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Stretch: Nordmark Pumps: 20 percent more profit from service

You run the case. Read the prompt, answer questions from the notes below, and share data only when the candidate asks for it or gets stuck. Score at the end.

Case timer

00:00

Target length:

1. Read the prompt aloud

Read it slowly, then pause. Let the candidate ask questions before they structure.

Nordmark Pumps, a Swedish maker of industrial pumps, wants 20 percent more profit in three years. The exhibit shows the share of installed pumps covered by a Nordmark service contract, by region. Where should it focus?

Format note: Difficulty: Stretch. Format: interviewer-led, with an exhibit. Industry: Industrials. Region: Europe. Interview length: about 40 minutes. The company is fictional and all figures are illustrative.

2. Answers to clarifying questions

Give these answers only if the candidate asks. If they ask something not listed, give a sensible answer or say it does not matter here.

If asked: What are the two businesses?
Answer: New pumps (about 4,000 a year at EUR 15,000 each, 20 percent margin) and service contracts on installed pumps (EUR 1,200 a year each, 40 percent margin).
If asked: How big is the installed base, and where?
Answer: About 50,000 pumps: 10,000 in the Nordics, 15,000 in Germany, 10,000 in the UK, and 15,000 in Southern Europe. About 2,500 old pumps are retired each year.
If asked: What is the goal?
Answer: 20 percent more profit within three years.

3. The hypothesis a strong candidate states

Listen for an early, testable guess like this one. It does not need to match word for word.

Service earns twice the margin of new pumps and many customers have no contract. My hypothesis is that raising the share of pumps under service contract in weak regions is the fastest route to the target.

4. A model structure

Compare the candidate's structure with this one. A different split can be just as good if it is clean and fits the problem.

Profit = equipment profit + service profit
- Equipment: units x price x margin
- Key: Service: installed base x share under contract x price x margin
- Levers: share under contract by region, base growth, service price

Exhibit 1

Reveal to candidate: when they ask for this data, say "Open Exhibit 1" (they press "Show exhibit 1" on their screen).

Share of installed pumps under a Nordmark service contract, by region (illustrative)(%)

So-what

Contract share falls sharply from north to south. Southern Europe has the largest gap and the most pumps without a contract.

5. The working, step by step

Each step shows how a strong candidate works it out. Share a new fact from it only when the candidate asks or is stuck, and let them do the math: the result in the dark box is what they should reach.

Step 1: Equipment profit
What a strong candidate does: 4,000 pumps a year at EUR 15,000 and a 20 percent margin.
Equipment profit (EUR a year): 4,000 × 15,000 × 0.2 = 12,000,000
Step 2: Service profit
What a strong candidate does: 50,000 pumps, 30 percent under contract, EUR 1,200 a year at 40 percent margin.
Service profit (EUR a year): 50,000 × 0.3 × 1,200 × 0.4 = 7,200,000
Step 3: Target
What a strong candidate does: 20 percent more than today's total.
Extra profit needed (EUR a year): (12,000,000 + 7,200,000) × 0.2 = 3,840,000
Step 4: Extra contracts from weak regions
What a strong candidate does: Raise Southern Europe (15 percent) and the UK (25 percent) to Germany's 35 percent, and Germany to 45 percent with remote monitoring.
Extra contracts: 15,000 × (0.35 - 0.15) + 10,000 × (0.35 - 0.25) + 15,000 × (0.45 - 0.35) = 5,500
Step 5: Profit from those contracts
What a strong candidate does: At EUR 1,200 a year and 40 percent margin.
Extra service profit (EUR a year): 5,500 × 1,200 × 0.4 = 2,640,000
Step 6: Growth of the installed base
What a strong candidate does: About 4,000 pumps sold and 2,500 retired each year adds 4,500 pumps over three years, at a 35 percent contract share.
Profit from base growth (EUR a year): 4,500 × 0.35 × 1,200 × 0.4 = 756,000
Step 7: All levers
What a strong candidate does: Adding a 5 percent service price rise, justified by remote monitoring and applied to today's contracts only, to be conservative (50,000 x 30 percent x EUR 1,200 x 5 percent).
Total extra profit (EUR a year): 2,640,000 + 756,000 + 50,000 × 0.3 × 1,200 × 0.05 = 4,296,000
Step 8: Curveball: cheap independent service firms
What a strong candidate does: Interviewer: "Independent service firms charge 25 percent less in Southern Europe. Suppose we only reach 25 percent there, not 35." The total becomes:
Total with weaker Southern Europe (EUR a year): 4,296,000 - 15,000 × 0.1 × 1,200 × 0.4 = 3,576,000

The recommendation to listen for

At the end, say: "The CEO walks in. What is your recommendation?"

Focus on service, starting with Southern Europe and the UK. First, service earns 40 percent margins against 20 percent for new pumps, and 70 percent of installed pumps have no contract. Second, closing regional gaps, growing the base, and a modest price rise add about EUR 4.3 million, above the EUR 3.84 million target. Third, low-cost independent firms threaten the plan: if Southern Europe reaches only 25 percent, the total falls to about EUR 3.6 million, short of target by about EUR 264,000, which equals about 550 more contracts at EUR 480 of profit each (EUR 1,200 x 40 percent). So offer a basic contract tier priced to compete with independents, sell contracts with every new pump, and use remote monitoring to show value that independents cannot.

Risks a strong answer names: Independents may cut prices further; Remote monitoring needs investment and customer consent to share data.

Next steps: Design a basic and a premium service tier; Make a contract offer part of every new pump sale.

Strong versus weak

A strong answer

Split profit into equipment and service, sized each lever against the target, and showed the curveball could make the plan fall short, then adjusted it.

A weak answer

Proposed selling more new pumps, the lower-margin business, and ignored the regional gaps.

Score the candidate

Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.

Structuring

1: No clear structure, or a memorized framework that does not fit the problem.
3: A sensible structure, but with some overlap, a gap, or no clear priority.
5: A structure built for this problem, with no overlap and no gaps, a stated hypothesis, and a clear first step.

Math

1: Frequent errors, no units, or needed heavy help to finish.
3: Right answers but slow or messy working, or one error caught late.
5: Accurate and clearly narrated, with units, a sense check, and what the number means.

Exhibit reading

1: Read the chart aloud without finding the number that matters.
3: Found the key number but gave only part of the so-what.
5: Pulled the right number quickly and said what it means for the case.

Synthesis

1: Summarized what was done, with no clear answer.
3: Gave an answer, but with weak reasons or no next step.
5: Answer first, then two or three reasons with numbers, the main risk, and next steps.

Communication

1: Hard to follow: long silences, no signposting.
3: Clear most of the time, with some rambling.
5: Calm and concise, signposted each step, and checked in with the interviewer.

Total

0 out of 25

Score all five criteria to see the band and the feedback template.