1 12/11/2012 Managing Projects and IT PMBA 2014 - Group 5 By Mark Meisner, Mahasweta Rath, Brenda Bray, and Warren

VanName OTIS Elevator Case Study

Background OTIS Elevator started with Elisha Graves Otiss invention of the safety brake elevator back in 1853. OTIS kept adding people-moving products and, over time, grew to a point where by 2004 they operated and serviced 1.5 million elevators, 100,000 escalators, and many moving walkways worldwide. The company revenues as of 2004 were $8 billion with an operating profit of $300 million. 1

OTIS was facing changes in the marketplace, where a focus on customer service was becoming a key factor. However OTIS was perceived in the global marketplace as an old-line manufacturing firm. Ari Bousbib, OTISs president, had a vision to become the recognized leader in service excellence among all companies, not just elevator companies, worldwide. In order to achieve this vision, Bousbib realized OTIS needed to upgrade its IT infrastructure where, in his words, the management of information flows between all the participants in both the production of the elevator and escalator systems and the performance and delivery of our installation and maintenance processes. 1

IT System Beginnings: OTISLINE In the early 1980s OTIS realized the need for a centralized customer service system. Throughout the marketplace, independent elevator and escalator service companies had sprung up by the hundreds. The Yellow Pages of every city and major town in the country listed dozens of them. Overseas markets witnessed the same situation. Customers did not consider it advantageous to having their OTIS elevators serviced by OTIS personnel. Local companies often responded to service calls faster than the closest OTIS service center. OTIS was losing substantial income that could be realized with their own service and parts business. At the time, local OTIS service offices handled

2 customer calls. Sometimes, service callbacks for an individual customer exceeded more than half a dozen in ninety days and the information usually stayed in the local service office. Management frequently had no idea of the severity of the problem of unresolved customers service problems. 2 There was no centralized system for senior and organizational management to monitor the quality and response time of service calls. Management was usually only informed of customer complaints about service problems when the customer cancelled their service contract. 1

In order to correct this problem, OTIS installed a centralized customer service center called OTISline. After successful Beta testing in a few key U. cities, this service was expanded across the country and functioned on a newly installed mainframe with 160 employees operating around the clock. This system reduced call response time to less than 5 seconds. OTISline also provided callback reports to management, and was able to restructure and increase its flow of information. Contract cancellation was curtailed dramatically, boosting contract sales and retention and substantially adding to OTISs bottom line. OTISline quickly grew from a network within the US to a network encompassing their international markets.1,2

Installing OTISline in 1990 was an enormous undertaking. Since the systems in place at that time relied on local systems rather then centralized ones, OTIS would have had to restructure its call systems in order to make OTISLINE a reality. An IT infrastructure had to be created from the ground up. Employees would have had to be trained and managers would have had new responsibilities and information added for decision-making processes. OTIS, in turn, would have had to overcome resistance to change within its organization. This would have been due to employees lack of understanding for the need for change, announced fear of impending layoffs, feelings of self-doubt in having to acquire new skills necessary in the future state of the organization; current comfort levels with the status quo; or the possibility of being asked to do more for the same pay. Resources also would have had to be allocated, at an enormous cost, for its creation and installation. OTISs organizational structure at the time shows that there many layers that information had to navigate through in order to reach upper management. By initiating

3 OTISLINE, the information channels were streamlined, allowing for shorter response time between the different layers within the organization. IT allowed for an expansion of a system that had previously depended on a telephone, pad and pencil in a local office, to a streamlined computerized process that sped communication between field mechanics, customers, and management.

The equally successful OTIS REM, a remote elevator monitoring system that involved the installation of microprocessors in elevators, quickly followed the success of OTISLINE. An elevator so equipped would monitor its own control system and send the data to a computer at headquarters. Problems would then be analyzed, reports generated, and service technicians dispatched before an elevator went out of service. 1 IT at OTIS was gaining strength.

IT Evolution: e*Logistics By 2004, OTIS was using a system labeled e*Logistics as a means of connecting sales, factory, and field operations. The systems in place relied on simple tools, functioning on open standard internet-based databases, software, intranets, extranets, e-mail and backend integration with enterprise systems. These solutions reaped enormous benefits due to the way OTIS implemented its IT structure and company policies.

The systems developed for e*Logistics were custom-built by OTIS using standardized data interfaces. Because of this practice, software packages did not need to build from the ground up, but rather incorporated existing technologies. OTIS also ingrained its philosophy and new business model companywide, ensuring that all levels, from the top down, were on board and compliant with the IT and organizational restructuring. The program hinged on peoples adaptability to change, 1, while targeting approximately 30% salaried, nonunion employees from union ranks who were familiar with technology. This approach allowed OTIS to maintain use of simple tools and be effective across North America; this ultimately set the course for rollout to the UK.

4 The main key to success - although using simple tools - was the way that E*logistics combined all three IT processes: Function IT, Network IT, and Enterprise IT. Function IT such as the use of workflow tools and reducing the number of engineering CADs enabled OTISs departments to function more efficiently. Network IT freed the flow of information facilitating collaboration, allowing expression of judgment, and fostering emergence.

Enterprise IT helped centralize the ordering, estimating, and contract processes. This eliminated the departments from operating in silos ensuring that, by using enterprise solutions, mandated process and procedures would be followed.

By tying together all three IT processes and platforms, OTIS was able to have a holistic view of the organization, ensuring that the best processes and procedures were in place, centralizing and linking communication and information within the entire organization (departments and employees), and utilizing web technology through the Internet. This allowed for an enormous amount of information to be processed and accessed anywhere, anytime and, in turn, enabled OTIS to streamline its manufacturing, engineering, sales, and other organizational processes quickly and efficiently.

Incorporating Best Practices While the e*Logistics program was a transformative piece in the IT revolution at OTIS, one of the key benefits was its ability to enforce and maximize the changes that executive management deemed necessary.

Prior to the launch of e*Logistics OTIS instituted Sales and Installation Process (SIP), a standardized set of best practices from the most successful units across the organization.1 Although benefits were realized when SIP first launched, management noticed that when a few key employees left the company, the program was compromised and benefits fell off and were lacking consistency. To make sure that the best practices that were identified via SIP were consistently and accurately applied across the organization, OTIS introduced e*Logistics. For example, SIP identified that,as a best practice, the staff

5 should fill out a paper-based checklist when dealing with new customers. One of the main issues raised was that there a lack of communication between sales supervisors and field-installation supervisors, led to cases where installation teams would be seeing the sales order for the first time when the elevator was delivered to the job site. With e*Logistics both supervisors were able to see the checklist and had to sign off on the proposal, resulting in a consistent and efficient process. Additionally, e*Logistics was able to automate, integrate and centralize other areas of the proposal process to include gathering customer account information, providing product specifications and proposal preparation. This automation was another example of ensuring that consistent data was captured across the organization. Once the customer accepted a proposal, the order then needed to be booked, validated, and scheduled.1 Prior to e*Logistics, each process was done manually, resulting in errors and inconsistencies. After the installation of e*Logistics, each of these steps was not only automated but the data was automatically fed to the financial systems at Otis. Throughout the sales cycle e*Logistics enabled the entire supply chain to track and modify each individual order, in a uniform and consistent manner, and to adapt if the customer made any changes.

In the case of order fulfillment, e*Logistics automatically fed sales information that was previously faxed or mailed by sales representatives to the contact logistics centers (CLCs). Otis was able to source parts more efficiently and more cheaply as a result of the connection between e*Logistics and the CLCs by allowing the CLCs to place orders wherever they could find the lowest cost for required quality and delivery times.1

Field installation was another facet of the Otis business that realized benefits from the ability ofe*Logistics ability to bake in and institutionalize best practices. Prior to e*Logistics, Otis did not follow a universal set of project management procedures. With e*Logistics, site managers received e-mails reminding them to monitor progress at the various work sites. Those managers were then required to provide status updates before the company would ship the requisitions to the field site. These baked-in best practices

6 resulted in better control over inventory and allowed the manager in the field to have more control over each projects success.

In the post-installation phase of a project, e*Logistics was able to create a uniform transition from installation to service. Once the field supervisor confirmed that a job was complete, e*Logistics automatically sent out billing documents in addition to reminders to service representatives to contact the customers to help with service contracts, again ensuring that best practices were followed.

As a result, e*Logistics enabled Otis to bake in SIP as well as other programs helping to eliminate the risk of program failure when key employees leave the company. Through the use of e*Logistics, Otis has successfully ensured that the necessary information, policies and practices are institutionalized across all functions of the organization.

Today and Beyond OTIS needs to continue to embrace IT as a tool for maximizing productivity and streamlining business operations across its organizational structure. Integrating cloud technology in to the IT model is an obvious and extremely beneficial next step in OTIS IT evolution. On average, only 11% of a companys IT budget is spent on developing new applications, according to Microsoft; the rest goes to maintenance and infrastructure.4 Generating the agility that cloud computing provides enables organizations to shorten the timeframe in launching its IT projects, resulting in less employee man-hours and enabling a more predictable time to market in moving its latest innovations. Having this technology in place to deliver faster and cheaper IT innovations supports an organization in maintaining its competitive edge and allows it to be more resilient to a changing marketplace.5 Since the cloud utilizes standard technologies, it allows organizations to increase their business continuity and reduce time spent on operational issues. The fact that the cloud allows companies to deploy the same or similar services repetitively with the same result; deployment of applications, services, and landscapes fosters a sence of predictability.5

Lastly, the most logical step for expanding OTISs adaptation to the cloud is the fact that its current IT model depends on the flow of information. The cloud is the perfect fit since it ensures that employees have access to all the documents they need no matter where they are, what device they are using, and with whom theyre working.4

References: 1.McFarlan, F. (2005). Otis elevator: Accelerating business transformation with IT. (Boston, Ma: Harvard Business School Publishing. Business School Case 305-048, June 2005) 2. VanName, B. A. Managing Partner Communigraphics Inc., Account Executive OTIS Elevator 1982-1986 (2012, December 01). Interview by W.A. VanName. 3. Prosci Learning Center. (n.d.). Top five reasons employees resist change Retrieved from http://www.change-management.com/tutorial-resistance-mod2.htm accessed 12/9/2012 4. McAfee, A. (2011, November). What Every CEO Needs to Know About the Cloud. Harvard Business Review, 124-132. 5. Schouten, E. (2012, October 16). 5 cloud business benefits. Retrieved from http://www.wired.com/insights/2012/10/5-cloud-business-benefits/