Otis Elevator

ITs 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
Elevators 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 OTISLINEs capabilities. A
competitive advantage that is not properly
positioned is not a competitive advantage at all.
Sales - OTISLINE Impact
OTISLINEs 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
Customer
Answering
Service
Mechanic
Field Office
District
Zone
Region
NAO
Headquarters
Mechanic dispatched
and fixes problem
Mechanic files report
Mechanic
paged
Problem/complaint reported
Routine
Reporting
OTISLINE
Mechanic
Customer
Mechanic dispatched
and fixes problem
Mechanic
files report
Mechanic
paged
Problem/complaint
reported Routine
Reporting
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
companys 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.