Background

Established in 1987, Infomedia serves 170,000 users representing 39 global automaker brands in 186 countries around the world with software for spare parts catalogs, parts and service sales, and lubricant point of sale solutions for oil companies. Infomedia provides about 200 discrete applications that help dealers service their customers while maximizing profitability. With dealers depending on the Infomedia’s software, performance and reliability become critical.

The Challenge

With innovation being Infomedia’s key competitive strategy, the company was one of the first software vendors to use Amazon Web Services (AWS) in 2012 in Australia. The key challenge was to preserve Infomedia’s level of service and performance as it transitioned to the cloud and Infomedia did this, in part, by liberal provisioning of infrastructure. But it found itself unable to track actual customer experience as well as the causes of any performance issues which it addressed by adding more infrastructure capacity in the form of cloud resources. It could not accurately distinguish between capacity constraints and suboptimal software resource consumption. As a result not only did costs face potential escalation but application performance was also at risk.

The Input

Infomedia chose New Relic, a pioneer in modern application performance management in the cloud, to help increase their operational visibility in the cloud. New Relic allowed them to better observe their application performance as well as consumption of cloud instances needed to provide the level of performance for the customer experience that they needed to maintain.

The Outputs

They used the New Relic APM to monitor application performance, New Relic Infrastructure to track the use of the underlying infrastructure to deliver that performance and the Health Map visualize the overall inter-relationship of application performance and infrastructure. They could be running 50 or more Amazon EC2 resources per application with 10 or more versions running at the same time and it was only with New Relic that they could accurately visualize and distinguish between application and infrastructure performance.

The Outcomes

This new ability to disaggregate application performance and infrastructure consumption allowed them to address the two issues separately to optimize application performance while also improving infrastructure utilization through the insights they obtained on each aspect. For example, one application alone was found to be using 49 large instances, indicating that the problem was more likely to be in deployment. This helped them reduce cloud spend by over 40%, and improved their decision making on provisioning for other applications. In another example, an application was found to be memory intensive rather than CPU intensive as was previously envisaged. In this case the savings were almost 90%. This also helped them to further improve customer experience.

In addition to resource optimization and application performance improvements, the insights provided by New Relic helped improve another key aspect of Digital Transformation – namely company culture. The causal transparency has helped to reduce “finger Pointing” and also improved the level of trust between executive and operational personnel.

Sources: New Relic

Key facts

• Michelin¹ is a global player in mobility and one of the leading tyre manufacturers across the globe.
• Michelin has 107,000 employees and achieved revenues of €21 billion for period ending TTM 6/15 and an EBITDA of €3.4 billion; margins have increased from 13.8% in 2011 to 16.6% TTM 6/15.
• EFFIFUEL™ by Michelin Solutions was the first innovation in the market targeting increased efficiency in fleet fuel consumption.

Uniqueness

• Michelin Solutions makes a contractual agreement to meet pre-defined targets, or otherwise provides a refund in proportion to expenses incurred.
• EFFIFUEL™ is a comprehensive ecosystem that includes sophisticated telematics, training in eco-driving techniques and the EFFITIRES™ optimized tyre management system.
• EFFIFUEL™ provides a “satisfaction or your money back guarantee” by providing the fuel efficiency service risk-free to truckers.

Value

• EFFIFUEL™ encourages careful handling of the truck equipment, leading to extra savings for companies and a potential doubling of pervehicle profits.
• A reduction in fuel consumption of 2.5 litres per 100km represents annual savings of €3,200 for long-haul transport (at least 2.1% reduction in total cost of ownership and 8 tonnes in CO2 emissions).
• Business model shift from selling tyre as a product to a service guaranteeing performance, has helped Michelin achieve higher customer satisfaction, increased loyalty and raised EBITDA margins.

Approach

• Michelin initiated the digital transformation internally, but they soon realized that in some critical areas, such as big data analytics or infrastructure they needed to partner with external experts.
• Cultural change was another prerequisite to successfully manage the digital transformation journey.
• The risk of changing the business model was mitigated since Michelin Solutions was created as a standalone entity and the company decided to test the solution by launching several pilots.

 Sources: Michelin, WEF/Accenture Analysis

Key facts

• The LEGO Group¹ engages in the development, production, marketing and sale of play materials. It provides toys as well as experiences and teaching materials for children in approximately 130 countries.
• Founded by Ole Kirk Christiansen in 1932, LEGO is based in Billund, Denmark. It is a subsidiary of KIRKBI and is currently privately held.
• In 2014, LEGO earned €3.8 billion in revenues and €1.4 billion EBITDA, with a margin of 37.1%. It currently employs approximately 13,000 people.

Uniqueness

• After a period of expansion (1970-1991) LEGO suffered a steady decline (1992-2004) and by 2004 LEGO was close to bankruptcy.
• Reaching a tipping point, LEGO started restructuring and a digital transformation programme focused on new revenue sources coming from movies, mobile games and mobile applications.
• LEGO’s design capabilities have been increasingly handed over to their fans e.g. through the Digital Designer (a web-based 3D design tool to create own designs). It’s USP towards learning and development differentiates it from competitors and convinces parents from millennial generation about the usefulness.

Value

• LEGO achieved an EBITDA margin of 37.1% in 2014, an increase of 15% since 2007.
• Revenues for LEGO have grown at a CAGR of 20% from €1.6 billion in 2009 to €3.8 billion in 2014.
• In 2014, the first LEGO movie achieved revenues of approximately $468 million with a production budget of only $60 million.
• LEGO has recovered steadily post 2005 and it is now seen as “the Apple of toys”. 

Approach

• LEGO’s new business group has become the incubator of the company, an open platform that allows fans and partners to experiment with “micro businesses”.
• LEGO was able to transform itself by launching new digital based businesses such as movies, LEGO Mindstorms, video games and applications, connected to their block systems that are more appealing to digitally savvy customer groups.

Sources: Lego Corporate Information, FT, LA Times, Global Toy News, WEF/Accenture Analysis