Accelerating Business Transformati€on with IT. McFarlan, F. Warren; DeLacey, Brian J. Case No. 9-
305-048. Published 09/24/2004, Harvard Business School Publishing, (20 pages).
Protagonist - Ari Bousbib
Objectives Become world leader in service o Bousbib's vision: "To become the recognized leader in service excellence among all companies%mdash;not just elevator companies—worldwide." o Bousbib challenged ... launch a new initiative that would help make Otis the #1 service company in the world p 235/15 Continue strong revenue growth Maintain / improve operating margins, already substantially above industry averages Establish strategic advantage in emerging markets e.g. China Make the transition from a manufacturing to a service organization Reorient Otis to a customer-centric organization Employ technology to provide an information advantage over service company competitors
Competitors FedEx, UPS, Procter & Gamble, Other Supply Chain Companies like The Wheels Group and Exel plc.
Decisions Test Tom and Ryan
Problems, opportunities and risks Problem 1: Challenges for e*Logistics p 233/13 Problem 2: Otis needed to embrace a culture of service and to develop the processes needed to deliver world-class service. Otis had to re-define its processes, beyond service support tools like OTISLINE customer service center and REM elevatore monitoring. Problem 3: The major problem facing Otis how can they can continue their dominance and profitability within a new market space, which is providing global logistics and service support to firms of any kind, while leveraging their investments in IT.
Evidence
Alternatives Alternative 1: Improve upon their current business model by incorporating analytics to their ERP and CRM systems. By utilizing analytics, Otis will be able to use the data in a quantitative manner to provide reliable, cost effective logistical and service support to customers world-wide. - This is also consistent with the vision of President Ari Bousbib and his recommendation to the parent company UTC.
Alternative 2: Continue to partner and outsource many of the service and logistical based work to those members within their value chain, while focusing on its standard business model of providing elevator and escalator service to developing nations, such as China and India.
Persuasions Rationale For Alternative 1: Eventually the demand for industrial goods will subside, as is evident in the decrease in demand for elevators and escalators in the United States. In order to continue profitability, Otis must explore different avenues of growth. The service sector is ideal because it is highly profitable, requires economies of scale and scope, and the demand is steady. All of these aforementioned characteristics are aligned with Otis’ core competencies and corporate vision. By integrating an analytical component to their current ERP systems, they will further differentiate themselves from the competition. Additionally, using quantitative data to assist in statistical analysis and decision making is highly reliable, factually based, and has an extremely high success rate.
Rationale Against Alternative 2: New demand is stabilizing in developed countries such as the U.S. and Europe. Also competition is fierce amongst those developing nations. Otis is not getting the full return on investment from their IT systems and they are not differentiating themselves. Furthermore, Otis is still operating in a fragmented value-chain and is susceptible to disconnects between its CLCs and DCs. Cycle-times will not improve.
Criteria
Action(s) Implementation: Otis currently utilizes three major ERP and CRM systems, which are E*Logistics, SIP, and ACA, to support the following functional areas: project proposals, sales processing, order fulfillment, field installation, and closing activities. But if they are to implement an analytical component to these systems the following steps must be taken. First, upper level management must be in support of this strategy and provide the necessary resources. Second, a single analytics initiative must be in place, which will require integrating its E*Logistics, SIP, and ACA into one transparent system avoid of inconsistencies and possessing standardization1. Next, the system must be enterprise wide and the firm’s focus must be directly on utilizing analytics in all aspects of the business. An analytical culture must be present within Otis and the firm must hire and promote those subject matter experts or individuals that comprehend and champion the use of statistical and quantitative analysis to assist in decision making. Finally, an iterative cycle of establishing metrics and monitoring performance must be implemented. If Otis follows such a plan, it will be able to succeed in the new market space and successfully compete in this data centric environment.
Lessons
Experience
Misc Analytics - I (RR) used the Competing on Analytics to strengthen my argument. We may want to attempt to incorporate 1 or 2 more of the readings if possible.
Analytics are enabled by merging the system that now supports pre-sales, demand forecasting, logistics with the new proposed system that tracks customer relationships and maintenance functions. We can propose a system that has federated access to distributed data stores that combine eLogistics information with that of the new databases created for customer relationship and maintenance information (including sensor fusion information, predictive maintenance functions.) New models for customer satisfaction that incorporate data from all of these points of view can be evolved on a quarterly basis to preclude falling utility of the model over time.
o Adoption and success rates of the new system would be tracked by several metrics... - p 234/14 para 2
Executive Summary Possible Text for the executive summary.(Maybe you could use some of this for the setup) Since the 1980’s Otis has invested heavily upon IT to capture, analyze, and disseminate data in order to provide valuable logistical and service solutions to customers all over the world. Originally these systems were to support Otis’ industrial based business model of providing elevator, escalator, and moving walkway services, but over time and with the vast array of clientele, their IT systems have evolved into something much more. These IT systems have transformed and now provide enterprise wide support to all players within the value chain. However, Otis is primed to take the next step in service by integrating an analytic component to their existing network of IT systems. The analytical system must be transparent, flexible, and scalable, yet provide for a certain degree of standardization in order to reduce training costs and increase efficiencies. Also, Otis must follow and implementation plan if it is to successfully implement this analytical component to its existing ERP and CRM systems. Additionally, the competitive landscape will change as Otis will be in direct competition with firms such as UPS, FedEx, Proctor&Gamble, The Wheels Group, and Exel plc that have recognized the value in service and logistic markets.
Chris - I think there are two primary avenues for improvement: one - improve the systems and processes involved in providing service, with the following aspects o "smart" machinery, including sensors in the machinery o monitoring in the REM to evaluate the operational performance of the elevators o These will have the effect of providing Otis with information their service competitors don't have, erecting a barrier to entry two - improve the integration among the value chain partners, including architects, contractors, clients, and manufacturing partners (how?)
Questions How to integrate analytics? You can picture that OTIS is building their transformation bottom up which is also consistent with the rhetoric espoused by top management. The transformation began on the bottom layer of a pyramid with sales, integration, and logistics support building one layer on top of another. This comprises pre-delivery sales. If you consider the next layers that now should be added, these include the transformation to service, which now involves pre-emptive service, just-in-time maintenance, automation methods for customers to report problems and check the status of thier service orders/personnel, on-line billing and payment, etc. This is the top half of the new pyramid.
Embed sensors into the product that detect performance outside of tolerance Embed diagnostics into controller systems Real time performance monitoring for service customers/service staff/managers
I am concerned about spending another 300 person years on software, this is very costly, can it be outsourced? Or does this represent a competitive edge that can not be duplicated? Chris - I think their systems are too strategic and valuable to be outsourced (also see below)
Competition is fierce in the service side of this industry, low cost and high quality of service will win the day Otis Elevator's Systems - please add information about them Current OTISLINE — Centralized Customer Service System 24 x 7 sub-second customer response Improved visibility ofcustomer service, tracking of service levels, esp. escalation of multiple incidents to higher level management e*Logistics — benefit: automated SIP pre-bid checklist SIP — Sales and Installation Process, implemented by Tony Black, incorporating best practices from around Otis related to sales and field operations. Key Feature - pre-bid checklist
SIMBA — Standard Interface Modular-Based Architecture
REM — elevator monitoring
Hyperion — roll up world wide financial systems into corporate systems
Future
There are two main foci of the business at OTIS. The first services pre-delivery sales and building logistic synchronization. The second aspect of their business targets after delivery maintenance and service. As OTIS moves forward transforming their business into a top performing service operation, they can expand the information technology context for e*Logistics to include preventative maintenance operations that tie directly to diagnostics networks that are embedded into the controllers of their "people moving" products along with measures of customer satisfaction, potentially full blown CRM for their service contracts. Expanded automation can provide the management at many levels with insight into the performance of the service business allowing managers to target weak areas for improvement and gain management support through profit attribution and customer satisfaction metrics.