Otis Elevator
• IT’s two business in one
— Sales
— Service
Elevator Manufacturing and Sales
• Highly correlated to the building cycle
• Only a few competitors
• A low-margin business
• Several “buyers” involved in the purchase decision
-- for example, the building contractor, architect,
and building owner
• Competition between companies is based on price,
reputation, and ability to satisfy elevator
performance specifications and architectural
requirements
• High barriers to entry
Elevator Service
• Low barriers to entry; many elevator service
companies were started by prior employees of
elevator manufacturers.
• Fragmented: thousands of elevator service
organizations.
• Stable demand and high profitability.
• Elevator manufacturers were awarded 60% to
80% of the service contracts for newly-installed
elevators.
• Cost of service is more important as buildings age
and competition for tenants intensifies.
• Diagnosis of elevators with microprocessor-based
control systems often requires proprietary
maintenance devices. The manufacturer was more
likely to retain the service contract for these
elevators.
Company Overview
• Otis is the industry leader.
• Otis pursues a differentiation strategy. It
specializes in elevators for large, complex
buildings and sells quality, service and the ability
to customize elevators. Its products sell for a
premium price.
• Otis has a large, highly-regarded service
organization.
• Some Otis elevators have microprocessor-based
control systems. These are replacing mechanical
elevator control systems, but at a very slow rate.
• Reliability is more important than cost for Otis
Elevator’s target customers.
Sales - Measurement of Success
• Bids won / lost
• Market share by region, by product
• By type of building, type of elevator, etc.
• Budgeted and actual profitability
• Comparison of planned and actual installation dates
Service - Measurement of Success
• Service contracts won / lost
• Profitability by customer, by office, and by region
• Response time by office, and by region
• Callbacks by customer and by office
• Time to repair elevator
• Time to repair and quality of repair for each
individual mechanic
Service - Impact of OTISLINE
(Being Proactive)
• Microcomputers have been embedded in recent
products -- information technology has been used
to transform the product.
• The OTISLINE system makes it possible for Otis
to offer performance contracts to its customers.
• OTISLINE makes it easier for senior management
to spot and manage difficult situations, resulting
in a higher level of customer satisfaction.
• If the information coming from OTISLINE is used
appropriately, the system may enable Otis to
become more customer-service oriented.
• OTISLINE significantly transforms information
flow within the organization.
• Otis must market OTISLINE’s capabilities. A
competitive advantage that is not properly
positioned is not a competitive advantage at all.
Sales - OTISLINE Impact
• OTISLINE’s ability to enhance the service
business can be a useful selling tool for New
Equipment Sales (NES) representatives.
• The New Equipment Sales system uses OTISLINE
to shorten the time it takes to record and process
a customer order.
Service Delivery Process: Before & After Otisline
Before OTISLINE
After OTISLINE
NAO
Headquarters
OTISLINE
Region
Problem/complaint
reported
Routine
Reporting
Routine
Reporting
Zone
Mechanic
files report
Mechanic
paged
Customer
District
Problem/complaint reported
Customer
Field Office
Answering
Service
Mechanic dispatched
and fixes problem
Mechanic
Mechanic
Mechanic files report
Mechanic
paged
Mechanic dispatched
and fixes problem
Source: Stoddard, D. and Applegate, L., Otisline Teachning Note, Harvard Business School Case #5-187-086
Discussion of Next Steps
• Finish the NAO roll-out!
• Clearly, exporting the system is a possibility; the
company’s leading division is, after all, European
operations.
• Selling OTISLINE, or perhaps OTISLINE service,
to other noncompeting organizations (e.g.,
appliance and automobile manufacturers) might be
an attractive sideline business.
• Enhancing OTISLINE is an ongoing but significant
responsibility. Competitors will undoubtedly
respond with similar systems, probably with some
enhancements.
• Finally, addressing the organizational and human
resource issues is critical. The value of
OTISLINE to the company is very compelling.
Dealing with organization resistance is an
important management challenge.