Competing in a Global Context — Florent Menegaux, CEO Michelin

Systems Leadership — April 11, 2019

This post first appeared on April 22, 2019 in Systems Leadership.

Our third visitor to Systems Leadership this year was Florent Menegaux, CEO of Michelin. During Menegaux’s visit we explored competing in a global context, and the class was a great juxtaposition to our previous guests from Asia (Samsung) and the United States (Qualcomm). Menegaux is dealing with the transformation of his company and industry at so many levels — from the rise of Chinese tire manufacturers to the developing needs of the electric and autonomous automobile market. All the while Menegaux shared how he must work to drive change in one of France’s most iconic companies — a firm with a 130-year history which is headquartered in the middle of France (see below), that is located away from Paris but is doing business all over the world. In Menegaux we saw a leader, and several key members of his team, that is working to leverage the company’s core competency in materials science with its growing digital and services businesses.

Redefine Your Strength (Material Science + Digital Services + Brand) → Horizontal

Beyond the shadow of a doubt, today Michelin is seen as a tire company. The history of the organization, which created the first pneumatic automobile tire, the first detachable bike tire and the first radial tire, is inexorably tied into its history. Even though the company has a digital services business with its Michelin Guides and its growing telematics and service groups, Menegaux highlighted that Michelin cannot be just a tire company in the future — they need to be able to bring solutions to customers in a variety of market segments or they run the risk of being increasingly commoditized as a component supplier with decreasing power in the mobility value chain. As the mobility industry goes through incredible changes around electrification (which causes tires to wear differently) and ride sharing (which changes the nature of how long tires need to last on a vehicle) the company needs to execute on its core business and simultaneously look for other areas of growth.

When you combine these changes with the tremendous rise of Chinese suppliers of tire manufacturers that serve the local Chinese market (which happens to be the largest in the world) and the inevitable growth in Chinese exports, the leadership team is working to redefine and communicate the company’s unique core competencies. What many do not realize is that Michelin is a world leader in materials science development and application, and this competency has the potential be levered into other market segments. The company is just starting to explore the ways its technical know-how can be used in other market segments as it redefines its core strengths.

In addition to materials science excellence, the Michelin brand, which has historically represented high quality products, gives the company one advantage over new entrants in the space — a history that represents safety and experience — a key attribute in the mobility space. As a Systems Leader, Menegaux needs to execute on the company’s core businesses and at the same time create future opportunities for growth and success.

The Importance of Glocal (Another System)

Menegaux talked about how much of Michelin’s business is what he called, “Glocal” — global + local. The company sells products all over the world and has employees in over 175 countries. As one of France’s largest companies with a rich heritage, the company needs to design and sell products that appeal both to OEMs and end-users in various market segments, and they can only do this when the leverage their competencies on a global basis while customizing solutions for local markets.

With 130,000 employees in these 175 countries, Menegaux and his leadership team need to fit into each local context in which they compete. The complexity confronting this Systems Leader is compounded as the company is competing not only against commercial organizations trying to win business, but as also highlighted previously by Steve Mollenkopf of Qualcomm, the company is competing against nation-states who have their own national interest in promoting certain industries (i.e. in how the Chinese government is supporting local manufacturing and exports as a national interest). The main way that Michelin must be effective is to have a strong presence in each country where it does business, and be seen as a trusted business partner for each locality. This blending of both global competence and local knowledge is a requirement of success for any organization that competes on a worldwide level, and is an increasingly necessary skill despite current changes in attitudes towards globalization.

(L-R) — Ralph Dimenna, Sonia Artinian-Fredou, me, Florent Menegaux, and Jeff

Challenge of Communication

As Menegaux highlighted, Michelin’s employees and customers need to understand both what Michelin does today but also what they need to do in the future order to be competitive. Menegaux shared how he is working not only to redefine how employees see the capabilities of the company, but how he must ensure that everyone sees a common vision and direction for the organization. This is made all the more difficult when one is simultaneously redefining the company’s core strengths while executing on global and local initiatives.

After the class session ended, Menegaux shared some of the frameworks he uses internally to help Michelin’s employees understand their future direction. I was struck by the clarity of the messages of what the company is striving to become, and also the flexibility in the tools that will allow the company to continue to evolve in the future. In using such a key message, Menegaux exemplified one of the key traits of a Systems Leader — the ability to understand multiple vectors impacting his business while being fluid enough to understand that whatever changes the company is facing today, Michelin needs to be able to continue to evolve in the future.

Post Script

If you ever have the chance, I highly encourage you to hang out in a small city in a foreign country that is playing in the World Cup final. Please allow me to introduce you to 15,000 of my closest friends in Cleremont-Ferrand.