Smart Move from Daimler

May 6, 2011 by Sophie Kirsten

Daimler now rents cars to customers, too. (Foto: Daimler AG)

The automaker Daimler now also rents cars to customers. (Foto: Daimler AG)

In the past few months, there has been much talk about the company car2go. It earns its money with a simple but brilliant idea: highly personalized, flexible car sharing. car2go is far from a traditional car rental company; in fact, it’s a subsidiary of automobile manufacturer Daimler.

Daimler, headquartered in Stuttgart, Germany, started adapting to a change in consumer habits and launched the car2go pilot project in October 2008. It soon became clear that the concept was popular. Since then, Peugeot and BMW have also initiated similar schemes.

car2go has little to do with Daimler’s original business model – namely, that of manufacturing and selling vehicles. The company has a foothold in a different industry altogether: the service sector. Daimler mastered this transformation successfully. car2go can already be found in the German cities of Ulm and Hamburg, as well as in Austin (Texas). More locations worldwide are set to follow.

A piece of the service pie

Ever more companies are taking a similar approach. They ask “Why should we just produce when we can also provide services?” The move is away from the assembly line and toward the customer. Another example is the German tool manufacturer Hilti, which has introduced fleet management, an innovative tool management system.

With this model, customers no longer purchase individual tools but pay for their use based on a specific building project or period. They loan tools directly from Hilti at a monthly fixed price. This includes all repair and maintenance costs, plus a free collection and delivery service. But is it really that easy for a tool manufacturer to become a service provider?

“Manufacturers have to realign everything if they want to move into the service sector,” says Christoph Pichler from SAP Business Transformation Services (BTS). His colleague Christopher Megies agrees. The two consultants say they have received an increasing number of inquiries from manufacturers over the past few months.

They all want to focus more on providing innovative, high-quality services – and, as a result, become more competitive and increase revenues. But it isn’t that simple. “Service offerings require certain competencies. Usually, lots of training is necessary or completely new staff need to be hired,” Pichler explains. “Plus, business processes are fundamentally different and, of course, companies need the right software to support these processes.”

Next Page: Planning and consulting from SAP

Planning and consulting from SAP

The distance from production to service might seem a short one. A company like Daimler builds cars, so why shouldn’t it hire them out, too? In reality, however, such a transformation of the business model requires a substantial amount of planning and organization – and therefore also investment. SAP BTS identified this trend and developed a specially tailored consulting service.

“We enable manufacturers to transform themselves to become providers of their own services,” Pichler says. “Our task is to accompany customers from strategy planning through implementation. We restructure business processes and the related system landscape in such a way that customers can meet the new business requirements.”

Often, SAP customers can use parts of their existing solutions for the new business unit. If customers deploy special industry solutions, their particular functions need to be retained when the transition is made between the manufacturing and service sector.

That’s why SAP BTS consultants work very closely with customers. They prepare them as effectively as possible for the transformation and support them during the transition phase. Using a jointly devised transformation plan, the process and system landscape is reshaped and extended. The goal here is optimal change management, in other words, to perform all the adjustments in the company and in the IT environment in a controlled way and as efficiently as possible.

Worth the effort

In some cases, it makes sense to found a subsidiary for the new service area – as, for example, Daimler did for car2go. Pichler explains, “The amount of work involved and the size of such a transformation vary from case to case.”

Sometimes it is sufficient to bundle the service offerings in a separate line of business. With some companies, targeted cooperation with service partners makes sense. “If the chances of success in the service sector are promising, then it’s definitely worth the effort,” says Pichler.

One thing is certain: Both companies and consumers are benefiting from the transformation trend. “Of course, companies already try to make good products to sell,” says Pichler. “But if they use their own products to provide their own services, they’ll need to put much more emphasis on aspects such as durability and maintenance costs.” As a result, companies can produce something that is well known and well liked in every industry: a win-win situation.

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1 comment

  1. Anonymous

    The trend towards the services business has already been going on for more than a decade: spare parts, maintenance services, installations – the whole MRO stuff.
    I don’t see a new trend here, or even that manufacturing companies transforming into service companies.

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