Sustainable Business Model Innovation using the Business Model Canvas - Michelin Case Study

Summary

Michelin has revolutionized its business model by offering tires for free and charging customers based on the kilometers driven. This innovative approach combines superior tire technology with sustainability efforts. By installing sensors in the tires, Michelin tracks usage, optimizing vehicle performance, and reducing waste. The model not only maximizes value for Michelin and its customers but also minimizes environmental impact through less tire waste, reduced carbon emissions, and material recycling. Michelin’s new approach demonstrates that sustainable business practices can be both profitable and beneficial to the planet, supporting several UN Sustainable Development Goals.

Takeaways

• 😀 Michelin faces strong competition from low-cost haulage companies.
• 😀 Despite having superior tire technology, Michelin struggled to capture value solely through price competition.
• 😀 Climate change regulations impacted both Michelin and their customers.
• 😀 Michelin's traditional business model involved selling tires for a one-time cost, after which customers disposed of them.
• 😀 Michelin introduced a new business model where they give tires for free but charge customers per kilometer.
• 😀 The new tires have embedded computer chips that track performance metrics like distance and maintenance needs.
• 😀 Michelin's model includes bundling services to optimize vehicle performance and reduce fuel consumption.
• 😀 The superior technology of Michelin tires allows for longer mileage, reducing the need for frequent tire replacements.
• 😀 By incentivizing customers to use fewer tires, Michelin maximized revenue per tire and reduced material waste.
• 😀 The new model promotes sustainability by reducing supply chain risks, carbon emissions, and waste to landfill.
• 😀 Michelin's direct customer relationship creates deeper connections and enhances product stewardship by facilitating tire recycling.

Q & A

How is Michelin differentiating itself from low-cost competitors in the tire industry?

Michelin is differentiating itself by offering superior technology in its tires, which allows them to last longer and provide more value, even though they are giving away the tires for free. Instead of competing solely on price, Michelin charges customers based on the kilometers their tires cover.

What new business model did Michelin implement to stay competitive?

Michelin implemented a new business model where they give away tires for free but charge customers per kilometer traveled. They embed computer chips in the tires to track performance and provide bundled services to optimize vehicle efficiency.

What are the key benefits of Michelin’s new tire model for customers?

Customers benefit from longer-lasting tires, reduced fuel consumption, and optimized vehicle performance through the services Michelin provides. This model also helps them minimize tire-related costs over time.

How does the embedded computer chip in Michelin tires work?

The embedded computer chip in Michelin tires tracks performance metrics like distance traveled and maintenance needs. This data allows Michelin to charge customers based on the kilometers covered and helps optimize tire usage.

How does Michelin's model contribute to environmental sustainability?

Michelin's model helps reduce waste by recycling tires and using fewer materials, lowering carbon emissions. Longer tire lifespans also lead to reduced supply chain risks and less waste sent to landfills, which benefits the environment.

What role does Michelin play in tire recycling?

Michelin takes on a product stewardship role by collecting used tires for recycling. This approach supports the circular economy, where materials are reintegrated into the manufacturing process, reducing landfill waste and promoting sustainability.

What makes Michelin's business model a win-win situation for both the company and its customers?

Michelin’s business model is a win-win because customers get more value from their tires, while Michelin generates revenue by charging based on tire usage. The model encourages longer-lasting tires, which reduces costs for customers and generates more income for Michelin.

How does Michelin’s business model align with the United Nations Sustainable Development Goals (SDGs)?

Michelin’s business model supports various UN SDGs by reducing carbon emissions, minimizing waste, and promoting environmental responsibility. Their focus on sustainability contributes to goals like responsible consumption and production, climate action, and decent work and economic growth.

Why did Michelin decide to give away their tires for free?

Michelin decided to give away their tires to focus on capturing long-term value through performance-based revenue. By charging for kilometers instead of a one-time sale, Michelin can better compete against low-cost competitors while promoting sustainability.

What impact does Michelin's model have on the tire industry as a whole?

Michelin’s model could revolutionize the tire industry by shifting the focus from selling products to offering services that optimize tire usage and vehicle efficiency. This approach may encourage other companies to adopt similar practices, leading to industry-wide changes in business models and environmental practices.