A division of a German engineering group, that had traditionally produced and sold large machines for the paper making industry, had built a modest service business totalling less than 5% of the division’s total revenue. Their current service offering consisted of providing spare parts, reactive and preventive maintenance service contracts.
The challenge
They were facing several challenges:
- Price pressure on new equipment sold was increasing due to increased competition from Chinese suppliers
- Annual growth of the company had been below industry average for the past 5 years
- Profitability of the overall business was going down
Two senior managers saw several opportunities to grow the service business but were having difficulties in convincing the board of directors to strategically invest in the service business in order to develop its potential.
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