Case Study Analysis: Otis elevator: Accelerating Business Transformation with IT

Name – Arnab Sanyal

Roll – 17P128

Q. 1. How do you describe the Elevator Industry? What is unique about this industry?

Answer. The Elevator industry, was a profitable industry with annual profit margin of 5-
10%. It had a lot of competitors all over the globe which consisted of Hitachi, Kinetek,
KONE, Mitsubishi and other, excluding the Otis Elevators. The elevators in a small
building were generally selected by contractor, manufacturer or the architect. In case of
large buildings, all the three group had to jointly discuss regarding the installation
process. The major criteria for selecting the elevator depends upon its price, reputation,
past performance and elevator performance and architectural requirements.

However other key factor that helped in the sale of the elevators are the service market.
The cost of service was the major considerations while installing a elevator. The
elevator manufacturers used to offer discount for long term service conditions to get the
contracts. Some manufacturers used to offer free first year discount to the customers in
an effort to attract and maintain customers. Therefore, the service was the major source
of revenue for the manufacturers rather than the new elevator sales.

Since elevator service turned to a profitable business many new participants started
popping up. By industrial analysis, rising demand, low barriers to entry and high
profitability was the sole reasons why the service industry kept on rising. Other than the
elevator manufacturers, there were a large amount of small companies that was
devoted exclusively to the services. They serviced all types of manufacturers and
mostly catered to the elevators that were old and did not have the modern day
technologies like microprocessor based control and those kind of technology.

The US and Western Europe had already witnessed a stagnation in the sales and the
majority of sales of the elevators used to come from the emerging economies . New
markets, as China, mainly profits with new sales, e.g. 62,000 units of elevators and/or
escalators were installed in China in 2002. A further indication is that the revenue, now
coming from China, eventually will move from new sales toward provided service. This
is estimated since the Chinese market, by time, will become a more mature market. As
Case Study Analysis: Otis elevator: Accelerating Business Transformation with IT
Name – Arnab Sanyal
Roll – 17P128

compared to the more mature and satiate markets, as Western Europe and the U.S., 75
% of the profit is provided service .The major players in China along with Otis and Konte
were Schindler, Mitsubishi and Hitachi.

Q.2. How IT driven business process transformation helped Otis to beat the
competition?

Answer. Before OTIS looked for IT measurements, the service personnel were
dispatched from local offices. With no interaction between the different offices, OTIS
had a minimal level of communication throughout the entire cooperation regarding the
service area. Due to this the knowledge sharing was very poor and each local office
handled each service request single handed, minimizing the efficiency. Further, the
communication throughout the organization was also very poor, where service problems
never reached the senior management until they had become critical situations. All
together this had a negative impact on the service time causing the customers
unnecessary waiting time.

To overcome this problems Otis decided to bring OTISLINE for the effective service of
the customers. It was a 24 X 7 customer support centre under which various customer
service benchmarks were defined, different escalation levels were introduced and quick
analysis was provided to the management to take quick and effective decisions and
improve customer satisfaction. Excess “callback” report were sent to the mangers
quickly for the fast resolution of the matter. This helped in reducing “callbacks” and
improving product reliability along with improved customer satisfaction. This helped in
restructuring the company, elimination of several layers of management and speeding
communication between field mechanics, customers and company management.

OTISLINE not only improved the information systems but also added the following
benefits:
Case Study Analysis: Otis elevator: Accelerating Business Transformation with IT
Name – Arnab Sanyal
Roll – 17P128

a) Visibility: - It helped increased the visibility of the service business of Otis and
also provided high quality of service to the customers.
b) Service Management System: - Was expanded to all maintenance activities for
elevators under a service contract. Some preinstalled applications such as
service price estimating were improved and new services such as billing were
added to SMS.
c) Priority handling: - Customers pertaining to a specific segment were forwarded to
specific dispatchers only and were always served with
topmost priority
d) Quicker identification: - The location of the customer was more easily traceable
with the help of OTISLINE and faster response to the callback was there.
e) Increase elevator sales:- New equipment sales representatives can use the
services to better process and record new sales
f) Information Flow: - With the help of OTISLINE, information can easily flow from
field officers and top management about callbacks. The excess callbacks reports
highlights specific problem installation and management can diagnose the
problem whether it is due to some component malfunction which can be
improved in the future.
Followed by OTISLINE they decided to launch REM Elevator Monitoring, which enabled
a micro-processed based elevator to monitor its control systems and log performance
statistics in a distant computer. The computer analyzed problems and produced trouble
reports and used to send service reports even before the elevator went out of service.
The system helped in running elevators to maximum performance levels and could
handle problems even before customer were aware of them. Other than that they were
also looking into the maintenance side of the business that includes new equipment
design, supply chain, new equipment manufacture and field installation.
Further in the year of 2001, Otis decided to come up with the SIMBA program to change
the product architecture and design processes. By engineering the SIMBA program
through the standard-interface and modular based architecture, it changed the project
Case Study Analysis: Otis elevator: Accelerating Business Transformation with IT
Name – Arnab Sanyal
Roll – 17P128

architecture and the designs process. The standardization reduced the number of
models used and lowered project costs in the value chain. Distinct engineering
programs fell from more than 500 to 50, and the 72 different types of motors ones used
were reduced to 10. In addition, the terminology used became standardized in order to
avoid misunderstandings and create a more effective environment.

An additional boost in sales and marketing was provided by the launch of the Sales and
Installation Process (SIP) to gather best team practices for the sales and field
operations. Best practices were made available by the successful sales officer and they
were standardized. This was one of the key success factors that helped in bringing the
sales and field installation team come closer to satisfy customer needs.

Q.3. What is e*Logistics Program? Critically examine the challenges of this program
from Organization Design perspective.

Answer. The major boost to the transformation occurred with the arrival of e*Logistics.
e* Logistics, combined sales, factory and field operations through the web. This
enabled infinite amounts of information to circulate throughout OTIS and for employees
to be in contact with the e*Logistics program. The major project proposal for the
betterment of the Information System had three major components, gathering account
information, determine the elevator configuration and Preparation of the proposal. Prior
to e*Logistics, the elements included in project proposal were done with minimal pieces
of automation and data was dispersed through separate systems. Due to this program,
everything became automated and the technology was able to handle the basic steps
which made it possible to easily change an order. The proposal’s information went
directly into OTIS’ financial systems.

The other areas where it helped was

a) Sales Processing : Prior to the implementation of e*Logistics, order booking,

validation and scheduling was done manually. This entire process was
Case Study Analysis: Otis elevator: Accelerating Business Transformation with IT
Name – Arnab Sanyal
Roll – 17P128

automated in the e*Logistics program through a workflow and circulated all key
documents to all supervisory personals electronically. Once contract is awarded,
field installation team could do the site assessment and then place the order to
factory. All this things resulted in saving lot of time, reducing inventory levels and
eliminating waste throughout Otis value chain.
b) Order Fulfilment : Regional Contract Logistics Centre (CLC) were responsible for
accepting orders from sales team and make on time delivery to customer. Prior
to e*Logistics, this process was manual, thus inviting lot of errors, miss
communication and in last wasting lot of time. With the implementation of
e*Logistics, sales person could send the order electronically to CLC, reducing the
chances of any error to almost nil. With the help of e*Logistics, CLC’s got the
access to worldwide subsystem integrators (SSIs) and allowing them to source
parts from multiple SSIs – wherever they could find the lowest cost and delivery
time.
c) Field Installation: e*Logistic program allowed field installation supervisors to be
more equipped and connected in the entire supply chain. Regularly monitoring
the status of the site remotely, field supervisors would request the delivery of
product when it is required. This entire automation and advancement helped Otis
in eliminating many hidden costs of lost, stolen and damaged material.
d) Closing Activities: With e*logistic, as soon as the supervisor confirmed the
completion of job, a workflow triggers promoting a series of customer contacts
and billing. This results in accurate billing and high conversion of maintenance
orders.

The major challenges as faced by the e*Logistics were as follows:

a) Technological challenges: The major challenge was to deliver the e*Logistics

program across 2000 PCs and 1000 different major locations. The major problem
lied in the process of standardization of the entire system.
Case Study Analysis: Otis elevator: Accelerating Business Transformation with IT
Name – Arnab Sanyal
Roll – 17P128

b) Personnel challenges: Otis had a total of 1500 sales representatives and 1500
field installation supervisors. They required substantial process training before
being on boarded.
c) Long term profitability: The pilots were being installed in various countries which
resulted in success, but the duration of success was around 6 months. The major
structure followed was the geographical structure that enabled them to launch all
the programs at the different geographies.