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
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
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.