represents a change we have just begun to grapple with. But it's not only the business fundamentals that have changed. We've changed. We've gone through the wringer and we've learned some very tough lessons. Now we're enjoying better times.

I believe our current reversal of fortune comes wrapped in a golden opportunity. Now, when we're not in imminent danger of going down for the third time, we can catch our collective breath. We can evaluate the changes we've been through, start asking some new questions, and start looking for new answers. So, where do we go from here? Beats me. I'm more than willing to gaze into my crystal ball at things that can be researched or projected. Behavior: that's a tough call. What I will share with you is what I hope the future holds.

To make it in the future as an industry, we're going to have to put our egos on hold. To survive in the future, let alone thrive, we're going to have to cooperate in ways which are unprecedented for our industry. Here's why: In an increasingly global marketplace, an increasingly electronic marketplace, we have to think outside the box. We have to break with past paradigms-paradigms which included a self-destructive tendency, in good times, to overspend, overbuild, and overestimate.

Consumption may be up now; global markets may look rosy. But, truly, nothing lasts forever. The paperless office may be a figment of some futurist's ripe imagination. But not taking the electronic threat seriously is equally a fantasy. We might not know exactly what, we might not know exactly when, but electronic media will have an impact on our business. When it does, I don't want to be the guy that says, "What just happened?"

In the future, as consumption levels off and declines, it's the low-cost producer that will survive-the producer who resists the temptation to repeat the industry's past mistakes. From Abitibi-Consolidated's point of view, if we start building capacity again like we did in the '80s, we're signing a suicide pact. From now on, all our growth will be responsible growth. How do we ensure that? We're already taking all the obvious steps on cost, spending rationalization, and capacity. If we're going to continue to be healthy, I suggest that we have to ask new questions and find new answers.

I believe a lot of those answers will come from pursuing a kind of cooperation we're not used to in our industry. Cooperation not just between companies, but also between companies and customers. What I am suggesting is totally legal cooperation under the laws of both the United States and Canada.

Cooperation with customers. We should strive to take some of the volatility out of the market by cooperating with our customers. We have tried in the past to find new pricing mechanisms that would even things out. There's been no shortage of good will, but we need to try harder and be more innovative. The solutions may lie in transportation, inventory management, or better quality papers. I don't know for sure. But I do know that the old model has not served any of us well. It's costing producers money. It's costing newspapers money. It's worse than robbing each other because in a very real sense we're each robbing ourselves.

Industry cooperation in the form of alliances. At the moment, when we talk about joint ventures, we're usually talking about working together outside North America. When we've had a problem at home, we've sought out markets abroad. As we expand into other markets, that's not going to be an option. We won't be able to play part-time in someone else's backyard without hurting ourselves-because that's going to be our backyard too. As we go into emerging markets, we can't repeat the mistakes we made at home. It makes far more sense to go into emerging markets cooperatively.

It's been much harder on our egos to cooperate at home. Our thinking seems to be, why work with another company when we can stand pat and tough it out? Mergers are rough-seven out of ten fail. With those odds, companies should only embark on mergers and acquisitions for strong business reasons, not strong ego reasons. But that doesn't mean we can't realize synergies through working together at home in strategic alliances. There is juicy low-hanging fruit in our own backyards-perfect legal fruits in areas such as market and product research.

The time has come for our industry to work together on issues that go beyond the immediate realities of our competitive marketplace. Taking a collaborative approach would be an unusual step for this industry. We face common challenges over the long term. The time to act is now, to shake off comfortable behavior patterns which may ultimately be self-destructive.

Ronald Y. Oberlander is operating chairman
Abitibi-Consolidated Inc. This comment column is excerpted from a keynote speech given at the Publishing and Communications Papers Conference in Montreal in September.

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