A continual flow of Moments of Belief at Hilti
In the customer-led companies we examined, Moments of Belief are not one-offs; they are normal, they are decisions and behaviours that are explained by a shared and (eventually) unquestioned belief that creating customer value in new and better ways is, in fact, the top priority and the strategy. While normal in customer-led companies, this continual flow of Moments of Belief is critically important in keeping the shared belief system strong, in sharing it with newcomers and keeping in perspective the legitimate and natural forces that would otherwise pull management inward. Hilti provides a helpful illustration.
Hilti, famous for the red drills used by construction workers around the globe, is a privately owned business that develops, manufactures and markets premium products and solutions for use by professionals in the construction, building maintenance, energy, extraction and manufacturing industries. In 2018, its nearly 30,000 employees generated revenues of just over €5 billion from its activities in 120 countries. The words of founder Martin Hilti continue to resonate throughout the organisation, ‘Markets are more important than factories.’ His first-hand observations of users informed product design, organisational design and later leadership behaviour. Market immersion simply became, and remains, the norm for leadership and decision making at Hilti. It provides the outside-in perspective that defines being customer-led. It also is the source of opportunities to create customer value in new and better ways as this flow over time of Moments of Belief at Hilti illustrates.
1996 - Challenging conventional wisdom
In 1996, France country manager Alain Baumann uncovered the large and highly attractive - but for Hilti, underserved - market of tradesmen working as sole traders or in small companies. To reach them, he intended to create a new route to market dedicated to professionals. This was completely outside of the norms of Hilti’s existing, longstanding and unique-to-the-industry business model, which relied on a huge team of sales and service engineers (7,500 globally at the time) to sell directly to customers. Customers saw Hilti’s expensive route to market model as an integral part of the Hilti offer. They valued the expertise offered by the sales team.
Baumann’s plan truly challenged the company’s executive board. While there were considerable known costs (putting a highly qualified Hilti sales engineer in store for all opening hours) and significant risks (the success or otherwise of the new retailer brand and its strategy including the eventual product range offered would reflect on Hilti; the territories of the existing Hilti sales engineers would most probably be cannibalised), the true potential of the move could not be properly assessed. After some considerable hesitancy, the executive board supported the move. It was the right thing to do. It was consistent with the kinds of customer- led innovation it wanted to see; moreover, some customers that highly valued Hilti were poorly served by the existing model. The support was well placed. Within a year it became clear that the model was viable, scalable and highly appreciated by the target segment customers, offering them considerably more convenience - an issue of enormous economic significance especially to sole or small traders. As the retailer grew, Hilti
France grew with it, achieving coverage levels that would be impossible with the existing route to market approach. For Hilti colleagues around the world, it had been another Moment of Belief, another big decision demonstrating the company’s customer-led priorities. The shared beliefs were stronger as a result and led others, most notably Hilti US, to pursue similar approaches.
2000 - Mining: The outside-in approach to building a better future
Hilti’s move into mining was bold. It meant that an organisation dedicated to the construction and building industry was going to enter an unfamiliar domain. The insight came from a Hilti sales representative who served one of the largest mining companies in South Africa. Being an expert on Hilti capabilities and solutions and being immersed in the client’s world, he realised the difference a Hilti tool could make.
He believed Hilti could apply its technical drilling know-how to make the work of miners operating at the ‘stope’ (the face of the mine where rock is broken) safer and reduce the damaging noise that traditional drills produce.
New equipment would need to be developed, a different sales process required and mining unions would need to be considered as the solution envisaged would lead to fewer equipment operators being required for the mineral extraction.
The crucial moment came when executive board member Ewald Hoelker made the trip to South Africa, descended to the face of one of the world’s deepest mines and saw the conditions the front-line miners worked in. He immediately saw the opportunity for Hilti to significantly improve the efficiency, effectiveness and safety of the process. And so Hilti set out on a long and ultimately successful development process. Today the business is stable, successful and established, creating customer value in new and better ways. The commitment to mining was an important Moment of Belief because it reiterated the importance of customer-led innovation to the whole organisation, something achieved by thinking broadly about the challenges of customers throughout their business systems. It reminded everyone of Hilti’s priorities and beliefs.
2001 - Evolving the business model: Moving from products to services
One of the most important developments in the company’s history was its decision to launch ‘Hilti Fleet Management,’ which like a car lease agreement allows customers to use (but not own) equipment for a fixed monthly fee. The fee includes the cost of service and repairs. In 2018, a little over ten years after its launch, more than one million tools were under contract with 100,000 customers. It is an important revenue and profit driver and success was neither obvious nor immediate. Indeed, it might never have happened if Marco Meyrat, head of the Swiss market, had not been pressured by one of his larger clients.
Whilst Meyrat understood the customer’s need, he also knew his organisation did not have the capabilities to deliver the service well and at scale. Embracing the opportunity would require building new capabilities, especially in contracting. Even Hilti’s core competence of direct selling would need to be adapted. Sales would take longer, with a different decision process involving different stakeholders. Further, questions arose such as how salespeople should be compensated, given they had previously been rewarded for the sale of specific equipment.
Yet, with the backing of the executive board that Meyrat is now part of, the company took a leap of faith. By asking for this service, customers had shown immense trust in the Hilti brand. Customers typically had tens of thousands (and sometimes hundreds of thousands) of Swiss francs tied up financing all on-site equipment. All of this was at risk every day from theft, poor handling and sub-optimal working and storing conditions. In the same way that office managers realised they didn’t need to be in the business of owning and maintaining expensive and temperamental printing equipment, construction companies realised they didn’t need to own much of their equipment on open sites. As they looked for a partner to take these risks on their behalf, who they could rely on for the best, most up-to-date technology, they turned to Hilti, a company and brand they had come to trust.
The executive board realised the implications, the set-up costs involved and the risks if they did not manage roll-out successfully. What they could not predict was the level of demand or indeed the reaction of other customers and their own salesforce. They took a brave step away from their core, but it worked, leading eventually to the company expanding the fleet business to cover non-Hilti assets.
These Moments of Beliefs have ensured Hilti maintains its outside- in shared beliefs, continually re-asserting that the business succeeds by being customer-led. Not only did these Moments of Belief create value for customers in new and better ways, they also led to profitable new revenue streams and business models. In so doing, they showed the organisation that outside-in thinking is the way things are done around here. They ensure Hilti maintains its outside-in orbit despite the relentless gravitational pull of inside-out forces, a pull strengthened by challenges to trading coming from the economic cycle and sharper shocks such as the global economic crisis and extreme currency movements.