Surviving Slowdown- the Metso Way

Prince Thomas
Updated: Aug 14, 2013 04:51:42 PM UTC

Despite the seemingly royal linkages of my first name, I like to see life from the back bench. While studying it helped when lectures were unending but later I realized it also worked as a corporate reporter. It gives a clear view of both the performer and the viewer; of the 360 degree perspective and the minute detail. Now while tracking the world of business for the pages of Forbes India as Senior Assistant Editor, I will use this space to share what I observe from that rear seat.

Joao Ney was not joking. His colleague from Thailand realised this and almost fainted. Bang in the middle of the economic slowdown in 2009, the Finland-based Metso, where Ney headed the services division of the mining and construction segment, was reeling under pressure. In Gurgaon, Joao had just told his Asia-team that he expected business to grow by 15 per cent every year.

"How can we do 15 per cent?" was the only question from worried colleagues.The company supplies technology and services to clients in process industries, including mining, construction, pulp and paper and power. The mining segment was one of its bigger verticals and the extracting industry was already feeling the heat of falling prices.

Four years on, the Thai unit has emerged as one of the best performing in the region. It grew at a compounded rate of 23 per cent.

The turning point, says Joao, was the decision, taken back in 2007 to change the business model and focus on services. This also included maintaining existing machinery, streamlining operations and saving costs. For all purposes, it was a step away from the company's traditional business model that centered around supplying technology and creating processes for new installed capacity.

The change at Metso is spreading to India, where the company clocked revenues of about $280 million in 2012. It has just signed its first maintenance contract with South West Mining for three years. "We have spent Rs 450 crore in India since 1992," says Sudhir Srivastava, Senior Vice president, Mining and Construction, Metso Asia. The company has manufacturing facilities in Alwar, Rajasthan and Ahmedabad, Gujarat.

Metso's experience is a good lesson on how companies can go through tough times by tweaking their business models.It is not the only one. Hays, the recruitment agency, used to focus on public sector jobs. But to ride out the slowdown, the company started providing additional services.From a drop in revenues in 2010, the company has grown business in the following two years.

In Metso's case the timing was just right. While its business has been affected by the slowing economy, the impact has been much lesser than what it could have been if no action was taken. "In 2008, while the capital business has seen a drop of 30 per cent, the impact on services business was much less at 10 per cent," says Joao. In the last six years, the share of services in the overall revenue of the $10 billion dollar company has increased from under 10 per cent to over 44 per cent.  In the mining and construction segment itself, the share of services is 50 per cent.

During the slowdown, Metso saw a change in its clients' priority. "Capital expenditure was falling and the emphasis was to repair, rebuild and increase efficiency of the installed capacity," says Joao. The company was able to benefit from this approach.

The larger challenge was to prepare the organisation for change. "It has not been easy as we needed to change the culture of the company. Because now we were not merely servicing machines installed by us, but also those of our competitors," notes Joao. This needed huge amount of training. The company has created 70 service hubs across the world and trains about 2,000 technicians and engineers at any given time. It has created the infrastructure that includes 10 regional distribution centres and 20 satellite warehouses that work 24/7.

Joao wants to increase the share of services and make the business more resilient to slowdown. And he is hoping that his colleagues from other parts of the globe learn from their Indian counterparts. "The attitude and the willingness to learn among Indians is huge," he says.

 

 

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