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The Quest for Global Solutions
less vulnerable to price pressures. Its leaders transformed it from a fading products company into a global solution provider.
The lure of opportunity Other companies are offering “solutions,” drawn by the promise of longer-lasting and more profitable relationships with customers or access to new markets. This was the case for the French tire manufacturer Michelin. 8 Through their own analysis and after discussion with their key clients, leaders at Michelin realized that one of the key drivers of productivity for a commercial vehicle was the condition of the tires. Tire-related issues, such as punctures and blow-outs, were the most frequent reason for a truck to break down. A truck’s fuel consumption could be improved by as much as 20% by keeping tires in good condition. With these factors in mind, Michelin’s leaders created an innovative business solution called Michelin Fleet Solutions. Professor Wolfgang Ulaga comments, proposed an ‘all-round hassle-free’ service package, whereby clients delegated the management of their tire assets to Michelin for a three- to five-year period. By outsourcing tire management, logistics providers and bus operators gained peace of mind, and achieved better cost control with fewer breakdowns, lower fuel consumption, improved vehicle monitoring and reduced administrative burden. Transportation companies were able to turn tire-related costs into a variable cost.” Of course, taking over the tire management process for customers meant rethinking the sales approach and realigning the organization in various ways. Michelin’s leaders faced the challenge of educating the customer to reason differently: from a tangible offering (tire sales) to an intangible offering (tire productivity over its lifetime). 9 Then there was the question of internal education, because making the business case for such a solution and putting a price on it became much trickier. The transition also meant redesigning the entire supply chain and shaping new ways of working in order to deliver on that promise without alienating the traditional sales force. It was a steep learning curve for Michelin. Within the company there is increasing realization that solution selling is a powerful “Customers don’t buy tires from Michelin, but rather the seamless functioning of their commercial vehicles; they buy productivity in the form of kilometers. So Michelin Fleet Services
Customers don’t buy tires from Michelin, they buy productivity in the form of kilometers.
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