Any business needs a coherent strategy if it hopes to succeed. However, in a climate where marketplace and financial changes are becoming ever more rapid, clinging mindlessly to a strategy can be a recipe for disaster. Simply put, companies today must be more agile in their thinking to take advantage of business opportunities that may present themselves.
North Vancouver’s Fortress Paper Ltd. has carved out a good and growing business niche since it began in 2006. That’s when CEO and chair Chadwick Wasilenkoff bought separate paper mills in Germany and Switzerland to produce specialty papers: security paper used in banknotes, passports and visas; and specialty papers such as non-woven wallpaper-base products and graphic and technical paper. But in 2009, the crushing downturn in the overall forestry industry threw an opportunity at Wasilenkoff that would move the company in a completely different direction. He had to decide: should Fortress stick with successful execution of a strategy or take advantage of an opportunity?
Wasilenkoff has always approached business as an investor instead of as a manager, and so he applied solid investment principles in order to reach his decision. One of the primary ones, he believes, is that “it’s better to be lucky than good.”
When Toronto’s Fraser Papers, which made printing and publishing papers, became a victim of the recession and filed for creditor protection in June 2009, Wasilenkoff started looking at its assets, especially Fraser’s shuttered hardwood pulp mill in Thurso, Quebec. The mill drew Wasilenkoff’s interest because it had the perfect technology for an idea he’d been playing with for some time: the conversion of hardwood pulp to dissolving cellulose, a commodity that was being sought by Asian textile producers. As the price of cotton soared, Asian textile companies wanted to replace it with rayon, which is derived from dissolving cellulose.
Wasilenkoff decided the opportunity was too good to pass up and went for it. He formed a subsidiary that obtained the Thurso mill for the fire-sale price of $1.2 million. After a $153-million conversion, it will switch from producing northern bleached hardwood kraft (NBHK) pulp to dissolving cellulose.
Wasilenkoff brought Quebec on board by providing jobs for union workers who had been laid off since the mill closed. The Quebec government was only too happy to lend him the funds needed for the conversion. Also, the Quebec and federal governments were willing to help fund a green 25-megawatt co-generation power plant fueled with wood waste and other biomass.
The mill will begin turning out dissolving cellulose in 2011, but in the meantime Fortress also got lucky. The NBHK market, which was in a severe downturn, turned up because of factors such as the Chile earthquake and a strike in Sweden. Suddenly, the plant that was closed because of low NBHK prices was turning a profit that will continue during the conversion.
• Get out of the groove. People tend to get caught up in groupthink. Wasilenkoff could see an opportunity because he takes a contrarian and long-term view of his and other industries.
• Think like an investor. Fortress earlier moved into wallpaper because a new method had appeared that made it profitable. Wasilenkoff determined that the Thurso mill was low risk and high return.
• Don’t drink the Kool-Aid. Look at everything around you from many angles. Wasilenkoff was able to make his decision because Fortress wasn’t a typical forest products company, which is usually concerned more with cost-cutting than its product mix.
Check out Tony's blog at bcbusinessonline.ca/insider