Exec: Incubator program paying dividends for Michelin

GREENVILLE, S.C.—Innovation isn't just another buzzword for Michelin.

It is the key strategy behind the company's investment in resources in order to produce unique products and services and enter into new markets, according to Ralph Dimenna, a senior vice president for the world's second largest tire maker.

Dimenna directs Michelin's global incubator program, developed within the last few years to take new innovations into the market and organically grow the company outside of the firm's core tire business.

While the Tweel tire technology represents the company's most viable product thus far from the incubator program, it is just one of many innovations that the group is pursuing. That's the message Dimenna delivered during his keynote address at the ACS Rubber Division's 187th Technical Meeting, held at the Hyatt Regency in Greenville.

The incubator program office has locations in Greenville; Clermont-Ferrand, France; and Shanghai. Its goal is to deliver new ideas, new business models, new ways of working and new processes for bringing innovative products into the market in a “very profitable, sustainable manner,” Dimenna said.

The company is funding five initiatives in North America, all generated internally, while examining other areas to pursue.

“We took some of those teams to a fairly sophisticated boot camp in terms of, what does it look like to have an idea, and build a business model around that,” Dimenna said.

Dimenna said Michelin has launched five startups in Europe, providing mentoring and an “a to z approach in terms of product to market, the financial support, the marketing support, the business acumen.”

Many of the endeavors are on a short funding leash, Dimenna said. Each undertaking is reviewed every 90 days, “and if we do not consider they are moving fast enough with their project, we are in the environment where we'll stop the funding, pivot and reorient to something else,” he said.

“That is very different for a big industrial company like Michelin.”

The tire maker, ranked only behind Bridgestone in Rubber & Plastics News most recent ranking of global tire manufacturers with $25.5 million in sales, has identified five main domains as “emerging ecosystems” and is determining where and what it can do to capitalize on those domains. They are:

• Flexible composites, which encompasses everything about rubber, rubber composites and technology. That has broad capabilities beyond just tires;

• Farm to market logistics: How do you deliver from the farm to the places that those products need to be? A big area of focus, Dimenna said this includes finding solutions to get products from the farm to the market in emerging and mature economies alike across the world;

• Connected mobility, which includes everything from intelligent tires to fully autonomous cars. Michelin is trying to figure out what role it can play in a more connected world;

• Maintenance service, to make life simpler and easier for the customer. How can Michelin get involved in selecting and maintaining a tire or vehicle? and;

• Travel business: What else can the company do outside of its current involvement in travel guides, a staple of the company for years, to build new business?

As part of this focus, Michelin recently announced it had acquired Blackcircles.com, a leading Internet tire sales company in the United Kingdom, its second acquisition of an Internet-based tire sales company in a month. The firm is paying $75.5 million for Edinburgh, Scotland-based Black Circles Ltd., owner of Blackcircles.com, which generated $31 million in revenue in 2013.

A few weeks earlier, Michelin spent $64 million to buy a 40 percent share of Allopneus S.A.S. of Aix-en-Provence, France.

Dimenna said Michelin is the only tire company to offer every type of tire in every single segment, and the mission of the incubator program is trying to look outside the core business of producing and manufacturing tires for all the different types of vehicles and markets that exist in the world.

“What we've seen is that in the last few years is we need to go even further than what we've done in the last 125 years and focus not just on products, but on services and on other ways to improve mobility for people,” Dimenna said.

The Tweel tire certainly is one of the tangible results of the incubator program office. Dimenna directly oversees the Tweel initiative, a 15-year project that reached fruition on Nov. 20, 2014, when the tire maker's first Tweel manufacturing plant opened in Piedmont, S.C., near the firm's headquarters in Greenville.

The Tweel is an airless tire that is the first product Michelin has manufactured in which rubber and plastic is “actually married together in the same product,” Dimenna said. The Tweel's highly engineered shear beam and spoke, with rubber encapsulated between the cords, can accommodate 4,400 pounds.

Though the cost of these tires is significantly higher than single-ply bias tires, the benefit, he said, is three-fold: No compromise, no downtime, no maintenance.

“Those three attributes are incredibly valuable to our customers,” he said.

The Tweel has several applications, including skid steers, industrial “golf carts” and commercial zero-turn lawnmowers manufactured by John Deere, which is a key player in the Tweel project. Dimenna said John Deere not only provided the means to bring the product to the market, but it also kept pushing the tire maker to perfect the technology.

“(John Deere) understands innovation. They understand it's messy,” he said. “Multiple times during the course of the three-year project, they said, "Just keep working. You'll figure it out. We'll figure it all together.' “

The tires deliver durability and wear, while providing additional comfort over foam-filled tires usually found on skid steers.

Skid steer operators had to wear mouth guards while working in rugged environments to prevent teeth from chipping, he said. “Now we're providing a solution with a comfortable tire, allowing them to do all the work before and even more, because they never get flat tires, and in an environment much better for them. It's the whole value.”

The structure of the Tweel plant is unique for Michelin, Dimenna said. The entire business is housed in the 135,000-sq.-ft. facility, including sales, manufacturing, marketing, quality and technical.

“The sales team knows exactly what we're producing yesterday, when it will be available, when it will be delivered to the customer; the marketing organization gets direct customer feedback because they're sitting right next to the quality organization, which is getting information every day. The technical teams know what they need to continue to improve on; the sales organization and the marketing organization know when the new product is going to be industrialized in the plant.

“Everything is very, very flat. For a big industrial company like Michelin, it's a very interesting new model to have everyone co-located in one facility, working together, communicating constantly to understand how to serve the market as fast as possible.”