How the innovation “ecosysytem” punctured Michelin’s new tyre
Michelin come up with an innovative new tyre with a genuine benefit – the PAX can run flat for 125 miles. They make it, launch it and get it listed. Consumers love it. Yet it falls flat (!) so badly the company gets sued by the same consumers. How did this happen?
The answer is a failure to create the right innovation "ecosystem", as described in a great case study in the FT here. An ecosystem is the series of other inter-linked partners and suppliers essential for the success of a new product or service. I posted on the example of the iPad ecosystem last year: growth has been driven by the Apple Stores where people can try it and, even more importantly, the thousands of companies creating apps that run on the device.
In the case of Michelin, the PAX system needed the support of several partners to work. First, the car makers. As the PAX System had a pressure monitoring system integrated into the car, so it had to ve built into cars early on in the design process. This part of the ecosystem worked well. Acura, Audi, Nissan, Renault started using the PAX system. Then the big coup was Honda installing it as standard on the Odyssey, the number 1 minivan in the US.
The PAX system's problems came with the second part of the ecosystem: the garages (image below, from The Wide Lens Book). The repair process required dedicated new equipment to remove, repair and re-fit the tyres. Unfortunately, garages were slow to install this equipment. Incentives to install the equipment were linked to the number of cars with PAX fitted. But the 200,000 PAX system Michelin claimed to have sold was only c. 0.3% of annual car production. Garage owners could see it would take many years for the base of PAX-equipped cars to become significant and make their investment worthwhile.
As a result, for many driver with PAX tyres they could not get them repaired, only replaced, which was much more costly. And, this being the US, the pissed off punters filed several class action lawsuits, accusing Michelin of hiding the lack of repair facilities. Michelin ended further development of PAX in 2007.
In conclusion, when working on your next big new innovation, think through the ecosystem you need for it to be a success. As the FT article says at the end: "Success requires an assessment of interdependence among all partners, and clear strategies to manage them. It is no longer enough to manage your innovation: now you must manage your innovation ecosystem."