This was the dilemma facing Per Stjernqvist, Nordic Managing Director of Volvo Construction Equipment for Denmark Norway and Finland. But instead of going with the flow of the recession and reducing his head count, he decided to attempt to push the other way and increase profits.
As the recession began to bite in the winter of 2008-09 he brought twenty of his key customers and 100 employees together for four hours and asked them to come up with twenty ideas to increase profit in after-sales (service and spare parts). His target was to add an extra 1 million Danish Krone (€135,000) of profit in the first quarter of 2009.
“Service and spare parts is the area that will help us survive the downturn,” he says. “Customers are not buying new machines but a great number are still running. We need to compensate on lost sales with after-sales where we have to be more efficient in lowering costs and selling more. Hence the idea of the seminar. I was a little afraid that some of our customers wouldn’t be interested in attending such an event, perhaps even seeing it as just a ruse to get money out of them. But they all wanted to come. They saw it as an opportunity to benchmark themselves in managing in a downturn and to get inspiration to see how things could be done in a different way.”
The meeting was organized by Frederikke Kroon who works with Copenhagen Business School on generating ideas for sustainable innovation. The 120 attendees were split into brainstorming groups and given a strict timetable to come up with 200 short-term solutions to the decline in the after-sales market. The 200 suggestions were then whittled down to twenty and then to seven that were deemed suitable for immediate implementation.
“It has worked out very well,” Per continues. “Not only are we heading for the additional one million in profit, I have not had to decrease the headcount of field mechanics at all, in contrast to every one of my competitors who have had to let some of their field mechanics go. We are a service company and the only way we can provide service is when we have motivated employees; if you can’t achieve that, you can forget having high service levels. My agenda is therefore to always keep my employees as motivated a possible. It is tough during a downturn, but, if you are open and honest about the motivation of the company and involve people in creating solutions, you can achieve motivation even in the current circumstances.
“The advantage is that customers use suppliers with motivated employees, and so we are actually increasing our market share because customers want to do business with us. The few new machines that are being sold in Denmark are being sold by Volvo because customers want to invest in a company they believe in. For me the way to survive the downturn not just by cutting costs but by trying to increase turnover.”
Read the full article: Beating the recession
