Smart Moves: Reinventing the wheel

The tyre industry has carved a well-worn track for itself, but one company has shaken its traditional image with some exciting innovations. Rachelle Thackray reports

AS Brian Smith, UK chief of one of Europe's largest tyre companies concurs, tyres are not an incredibly sexy product. This is illustrated by the probability that having a blow-out on the motorway will induce fury rather than pleasure; tyres are a necessity, not a luxury.

In an industry which has been chugging along for more than 100 years, it might seem like uphill work to reinvent the wheel and find new markets. "It's a mature product, and there's not going to be a sudden leap forward in technology," admits Mr Smith, who joined the Continental Tyre Group as managing director four years ago, after a stint as commercial director at Leyland Daf.

Nevertheless, he has made significant inroads into company philosophy, pumping in new life through a series of initiatives which he hopes will increase Continental's market share. Part of Hanover-based Continental AG, it is fourth behind Goodyear, Pirelli and Michelin.

Two key elements in his approach are the manipulation of a growing trend for outsourcing and a strategic building-up of his brand by cashing in on association with companies such as Volkswagen. He believes he has been something of a catalyst in a traditionally staid industry, a claim endorsed by colleagues who say he is a live wire and unafraid to demolish established practices. He says: "I was surprised by how old-fashioned the industry was. There was a lack of challenge, and some employees were unwilling to come forward with ideas. I have challenged them to give of their best. There's a real buzz being in a company that's doing well."

The sticking point is to determine the way forward in a mature market. "Anyone can get a level of proficiency in making a tyre, and the consumer takes the product for granted. You have to look at your core competencies and say 'What more can we do with related products?' We don't want to give up on tyres, but the real growth is in associated products. You work with your suppliers and customers to see what extra you can do for them.

"When I came on board, I set about looking for what I could offer that wasn't the tyre. When people came along excited about a new tread pattern, of course I valued the technological improvement and was pleased to offer it to the customer, but the main thrust was 'I have got to be different and better for other reasons'."

One thing he noticed was that individual tyre dealers needed a helping hand when it came to replacing a tyre on a vehicle. "It's quite a complex business to choose the right size and fit it to the right wheel. But it is a simple step for us to provide sub-assembly and create machinery that could deliver the complete wheel and tyre."

And Continental has done so, teaming up with a software company to provide dealers with the wherewithal to access original tyre specifications through their computers. The company is also working with car manufacturers Volkswagen and Mercedes-Benz to develop engineering systems including ISAD, a German acronym for a unit which eliminates the need for a heavy starter motor and dampens noise from the engine.

Meanwhile, Brian Smith's eagle eye was sharp to spot the opportunity to assist fleet operators who, he deduced, would be more than happy to have wheel worries taken off their hands. "Fitting tyres is not a pleasure, and what they would like is for someone to say 'I will take on management of your tyres and guarantee you quality at a cost'." Thus, the Tyre Management System (TMS) was born, and is now used with thousands of UK fleet vehicles, monitoring everything from tyre pressure to tread. "I don't sell the tyre to the customer; I manage the customer's vehicles. He knows I know how to get better mileage and safety," says Mr Smith.

Another initiative has been a waste-management system for tyre dealers and garages. "They had old filters, catalytic converters, brake shields and dirty rags. We had to understand what was needed and what we could offer. But now I can go to a truck operator and say 'I can help you, sir'."

Such packages seem attractive to those wishing to outsource. But while the concept, one of the most fashionable business buzzwords around, has droves of followers, there are doubters. Bob Aylott, principal consultant at KPMG Management Consulting, warned that while many organisations outsource in the belief that they will gain control over operational costs and service levels, this could prove misleading. "Outsourcing appears to be the most commercially viable choice as cost benefits can be achieved through avoiding recruitment costs, eliminating capital requirements and sharing risks," he says.

"[But] the organisation must be able to absorb the changes that the supplier will inevitably bring to the client. The client must work to ensure that changes are made with the organisation, not to the organisation. In order for an outsourcing agreement to be successful, the organisation must be prepared to spend management time - a commitment which is not always foreseen. It can be a success, but only if it is systematically managed through all its stages."

Brian Smith acknowledges the need for a partnership between supplier and client; to that end, many of his clients were invited to a forum in Hanover in February, at which 1,800 guests included Germany's potential chancellor, Gerhard Schroeder.

Meanwhile, the process is working two-way, with Continental's UK arm outsourcing parts of its business, such as distribution. "My job is tyres and related services," says Mr Smith. "I haven't got the core competency to distribute."