How the World’s Oldest Company Reinvented Itself7 February, 2018 / Articles
The decline in demand for paper hit Stora Enso hard. By 2011 the pulp and paper giant — the world’s oldest corporation, dating back to 1288 — had laid off over one-third of its 30,000 employees. Though profitable again, the company needed to transform itself into a global renewable materials company.
Jouko Karvinen, the CEO at the time, and his team decided not to depend on consultants, which would have been the typical way to go. Instead, they sought to reenergize and leverage their own people, but, Karvinen explained, “We also did not just want to handpick the usual senior managers we had always worked with before, because we knew that, in order to drive the transformation of the company, we needed new and fresh perspectives.”
Among a number of initiatives to kindle the transformation, Stora Enso took a novel approach to change management. Rather than handpick the usual senior managers, a team called Pathbuilder was formed of a diverse group of insiders to present senior leaders with new ideas. Think of it as a “shadow cabinet.” To start, the Pathbuilder team undertook establishing a new company purpose and values along with the design of a group-wide process for how to implement disruptive innovations and digitalization.
On a larger scale, the Pathbuilder group supported Stora Enso’s transformation into a global renewable materials company. In 2006, 70% of revenues and 60% of the company’s profits still came from paper; today the new growth businesses contribute 67% of sales and 76% of profits. Since 2011 the share price has more than doubled. The culture is also evolving and improving, as evidenced by an annual survey that tracks the main levers for the transformation, including innovation and sustainability, leadership, team, and engagement.
Here’s how the Pathbuilder program succeeded — and how you can implement it at your company.
The initiative began with an ad on the company’s intranet where anyone in the organization was invited to apply to the Pathbuilder program — an internal change initiative designed to address some of the most critical challenges facing the company at the time. The ad read: “As questioning old ways of doing things and finding new and different solutions to satisfy customers, shareholders, and employees is a daunting challenge, we have concluded that the Group Executive Team needs help.”
Two hundred and fifty employees from throughout the organization applied to become Pathbuilders. Following a thorough selection process, including interviews, ability tests, and an assessment center, 16 participants from widely different functions and levels of seniority were selected to work with top team sponsors over a six-month period. Interestingly, many of the Pathbuilders who excelled in the program had not been on the radar of Stora Enso’s established talent screening system.
When designing the Pathbuilder journey, Stora Enso made five choices that, in combination, contributed to its success in the company’s continuing transformation.
First, and most important, by relying on the self-nomination approach, the company tapped into the hidden energy, diversity, and skills of its employees. As a result, Pathbuilder represented different corporate functions, geographies, and personality types. In addition, participants came from all hierarchical levels of the organization. As one participant commented on this mix: “We had very senior teammates with an intimate understanding of the organization working alongside recent hires who brought fresh outside perspectives. It was this mix of perspectives that allowed us to come up with unconventional yet implementable ideas and recommendations.” As a testament to the diverse group of talent assembled, more than 70% of the Pathbuilders have moved into significantly different or more-senior positions since they participated in the program.
Second, the leadership team was closely involved in the projects, sponsoring the teams throughout the six-month journey and emphasizing how critical the initiative was to the transformation of the company. On the one hand, this elevated the visibility of the program and enticed the most capable and motivated candidates to apply. On the other hand, top team sponsors also benefited from the continuous and intense interaction with the Pathbuilders. When sponsors worked with their teams and engaged in discussions over the six-month period, they were challenged to open up to the potential of new ideas and, over time, develop different perspectives and views of the business. Because of their active involvement throughout, the sponsors were ultimately more eager to move the project recommendations forward in their respective line organizations.
Third, building the project work around mission-critical challenges was important not just to motivate participants but also to sustainably engage top team sponsors. If projects had been set up primarily for the sake of participant learning, as is often the case in executive education programs, the sponsor’s interest would likely have waned after one or two runs. However, since project sponsors saw pressing challenges being resolved, the program became a vital vehicle to help them achieve business goals. One business head comments: “Initially, we had to coerce the top team colleagues into submitting their projects. After having witnessed project outcomes over several years, in 2015 all of us were ultimately competing with 14 proposals, which were directly pulled from the strategy, for one of four project slots.”
Fourth, intensive training helped accelerate contribution. Building a diverse team with highly motivated people was necessary, but not sufficient. Several of the Pathbuilders, though smart, young, and energetic, had little or no experience working in close collaboration with top management on highly complex challenges, so enabling them to perform was essential. More concretely, participants learned specific, project-relevant skills in areas such as strategy, structured thinking, innovation, digital, and, equally important, leadership to be able to work effectively as a team and navigate the dynamics and difficult trade-offs of the senior leadership team. In each cohort, the Pathbuilders convened for three five-day, face-to-face modules where they learned relevant concepts and received outside inputs, which they directly integrated into their project work.
Fifth, Stora Enso closely tracked both the business and the people impact of the Pathbuilder program. Working outside the line organization created impact, but also a lot of noise in the system, as it challenged traditional ways of working. In particular, the self-nomination process upended the established power distribution and people’s sense of entitlement, as companies would normally appoint people to be part of important initiatives rather than allow “just anyone” to apply. To manage and counteract this noise and to maintain momentum, business impact was rigorously measured by following up on the results of each project. The impact on people was measured by tracking how many participants had moved into considerably different and/or more-senior positions within 12 months of finishing the program. These tangible success stories served as proof points to justify and sustain the chosen approach over time.
The critical decision that made the Pathbuilder program a key vehicle to drive change within Stora Enso was the self-nomination process for participants, which allowed for diverse teams that mixed background, age, and experience. However, this move would not have been nearly as effective, and could have backfired, had the top team not made the decisions outlined above that created an overall structure of mutually reinforcing and self-sustaining actions. Supporting the change agents to learn, develop, and grow; tasking them with projects that were mission-critical to the company’s future; encouraging them to challenge and cooperate with the senior management team; and closely tracking the impact of these efforts — these were levers that ultimately enabled the Pathbuilders to contribute significantly to Stora Enso’s transformation journey.