Michelin Firm’s Adoption of Digital Service Platform

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Founded in 1832, Michelin is a French multinational corporation that specializes in the design, manufacturing, and retreading of tires. Based in Clermont-Ferrand, Michelin has a presence in ten geographical regions across the world and is the largest tire manufacturing company in the world (Gupta & Godwin, 2021). The company designs and manufactures tires for automobiles, motorcycles, heavy equipment, bicycles, aircraft, and space shuttles at its 69 production facilities in 18 different countries across the world (Gupta & Godwin, 2021). With a large number of customers and suppliers across its production line, Michelin needs an effective method for managing its huge business. In particular, the modern world of business requires an effective online platform for e-commerce, a new business approach that almost every organization is using to improve competitiveness.

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Michelin requires a digital platform that will connect it with customers, service providers, and dealers. The company started its Digital Service Platform (DSP) in 2014, a cloud-based system that connected it with customers, service providers, and dealers (Gupta & Godwin, 2021). However, the adoption of the new system has been slow, and the company needs to find ways to accelerate the DSP before the competitors can take over and the company loses its customers (Gupta & Godwin, 2021). Consequently, the purpose of this paper is to develop appraise, evaluate, and analyze the situation at Michelin regarding its adoption of DSP. Specifically, the paper will appraise the reasons for adopting the DSP, the values that the platform will provide, and the reasons why customers resist the platform. In addition, the paper will provide a set of recommendations for Michelin to accelerate its adoption of the DSP platform.

Why Michelin Is Interested in Adopting a Digital Service Platform

One of the main reasons why Michelin wants to adopt a DSP is to establish a strong and effective working relationship between the company, service providers, and fleets. From the case study, it is clear that the fleets, which are the main customers, have to frequently struggle as they try to find efficient methods of optimizing planning and scheduling service work and maximizing uptime for their vehicles (Gupta & Godwin, 2021). On their part, service providers face challenges associated with cumbersome and complicated administrative tasks that they manage in running their business operations effectively.

By developing and adopting a DSP, Michelin seeks to become a leading broker of service relationship management solutions to fleets and service providers. The DSP is able to streamline a three-way relationship between the company, fleets, and service providers with real-time digitization in order to reduce errors while also improving timeliness and the turnaround time for services (Pudovkina & Sharokhina, 2019). The company is seeking to achieve a DSP that is easy to use when scheduling and planning for future loads. In addition, Michelin seeks to achieve a DSP as it is able to provide increased visibility and transparency by removing uncertainty in event management (Yong et al., 2020). The idea is to address customer questions regarding the time the vehicle is expected to be ready and the final cost of the service.

On the side of the customers, the DSP will create an ideal experience while also simplifying and making service efficient within the internal business processes. The real-time capabilities of the system are designed to deliver accuracy, enhanced efficiency, and insightful intelligence across various aspects of service events and management of sales order (Pudovkina & Sharokhina, 2019). Moreover, DSPs act as the leader and conductor of customers’ tire and service operations business lines (Leão & da Silva, 2021). Therefore, Michelin wants to ensure that its customers’ operations are running smoothly to create an environment that allows those clients to focus on their core businesses.

It is important to note that DSPs improve and enhance data collection for companies, which makes it easy to optimize information for analysis in order to improve the business process. By adopting the new system, Michelin will achieve a system with the capacity to gather the right data and incorporate it for business intelligence at a high level (Leão & da Silva, 2021). The new DSP system will create a method through which different functional units within the company will translate raw data into insights (Pudovkina & Sharokhina, 2019). In this way, Michelin will have a single view of the customers’ operations, production, finance, operations, and business opportunities. This will also apply to fleets and service providers since they are included in the same category with the end users.

The Values That Michelin’s DSP Provides to Its Fleets and Dealers

Customer experience is expected to improve with the adoption of DSP. Fleets and service providers are the main customers for Michelin’s business. They always face a number of problems such as endless choices, low prices, and issues in delivery. By adopting the new DSP, Michelin will ensure that it gives the fleets and dealers an ideal experience while also simplifying and making service efficient within the internal business processes (Chaniot, 2019). The real-time capabilities of the system are designed to deliver accuracy, enhanced efficiency, and insightful intelligence across various aspects of service events and management of sales order.

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Adopting the DSP will help the fleets and dealers with increased agility with digital transformation. For fleets, DSP will improve speed-to-market and also help them achieve continuous improvement strategy. In particular, the fleets will ensure that their vehicles are serviced on time, which will help them reduce the time wasted when vehicles have to stay idle as they wait for tire changes (Chaniot, 2019). For dealers, the DSP will ensure that they achieve a seamless business line such that they always place orders based on the demand and that they have inventories necessary to meet the market demands at all times.

Dealers and fleets will achieve improved productivity when Michelin adopts the three-way relationship with them. Specifically, DSP will streamline workflow and automate many manual tasks while also integrating data. In this way, DSP will empower fleets and dealers to work efficiently as it will reduce delay time (Chaniot, 2019). Furthermore, DSP will provide the dealers and fleets with real-time digitization in order to reduce errors while also improving timeliness and the turnaround time for services.

Through Michelin’s DSP, dealers will fully structure their transactions online. The system will offer dealers with integration of tires and treading services. In turn, dealers will experience profitability, even during when inventory levels are low (Pudovkina & Sharokhina, 2019). Through DSP, dealers will achieve seamless online shopping environment that is configured specific to their business. In addition, dealers will be able to access details of inventory and create a deal that will incorporate trade-in value, protection plans, and fees.

Why the Dealers Are Resisting Adopting the DSP

Despite the benefits associated with DSP, most dealers working with Michelin resist adopting the technology for a number of reasons. First, most dealers are worried about making solid investments and assuming new risks for returns (Gupta & Godwin, 2021). In particular, Michelin’s failure to launch Truck Care some years back makes most dealers remain wary of the new system. Secondly, most dealers are old organizations that have been doing business in the traditional way (Gupta & Godwin, 2021). They are highly conservative and less inclined to the application of internet technology in their businesses. Therefore, they do not see the reason to change their business models. Most dealers do not like the idea of paying fees for DSP (Chaniot, 2019). Instead, they would like the DSP to generate incremental business for them rather than improving the efficiency of the existing system.

Third, Michelin faces a problem as it tries to work with dealers in establishing mechanical care network. In this case, dealers are reluctant to sign up for mechanical care, stating that they need to have sufficient fleets that would generate adequate revenue (Chaniot, 2019). On their part, fleets can only sign up when there is an already established network of dealers to meet their needs. To achieve this objective, Michelin must ensure that it has many locations to serve its fleets countrywide. However, if it establishes its own locations across the country, dealers will treat them as competitors and will reject working with them.

It is also worth noting that most dealers have in place their own business systems that make it difficult to integrate them with the cloud-based system that DSP uses. Most dealers do not want to configure their systems in order to integrate them with Michelin’s DSP. In addition, integrating Michelin’s DSP with dealers’ systems raised concern among them because they fear that the integration is likely to give Michelin more visibility into their business operations. It is with noting that most dealers also sell tires from other manufacturers as they are independent companies (Chaniot, 2019). Allowing their systems to integrate with Michelin’s DSP is not their priority because they do not deal with Michelin brands only.

What Should Michelin Do to Accelerate the DSP Adoption?

Michelin needs to prove to the dealers that the integration of their systems and DSP will not negatively affect their business and will instead improve their productivity. First, it is recommended that Michelin work closely with the dealers, especially using its technology department. Michelin needs to provide training to dealers’ employees in the IT department or system developers. The company should start a separate pilot study with each dealer to help them realize the potential of integration (Pudovkina & Sharokhina, 2019). It is recommended that each pilot program runs for one financial year in order to have the chance for evaluating its impact on the dealer’s financial performance.

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Secondly, Michelin needs to scrap the charge it is imposing on dealers who want to use its DSP. Indeed, most dealers who reject the integration of their systems with DSP do so because they do not want to pay the fee charged (Chaniot, 2019). Given that DSP will eventually improve Michelin’s profitability by more than thirty percent as projected, it is necessary to completely scrap the fee altogether and instead focus on making more sales through the technology.

Third, Michelin should develop a separate sales force for the DSP. The idea is to avoid mixing the old business model with the new system, given a large number of dealers the company is likely to lose if the existing method is scrapped. It is quite difficult to convince all the dealers to integrate their systems with Michelin’s DSP (Chaniot, 2019). Therefore, those who agree to sign up with the new system will be treated as a new business line, which will allow it to work as a separate sales force for DSP. Accelerating adoption of DSP will require Michelin to acquire a dealer POS system because it is much easier to integrate it with dealers’ systems than using an existing service operator.

Finally, it is recommended that the North American branch of Michelin work on its own in adopting and applying DSP. The head office in France need to allow the North American branch to adopt the DSP system based on the nature of the local market rather than the worldwide or European markets. In this way, the North American branch will have the freedom to adjust the new system to reflect the local needs, which are quite different from those in other areas. This freedom will ensure that there will be little change in the company’s internal culture. Rather, the corporate culture of the North American branch will change slightly when the company starts developing a separate sales force for its DSP.

References

Chaniot, E. (2019). Tools for transformation: Michelin’s digital journey. Research-Technology Management, 62(6), 31-35. Web.

Gupta, S., & Godwin, C. (2021). Michelin: Building a Digital Service Platform. Harvard Business School.

Leão, P., & da Silva, M. M. (2021). Impacts of digital transformation on firms’ competitive advantages: A systematic literature review. Strategic Change, 30(5), 421-441. Web.

Pudovkina, O., & Sharokhina, S. (2019). Digital platform of industrial cooperation–Innovative direction of regional industry development. SHS web of Conferences, 71, 04016. Web.

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Yong, X., Xinxin, T., Su, Z., Yao, W., & Rui, C. (2020). Construction and application of digital creative platform for digital creative industry based on smart city concept. Computers & Electrical Engineering, 87, 106748. Web.

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