First published in the Digitalist on April 26 by Alfred Becker
With the explosion of a digital economy, it’s tempting to dismiss analogue materials as archaic. We reimagine our world as moving more and more online. That leaves traditional modes of communication and commerce behind.
Paper and packaging, for example, may seem outdated, but that’s not actually true. We still need paper for many purposes. Moreover, packaging isn’t going anywhere. Its value as a medium for transporting commercial goods will ensure that. Instead of going the way of the dinosaur, paper and packaging companies are merely transforming.
They are now putting a magnifying glass on traditional value chains in search of new business and new profits. This puts a new spin on the conventional idea of disintermediation. Below, we’ll talk about that classic idea and how paper and packaging is rewriting it. We’ll also talk about where these industries might find expanding markets in future.
What is disintermediation?
Disintermediation has a relatively simple definition, according to Merriam-Webster. It means the elimination of an intermediary in a transaction between two parties. In other words, the most basic definition of disintermediation is the removal of a middleman. In the case of a paper company, it might mean deciding to buy wood itself rather than wood that has already been pulped. Thereby a company owns more of the supply chain.
This has several benefits. One is being able to control costs. Another is being able to keep more of the profits associated with adding value to a product, i.e. turning wood into paper for distribution to customers. And a third is being able to control the sourcing of materials and their eventual distribution. This not only helps companies compete more effectively, but gives them better oversight. That in turn can lead to greater environmental success and more.
It’s no surprise, then, that disintermediation is a popular business decision with both large and small companies. Cutting out middlemen can be simpler and more profitable. It can also take some pretty interesting forms, as we’ll see below.
Disintermediation in paper and packaging
In paper and packaging, companies are increasingly looking up, down, and across their value chains. They’re doing this because they hope to expand into additional markets. And guess what? It’s working.
For example, a large multinational pulp and paper company applied disintermediation techniques to sell their graphical paper products more directly to their end customers, including distributors and office supply stores. They are able to have more control over their process and both increase their own profits and reduce pricing because of of disintermediation.
New digital business models have enabled a lot of these developments. Hyperconnectivity makes it easier for the company to source better products and find buyers. Digital customer engagement allows them to take stock of what their buyers need. And digital transformation makes all sorts of novel developments possible. That leads to majorly expanding markets.
Disintermediation and expanding markets
Granted, disintermediation is not automatically valuable. Depending on the business model, it may not work as well. For instance, points out David Steele writing for the University of Alaska Anchorage, there are some serious barriers to entry. If a company cannot do what its intermediaries do nearly as well, it might not be a great idea.
However, disintermediation generally offers a ton of opportunities. Consider combining forest products with the latest technology. This has serious implications for the Internet of Things, the idea that soon everyday objects will have the ability to send and receive information.
Transmission performed by, say, packaging materials has a wealth of benefits. They might be able to report on warehouse or shipping conditions. They could help consumers track products.
Or they could authenticate products so customers know they’re the real deal.
The beauty of Industry 4.0 is that it will enable ever-greater amounts of interconnectivity and information. This will make it easier for business to pinpoint where they might disintermediate.
They can then offer better products to customers. They can shorten supply chains and add more value to consumers. And they can spend more time innovating and less time dealing with middlemen.
The result is bound to be a higher degree of innovation and success. We will see this both within the paper and packaging industries and beyond it. As our case study demonstrates, this business approach significantly advances innovation. It also reduces waste and targets consumer needs. Overall, it can make business and the world better and more successful.
The global paper and packaging industry is in a state of transition as it tries to thrive in this age of digital media and paperless technology. Learn How Digital Transformation can Save Paper and Packaging.
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