At the inaugural FDE dinner in Helsinki, produced in partnership with Genpact, a group of 40 CFOs and business leaders heard Tapio Korpeinen, CFO and EVP energy for UPM, explain how the Helsinki-based giant has been transforming operations to drive value growth and profitability.
In the world-famous game of 'rock, paper, scissors', paper normally beats rock. In Finland today, rock and metal currently dominates the music scene, with 54 bands per 100,000 inhabitants. On the other hand, paper, as an industrial commodity, over the past few years, has metaphorically been cut by scissors. The decline in paper demand in Western Europe was one of the key drivers for UPM's transformation - nothing to do with the popularity of heavy metal or rock though.
On a mild October evening at the prestigious Hotel Kämp, keynote speaker Tapio Korpeinen referred to two key turning points in UPM's transformation (for more on this, see our cover story on page 32). First, in 2005, UPM decided to reduce paper production by 4.4 million tons a year and restructure into three business groups: upstream, midstream and downstream. Then, in 2013, the company changed the way it operated by establishing six stand-alone businesses.
"Ten years ago, UPM was a traditional vertically integrated paper company, where the paper business in the Western world was the core business. From that, we have taken the old value chain and changed into six quite independent businesses that have been decoupled from each another," he said.
Korpeinen noted that although independent, these businesses make use of the support provided by UPM's own shared services organisation. A number of transactional processes within this operating model are now being delivered or managed by third parties, including Genpact, which two years ago won a contract to create a global hub for UPM's transactional finance processes in Kolkata, India.
Next-level shared services
Pieter van den Goor, Genpact's VP and head of Nordics, who was one of the key architects of the UPM-Genpact deal, made the introductory address and touched on the success of the deal to date.
Following Korpeinen's speech, Pascal Visée, executive adviser and former chief enterprise support officer for Unilever, served as moderator for the session and moved the discussion on to talk about how companies can take shared services to the next level. He emphasised the importance of companies moving away from managing shared services on a functional basis and towards process-driven global business services. He also highlighted the importance of digital tools such as robotics, big data/analytics and cloud-based delivery.
"Digital is a crucial consideration, with many industries, and their competitive dynamics, set to be forever altered. The key is to harness digital in a way that can enhance growth, enable business agility and drive cost savings. If the right strategies aren't adopted, money will typically be haemorrhaged on initiatives that return inadequate ROI," said Genpact SVP Ahmed Mazhari, emphasising the focus on digital.
Mazhari's colleague Patrick Cogny, SVP infrastructure, manufacturing and services, explained that Genpact architects what it calls the 'Lean DigitalSM enterprise', through a unique approach based upon its patented Smart Enterprise Processes (SEPSM) framework to reimagine its clients' middle and back offices, and thus propel their digital transformation strategies.
"Lean DigitalSM is a combination of classic and cutting-edge methods - specifically, lean principles, advanced digital technologies and a discovery process that involves design thinking - to harness digital's revolutionary power in an agile way. Ultimately, the emergence of Lean DigitalSM practices can help generate material impact for large enterprises through the latest technologies, faster," concluded Cogny.