Caterpillar Smart Iron

As the digital marketing product manager at Caterpillar machines, Kevin Espinoza had spent the past five years championing a move to enable the Internet of Things (IoT) on the manufacturing company's equipment. With sensors on the machines, Caterpillar had access to real-time information about usage, the life of the equipment, and problems, among other data. When his friend Kevin Bencz, Caterpillar's global marketing director of aftermarket services, stopped by his office with a question, Espinoza knew he could help.

Bencz's theory was that customer retention was heavily linked to machine uptime. If a company had fewer costly breakdowns, customers would be more pleased, see the value in a more expensive Caterpillar purchase, and again buy the company's products. As the leader of aftermarket services, Bencz had been urging the organization to devote more resources to his department. More service resources, more attention to customers, and fewer breakdowns would result in more profit. But although the general plan made sense, senior management wanted more hard proof before granting Bencz's request. Bencz and Espinoza decided to look at total retention for the entire Caterpillar organization based on downtime.

Note: The use of this case is restricted to classes at the Kellogg School of Management.