Maintain leadership

Business re-engineering in a 70 year old global leader in Heavy Industrial Equipment (HeavyClient), expanding the business, stabilise revenue flow, block out local competitors and change business model to meet customer's demand for a global leader.
HeavyClient has a turnover of € 1000 million and is the world leading supplier of Heavy Industrial Equipment in its industry, since 70 years. The brand is known in its industry for ground breaking engineering innovations. HeavyClient has been organised in new-sales divisions and one common after-sales organisation with a global network of service stations.

The mission:
Use the brand recognition of innovation to:

  • Create an expansion model to better penetrate the potential customer base
  • Integrate further in the value chain and increase recurring revenues
  • Change from an engineering culture to a sales culture.

Solution:
We started by formulating a business vision and verified it by collecting background information from external and internal sources. The goal of a new business model; Provisioning of functional availability, rather than sales of equipment and service was communicated internally.

A step stone programme, including invention of a Services programme was built:

  • Creation of offerings, pitching and sales of the new concepts to target customers by David Ericksson, simultaneously leading and training selected staff
  • Creation of sales tools and specific creation of support tools connected to the ERP system. Introduction of M2M (Machine to Machine) communication tools for remote access to our equipment at customer's sites was introduced
  • Training of staff in the service division to sell the new services, including run-in of a permanent director of the new business area

A broader roll-out including new equipment bundled with life cycle services contracts is planned together with the new sales divisions. This work will likely result in a re-organisation of the whole company structure to enable sales and delivery of the functional availability services, according to the formulated business vision.
 

Passadvinden´s roll has been the one of an additional member of the executive team, operatively executing the mission outside and inside HeavyClient, including invention of unique offerings, tools and training of staff, while simultaneously beeing a soundboard to the CEO. In the daily work David Ericksson have acted in the field with the customer's business card, Vice President Services Development, representing the customer in business negotiations with new and old target customers.
 

Achievements:
During the first years of introduction 500 new long term (5 years) contracts have been signed, giving healthy recurring revenues. Again HeavyClient has proven their brand as innovation leaders, this time in services. The change of business model has triggered the beginning of a total restructuring of HeavyClient's organisation. The present CEO considers this work as the most brilliant and important cornerstone for the future strategy of the company.

In summary:

  • Kept leadership by unique differentiation, Services
  • New revenue streams trough ~ 500 sites on contract
  • Significantly raised company value when sold to new owner
  • Reduced costs
    • Logistics
    • Staff
    • Spare parts
  • Prepared for next innovative offering step -  Stepstone to the future
  • Happy customers 

Particularities:
This particular Heavy Equipment industry is very cyclical. It also has the same characteristics as many other industries built on heavy equipment; Few, well known, large new-build projects that are known to the whole industry invites to fierce competition and, consequently, very low new sales margins. The installed base is 10-15 times bigger than the annual new deliveries and represents an untapped market for preventive maintenance and services. The after-market is dominated by many small local players, doing repair rather than preventive maintenance.

The customer's customers have a situation where they are paid for available up-time, penalised for being “off-hire”. Consequently they would like to have available functionality rather than owning and maintaining their mission critical equipment.  

Change management including introduction of new business models in a conservative industry is challenging, not the least internally in the company. Typical internal characteristics are: Generally low formal education level, considerable resistance to change, an engineering culture prevalent, few good communicators, all in all making it difficult to collect and convey information and act speedy.