Transformation of the Forest-based Bioeconomy by Embracing Digital Solutions

This paper attempts to explore a new insight to both industrialized and growing economies by demonstrating a digital-driven creative disruption in the forest-based bioeconomy which is beginning to replace its conventional and narrow concept of a forest-blinded economy. Notwithstanding the potential broad cross-sectoral benefits to both industrialized and growing economies, natural environments and locality constraints and the incessant challenge of distance have impeded balanced development of this economy. However, driven by digital solutions the economy has taken big steps forward in recent years. Digitalization has enabled real-time end-to-end supply chain visibility, improved delivery accuracy, stock level optimization and alignment with demand planning. These have led to digital ecosystem collaboration and a transparency crossover industrialized and growing economies worldwide. Thus, creative disruptive platform has emerged by embracing digital solutions. By means of an empirical analysis focusing on the noteworthy business activities at the forefront of both upstream and downstream of the chain, this paper demonstrates a transforming stream observed in the forefront of a forest-based bioeconomy chain. This research thus explores a new insight common to both industrialized and growing economies in constructing a creative disruption platform by embracing digital solutions.


INTRODUCTION
The forest-based bioeconomy is beginning to replace its conventional and narrow concept of a forest-blinded economy. The forest-based bioeconomy is an important sub-sector of the bio-based economy where forests are anticipated to deliver a significant contribution of biomass (Hetemaki, 2014;Scarlat et al., 2015). A bio-based economy can be defined as one using "production paradigms that rely on biological processes and, as with natural ecosystems, use natural inputs, expend minimum amounts of energy and do not produce waste as all materials discarded by one process are inputs for another process and are reused in the ecosystem." (Nebe, 2011). However, notwithstanding the potential broad cross-sectoral benefits to both industrialized and growing economies, natural environments and locality constraints and the incessant challenge of distance have impeded balanced development of this economy. Thus, digital solutions that may enable real-time global information sharing, and transparent transactions, collaborative creativity, and advanced analytics (Poyry, 2017).
To understand the changes in forest or environmental sustainability, it requires the consideration of forest-based products such as books, magazines, buildings, furniture, food, textile, packages and so on (Hetemäki, 2014). Within the forest-based bioeconomy of Europe, pulp and paper is an important industry which accounts for approximately 150 million cubic meter of wood consumption annually and adds 15 billion euros to the Gross Domestic Product (GDP) of European Union. (CEPI, 2014). Moreover, Pulp and paper industry accounts for 2/3 of the total production value of the Finnish forest industry as illustrated in   (2006 -2015).

Transformation of Forest-based Bioeconomy
Currently, European pulp and paper industry is undergoing the transformation due to changing customer needs and market dynamics under increased global competition and policies. Latin America and Southeast Asia have intensified the competition with low cost of production for pulp and paper respectively. In order to stay competitive, pulp and paper industries need to innovate their business models, products, services and processes. Consequently, digital solutions carry huge potential to transform the industry (CEPI, 2015). Pulp and paper industry constitutes sophisticated global value chain consisting of upstream chain and downstream chain as illustrated in Fig. 3.

Figure 3: Value Chain of Forest-based Bioeconomy focusing on Pulp and Paper Industry
Source: Authors' elaboration based on (Beamon, 1998).
The upstream value chain attributes to the raw material from forest to primary production of wood, pulp, paper and paperboard while the downstream value chain attributes to the manufacturing of printing paper to the final products for the customers. Fig. 4 illustrates global leaders in upstream and downstream in forest-based bioeconomy in 2015. Watanabe,C. Naveed,N. Naveed,K. Neittaanmäki,P. 194 Journal of Technology Management for Growing Economies, Volume 8, Number 2, October 2017 It is evident from the Fig. 4, Asia accounts for the largest share both in production and consumption, and they are depending on traditional system. Contrary to Asia, Europe (particularly Finland) and the US take pivotal role in digital solutions leading them leaders of upstream and downstream for digital solutions (CEPI, 2015) . Figs. 5 and 6 demonstrate trends in production and consumption of paper and paper products in the world over the last five decades. Figs. 5 and 6 demonstrate trends in production and consumption of paper and paper products in the world over the last five decades. Fig. 5 highlights also trends in Finland as a leading upstream country in the value chain (See Appendix 1 yearly statistics over the period 1961-2015).   Source: Finnish Forest Industries (2016).
These Figures suggest that global structure of production and consumption of paper and paper products has dramatically changed after the Lehman shock in 2008 particularly in Europe and North America. While global production of paper and paper products continued to steady growth initiated by these global leaders corresponding to consumption increase before the Lehman shock, these initiatives were substituted by emerging economies, particularly by Asia.
In addition to economic stagnation after the Lehman shock in 2008, increasing concern to de-carbonization has accelerated consumption decline in global leaders and subsequent production decrease in these leaders as typically observed in Finland which shares 6-8% global pulp production. Such a balanced decline in global leaders corresponds to digitalization of economy as clearly observed in North America which demonstrates explicit production decline corresponding to the net bubble bursting in 2000.
However, if we look at Fig. 6 together with Fig. 2 (and also Figs. 12-2 and 13 in the next section) carefully, we note that decreasing pace in production in Europe and North America have stagnated and signature of resurgence can be observed very recently (PTT, 2016). This resurgent possibility inspires us a hope of digital solutions to the long-lasting impediments of the forest-based bioeconomy.
Notwithstanding the potential broad cross-sectoral benefits to both industrialized and growing economies, natural environments and locality constraints and the incessant challenge of distance have impeded balanced development of the forest-based bioeconomy. However, recent advancement of Watanabe,C. Naveed,N. Naveed,K. Neittaanmäki,P. 196 Journal of Technology Management for Growing Economies, Volume 8, Number 2, October 2017 digitalization has enabled real-time end-to-end supply chain visibility, improved delivery accuracy, stock level optimization and alignment with demand planning. These may lead to digital ecosystem collaboration and a transparency crossover industrialized and growing economies worldwide. Thus, creative disruptive platform can be emerged by embracing digital solutions.
To date, many studies analyzed value chain of the forest-based bioeconomy (Hetemaki, et al. 2014;Toppinen et al., 2017;Mustalahti, 2017;Wolfslehner et al., 2016;Giurca, A. 2017;Hetemaki, 2016;Pelli et al., 2017) from different dimensions. For example, Hetemaki, et al., 2014 described the European forestbased sector as a creative destruction. Toppinen et al., 2017 attempted how the pulp and paper industry may transform strategically, and possible potential for value creation. Mustalahti, 2017 focused on the conceptual understanding of responsive governance of the forest-based bioeconomy by describing the need for inclusion of citizens and environmental capability in the forest-based bioeconomy. The study conducted by Wolfslehner et al., 2016 gave insights on the potential use of forest-based indicator sets in Europe and how bioeconomy indicators can be designed in the future. Giurca, A. 2016 in his study attempted to describe the forest-based bioeconomy for Germany as well as strengths, weaknesses and policy options for lignocellulosic biorefineries. Although various studies are available on the forest-based bioeconomy however, none has undertaken the analysis from the view point of creative disruption platform by embracing the digital solution and encompassing the whole value chain of pulp and paper industry from up-stream to downstream.
The objective of this paper is to analyze the transformation of forest-based bioeconomy and it explores new insights common to both industrialized and growing economies in constructing a creative disruption platform by embracing digital solutions. This paper conducts an empirical analysis by focusing on the noteworthy business activities in the case leading firms UPM and Amazon positioned at the forefront of upstream and downstream of the chain respectively.
The structure of paper is as follows: Section 2 analyzes structural change in supply chain of the forest-based bioeconomy. Perspectives of transformation towards creative disruption platform is presented in Section 3. Section 4 briefly summarizes noteworthy findings, implications, and suggestions for future works.

Supply Chain Embracing Digital Solutions
Given a possible digital solutions to the impediments of forest-based economy, it can be attributed to the maturity of the following conditions:   Source: Authors' elaboration based on (Beamon, 1998) and (CEPI, 2015) With such structure that enables to embrace the advancement of digital innovation, digital solutions as illustrated in Fig. 8 have incorporated in the value chain thereby transformation of forest-based bioeconomy has been enabled.

Structural Change in Downstream (1) Market Structure
Aiming at analyzing structural change in downstream of the forest-based bioeconomy as a consequence of transformation toward digital solutions, Watanabe, C. Naveed, N. Naveed, K. Neittaanmäki, P.

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Journal of Technology Management for Growing Economies, Volume 8, Number 2, October 2017 Table 1 and Fig. 9 review trends in sales volume, sales revenues and prices of books by types in the US. substitution changed from 2012. Contrary to re-gaining popularity of p-books, sales volume and subsequent sales revenues increase in e-books have stagnated. This "renaissance" of p-books remind us of the resurgence of the US music industry initiated by the "renaissance" of live music by assimilating digital innovation initiated by digital music (Naveed et al., 2017). Inspired by this noting "renaissance" in p-books, Fig. 10 reviews trends in sales volume of p-books and e-books in the US over the period of 2004-2015.  In order to further analyze dynamism leading to "renaissance" of p-book under digitally-rich environments and Amazon's digital solution challenge, Fig. 11 compares dynamism between price decrease and sales volume increase in p-books and e-books. Fig. 11 demonstrates that contrary to e-books behavior, p-books constructed a virtuous cycle between price decrease and sales volume increase after 2012 while they suffered a vicious cycle previously. This dynamism may be the source of p-books "renaissance" and this can largely be attributed to Amazon's digital solution oriented strategy (Johnson et al., 2017). (average in 2013-2015).

Prices Decrease Rate of Books in the US by Types
Watanabe, C. Naveed, N. Naveed, K. Neittaanmäki, P.

Customer's Buying Behavior
Amazon pays special attention to customers propensity that "We read our news on tablets and phones, work all day on screens, but at the end of the day we might just want something on paper -a book, magazine, or newspaper -to read with thought and relax" (Stora Enso, 2017) Given that p-books "renaissance" can largely be attributed to Amazon's digital solution oriented strategy, however customers' buying behavior should be analyzed.
With this postulate in mind, Fig. 12 analyzes customers' buying behavior of books in the US. Figure 12 demonstrates continuous increase in e-commerce in buying books in the US (Fig. 12-1), Fig. 12-2 demonstrates noteworthy change that books sale by bookstores changed to increase in 2016, first time after decline from 2007.
This change demonstrates one of the institutional source of p-books "renaissance" similar to that of live music in the US music industry (Naveed et al., 2017). People preference shift from excessive e-books and e-commerce to p-books by brick and mortal shopping should not be overlooked. Taking such  (Lavecchia, et al., 2016).

Amazon's Disruptive Business Strategy
As reviewed earlier, Amazon's digital oriented strategy has provided significant impact on p-books "renaissance" in the US. With its basic principle of "merging Watanabe, C. Naveed, N. Naveed, K. Neittaanmäki, P.

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Journal of Technology Management for Growing Economies, Volume 8, Number 2, October 2017 net and real" Amazon has been endeavoring ICT-driven disruptive business strategy. In line with this strategy, Amazon acquired a giant physical store, Whole Foods in June 2017 (Yglesias, 2017). Opening a considering number of brick and mortar bookstores is in line with this strategy The new business strategy of Amazon is driven by a company's reaction time to changes in consumer demand and preferences. Each transaction tailors the experience for both the retailers and customers. From the operational perspective, inventory inefficiencies are virtually eliminated and from customer's perspective, there is never-ending supply of inventory. Table 2 summarizes this strategy.

Acquisition of a giant physical store, Whole Foods -merging net and real (cf. Co-evolution of live music and streaming music) Original source: Johnson et al. (2017). American Association of Publisdhers (AAP) -Monthly Statshot
Given the significant role that Amazon plays in the very end of the downstream of pulp and paper industry chain, its digital oriented strategy, ICT-driven disruptive business strategy will impacts on the upstream of this forest-based bioeconomy chain.

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STRUCTURAL CHANGE IN UPSTREAM A Fluid Industry Ecosystem
Inspired by the foregoing resurgent possibility in pulp and paper industry observed in the downstream of its value chain, particularly in the US p-books market, structural change in upstream of the chain was analyzed focusing on its leader, Finland. A possible sign of resurgence in the downstream market as observed in the p-books market in the US provides confidence of its prospect. Furthermore, transformation trend in the whole value chain of pulp and paper industry toward digital solutions and Amazon's ICT-driven disruptive business strategy as reviewed in the preceding sub-section suggests a possibility of creative disruption platform embracing digital solutions through the whole value chain of this industry.   . Source: Finnish Forest Industries (2016). Watanabe,C. Naveed,N. Naveed,K. Neittaanmäki,P. 204 Journal of Technology Management for Growing Economies, Volume 8, Number 2, October 2017

Embracing Digital Solution for Competitiveness
Corresponding to the foregoing anticipation toward digital solutions noteworthy digital solutions challenge can be observed in leading forest firms in Finland. Table 3 demonstrates noteworthy digital solutions challenge initiated by leading forest firms in Finland such as UPM, Stora Enso and Metsä. By utilizing advanced digital innovation such as digital maps, GPS, online wood trade, drone helicopters and virtual reality these leading firms have been endeavoring to replacing the traditional non-renewable materials with renewable, recyclable and low-impact alternatives.

UPM's Disruptive Business Strategy
UPM has changed its business model from a vertically integrated forest industry model into a company with six separate business areas. UPM has a versatile business portfolio and good geographic spread. The versatile use of forest biomass and focus on competitiveness and innovation will continue to advance their Biofore strategy. UPM's Biofore strategy includes continuous improvement programmes and short-term actions to drive performance; mid-term growth projects as well as mid-to long-term development work to create new, high value-added growth (UPM Annual Report, 2016).
With such endeavor supported by the advancement of digital innovation, ICT-driven disruptive business strategy, similar to leading challenge observed in the downstream of the value chain initiated by Amazon, has been undertaken by leading firms in the upstream of the chain. design approach consists of 8 steps as (i) selection of low impact materials, (ii) reduction of material usage, (iii) optimization of production techniques, (iv) optimization of distribution systems, (v) reduction of impact during use, (vi) optimization of initial lifetime, (vii) optimization of end-of-life system, and (viii) new concept development. Advanced innovation has been deeply involved in each respective steps and systems integration has been accelerated thereby effects of digital solution can be maximized.

Selection of low impact materials
Selection of low-impact materials, for example, by replacing fossil fuels with bioenergy and fossil raw materials with sustainable options.

Reduction of material usage
Reduction of material usage by applying smart production techniques, designing longer-lasting products with less material and reusing components.

Optimization of production techniques
Optimization of product techniques by continuously improving operational performance, for example, by reducing energy and water consumption and by sharing services and utilities.

Optimization of distribution systems
Optimization of distribution systems, for example, by using lighter and reusable packaging in end-product delivery.

Reduction of impact during use
Reduction of impact during use by lowering the environmental impact of customer processes, for example, by offering lighter paper grades to reduce the fuel consumption of distribution.

Optimization of initial lifetime
Optimization of initial lifetime by offering extended-life products that are multifunctional and recyclable, easy to maintain and repair.

Optimization of end-of-life system
Optimization of end-of-life systems by selecting non-toxic, reusable materials that are easily separated and sorted for reuse.

New concept development
New concept development, for example, thinking of new ways to use the product already in the design phase, without forgetting multi-functionality and shared use.

Source: Ecodesigned Products (UPM, 2017).
In UPM, transformation of business strategy, business portfolio and business performance started back in 2008. UPM has yielded the following benefits in recent years through the appreciation of above eco-design approach: 1) Transparency and accountability -commercial strategies, benchmarking, Watanabe, C. Naveed, N. Naveed, K. Neittaanmäki, P.
3) Growth -focused investments with attractive returns and clear competitive advantage. UPM aims to add value to its business with competitive and responsible operations through building a global platform.

Creative Disruption Strategy
Appreciated by accelerating endeavor towards digital solutions initiated in the forefront of downstream and upstream of the value chain of pulp and paper industry as reviewed in the preceding section, creative disruption platform embracing digital solutions can be anticipated. Fig. 14 illustrates the concept of this platform.
Advancement of digital innovation leverages reconstruction of traditional institutional systems indigenous to conventional forest-blinded economy encompassing (i) low productive production system, (ii) rigid rules and conventional customs, (iii) traditional business models, and (iv) law and regulations applicable to non-digital economies.
Reconstructed institutional systems in turn create new business systems such as (i) new digital technologies, (ii) products and services, and (iii) new business model.
These new business systems accelerate reconstruction of traditional institutional systems. Thus mutually inspiring virtuous cycle between disruption and creation emerges leading to constructing creative disruption platform embracing digital solutions.

Digital Solutions in Transformation into Creative Disruption Platform
Advancement of digital innovation thus transforms value chains of forest industry into creative disruption platform in a stepwise way as illustrated in Fig. 15.
Traditional one way supply chain from forestry to consumption (step 1) transforms into creative disruption platforms within upstream and downstream, respectively (step 2). Further digital solutions in downstream leverage disruption of upstream (step 3) which reacts to inducing new business systems creation in downstream (step 4). Thus creative disruption platform through whole value chain of the forest-based bioeconomy can be expected. Source: Authors' elaboration based on (Beamon, 1998) and (Hetemaki, 2016). Watanabe,C. Naveed,N. Naveed,K. Neittaanmäki,P. 208 Journal of Technology Management for Growing Economies, Volume 8, Number 2, October 2017

Analysis of Creative Disruption Platform Construction
In order to demonstrate the foregoing hypothetical expectation with respect to possible transformation of forest-based bioeconomy into creative disruption platform, an empirical analysis was conducted focusing on the effects of creative disruption in downstream on upstream market. Fig. 16 outlines framework of this analysis. Aiming at demonstrating the emergence of the above creative disruption, the analysis was focused on the effects of Amazon's creative disruption efforts in downstream as reviewed in 2.2 on market capitalization of UPM, leading firm in upstream as reviewed in 2.3 (See the details of yearly statistics Appendix 1).  It is generally postulated that market capitalization of UPM is governed by its indigenous efforts as operating income improvement and increase in R&D investment increase. It is also subject to external situations as economic environment represented by S&P 500 index in the EU. Furthermore, given the creative disruption between upstream and downstream, it should be influenced by Amazon's creative disruption efforts in downstream as represented by its stock price. Based on postulate, a correlation analysis identifying the governing factors of market value of UPM was conducted. Table 5 summarizes the result of the correlation analysis between market value of UPM and governing factors to this value both in upstream and downstream over the period 1998-2016.  The figures in parenthesis indicate t-statistics: Significant at the *1 1%, *2 5% and *3 30% level. Table 5 demonstrates that market value of UPM is subject to indigenous efforts as operating income improvement and R&D increase as well as economic environment as generally anticipated. In addition, Table 5 demonstrates the significant effect of stock price of Amazon that represents the consequence of creative disruption efforts in downstream. While this effect reacted negative impact on UPM market value up until 2011, it changed to positive inducement from 2012 corresponding to Amazon's creative disruption efforts endeavored from these years as reviewed in 2.2. This positive reaction could be considered as an evidence of the emergence of creative disruption between downstream and upstream of the value chain. Fig. 17 demonstrates correlation between stock prices of Amazon and UPM and supports the forgoing correlation analysis. Fig. 17 demonstrates that Amazon's stock price increase induced UPM's stock price from 2013. Watanabe, C. Naveed, N. Naveed, K. Neittaanmäki, P.

Source: Yahoo Finance and Nasdaq Helsinki Stock Exchange
On the basis of the foregoing analyses consecutive creative disruption between Amazon and UPM as illustrated in Fig. 18 was demonstrated. This suggests digital solutions in transformation into creative disruption platform in the forest-based bioeconomy.

CONCLUSION
In light of the noteworthy transformation stream observed in the forefront of forest-based bioeconomy by embracing digital solutions, its platform dynamism was analyzed. An empirical analysis focusing on the noteworthy forefront business activities in both upstream and downstream of the supply chain was conducted. UPM (Finland's leader) and Amazon (US leader) were taken as representing respective stream. Noteworthy findings include: (i) Similar to music industry, resurgent trend can be observed in recent years in book industry. (ii) This is initiated by a renaissance of p-books. (iii) This renaissance can be attributed to people preference shift from excessive e-books to p-books and also e-commerce to brick and mortal shopping. (iv) Digital innovation enabled to satisfy this requirement by constructing a virtuous cycle between price decrease and purchase increase in p-books. (v) Correspond to such transformation stream in print media industries, e-commerce giant Amazon has endeavored creative disruption by merging net and real through acquiring giant physical stores. (vi) Induced by such a significant transformation stream in the forefront of downstream of forest-based bioeconomy, similar ICT-driven transformation stream has impacted on the upstream of the economy. (vii)Forest and its products industries have also been transforming by embracing digital solutions. (viii)This transformation, in turn further accelerates the transformation of downstream of the economy. (ix) Thus, creative disruption platform has taken big steps in the whole chain of forest-based bioeconomy. (x) All can be attributed to the digital innovation that enables real-time endto-end supply chain visibility, improved delivery accuracy, stock level optimization and alignment with demand planning.