Harvard Case - Hilti Fleet Management (A): Turning a Successful Business Model on Its Head
"Hilti Fleet Management (A): Turning a Successful Business Model on Its Head" Harvard business case study is written by Ramon Casadesus-Masanell, Oliver Gassmann, Roman Sauer. It deals with the challenges in the field of Strategy. The case study is 23 page(s) long and it was first published on : May 4, 2017
At Fern Fort University, we recommend Hilti adopt a disruptive innovation strategy by launching a fleet management platform as a separate business unit. This platform would leverage Hilti's existing core competencies in technology and analytics, manufacturing processes, and customer relationships to offer a comprehensive suite of services for tool fleet management, including predictive maintenance, remote diagnostics, and optimized tool utilization. This business model innovation would create a new value proposition for Hilti, expanding its reach beyond its traditional customer base and capturing a significant share of the burgeoning fleet management market.
2. Background
Hilti, a leading global manufacturer of power tools and fastening systems, has enjoyed remarkable success with its direct sales model and focus on customer service. However, the company faces increasing competition from online retailers and the rise of shared economy models. This case study explores Hilti's strategic dilemma: whether to maintain its existing business model or embrace disruptive innovation to secure future growth.
The main protagonist is Michael Mayr, Hilti's CEO, who is tasked with navigating the company through this strategic crossroads. He must decide whether to invest in a fleet management platform that could potentially disrupt its existing business model, or to continue focusing on its core business of selling power tools.
3. Analysis of the Case Study
Industry Analysis:
- Porter's Five Forces: The power tool industry is characterized by intense competition, with several well-established players and a growing number of new entrants. The bargaining power of buyers is moderate, while the bargaining power of suppliers is low due to the availability of alternative materials and manufacturing processes. The threat of substitutes is moderate, with the emergence of new technologies like 3D printing posing a potential threat.
- Industry Lifecycle: The power tool industry is in a mature stage, with slow growth and intense competition. This suggests that Hilti needs to find new avenues for growth, such as expanding into new markets or developing innovative products and services.
SWOT Analysis:
Strengths:
- Strong brand recognition and customer loyalty
- Extensive global distribution network
- Expertise in manufacturing and product development
- Strong financial position
- Strong customer service and technical support
Weaknesses:
- Reliance on a traditional direct sales model
- Limited digital presence
- Lack of experience in fleet management services
Opportunities:
- Growing demand for fleet management solutions
- Increasing adoption of digital technologies
- Expansion into new markets, particularly emerging economies
Threats:
- Increasing competition from online retailers
- Rise of shared economy models
- Technological disruption
Competitive Advantage:
Hilti's competitive advantage lies in its core competencies of technology and analytics, manufacturing processes, and customer relationships. These strengths can be leveraged to create a competitive advantage in the fleet management market.
Value Chain Analysis:
Hilti's value chain can be leveraged to develop a successful fleet management platform. The company's expertise in product development, manufacturing, and distribution can be used to create and deliver high-quality fleet management solutions. Hilti's strong customer relationships and technical support can be used to provide exceptional customer service and support.
Business Model Innovation:
Hilti can leverage its existing strengths to develop a disruptive innovation in the form of a fleet management platform. This platform would offer a comprehensive suite of services for tool fleet management, including:
- Predictive maintenance: Using data analytics to predict tool failures and schedule maintenance proactively.
- Remote diagnostics: Providing real-time monitoring and diagnostics of tools, enabling faster troubleshooting and repairs.
- Optimized tool utilization: Using data analytics to optimize tool usage and minimize downtime.
This business model innovation would create a new value proposition for Hilti, expanding its reach beyond its traditional customer base and capturing a significant share of the burgeoning fleet management market.
4. Recommendations
Hilti should launch a fleet management platform as a separate business unit. This platform would leverage Hilti's existing core competencies in technology and analytics, manufacturing processes, and customer relationships to offer a comprehensive suite of services for tool fleet management.
Key Recommendations:
- Develop a comprehensive fleet management platform: This platform should include features such as predictive maintenance, remote diagnostics, optimized tool utilization, and data analytics.
- Invest in technology and analytics: Hilti should invest in developing its capabilities in data analytics, AI, and machine learning to power its fleet management platform.
- Build a dedicated team: Hilti should assemble a team of experts in fleet management, data analytics, and software development to drive the development and implementation of the platform.
- Leverage existing customer relationships: Hilti should leverage its existing customer base to pilot the fleet management platform and gather feedback.
- Market the platform effectively: Hilti should develop a comprehensive marketing strategy to promote the platform to its existing and potential customers.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The fleet management platform aligns with Hilti's core competencies in technology and analytics, manufacturing processes, and customer relationships. It also complements the company's mission of providing innovative solutions for its customers.
- External customers and internal clients: The platform addresses the needs of both external customers (construction companies, contractors, etc.) and internal clients (Hilti's own sales and service teams).
- Competitors: The platform allows Hilti to compete effectively in the growing fleet management market, differentiating itself from competitors through its expertise in power tools and its strong customer relationships.
- Attractiveness ' quantitative measures if applicable: The fleet management market is expected to grow significantly in the coming years, offering significant potential for Hilti to generate revenue and profits.
6. Conclusion
By embracing disruptive innovation and launching a fleet management platform, Hilti can secure its future growth and maintain its leadership position in the power tool industry. This strategy will leverage the company's existing core competencies and create a new value proposition for its customers, expanding its reach and capturing a significant share of the burgeoning fleet management market.
7. Discussion
Alternatives:
- Maintain the existing business model: This would involve continuing to focus on selling power tools through its direct sales model. However, this approach would expose Hilti to increasing competition from online retailers and the rise of shared economy models.
- Acquire an existing fleet management company: This would allow Hilti to enter the market quickly. However, this approach would require significant investment and could pose integration challenges.
Risks and Key Assumptions:
- Technology adoption: The success of the platform depends on the adoption of digital technologies by customers.
- Competition: The fleet management market is becoming increasingly competitive, and Hilti will need to differentiate itself to succeed.
- Integration: Integrating the platform with Hilti's existing systems and processes could pose challenges.
8. Next Steps
- Develop a detailed business plan for the fleet management platform.
- Secure funding for the development and launch of the platform.
- Assemble a dedicated team to develop and implement the platform.
- Pilot the platform with a select group of customers.
- Market the platform to Hilti's existing and potential customers.
By taking these steps, Hilti can successfully launch its fleet management platform and capitalize on the growing demand for fleet management solutions. This disruptive innovation will enable Hilti to secure its future growth and maintain its leadership position in the power tool industry.
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Case Description
This case explores the introduction of fleet management in the construction industry by the premium power tools manufacturer Hilti in 2000. Following its customers' needs, Hilti moved from selling power tools to leasing them as a service. The introduction of the new business model contributed significantly to the success of Hilti, since it sustainably differentiated the company from its competitors. For instance, the adoption of fleet management resulted in customer loyalty levels five times higher than under the dominant business model Hilti had formerly employed, and over-proportioned profit contribution at Hilti. Hilti's Chief Technology Officer described the importance of the innovation as follows: "Hilti developed many very innovative and successful products over the years, but they paled in comparison with the fleet management business model, which was the most important innovation in Hilti's history." All told, Hilti, which had about 22,000 employees and made about 4.5 billion Swiss Francs (or $4.589 billion USD) in sales in 2015, managed 1.5 million tools under fleet management contracts in 40 countries, resulting in a contract value of more than 1.2 billion Swiss Francs (approximately $1.4 billion USD). Case A describes the strategic decision-making process regarding the introduction of fleet management in its early planning stages. Case B (separate) tackles the implementation and scaling process of fleet management over the years and explores current challenges facing the BMI.
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