Michelin, a worldwide leader in the tyre industry, launched in 2000 a comprehensive tyre-management solution offer for large European transportation companies, called Michelin Fleet Solutions (MFS). With this new business model, the company ventured into selling kilometers - instead of selling tyres. This decision moves the strongly product-driven firm into the new world of services and solutions. The shift is intuitively appealing, and it provides Michelin with an opportunity to differentiate itself in the tyre business. After 3 years, however, expansion is far below expectations and profitability is terrible - despite the outside help of a strategy consulting firm. The case presents the decision point in 2003, whereby MFS's future has to be decided. Should Michelin seek to further develop this solution offer, and try to repackage the offer yet another time? Or was it just a passing fad that should be abandoned?
This case investigates the difficulties that industrial groups face when they transition from selling products to providing service. It enables participants to reflect on the following issues:
What's industrial groups' rationale for moving towards solutions?
What kind of business model reconfiguration does it imply?
How does moving to solutions raise multiple challenges throughout the organization (eg in terms of sales force management, risk management, channel relationships etc)?
Business Model Innovation: Michelin Fleet Solutions - From Selling Tires To Selling Kilometers
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