Michelin’s digital transformation journey has evolved from tires-as-service to fleet management and new forms of customer engagement
A 130-year-old French tire manufacturer may not seem like a likely pioneer in digital transformation. But Michelin began its journey early, launching tires-as-service back in 2000, charging for outcomes rather than just tires. The move was prescient: corporates the world over are now seeking to move from being product providers to service companies in order to ward off digital interlopers aiming to disrupt their sectors. The ability of Europe’s large corporates to embrace these types of new digital models is crucial if Europe is going to compete on the global stage.
That message is not lost on Michelin. “This is just the beginning of our digital transformation,” says Eric Chaniot, Michelin’s Chief Digital Officer, who previously worked for tech startups as well as Hewlett-Packard and Apple. “We don’t see ourselves as a tire company, we see ourselves as one of the leaders in mobility and if we want to continue to be one of the leaders in mobility we have to be much better at everything digital.” To that end, the tire-maker has formed its own venture capital unit and regularly collaborates with a wide range of startups. It has provided digital skills training to some 16,000 of its 140,000 employees. And it has built a digital accelerator in India to help it scale digital application deployments worldwide and master specific domains such as mobile app development, data analytics and user interfaces (with the aid of consultancy Capgemini.)
“Everything we do — even on digital — is connected with the purpose of Michelin: to enable people and goods to travel in a better and more sustainable way,” says Chaniot. “Our digital efforts are focused around the four pillars of our strategy: tires, services and solutions, mobility experience, and high-tech materials.” He points to Michelin’s history of innovating everything from radial tires and airplane landing gear to restaurant guides and travel maps.
From Tires To Fleet Management
Selling stand-alone tires is still an important part of Michelin’s revenues and that business is also going digital. The company does not own distribution channels in all countries but it is making it easier for consumers to find and buy its tires from dealers through Michelin-owned websites or digital initiatives supporting its partner dealers. That effort, along with other initiatives, should help the company reach its strategic objective of “a plus 20% increase in tire sales by 2020,” Chaniot says. Michelin first became a service provider 19 years ago with the launch of Michelin Fleet Solutions. The idea was to create a value-added service for fleet operators using large vehicles. Instead of having fleet operators bear the upfront cost of buying and replacing tires,the unit offered to maintain and guarantee the tires for a nominal monthly fee.The project was not as successful as hoped 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, according to an analysis posted on Harvard Business School’s Digital Initiative page. For instance, Michelin’s sales teams felt that by selling the services, they would be undermining their sales of new tires.
In 2013, the company decided to try again, creating a separate division — Michelin Solutions — to design services for commercial vehicles. Leveraging Internet of Things (IoT) technology, Michelin launched EFFIFUEL, a system that uses sensors inside trucks to collect data, like fuel consumption, tire pressure, temperature, speed and location. The data is then processed in the cloud and analyzed by Michelin experts, who provide recommendations and training in eco-driving techniques. The tire maker offers a contractual agreement to meet predefined targets or provide a refund in proportion to expenses incurred. EFFIFUEL encourages careful truck diving, leading to extra savings for companies and a potential doubling of per-vehicle profits, according to a World Economic Forum case study. A reduction in fuel consumption of 2.5litres per 100 kilometers represents annual savings of €3,200 for long-haul transport, at least a 2.1% reduction in total cost of ownership and 8 tons in CO2 emissions, the study says. Michelin’s 2017 acquisition of Nextraq, a U.S. company specializing in GPS fleet and mobile workforce management, helped Michelin move into fleet management. “When you start to manage a fleet of trucks, guess what? Our customers start seeing us in a very different way, as a company that can help them optimize their business, enable them to be more efficient and generate more margins,” says Chaniot. “We are also convinced our fleet customers will give preference to Michelin tires, so it is a way to both differentiate ourselves and drive the core business.”
Michelin is also currently exploring how to use connected tires to reduce safe waiting time between airplane flights, to help cities conduct predictive maintenance on buses, and make mining operations more efficient. At the same time it is experimenting with new materials that could help make tires more durable and environmentally friendly, and with new ways to engage consumers around food and travel to reinforce its brand.
Mastering Change Management
But the tire manufacturer — like all big corporates — still faces a number of challenges. Only about 5% of a successful digital transformation depends on tech, says Chaniot. The other 95% is about change management. Changing procedures and mindsets is hard, he says. “No one ever tells you ‘no’ but you can see in their eyes that they feel like saying it. Luckily I report to the globalCEO so we always find a solution.”
