Michelin is one of the three largest manufacturers of the tires worldwide . The company manufactures tires for a wide variety of vehicles from space shuttles to bicycles. Michelin has a history of operating with an innovative mindset in order to stay resilient and relevant in an intensely competitive marketplace. It is credited with transforming the industry through inventions such as the first radial tires as well as the publication of the Michelin Guide to encourage people to drive, thereby increasing the demand for tires .
In 2000, Michelin made a giant leap by expanding its remit from solely being a manufacturer of tires to becoming a service provider through the launch of the Michelin Fleet Solutions (MFS) . Michelin’s tires were traditionally priced at a premium and the idea was to create a value-added service for large vehicles fleet operators. Instead of a traditional model, where the customer bore the upfront cost of the tire as well as the entire risk associated with its replacement in case of damage, MFS shared this risk with the consumer for a nominal monthly fee. The project was unsuccessful due to the company’s failure to communicate the value proposition of the added service (better maintained tires last longer), and its inability to align internal incentives. For instance, the sales team felt that by selling MFS, they would be undermining their primary KPI of new tire sales. Moreover, the company struggled to manage the complexity of the cost structure associated with the provision of this service.
Despite the setback, the senior management was convinced that the future lay in harnessing the power of information systems. In 2013, they created a separate division – Michelin Solutions – in order to design, develop and market services for commercial vehicles, particularly trucks. By leveraging IoT, they launched EFFIFUEL – an ecosystem that uses sensors inside vehicles to collect data, like fuel consumption, tire pressure, temperature, speed, and location . This data is then processed in a cloud solution and analysed by Michelin experts, who provide recommendations and training in eco-driving techniques .
EFFIFUEL is a comprehensive ecosystem that includes sophisticated telematics, training in eco-driving techniques and the EFFITIRES optimized tyre management system.
Confident Customer Promise
EFFIFUEL™ provides a “satisfaction or your money back guarantee” by providing the fuel efficiency service risk-free to truckers, and refunding them if the pre-defined targets for savings are not met.
By encouraging careful handling of the truck equipment, the company has unlocked significant savings for their customers: a reduction in fuel consumption of 2.5 litres per 100km represents annual savings of €3,200 for long-haul transport travelling over 120,000 km (at least 2.1% reduction in total cost of ownership and 8 tonnes in CO2 emissions) .
Michelin has learned its lesson from MFS and now works with specialist partners, particularly in the field of big data analytics. Success factors have been an emphasis on cultural change, convincing sceptical employees about the benefits of the new business model, and having an iterative approach built around pilots within the standalone entity of Michelin Solutions .
In doing so, they have migrated from being a company that sells tires-as-a-product to a service that guarantees performance, which has led to higher customer satisfaction, loyalty and retention and raised profits .
By embracing technology-led products, they are also bedding a culture of digitization operationally with production techniques increasingly using robotics, 3D printing and augmented reality to create the plant of the future. By demonstrating success in an incubator, the company has managed to create a more open-minded attitude in the workforce. Furthermore, Michelin is now building more internal capability through acquiring third-parties such as Sascar , a Brazilian digital fleet management company with expertise in telematics.
Michelin is in a position to take advantage of their head-start by building on the ‘as-a-service’  offering model to capture the larger space of drive management. In order to sustain their success, Michelin could unlock further spaces:
- The low-cost emerging economy: the hotbed for growth is China and India, traditionally dominated by low-cost suppliers. There’s an opportunity to build accessible and affordable solutions that can operate in more complex road conditions. They need to act fast and build a flexible operating model for monitoring systems and local knowledgebase required to win there.
- Uberization of tires: Due to direct access to consumer data and internal data mining capability, they could launch an on-demand tire service using predictable modeling.
- Autonomous vehicles: momentum is building for self-driving vehicles. In order to get a slice of this market, Michelin will need to showcase the strength of its offering to become the partner of choice within driving sensors. This may require their organizational borders to be more translucent so they will need to rethink how they protect the IP of their processes.
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