Boise Automation Canada LTD - The Lost Order at Northern Paper

W12785
BOISE AUTOMATION CANADA LTD.: THE LOST ORDER AT

NORTHERN PAPER (A) (REVISED)
Professor Michael Taylor wrote this case solely to provide material for class discussion. The author does not intend to illustrate
either effective or ineffective handling of a managerial situation. The author may have disguised certain names and other identifying
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Copyright © 2012, Richard Ivey School of Business Foundation Version: 2015-06-11
On September 9, 2011, Rob Allison stared out the window of his Sudbury, Ontario office. He was
disappointed with the news that he had just lost a $1.2 million opportunity with Northern Paper Inc.
(Northern), a paper mill in Rocky Falls, Ontario. The opportunity had been to design, supply and install
an automated control system for Northern’s wood chip handling system. Allison, the senior account
manager in northern Ontario for Boise Automation Canada Ltd. (Boise), had more than 20 years
experience selling automation systems in heavy industry. If he had won the order, it would have easily put
him over his target quota for 2011 and would have significantly boosted his incentive payout. Now, with
less than three months before the end of the year, he was unlikely to meet his target for the year. Allison
felt like someone had just stolen the money for his family’s summer vacation, which may actually have
been the case since he would likely not receive the bonus he had been counting on this year.
Although greatly disappointed, Allison wanted to understand what had gone wrong and to learn from the
experience to avoid repeating it. What should he have done differently? He started by reviewing his notes.
THE AUTOMATION EQUIPMENT AND SYSTEM MARKET
Automation Systems
Automated control systems were widely used in many manufacturing processes. An automation system
was an integrated system that usually included a series of sensors, actuators and controllers with
programmed logic to automatically control the equipment in the manufacturing process. A simple
example of an automation control system was a household heating system. The furnace in a home could
be simply turned on when heat was needed and turned off when the house felt warm. A thermostat
automatically controlled the furnace by sensing the temperature in the house and then taking the
appropriate action, that is, to turn the furnace either on or off automatically. A programmable thermostat
added input variables beyond the temperature in the house, including the time of day and the day of the
week. The programmable thermostat was the system controller with the programmed logic.
This document is authorized for use only in Prof. Vinod Kalia's B2B Marketing_09/20/2022 at SOIL Institute of Management from Sep 2022 to Mar 2023.
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Industrial automated control systems often controlled the operation of batch, or continuous
manufacturing, processes. Industrial process control systems could control the temperature of a liquid, the
speed of a production line, the volume of fluid being pumped and many other manufacturing variables.
Industrial automated control systems commonly had hundreds, and sometimes thousands, of measurement
sensors and a similar number of process control actuators.
The design of automation systems required two broad skill sets. First, a designer needed in-depth
knowledge of the technically complex and ever-changing components of industrial control systems.
Second, a designer needed a comprehensive understanding of the process to be automated.
AUTOMATION SYSTEM COMPETITORS
The automation market consisted of several types of competitors: manufacturer solution providers,
independent system integrators and hardware suppliers. Automated control systems were normally
purchased as a complete package. Rarely did end-users buy hardware and design their own system. The
system supplier usually designed the new automation system, installed or supervised the installation of
the system, programmed the controllers and provided any training necessary for the customer.
Manufacturer solution providers were automation hardware manufacturers that also provided turnkey
automation solutions. Canada had approximately five to 10 large manufacturer solution providers,
including large global competitors such as Honeywell, Siemens and Rockwell. Independent system
integrators were engineering firms that were independent of any manufacturers. Canada had
approximately 20 large multinational engineering firms in addition to several dozen mid-size independent
integrators and hundreds of small independent integrators. Mid-size integrators tended to focus on a short
list of specific industries where they had expertise in client processes. Smaller firms usually built their
business on in-depth knowledge of specific customers, strong customer relationships and strong customer
service. The advantage of independent integrators was their ability to employ the equipment that best
suited the application, regardless of the manufacturer. The advantage of manufacturer solution providers
was their deep technical knowledge of their products and, usually, their worldwide resources with client
industry experience and expertise. Hardware suppliers manufactured sensors, communication devices,
actuators and controllers. Normally, hardware was purchased as part of a system, except when a part was
required to repair an existing system.
PAPERMAKING INDUSTRY
The papermaking industry had a long and storied history in Canada. Today, making paper was a high-
tech, capital-intensive, energy-intensive automated process in a competitive global market. An integrated
paper mill first converted logs to wood chips, then converted the wood chips to wood pulp, which was
then processed into finished paper. Canadian papermakers competed against low-cost suppliers around
the world with a sharp focus on cost control and production efficiency. Consequently, Canadian paper
mills operated tightly controlled 24-hour continuous processes with minimal production outages.
Most of the operations in a paper mill were automated. Normally, any additions, updates or modifications
to any portion of an automation system in any part of a paper mill required the approval of a number of
people in the company’s organization. The initial need for a change could be identified by a machine
operator in the mill or by the mill’s engineering staff. Next, the engineering staff usually defined the
specific details of the required changes to the automation system. Ultimately, the mill’s chief engineer
was responsible for the final decision on any alterations or additions to any process in the mill.
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Once the required modifications were defined, the engineering department investigated the projected cost
and completed a cost-benefit analysis. Automation systems suppliers were sometimes asked for budget
proposals and pricing to help improve the accuracy of the engineer’s cost-benefit analysis. If the
suggested control system improvements were economically feasible, the engineering manager forwarded
a request for funding to the finance department. The funding request was weighed against capital hurdle
rates and the priority of other funding requests to determine whether to allocate funds to the project, thus
completing the funding request process.
Prior to funding approval, the director of operations or the mill manager was required to also approve any
changes to any equipment in the mill since he or she was responsible for production output. Any changes
to the mill’s equipment or the processes could dramatically affect production levels and scheduling.
Once the funding for the project was approved, the engineering department worked jointly with the
purchasing department to finalize a specification for the project and to identify a list of qualified
suppliers. Each qualified supplier was sent a request for quotation (RFQ), which included a detailed
specification and the due date for the proposal.
In addition to a firm-price proposal to the requested specification, suppliers sometimes submitted alternate
proposals that included suggested improvements to the project.
Once submitted, each proposal was evaluated to determine the best supplier for the project. Everyone on
the mill management team, by and large, took a general management perspective on all activities and felt
responsible for the management of the mill’s profitability. Normally, staff in the purchasing department
reviewed the commercial terms of the proposal, while staff in the engineering department evaluated the
technical aspects of each proposal. In addition to price, suppliers were also evaluated on technical
expertise, project management capabilities, experience and subjective judgments, such as the likelihood
that the project would progress smoothly and be completed on time with minimal problems. If a supplier
submitted an alternate suggested improvement, which had not been requested in the specification, the
suggested improvement was evaluated to determine whether it had merit and would fit within the
approved funding of the project. If an alternate to the specification met those criteria, the engineering
department would next seek approval from operations to understand any unforeseen impacts of the new
suggestion. Ultimately, all proposals were evaluated on price after their technical merits had been
approved. Once a supplier was selected, staff in the purchasing department finalized a contract between
the supplier and the paper mill, after which both companies appointed a project manager to manage the
implementation and communications during the life of the project.
BOISE AUTOMATION CANADA
Boise was the Canadian arm of Boise Corporation Inc., a multinational manufacturer of electrical and
electronic equipment, including automation equipment, which conducted business in a wide variety of
industries around the world. In Canada, Boise specialized in turnkey automation solutions that included
custom design of the automation system, supply of all equipment and components in the system and
complete turnkey installation and start-up services to make the system fully functional for the customer.
This work required considerable process knowledge of client systems; consequently, Boise had focused
on several specific industries to ensure its staff had the requisite in-depth design knowledge and client
process expertise. One of its target industries was the papermaking industry.
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Boise had a state-of-the-art product line, which included features that it considered a competitive
advantage in the market:
• New high-resolution graphics on the system monitors, making it easier for operators to graphically
see the status of fluid levels, temperatures and flow rates.
• The higher resolution monitors made it possible to display more on-screen data than any other system
on the market.
• Unique on-screen help functions assisted customers in making adjustments to the program settings.
• Latest technology sensors were equipped with
− improved accuracy for optimum control,
− improved reliability in harsh industrial environments such as paper mills and
− embedded high-speed communication technology that was ready for the next generation of high-
speed controllers, which were beginning to emerge on the market.
Although the complexity of the system and the new on-screen features had been criticized because of the
considerable time required for customers to learn to use them, the product line was recognized in the
industry as the most capable system on the market.
The design of automation systems required an understanding of the customer’s needs so that an
appropriate solution could be proposed to suit those needs. Consequently, some of the basic conceptual
design work needed to take place at the earliest discussion stages so that the proposed system would meet
the complicated needs of the situation. Boise had an excellent reputation in the market for high customer
satisfaction, largely attributed to the effort that its engineers put into understanding customers’ needs.
The Boise sales organization was very aggressive and followed a structured sales process to maximize the
win rate and, consequently, the company’s growth rate. Because many approaches could be used to
design an automation system, it was important for the proposed design to match the customer’s
requirements as closely as possible. Once the customer’s needs and preferences were understood, the
design team could conduct a preliminary design that would be presented as part of the company’s
proposal. The proposal was forwarded to the customer in a document, but, most times the proposal was
also presented in a formal face-to-face presentation, which allowed the customer to ask questions (see
Exhibit 1 for an overview of the Boise sales process).
NORTHERN PAPER INC.
Northern was an integrated paper mill located in Rocky Falls, Ontario, approximately a three-hour drive
from Sudbury. For more than four decades, Northern had been manufacturing paper at the mill beside the
falls for which the town had been named.
THE OPPORTUNITY
In February, Allison received a call from Dan Reynolds at Northern, asking whether Boise would be
interested in bidding on a new automation system for Northern’s wood chip handling system. Over the
course of the following months, Allison met with Reynolds and others at Northern to discuss Boise’s
proposal (see Exhibit 2 for excerpts from Allison’s sales call log).
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The Disappointing News
Seven months later, Allison had just read an email from Reynolds, indicating that Boise had lost the
order. Only minutes earlier, Allison had felt satisfied that Boise had submitted a proposal that included
superior products at an extremely competitive price.
Allison telephoned Dieter Haase, the Eastern Canada regional sales manager, and informed him that
Boise had lost the $1.2 million opportunity with Northern. Haase received the news moments before he
walked into the Friday afternoon senior management meeting where he passed along the disappointing
news to the senior Boise management team.
The Ripple Effect
Jenny DeBour, the Boise engineering manager, immediately warned the team of a utilization drop in the
engineer department during the upcoming quarter. The resource schedule had been built with the
expectation that a number of engineers would be devoted to the Northern project for several weeks.
Jean-Marc Belanger, the vice-president of finance, was equally disappointed. The lost revenue would
have an impact on the company’s profit forecast, as well as on its cash flow projections for the upcoming
quarter, both of which had already been submitted.
SALES FORCE MANAGEMENT
Now, as Haase sat in his office late on that Friday afternoon, he didn’t need anyone to add their
disappointment to his. Although the sales team had improved their performance in the last year, as the
manager of the sales team, Haase still wondered what else he should do to help avoid a repeat of the loss
at Northern. In the automation business, most negotiations represented a large piece of business.
Consequently, losing an order had a large impact and, as was noted by Belanger and DeBour, had a ripple
effect in the organization. Haase wondered what he could do to improve his own management of the sales
team and improve the effectiveness of his account managers. To help avoid surprises like the unexpected
loss at Northern, Haase wondered if he could determine the probability of winning other opportunities
that existed in Boise’s sales funnel.
ROB ALLISON
As Allison sat disappointed, he looked out his office window and wondered why Boise had lost the order.
What should he have done differently? He was eager to learn from this experience and not repeat it.
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EXHIBIT 1: BOISE AUTOMATION CANADA’S SALES PROCESS
Opportunity Pursue Update CRM

Opportunity (Close
Assessment
Y/N? Opportunity)
No
Yes
Investigate Submit Update CRM

and Develop Proposal (Close
Y/N? No Opportunity)
Action Plan
Yes
Develop and Win

Update CRM
Present Contract (Complete Loss
Proposal. Y/N? Review Report)
No
Implement
Yes
Win-Actions
Develop
Implementation
Plan With Customer
Note: CRM = customer relationship management
9B12A008
EXHIBIT 1 (CONTINUED)
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Note: RFQ = request for quotation; DMU = decision-making unit

Page 8
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Source: Authors notes.

Page 9
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EXHIBIT 2: EXCERPTS FROM ROB ALLISON’S SALES CALL LOG
February 7
• Received a call from Dan Reynolds in the Northern Paper purchasing department asking if we want to
bid on the new automation system for their wood chip handling system. He offered to mail out the
specification, but I offered to pick it up, hoping to make some inquiries about the origins of the
request.
February 8
• Dan was fairly busy and only had a moment to talk. I picked up the bid package. I was expecting a
request for proposal, which asked for different suggested design approaches, but the package was a
bid specification and an RFQ (request for quotation). The Northern engineers had already decided
their approach and written a specification.
• The quotation was due April 4.
• Confirmed with Dan that Boise did not have to submit requalification documents as a qualified
automation system supplier for Northern. The process to become a qualified supplier took over six
months when we did it three years ago.
• After reviewing the documents in the office, I forwarded the bid package to Jenny DeBour in the Boise
engineering group in Toronto to start developing a proposal.
February 17
• Received a call from Mr. Jennings at Northern’s corporate standards office in Montreal. He wanted to
make sure we were planning to submit a bid. Jennings was familiar with the Boise system and had a
very positive assessment of our product compared to others in the industry. He emphasized that we
needed to be price competitive, but he was hopeful that we would win the bid at the mill in Rocky
Falls.
February 23
• Received a call from Jenny DeBour, the Boise engineering manager in Toronto, with some concerns
about the RFQ from Northern. She explained: “Northern’s RFQ specified the industry standard
requirements. Our equipment can easily surpass the requirements, but since we can do so much
more, we will likely be 25 to 50 per cent higher on price compared to Honeywell, Siemens or JTB. In
addition, Northern is missing the opportunity to prepare for the new generation of high-speed
controllers. They are missing an opportunity to do it right. The right price for this job is between $1.3
million and $1.4 million, but with standard technology this could go for much less.”
• I called Jason Li, the engineering manager at Northern, to explain the opportunity to incorporate the
newer technology. Jason was rather terse on the phone. “Just meet the spec. The firm with the lowest
price will get the contract. All the bidders have been prequalified and are bidding to the same
specification. I am tired of people trying to convince me to buy the latest technology on the market.
Last year, I spent months trying to get the Director of Finance to approve my request for funding in
this year’s budget. I evaluated the various technologies and we wrote the spec based on what we
need.” Since we had not made our final pricing decision, I didn’t mention any number to Jason.
• Made arrangements with Reynolds to visit the mill next week.
February 28
• Mill visit to investigate wood chip automation system. Boise attendees: Jenny DeBour and myself.
• Met with Dan Reynolds and asked how the system proposals will be evaluated. He said there would
be a review committee, but the committee members had not been determined. The committee would
look at the technical merit of each proposal, which means “did you meet the specs” and on price.
• When asked who we were bidding against, Dan did not answer and changed the subject.
Page 11 9B12A008
• Met with engineering manager Jason Li. He is much friendlier in person. He introduced us to his
control systems engineer, Derrick Rogers, who had worked at the mill for over 10 years. Derrick
answered all of Jenny’s questions without hesitation and gave us a tour of the wood handling area of
the mill. It seems that Northern has concluded that the existing control system is uneconomical to
maintain. It seems to be a stand-alone system not connected to the main systems in the mill. JTB has
supplied most of the major systems to the mill over the past 10 years or more.
• Jenny indicated that she has all the information her team needs to complete the preliminary design
and to cost and price the project.
March 2
• Telephone call: Spoke with Jennings in Montreal and explained the opportunity to incorporate the
newer technology. He agreed and said that he would be attending a meeting with the decision
committee after the bids are submitted. He suggested that we submit a proposal with two alternatives:
an alternative with the old technology and one with the new technology. I told him that we have
discontinued the old technology product line because it weakened the merit of the new technology,
which is clearly superior. He then suggested that we meet the requirements of the specification and
point out where we surpassed the specification. He did not know who would be on the Rocky Falls
decision committee besides himself and Jason Li.
March 7
• Conference call: Jenny DeBour, Boise Eastern-Canada regional sales manager Dieter Haase,
myself. Jenny and I described the situation and the importance of the pricing decision. Dieter
suggested: “Let’s go in at $1.4 million and sell the value of our superior technology. It is clearly
worth at least a 20 to 25 per cent premium.”
March 31
• Email from DeBour. Her team has completed the Northern proposal. We need to finalize the price.
• Boise internal conference call: Jenny DeBour, Dieter Haase, myself. We finalized on a price of $1.35
million.
April 4
• I delivered the quotation to Dan Reynolds today. It was an impressive professional proposal with a
detailed 100-page explanation of our design concept to meet Northern’s specifications, a description
of our capabilities, résumés of Boise’s key people in the project and our project implementation plan.
The proposal described the specific system we had designed to meet the exact requirements of the
Rocky Falls mill.
• When I asked, Dan indicated the decision committee will include engineering manager Jason Li,
control system engineer Derrick Rogers, mill operations manager Bob Muma, someone from the
wood chip operations department, someone from the corporate finance group, Jennings from
corporate standards and himself. The finance person and the wood chip representative have not
been selected yet.
April 5
• Today, I booked individual meetings with each person on the decision committee to answer any
questions they might have about our proposal. Jennings is first. He was going to be in Rocky Falls for
two days — April 6 and 7.
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April 6
• Met with Jennings who indicated that he favoured our proposal as the strongest technical solution. He
had some minor questions about Internet connectivity, but there were no concerns.
April 7
• Met today with Dan Reynolds who indicated that from a commercial point of view we had satisfied all
the requirements, but so had the other bidders. He would not tell me how many other bidders there
were, but presumably one of them is JTB. He did say we are not the lowest price by a significant
margin. It sounds like the detailed assessment of the proposals may take awhile. Dan said their plans
are to issue a contract by the beginning of the summer so they can get the job done before the cold
weather in the fall. He also indicated that the decision committee had met, and there was a lot of
heated discussion about how to proceed. He would not elaborate.
April 11
• Scheduled meeting with Jason Li, who had to cancel at the last minute. Rescheduled for April 18.
April 15
• Jason Li called to reschedule our appointment on the 18. He will be out of town on business for a
week. He wants to rebook an appointment when he gets back. We spoke briefly on the phone. He
said our proposal was interesting — he liked some of the new features that he had not seen before —
but we need to rethink our price if we want to be a serious contender. Jason indicated that we were
“over 30 per cent [too] high.” I’m not sure if he is negotiating or just trying to discourage me from
distracting him if he has eliminated us from the race.
May 9
• Finally got a five-minute meeting with plant manager Bob Muma. He had no questions and seemed a
little uninterested. I framed our higher price as an investment in future flexibility. His response was
interesting: “We invest in technology to help us make paper products. I have some of the best
engineers in the business in our company. They make technology decisions that are best for the
business — besides the operators prefer uncomplicated systems that they are familiar with.” Bob had
to take an urgent phone call before I had a chance to explain any more.
• In the interest of finding an ally, I called Jennings in Montreal and asked for the committee’s
assessment of our proposal. He said: “Technically, your solution is very strong; however, the price is
beyond the budget. If you can be competitive with the mainstream market, then you have a real
chance of winning this. It is difficult for me to support you when your price is so high.”
May 10
• Boise internal conference call: Jenny DeBour, Dieter Haase, myself. After a long discussion, it was
agreed to lower our proposal price to $1.25 million.
• I communicated this in an email to Dan Reynolds immediately.
May 11
• I informed Jennings of the new lower price. He said that we were “still a ways from being the lowest
bidder, but it is easier to justify the premium price at this level.” He was going to convene a
conference call of the decision committee.
Page 13 9B12A008
May 25
• Jason Li and I finally got a chance to have our long-awaited meeting. I was expecting a warm
reception after we dropped our price, but I was greeted with “Why are you getting the corporate guys
in Montreal involved in this? That doesn’t make you any friends around here.” The meeting was brief
and ended with Jason’s comment, “If your package is within our budget, and is the best value, then
we will buy it. However, at $1.25 million the committee won’t accept it. You should also know that
there is a delay in our project and a chance that it may be cancelled. Nevertheless, the committee is
meeting at the beginning of the month to make the final decision.”
June 2
• I received a call today from Dan Reynolds indicating that the decision committee is meeting next
week to make their final evaluation. If we want to submit a more competitive price, we should make
sure he has it by Monday, June 6.
June 3
• Emergency conference call: Jenny DeBour, Dieter Haase, Boise Automation Global Product Line
manager Victor Korman and myself. Victor kicked off the meeting: “I have read your call reports. From
a marketing perspective, this is a new superior product, which we should not be giving away. If we
are going to compete on price with older generations of technology we would not have invested in
developing this newer technology.” After a very long debate and weighing the need for superior price
positioning against the need for booked orders this year, it was decided to submit a price of $1.2
million to be certain we win the order. We could use it as a showcase for our new technology.
June 6
• I emailed Dan Reynolds to inform him of the new price. He confirmed that he received the message
and said they will be in contact if they have any questions.
June 14
• I contacted Dan Reynolds today to see if there was any news. He indicated it was a bad time to push
this project forward but wouldn’t say any more. Everyone was very busy with little time for special
projects. He indicated that he would be in touch with us if there was any news.
• I contacted Jennings, but he is on vacation until mid-July. His assistant indicated that he books this
time period off every year.
August 8
• Separate emails to Dan Reynolds and Jennings with “Hope you are enjoying your summer” and a
general inquiry, “Is there any news or progress on your automation project?”
August 15
• No response to the August 8 emails.
August 29
• No response to the August 8 emails . . . hesitant to pester Reynolds . . . set a reminder to self to
contact him again if we don’t hear anything in a week.
September 9
• Received an email from Dan Reynolds. Northern signed a deal with a competitor to design, supply
and install the automation system, but the email did not indicate who.

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W12785

BOISE AUTOMATION CANADA LTD.: THE LOST ORDER AT

Copyright © 2012, Richard Ivey School of Business Foundation Version: 2015-06-11

THE AUTOMATION EQUIPMENT AND SYSTEM MARKET

AUTOMATION SYSTEM COMPETITORS

BOISE AUTOMATION CANADA

NORTHERN PAPER INC.

The Disappointing News

The Ripple Effect

SALES FORCE MANAGEMENT

EXHIBIT 1: BOISE AUTOMATION CANADA’S SALES PROCESS

Opportunity Pursue Update CRM

Investigate Submit Update CRM

Develop and Win

Note: CRM = customer relationship management

Note: RFQ = request for quotation; DMU = decision-making unit

Source: Authors notes.

EXHIBIT 2: EXCERPTS FROM ROB ALLISON’S SALES CALL LOG

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