Latest / The Pivot Podcast with Fexingo: How Businesses Change Direction and Survive Disruption / How a 105-Year-Old Tire Maker Reinvented Its Whole Business
Transcript
- Lucas: So here's a number I keep coming back to: a truck tire in 1970 lasted about 100,000 miles. Today, a premium truck tire can go 250,000 miles or more. Luna: And that's good for the trucker, but terrible for the tire maker, right? Fewer replacements. Lucas: Exactly. Michelin — a company that's been making tires since 1889 — looked at that trend plus the rise of ride-sharing and autonomous vehicles, and they realized the traditional model was heading for a wall. So they did something radical: they stopped selling tires. Or at least, they started selling something else. Luna: They started selling miles. The 'tire as a service' model. Lucas: Right. Instead of a fleet paying for a set of tires upfront, Michelin charges a per-mile fee that covers the tires, maintenance, replacement, and even real-time pressure monitoring. The fleet gets a predictable cost, Michelin gets recurring revenue, and everyone has an incentive to make tires last longer — which Michelin already wanted. Luna: It sounds simple, but it's a total shift. I mean, Michelin had to become a data company almost overnight. They needed telematics, sensors, analytics to know when a tire was wearing out. Lucas: And they had the advantage of a head start. They'd already acquired a telematics startup called Sascar in Brazil back in 2014, which gave them a data platform. So when they launched the pilot with a fleet in 2021, they already had some of the digital infrastructure. Luna: What were the results of that pilot? I remember reading a case study — it was with a trucking company in France. Lucas: Yeah, with a company called Jacky Perrenot. The pilot ran for about 18 months. Michelin reported that the fleet reduced its tire-related costs by 22 percent, and Michelin's revenue per vehicle actually went up, even though the fleet was buying fewer individual tires. That's the magic of the subscription model: predictable, higher-margin revenue over a longer period. Luna: But I imagine the internal pushback was fierce. Michelin's salespeople were trained to sell units — number of tires, volume discounts, that's the game. Now you're asking them to sell a service contract. Lucas: Huge cultural shift. Michelin had to retrain its entire commercial team. They created a new division called Michelin Solutions, separate from the tire business, to incubate the model without the old habits dragging it down. That's a classic pivot move: isolate the new thing so it doesn't get killed by the existing profit center. Luna: And the customers were skeptical too. Fleet managers are used to owning their equipment, not leasing it. They worry about lock-in, about data privacy, about losing control. Lucas: So Michelin had to be very careful about how they framed the value proposition. They didn't say 'you don't own your tires anymore.' They said 'you don't have to worry about tire management anymore. We take the risk, we optimize the lifespan, you get better uptime and lower total cost of ownership.' The data also stays with the fleet — Michelin just uses it to predict wear. Luna: And it wasn't just truck tires. They've started applying the same logic to mining tires, which are these massive tires that cost tens of thousands of dollars each. A mining company might have a fleet of haul trucks, and tire failures cause huge downtime. Lucas: The mining tire as a service contracts are even more compelling. Michelin charges per ton of material moved, and they guarantee a certain number of working hours per tire. If a tire fails early, Michelin eats the cost. That's real skin in the game. Luna: It also aligns incentives perfectly. If Michelin can make a tire last 10 percent longer, they capture that value. The customer just pays less per ton. It's a win-win. Lucas: And it's a very sticky business model. Once a mining company integrates Michelin's sensors and data platform into their operations, switching to a competitor isn't just about price — it's about rebuilding all that infrastructure. That's the holy grail for any B2B company. Luna: But let's talk about the timeline. This didn't happen overnight. How long did it actually take Michelin to go from idea to scale? Lucas: The internal discussions started around 2015. The first pilot with Jacky Perrenot was 2021. Commercial rollout in Europe was 2023. So we're talking eight years from concept to a real revenue stream. And even now, I think tire as a service is still less than 5 percent of Michelin's total revenue. This is a long-term bet. Luna: That's an important lesson for listeners thinking about pivoting their own business. It's not a flip of a switch. You have to be willing to run a pilot for years, lose money on it initially, and convince the organization to be patient. Lucas: And Michelin has the luxury of a strong balance sheet — they generated over two billion euros in free cash flow last year. So they could afford to experiment. A smaller company might not have that runway, but they could still do a pilot with one customer, one region, and prove the model before scaling. Luna: What do you think is the biggest risk Michelin still faces with this pivot? Lucas: Probably the commoditization of the technology. As tire sensors and telematics become cheaper and more widely available, competitors like Bridgestone or Goodyear could launch their own service model. In fact, Goodyear already has a fleet management service called FleetOnline. The differentiation has to come from data analytics and service quality, not just the hardware. Luna: And there's also the risk that fleets will eventually want to own their data entirely and commoditize the tire provider. If a startup offers a platform that works with any tire brand, Michelin loses its lock-in. Lucas: That's the classic platform threat. But Michelin is trying to stay ahead by making their data platform — they call it Michelin Connected Fleet — the best in class. They're investing heavily in AI to predict tire wear down to the individual vehicle level. If they can reduce downtime by another 10 percent, that's worth a lot to a fleet. Luna: So far, the pivot is working. Michelin's operating margin in its services business is higher than its tire business. And the services revenue is growing at double digits. Lucas: And they're expanding into adjacent areas. They now offer a service for electric vehicle fleets that optimizes tire pressure for range. They're even partnering with autonomous vehicle companies to design tires specifically for robotaxis, which have very different wear patterns. Luna: It's a great example of a company looking at the long-term trends — longer-lasting tires, shared mobility, electrification — and saying, 'We need to change what we sell before the market forces us to.' Lucas: Exactly. They didn't wait for disruption to hit. They anticipated it and started building the new model while the old one was still profitable. That's the hardest thing for any business to do. Luna: Honestly, if this conversation moved your thinking forward in some small way, you know where to find us. It's buy me a coffee dot com slash fexingo. The smallest possible gesture, but it genuinely helps keep these episodes ad-free and focused on the substance. Lucas: Yeah, it's one of those things where if today's show was worth a coffee to you, that's the link. We appreciate every single person who's chosen to support the show that way. Luna: Alright, back to the case. One thing I find fascinating is how Michelin is now using the service model to gather data on tire performance in real world conditions, which then feeds back into their R&D for new tire compounds. That's a virtuous cycle the old model never gave them. Lucas: That's a huge hidden benefit. In the old model, Michelin would sell a tire, and the customer might use it for three years, then throw it away. Michelin never really knew how it performed in the field. Now they have continuous data on temperature, pressure, wear patterns, road conditions. That data is incredibly valuable for designing the next generation of tires. Luna: And it also helps them optimize the retreading process. Michelin retreads truck tires multiple times, and with better data, they can decide exactly when to retread and how many times it's safe. That's a big part of the circular economy angle too. Lucas: Right. The pivot is not just about revenue model — it's also about sustainability. By maximizing tire lifespan and retreading, Michelin reduces raw material consumption. And since they own the tire throughout its life, they can ensure it gets recycled properly at end of life. That's a powerful story for corporate customers who have their own ESG goals. Luna: So what's the one takeaway for a business leader listening? If you're in an industry where your product is becoming more durable, or where usage patterns are shifting, maybe it's time to think about moving from selling a product to selling an outcome. Lucas: I think the key is to start small, with one customer segment, one geography, and be prepared for a multi-year journey. Michelin didn't bet the company on day one. They created a separate unit, ran a tiny pilot, proved the unit economics, and then slowly expanded. That's the playbook. Luna: And don't underestimate the internal resistance. The sales team that's been selling units for decades will feel threatened. You have to bring them along, retrain them, and maybe create new incentives that reward recurring revenue over one-time deals. Lucas: Absolutely. And finally, think about the data. If you're not capturing data on how customers actually use your product, you're flying blind. The service model forces you to get that data, and that becomes a competitive moat over time. Luna: Great episode. Next time we're going to look at a very different kind of pivot — how a legacy media company survived the shift from print to digital by betting on a subscription model. Lucas: Looking forward to it. For now, thanks for listening, and as always, keep pivoting.