**2.1 Structural change in the supply chain**

Pulp and paper industry (PPI) is the backbone of forest-based bioeconomy in Europe as big chunk of gross domestic product (GDP) of European Union (EU) comes from PPI. In recent years, the demand for printing and graphic paper in industrialized countries has declined; therefore the forest-based industry is prone to major structural changes, especially in forest-dependent countries. The industry needs to be more dynamic in developing new products, research-related ecosystems, and innovative business models [13].

**Figure 2** demonstrates the geographical structure of production and consumption of paper and paperboard in 2015. Asia is on top in both production and consumption while they are lagging behind in adopting the digital solutions. Conversely, the USA and Europe (particularly Finland) are leading in developing digital solution [16].

**Figure 2.**

*Worldwide production and consumption of paper and paperboard (2015). Original source: Watanabe et al. [13].*


World pulp and paper industry leaders and their digital ability (2015).

Ojala et al. [17] discussed that forest-based industry was not facing fierce competition until the 1990s and was running under low degree of internationalization with prime focus on business-to-business products while maintaining the long-term business relationships. The forest-based industry is reshaping over time due to new business dynamics, customer needs, global competition, and strategic orientation [18].

Nowadays, the increasing role of Latin America, Southeast Asia, and China has intensified global competition in pulp and paper industry by lowering the production cost for pulp and paper. Thus, many firms in pulp and paper industry need to innovate their business model, product portfolio, services, and processes. Therefore, forest-based companies are introducing the performance improvement programs to cope with the challenges in their value chain ranging from equipment reliability to analytics in commercial operations. The incorporation of digital solutions and internet of things (IoT) potentially delivers significant gains to the industry by focusing on the following areas:


The implementation of digital solutions in the forest-based industry is subject to the formation of a sophisticated global value chain comprising upstream and downstream players interacting each other and having the capacity of embracing digital innovations. **Figure 3** demonstrates the value chain of forest-based bioeconomy focusing on the PPI wherein digital solutions are incorporated in both upstream and downstream of the value chain.

The framework that facilitates the transformation of forest-based bioeconomy through digital innovation is illustrated in **Figure 4**.

#### **2.2 Consumer preferences and role of prosumers**

While learning about the transformative direction of forest-based bioeconomy, people's preferences cannot be ignored as both demand and supply sides are equally important in forest-based bioeconomy value chain. Wesseler and Von Braun [20] are of the view that customer's preferences are shifting toward eco-friendly products

**133**

**Figure 4.**

the prosumers.

**Figure 3.**

*Watanabe et al. [13].*

customers by using Amazon's digital platform.

to increase the acceptance of newly developed products.

*Digital Solutions in the Forest-Based Bioeconomy DOI: http://dx.doi.org/10.5772/intechopen.84828*

(bioproducts: food, textiles, composites materials) in both industrialized and developing countries. According to the Ministry of Economic Affairs and Employment of Finland [21], the demand of organic food is steadily increasing in supermarkets. The promotion of bioproducts, tax policies, and regulations are the drivers of shift in customer's preferences. Further, virtual communities are playing their role by sharing their views on what is ethical, sustainable, and eco-friendly by using the power of social media. People follow and take advices online; thus the role of digital technologies has increased in setting the people's preferences, and role of consumers has been changed to

*Value chain structure of the forest-based bioeconomy focusing on pulp and paper industry. Original source:* 

The increased consciousness toward sustainability and environmental issues has made prosumers to appreciate those companies who deliver great customer experience and are more responsible in using the natural resources in their operations. Therefore, companies are trying to find ways to waste less; for example, in 2013, Hennes and Mauritz (H&M) launched a global program for collecting used garments for recycling and transforming those to the new products. Similarly, Amazon is supporting individuals in multiple ways by letting them to offer their services (e.g., book publishing on kindle, cleaning, assembly, and electrician) to Amazon

The abovementioned trends indicate that the upstream of the value chain of forest-based bioeconomy is largely driven by the downstream of the economy; therefore all stakeholders in the value chain need to focus on consumer-driven business models and appreciate consumer's involvement in the innovation process

Amazon with its disruptive business strategy triggers the demand worldwide in the retail sector, which in turn stimulates the upstream industries in the bioeconomy chain. Amazon analyzes customer buying behavior by using big data

*Transformation of forest-based bioeconomy under digitalization. Original source: Tieto [19].*

#### **Figure 3.**

*Elements of Bioeconomy*

World pulp and paper industry leaders and their digital ability (2015).

**Production (Wood pulp) Export (Paper and paperboard) Consumption (Paper and** 

USA (7) Germany (13) China (62) Canada (11) USA (7) USA (7) Brazil (84) Finland (2) Japan (10) Sweden (3) Sweden (3) Germany (13) Finland (2) Canada (11) India (89)

*The figures in parenthesis indicate World ICT ranking (WEF, 2015).*

**Paperboard)**

Ojala et al. [17] discussed that forest-based industry was not facing fierce competition until the 1990s and was running under low degree of internationalization with prime focus on business-to-business products while maintaining the long-term business relationships. The forest-based industry is reshaping over time due to new business dynamics, customer needs, global competition, and strategic orientation [18]. Nowadays, the increasing role of Latin America, Southeast Asia, and China has intensified global competition in pulp and paper industry by lowering the production cost for pulp and paper. Thus, many firms in pulp and paper industry need to innovate their business model, product portfolio, services, and processes. Therefore, forest-based companies are introducing the performance improvement programs to cope with the challenges in their value chain ranging from equipment reliability to analytics in commercial operations. The incorporation of digital solutions and internet of things (IoT) potentially delivers significant gains to the

1.Optimization of tree plantation and forestry operations for improved yield

2.Constraints free supply to the downstream processing activities and reduce

3.Support skills development and technology transfer across the firm operating

4.Enable customer retention by improving the customer value and experience

The implementation of digital solutions in the forest-based industry is subject to the formation of a sophisticated global value chain comprising upstream and downstream players interacting each other and having the capacity of embracing digital innovations. **Figure 3** demonstrates the value chain of forest-based bioeconomy focusing on the PPI wherein digital solutions are incorporated in both upstream and

The framework that facilitates the transformation of forest-based bioeconomy

While learning about the transformative direction of forest-based bioeconomy, people's preferences cannot be ignored as both demand and supply sides are equally important in forest-based bioeconomy value chain. Wesseler and Von Braun [20] are of the view that customer's preferences are shifting toward eco-friendly products

industry by focusing on the following areas:

and quality

the supply chain costs.

downstream of the value chain.

through digital innovation is illustrated in **Figure 4**.

**2.2 Consumer preferences and role of prosumers**

in global settings

**132**

*Value chain structure of the forest-based bioeconomy focusing on pulp and paper industry. Original source: Watanabe et al. [13].*

(bioproducts: food, textiles, composites materials) in both industrialized and developing countries. According to the Ministry of Economic Affairs and Employment of Finland [21], the demand of organic food is steadily increasing in supermarkets. The promotion of bioproducts, tax policies, and regulations are the drivers of shift in customer's preferences. Further, virtual communities are playing their role by sharing their views on what is ethical, sustainable, and eco-friendly by using the power of social media. People follow and take advices online; thus the role of digital technologies has increased in setting the people's preferences, and role of consumers has been changed to the prosumers.

The increased consciousness toward sustainability and environmental issues has made prosumers to appreciate those companies who deliver great customer experience and are more responsible in using the natural resources in their operations. Therefore, companies are trying to find ways to waste less; for example, in 2013, Hennes and Mauritz (H&M) launched a global program for collecting used garments for recycling and transforming those to the new products. Similarly, Amazon is supporting individuals in multiple ways by letting them to offer their services (e.g., book publishing on kindle, cleaning, assembly, and electrician) to Amazon customers by using Amazon's digital platform.

The abovementioned trends indicate that the upstream of the value chain of forest-based bioeconomy is largely driven by the downstream of the economy; therefore all stakeholders in the value chain need to focus on consumer-driven business models and appreciate consumer's involvement in the innovation process to increase the acceptance of newly developed products.

Amazon with its disruptive business strategy triggers the demand worldwide in the retail sector, which in turn stimulates the upstream industries in the bioeconomy chain. Amazon analyzes customer buying behavior by using big data


#### **Figure 4.**

*Transformation of forest-based bioeconomy under digitalization. Original source: Tieto [19].*


#### **Table 1.**

*Finnish forest-based firms' initiatives under digitalization.*

analytics and offers recommendations to the customers for future buying based on their browsing history. Amazon's business strategy adheres to the shift in customers' preferences and response time to those changes by leveraging digital technologies as source of competence.

Similarly, leading forest firms are putting their efforts in understanding the consumer behavior and developing new products accordingly by using digital technologies and circular economy way of thinking. Examples of such trends are demonstrated in **Table 1**.
