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The recipient of the 2015 MIT Sloan CIO Leadership Award describes how a comprehensive adoption of digital capabilities in multiple parts of the business transformed Schindler, a 140-year-old elevator manufacturer.
By Michael Nilles, CIO, Schindler Group, and CEO, Schindler Digital Business AG
A few years ago, Schindler had just completed a successful transformation process. The company, with 56,000 employees in more than 100 countries, went from being a decentralized federation of national businesses to a globally integrated enterprise.
For starters, we had rationalized the IT function, retiring outdated legacy systems and consolidating our infrastructure and data centers. This enabled the next big initiative – we call it operational excellence – which led to a massive business process overhaul that optimized our entire internal value chain, everything from finance to supply chain to product installation to service.
Achieving operational excellence across the organization had created a strong global platform while simultaneously allowing us to remain ultra-local for certain functions. For example, Schindler has more than 1,000 service centers worldwide, which allow us to stay extremely close to our customers.
What we had achieved was remarkable, and we might have stopped there. But we realized that, in the mid-term, some of our competitors could replicate what we’d done. In fact, some were already beginning to do just that. So we asked ourselves, “How can we make a really big difference?” The answer was that we needed to evolve into what we call a leading-edge digital business.
And that meant taking a broad view of the challenge.
From the very first day, we said, “It’s not just about developing an app for our people in the field. It’s not simply about the Internet of Things or even the ‘Internet of Everything.’ And it’s not really about technology. It is about developing a fundamental, long-lasting, gamechanging business model” – what we came to call our Integrated Digital Service Platform.
People will often come up to us at a conference and say, “We’re trying to become more digital. We have this initiative or that initiative. How did you do it?” We tell them the most fundamental requirement is to look comprehensively at your business. You can’t just drive the technology initiative; you have to really think about how you can substantially improve your business model, or disrupt it altogether from a completely new angle. To take full advantage of new digital technologies, you need to take a holistic approach.
Our digital reinvention has four pillars: our customers, our products, our employees, and our processes. But don’t mistake these pillars for silos. Making each of the four areas “smarter” through new digital capabilities synergistically increased the “intelligence” of one or more of the other areas.
The program has been tremendously successful and it has yielded significant business benefits for Schindler. But this isn’t the end of the story. As we said after we had been through our operational excellence initiative, “What needs to be done next?”
The Four Pillars
Our slogan at Schindler is that we move 1 billion people a day on our elevators, escalators, and moving walkways. That’s one-sixth of the world’s population, and so we have a big responsibility. Our mission is to ensure the safety and reliability of that vast system. Doing so not only benefits the passengers using our products but also increases customer satisfaction and thus drives revenue growth. Our digital transformation has helped further that mission in four aspects of the business.
Superior Customer Experience We asked ourselves how our digital service platform could enhance the experience of our customers – in our service business, typically the facilities managers of one or more buildings. One of the worst things that can happen for the facilities managers of, say, a big retail store chain is an elevator being out of service. Not only is it inconvenient for the store’s customers but it also can put a dent in sales by hindering shoppers’ ability to move from floor to floor.
In the past, it could take several hours before the facilities manager was even aware of this problem. It sounds hard to believe, but think about it: When you’re in a store and an elevator isn’t working, you assume the problem has already been reported by someone else. It is usually hours before someone finally tells the front desk or a supervisor and news of the problem reached the facilities manager.
We had earlier created a web portal for our customers called Schindler Dashboard, which provided them with, among other things, the status of their elevators and alerted them when one wasn’t working. In talking with customers about this, we learned that, while they liked the portal, they were often away from their desk as they traveled through a building or between sites. They told us, “I’m on the move a lot of the time and I want to be alerted to problems as soon as they happen.”
So we recently unveiled the Schindler Dashboard mobile app. It provides the facility manager real-time operational status of all his elevators; allows him to make service requests; and regularly notifies him of the status of repairs, including whether the service technician is already in transit or onsite and when the equipment is expected to be back in operation. With all this information on his mobile phone, the entire process is for him nearly hassle-free.
Smart & Connected Products Of course, if a facilities manager is to receive real-time notification of equipment breakdowns, you can’t rely on shoppers or employees to report a problem. So information on the operational status of all his elevators is now communicated directly from the equipment to the Schindler ecosystem, including the Schindler call center, the dispatched Schindler service technician, and eventually the facilities manager. When there is a problem, everyone knows about it.
The products report much more than breakdown alerts. For example, our elevators now include sensors that anticipate possible future problems, which allows us to do predictive as well as regular maintenance. This remote condition monitoring of potential problems has significantly improved elevator uptime.
But digitizing our products has involved more than simply connecting them over the Internet of Things and reading the data they generate. It involves actively analyzing the data and making use of that analysis. So, for example, the predictive maintenance data isn’t used simply to anticipate problems. We use it to calculate the spare parts that service technicians covering a specific region will need to have with them in their cars on a given day, as they travel from site to site.
Smarter Employees Smarter products don’t only improve customer service and satisfaction but also the day-to-day experience of the technicians providing that service. Schindler’s 20,000 service technicians are part of the ecosystem of people who receive initial alerts transmitted directly from elevators when there is a service issue. No longer does the facilities manager have to call the Schindler call center, which then calls the technician and tells him to report to a certain location. The technician may already be on the way to a building when a facilities manager becomes aware of the problem – information that appears on the facility manager’s Schindler Dashboard mobile app.
Furthermore, as we have seen, a service technician responding to a call often will have the right replacement parts in his vehicle – something we’ve gotten much better at predicting in the past two years, as the algorithms have improved based on experience. Think how crucial this is to the time-critical task of bringing an elevator back into service. In the old days, a technician would evaluate a disabled elevator, determine the part that he needed, and head back to his office to get it. In cities, he likely would have faced lengthy traffic jams as he was on his way to retrieve the part, while the out-ofservice elevator remained idle.
Of course, with our new digital capabilities, the technician may not need a spare part at all. Predictive maintenance will have meant that a technician has replaced the part on a previous, regularly scheduled maintenance visit already.
Whatever the scenario, the service technician is now equipped with a mobile toolkit when he arrives on the scene. It is very small and quite light – because it is contained in his iPhone! This digital toolkit contains a library of general and specific information that is immediately relevant to a technician on a service call: technical specs and diagrams of the different elevator models, a spare parts catalog with ordering system, the service contract covering the equipment at this location, information about the customer. Perhaps most important is that our remote monitoring of the elevator and analysis of data generated by the sensors means that the technician will also find in his toolbox possible causes of the problem. It might suggest that, say, spare part 4711 is the most likely cause of the problem with the door and provide him with repair instructions if that turns out to be the case.
To aid in trouble-shooting, the technician can use his iPhone as a diagnostic tool, connecting it to the elevator control panel with a cable or via Bluetooth. This allows him to see the error log, make setting adjustments using the touchscreen on his phone, and, once the repair is made, run a test on the elevator. When finished, he can move on to his next job, referring to his daily job list, also on his phone.
Smart Processes By processes I don’t mean traditional processes, such as supply chain planning, that are governed by ERP systems. I’m talking about processes that are enabled by the comprehensive adoption of digital tools and the use of smart digital algorithms. To cite just one example, we worked with the Fraunhofer Institute, a large research organization, to adapt an algorithm they developed for airfreight route optimization for use with our service technicians. The aim is to calculate the best route for a service technician to take from one service job to another. And the algorithm doesn’t just take into account distance and time; it also integrates such factors as the type of the equipment being serviced at a particular site, the kind of service required, and the expertise and skills needed to provide that service. Consequently, the fastest and most efficient way to get an elevator back in service may involve sending a service technician who isn’t the closest technician to the site. Optimizing service routes in this way and providing technicians with immediate access to relevant data on their iPhones has had astounding consequences, eliminating roughly 40 million driving kilometers by our service technicians, and thus preventing nearly 4,500 tons of carbon emissions per year.
The “Fifth Pillar” While not an element of our Integrated Digital Service Platform, we haven’t forgotten the party who is perhaps the most important beneficiary of a superior digitally enabled experience – the passengers riding Schindler elevators, escalators, and moving walkways.
Our new PORT (Personal Occupant Requirement Terminal) Technology, developed by our Transit Management Group, both optimizes elevator usage within a building, leading to significant energy savings, and personalizes elevator service. For example, the passenger’s use of a programmed access card automatically customizes the elevator ride to her needs, whether it be a longer door-open time for a disabled passenger or an automatic stop at a tenant’s floor. Or, during off-peak hours, some elevators in a building are put on standby to save energy, without substantially increasing waiting times.
In the case of one PORT Technology feature recently launched in China, an app on an individual’s phone takes the place of the access card. This means that the passenger, immediately upon entering a building, is directed to an elevator programmed to stop at the correct floor. A building resident can provide a similar experience for an expected visitor, by sending a coded message to the visitor’s phone before he arrives.
The Pillars Intertwined
The adoption of our Integrated Digital Service Platform has been a massive undertaking, and it has produced significant business benefits, including improved customer satisfaction levels. So what sort of advice can I share from our experience?
For one thing, our earlier operational excellence initiative provided an absolutely necessary foundation for our digitization initiative. I think in a traditional industry like ours, many companies don’t yet have that operational excellence piece in place, which would limit the effectiveness of their digitization projects. There’s an echo from the year 2000 here: A company would say, “We need an e-commerce site,” they would create one, a customer would place an order on the site – and the internal sales team would then print it out, go to the office next door, and retype it into the existing order system.
Another crucial takeaway is something we knew but that was underscored by our experience: A digitization program needs to be comprehensive rather than piecemeal because its various elements are interconnected and therefore can reinforce one another. You might say that the four pillars of our digital platform initiative weren’t freestanding but were “intertwined.” One goal of the program was to provide quicker response to service requests. In the past, a facilities manager with an elevator out of service would contact our call center, and the call center would try to find a technician available to take the job. But the service center wouldn’t know who was where. People would be occupied with an existing service call. Some technicians might even be out of cell phone coverage.
Clearly, using smart phones to link our service technicians with the call center would help, as would the detailed information about Schindler products that could be loaded onto the phones
But simply giving our service technicians iPhones so that they’d always be connected and have troubleshooting information at their fingertips wasn’t enough. We needed to integrate this digital solution for our employees with the digital solution we had created for our customers, so that technicians and customers, along with the service call center, would all be aware of service issues as they arose and kept up to date on our service response in real time. Even more important to transforming the service model, we needed to integrate with this digital solution for customers and technicians the data generated by our digital solution for products – and not just data, but our analysis of that data. This analysis of the data generated by individual elevators would provide a technician with diagnostic information about the particular equipment he was working on. And in many cases, it would ensure that the parts he needed to fix a problem were already in his vehicle.
This last step – analyzing the data you collect from products over the Internet of Things – is one that many companies have yet to take. But from the beginning we said, “If we get this data out of the products, then we need to make useful process information out of it.”
So we needed a comprehensive digital platform not just because it covered all the bases but because the integration of the different elements yielded benefits we wouldn’t realize if they had been treated separately. That’s what made our initiative a real game changer for us.
My final bit of advice: When you have completed an initiative like ours, ignore that satisfying but misleading sense of completion. What seems like completion is only a milestone on the digital transformation journey.
The Change Factor
An initiative on the scale of our digital transformation program represents a huge change for an organization. Managing it requires an appreciation of three factors affecting this kind of change.
The first, which is the most important and often comes into play with digital projects, is the traditionally strong functional focus that exists in most organizations. A comprehensive digital transformation initiative like ours will span organizational boundaries and integrate the activities of numerous functions – a business line’s service function, Research and Development, IT, and Supply Chain, for example – which will require the support of those functions. Although certainly people can be resistant to adopting a broader point of view, sometimes it’s simply that they have never been asked to do so. To encourage support for our initiative, we formed numerous cross-functional teams and actively promoted the benefits of what we dubbed Schindler’s “unity of effort.”
The second factor is the willingness and ability of the workforce to change what they do. In our case, we needed some 20,000 service technicians to suddenly become digitally savvy. Most wouldn’t have previously owned a smart phone or maybe even a laptop, so we expected moving them from pencil and paper to a digital platform would be a tremendous challenge. But they surprised us. The digital toolkit, created for the iPhone, was extremely well-received, even among the older technicians. We had 60-year-old technicians who were excited to show the tool to their children and grandchildren. Of course, we ran a massive training program to help with the transition. But getting buy-in from the technicians was much easier than we expected.
The third factor influencing change management is the IT function itself. In a very traditional company like ours, the IT organization has focused on standardization, developing perfect solutions. The business side would develop functional specs for a project, throw them over the wall to IT, and then IT would work for several months or maybe even years to develop a total solution.
But with this digital platform initiative, IT would need to take a different approach – agile, risk taking, focusing on speed as much as perfection. We decided the best way to achieve that was to found a separate entity, Schindler Digital Business, which is a kind of incubator for speedy innovation. It is in fact a startup business – it’s a separate legal entity – and it has a startup mentality.
People hired by the Digital Business unit are required to quickly come up with an MVP – a minimal viable product – that we then give to our user base to test. The users provide rapid feedback and then the product must go through several internal funding rounds in order to be developed further. Take, for example, the digital tool kit that was developed for our service technicians. The first release came after six months after work began, which is phenomenal. Our service technicians tested it and provided feedback. It was then deployed globally. Although it didn’t have 100% perfect functionality, it offered a tremendous user experience, with a user interface and design that people liked. The last, say, 20% of functionality was added in the second and third releases.
The founding of this separate digital operation was the best way to get the skills and mindset that we needed to support our digital platform initiative
Who Leads the Change?
It’s a frequently asked question these days: Who will drive our digital initiatives? This often leads to a follow-up question: Do we need a Chief Digital Officer? And there’s sometimes a further question, one that rightfully worries many CIOs: Do we still need a Chief Information Officer?
My answer to those questions: The title doesn’t really matter so long as you have one integrated organization driving digitalization. What you don’t want is two separate functions, one headed up by a CDO and the other led by the CIO. That will result in a non-integrated approach that precludes a comprehensive strategy like the one I’ve described.
So is the CIO well-positioned to take the lead? The problem is that, in many cases, the CIO is associated in people’s minds with the two phases we went through before our digital initiative. The first is IT rationalization, which is obviously something CIOs are expert in. The second is operational excellence, optimizing your internal business processes. There was a time when people were asking whether companies needed a Chief Process Officer, but in recent years CIOs have gained a lot of credibility in this area, too, as they’ve overseen global reengineering projects involving, say, SAP implementations.
But when it comes to leading the third phase – digital – where you’re transforming the business model with really disruptive innovation, most executives don’t see the CIO as being the right person for the job. This isn’t because IT is the wrong function to lead this change but because many CIOs aren’t personally viewed as an innovationleader, driving-change, risk-taker type of individual.
But if the CIO isn’t this kind of person, I’d argue that he or she is the wrong person for the job. Ideally, the CIO could evolve in to the broader scope of the new CDO role if we assume this stands for the third phase. If you want to enable a game-changing business model, in the long run you can’t have two separate organizations reporting to different executives.
In any case – no matter if you code him CIO or CDO – it is of paramount importance that the digital transformation leader is an exceptional team player who drives unity of effort across the company’s functional silos. He needs to build a strong coalition with the Chief Technology Officer, in order to build digital capabilities into the product itself, and with the Chief Marketing Officer or Lines of Business leaders, in order to develop a digital go-to-market strategy.
Digital transformation isn’t about technology, it’s about looking comprehensively at your business with the aim of enhancing or reinventing your business model. Too often, people mistake discrete digital initiatives – developing a tremendous customer app, for example, or integrating your products into the Internet of Things – for digital transformation
To take full advantage of new digital technologies, you need to take a holistic approach. That’s because when digital capabilities are adopted across functions or along an entire value chain, they synergistically reinforce each other and generate benefits that extend beyond the area of their immediate application.
A digital transformation program represents a huge change for an organization, and managing it requires an appreciation of three factors affecting this kind of change: an organization’s functional focus, its workforce, and the IT function.