{"id":14701,"date":"2016-11-16T17:17:39","date_gmt":"2016-11-16T22:17:39","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/otis-from-mechanical-to-digital-innovation\/"},"modified":"2016-11-16T17:19:35","modified_gmt":"2016-11-16T22:19:35","slug":"otis-from-mechanical-to-digital-innovation","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/otis-from-mechanical-to-digital-innovation\/","title":{"rendered":"Otis \u2013 From Mechanical to Digital Innovation"},"content":{"rendered":"

Elisha Otis didn\u2019t invent the elevator; he invented the elevator brake in 1852 [1]. This invention, however, was far more important. It transformed skyscrapers from a dream to a practical reality. Otis was at the forefront of mechanical technology in the 19th century, and now it is at the forefront of digital technology.<\/p>\n

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\"Otis<\/a>
Otis Elevator Patent<\/figcaption><\/figure>\n

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Research and Development at Otis<\/u><\/p>\n

Today, Otis rakes in $12 billion in revenue and is the world leader in elevator installation and maintenance with a market share of 10% [2][3]. In this highly competitive industry, it is important for Otis to have strict controls on its costs. To do so Otis has made several digital innovations to its elevators. \u201cOn a year-to-year basis \u2026.the investment in R&D and IT together is 40%-50% more.\u00a0 It is a considerable amount of money that the leadership has dedicated to the transformation and digitalization strategy\u201d says Marcus Galafassi,\u00a0VP of Information Technology and CIO at Otis [4]. Most of this spend targets the maintenance and servicing sector.<\/p>\n

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Targeting the Service Component<\/u><\/p>\n

Otis\u2019 service contracts form a significant part of its profits. An analyst from William, Blair and Company estimates it to be 65% of the profit [5]. These profits take a significant hit when there are unscheduled callbacks. To put it into perspective, Otis has 2 million service contract elevators transporting 2 billion people daily with only 30,000 service technicians worldwide [6]. This amounts to 60 millions hours servicing elevators yearly [7]. The median pay for 2015 was $39 per hour for elevator service technicians. Assuming a conservative $25 for worldwide average pay, leads to a net spend of $1.5 billion [8]. For a company with revenues of $12 billion and operating profits of $2.5 billion this is a significant cost [2].<\/p>\n