Case Name :      Innovating at Arauco: Chile’s Largest Forestry Company

Authors :           Carlos Osorio, Pratima Bansal

Source :              Ivey Publishing

Case ID :           9B16M139 / W16548

Discipline :        General Management

Case Length :    08 pages

Plagiarism : NO (100% Original work)

On February 27, 2010, Chile was razed by a three-minute earthquake of 8.8 magnitude on the Richter scale. More than 500 people died and nearly 400,000 homes were destroyed. The overall cost was estimated at US$20 billion. Over 70 per cent of the people who had died in the earthquake were from the coastal town of Constitución. Celulosa Arauco y Constitución (Arauco), a Chilean-based forestry and timber company, was Constitución’s largest employer. Arauco’s pulp mill and major sawmill in Constitución was completely destroyed, and all but one of the 34 remaining manufacturing facilities were wiped out. The company’s executives moved rapidly to respond to the crisis and create a plan to rebuild Constitución. By the end of April 2010, Arauco’s pulp business in Chile was operating at 70 per cent capacity and in May, the company’s pulp mill in Constitución reopened. However, the disaster had left an indelible imprint on Arauco’s vision and values. The company had been thinking about pursuing further innovation. The company’s values of efficiency and productivity had been tested with an environmental disaster in 2005, but innovation was still limited. Then in 2009, an opportunity provided Arauco with the ability to engage innovation on a larger scale. But the earthquake and rebuilding efforts now required the company’s full attention. Should Arauco proceed with its innovation, and if so how would Arauco balance these two different objectives?