CIO is pushing the right buttons
- 30 October, 2015 16:30
Schindler Group moves 1 billion people a day. Most of those people go up and down via Schindler elevators and escalators operating in over 100 countries. Some use the company's moving sidewalks at airports. But it's not just the mechanical systems--the nuts, bolts and belts of its machines--that keep people moving. The Switzerland-based company has become increasingly reliant on its digital systems to ensure smooth operations, and today its digital organization is as critical as its mechanical one.
Schindler, the world's second-largest maker of elevators and escalators, behind Otis Elevator, has been undergoing a digital transformation for several years. Leaders at the 141-year-old company saw the need to do more than improve the mechanics of their equipment; they say they had to make both their equipment and their employees smarter, in an industry that is highly competitive but also has great growth opportunities.
CIO Michael Nilles has been instrumental in positioning the $9.3 billion company for future growth by leading--in concert with other business units--a digital transformation that includes connecting to the Internet of Things and deploying mobile technologies to do the job.
"Digitalization is something that's impacting our top and our bottom line. At first it was bottom line, but it's becoming more and more important to growing our top line," Nilles says. "The big investment is paying off. You can't just replicate this in another company."
The market opportunities are significant. The overall global demand for elevator, escalator and moving walkway equipment and services will reach an estimated $111 billion in 2017, rising 5.6 percent a year, according to The Freedonia Group. Industry analysts say that the big growth drivers are urbanization and high-rise construction projects, especially in regions such as Asia and the Middle East. China is a major battleground.
Schindler competes fiercely with the other members of the elevator industry's Big 4--Otis, Kone and ThyssenKrupp--not only for new elevator installations and upgrades but also for maintenance and service deals. Maintenance accounts for half of the Big 4's revenue and (because of its higher profitability) about three-quarters of their operating profits, according to Credit Suisse analysts.
Greg Ergenbright, president of Schindler Elevator Corp., the U.S. arm of Schindler Group, has been a key partner in the journey to the digital enterprise. He says digital transformation is helping the company win and retain customers--and thus capture a bigger share of those growth opportunities.
"I've seen a rapid change in terms of the speed that customers require information and the type of information they require. They want information in real time," Ergenbright says. They want performance data--equipment uptime, the number of outages or problems with a particular unit, the nature of those problems. "Now that's available via our app," he explains. "It's a selling point, and the feedback from the market is very favorable."
Ergenbright recounts a recent meeting in which Schindler employees encouraged a representative of one of its big accounts to check out the Schindler Dashboard, a mobile app (and Web portal) for customers.
The dashboard gives clients--managers of large buildings or multiple properties--an overview of the operating status of their elevators and escalators. After downloading the app, the client could see that two units were out of service. He then asked if he'd be notified when another unit goes out of service. As if on cue, a notification popped up, indicating an outage--an outage he quickly verified via phone with workers on site. The client could see, too, that Schindler personnel knew about the problem and were already scheduled to fix it.
"The type of information we're offering isn't unique, but the ease of use of the app and the real-time nature of it is," Ergenbright says. "Everyone involved in the process sees the same thing, everybody knows exactly what's going on in real time."
That level of customer service helps Schindler win over customers who see it can help them be more efficient and keep their own customers happy, Ergenbright says.
Consider a typical scenario: A property manager gets a call from a tenant complaining about an elevator or an escalator out of service. Unless the property manager is on site and sees the problem, or has been informed by a worker in the building, the call would come as a surprise. Not the way to impress tenants. But now, with the dashboard, Ergenbright says the property manager can respond to such calls with a "Yes, we're aware of the problem and it's already scheduled for service."
When Nilles started with the company in late 2009, Schindler couldn't deliver that kind of customer service. If an elevator or escalator broke down, Schindler wouldn't know about it until a call for service came in. Then the company's call center would schedule a technician, who would have to visit the site to figure out the problem before starting to fix it.
Today, six years later, that process has been streamlined and shortened.
Schindler now has unprecedented insight into the health and well-being of the equipment it has installed throughout the world. Sensors collect and transmit data related to equipment performance, while a business rules engine on the back end analyzes that data for insights into the current maintenance requirements for specific pieces of equipment. A collection of apps shares that same information with building owners, facility managers and Schindler employees, who use it to handle service needs more efficiently and effectively.
Workers aren't only getting real-time alerts when problems arise, though. They now know about potential future issues and can respond before there's even an outage, thanks to new predictive analytics systems that analyze data from the equipment to forecast possible mechanical issues.
Nilles says this "closed-loop service platform"--in which the dispatcher, the equipment and everyone in the field has the same real-time information--is the first of its kind in the industry.
Schindler's growing use of big data, predictive analytics and smart algorithms allows it to better prepare for broader problems, too, because the company can more accurately anticipate the most common problems for equipment installed in a given area--and store spare parts with or close to the technicians who will need them. And technicians can use a Schindler spare parts finder app for parts they don't have on hand. (In North America, the company stocks about 50,000 different replacement parts.)
Those apps are part of what Nilles calls a digital tool case, a collection of resources that each of the company's 30,000-plus field workers--about 20,000 service technicians plus 10,000 supervisors or people in other related roles--now has.
These digital tool cases feature iPhones (for workers who need something small) or iPads (for supervisors or others with additional information requirements). The devices come with Schindler apps suited for each worker's needs. Technicians can access detailed information they need to do their jobs (information that they once lugged around in paper documents). "It was one of the key objectives, to make the whole experience as easy as possible for them," Nilles says.
Most elevator companies are going high-tech to be competitive, says Soumya Mutsuddi, an industry analyst at Technavio. She says that Otis and Kone also have mobile-based applications that predict equipment service needs and stay connected with customers. Where Schindler is ahead of the pack, Mutsuddi says, is the mobile toolkit for service technicians, a collection of apps on Apple devices that enable workers to provide faster and more-efficient service to clients.
An evolutionary trip
Schindler was hardly starting from zero when it embarked on its digital transformation six years ago. Elevators, for instance, already came with phones that passengers could use to contact call centers. And Schindler was already collecting some basic data about the health of its elevators and escalators. And elevators already had electronic controllers and sensors, although the data that they collected generally resided locally on the machines.
But these technologies, along with the back-end IT infrastructure that ran day-to-day operations at Schindler, were just pieces that needed to be brought together and taken to the next level.
Nilles says digital transformation isn't about a specific technology or even the entire IT stack. Rather, he says, it's about a "game-changing adaptation to your business model to stay at the forefront of your industry."
However, before Schindler could take on that higher-level transformative work, he says the company had to fortify its IT foundation. That foundational work was in two areas: IT rationalization and global business process optimization.
The IT rationalization phase was aimed at standardizing the global IT infrastructure and retiring legacy systems to improve efficiency at the company, which has more than 54,000 employees worldwide (more than 5,000 of them in North America). The next phase, called SHAPE, for Schindler Harmonized Applications for Process Excellence, focused on integrating and synchronizing global business processes and applications. "The overall target was to drive the company toward operational excellence," Nilles says, noting that this project affected the entire company--including finance, the supply chain and service management, for instance.
These were major undertakings and they presented big challenges. "It was a hard and painful journey," Nilles recalls. "We went through a few lessons-learned phases. Because when you're doing such an effort, it's a business transformation exercise. It's about change management. You have to train people, make organizational adaptations so people can make use of the new solutions. All of that's involved."
Schindler officials declined to disclose how much money the company spent on these projects, although Nilles says the investment was significant.
Still, Nilles says he and other company executives realized that any competitor could make the same improvements if it was willing to spend the money. "This gave us a good competitive advantage, but there were other companies that were working on operational excellence. We knew that it could be replicated--it only requires a huge investment," Nilles says. "We were thinking about how to gain a competitive advantage using new innovative and digital solutions that were emerging to achieve a superior customer experience. We asked what that looked like. We didn't want to look into one piece. We wanted to change the way the customer did business with Schindler."
That thinking launched Schindler on the third phase: moving to what Nilles calls a "leading-edge digital business."
Leading digital transformation
Building on the IT rationalization and global operational excellence phases, Nilles and his team capitalized on mobile tools and a confluence of maturing technologies--sensors, connectivity, big data and analytics systems--that collectively evolved into the Internet of Things.
At Schindler, older equipment already in operation has to be retrofitted with connectivity modules, while equipment manufactured in the past few years already comes with the sensors and connections needed to fit into this new ecosystem.
The technology embedded on equipment in the field connects to the company's back-end systems, where an analytics engine handles up to 200 million incoming data points every day.
The technology is a mix of commercial products and systems developed in-house, Nilles says, adding that Schindler's leap into digitization couldn't have happened without innovations from the vendor community, such as cost-effective data analytics technology.
"Twenty years ago, you couldn't connect products to back-end systems or do even simple basic monitoring without it costing you a fortune," Nilles says. "Now we have a robust, technology available at a very low cost that's exponentially driving this digital opportunity."
And the fact that the iPhone is a critical component of the digital tool case puts a distinctive spin on Schindler's digital transformation. While Apple has had a reputation for ignoring the enterprise, Nilles says the iPhone is "a fantastic tool for the field, and it's easy to understand for the user."
Deploying the technology, however, was only part of the initiative. Nilles says the digital transformation also required understanding the value hidden in the data; understanding how it yields insights that improve how Schindler delivers products and services; and using those insights in day-to-day operations so they bring value to the company's customers.
"This data doesn't mean anything if you don't put the right business rules and machine-learning algorithms to it," Nilles says. "That's where we have the biggest competitive advantage. We are able to deliver a superior customer service experience."
George Westerman, principal research scientist at MIT's Sloan Initiative on the Digital Economy, agrees. "Getting value from digital isn't about the technology, it's about the leadership," he explains. "You adopt a mobile app or analytics, that's not going to drive more customers to your company. But you work with your people to be smart about how they make decisions, and now value starts. So the goal isn't to have mobile customer engagement, but truly intimate customer engagement powered by technology." Putting it another way, he says, "digital is just a hammer, and it's how you use the hammer that matters."
In May, MIT recognized the importance of Nilles' work, awarding Schindler its 2015 MIT Sloan CIO Leadership Award. Westerman, a co-chair of the MIT awards program, calls Schindler and other successful digital companies "digital masters."
What's a digital master? "They're doing better things with technology, and they're outperforming their peers," Westerman says. He defines digital transformation as "using technology to drive big changes in the performance or the reach of organizations."
Others, too, see Schindler's work as being on the leading edge. In addition to the MIT award, Schindler won the 2015 Digital Business Innovation Award from IT services provider Capgemini, German business newspaper Handelsblatt and the University of St. Gallen. Schindler's multistage digital transformation "dramatically increased their efficiency and their customer satisfaction," says Uwe Dumslaff, CTO of Capgemini in Germany.
A prime example of the state of the art is 4 World Trade Center, a post-9/11 skyscraper in lower Manhattan that opened in November 2013. It's a building that's smart, green and 72 stories tall. Schindler provided 34 energy-efficient, high-rise passenger elevators that reach speeds of up to 1,800 feet per minute. The building uses Schindler's intelligent destination-dispatching system, called PORT (short for Personal Occupant Requirement Terminal), which optimizes traffic flow and provides personalized service. This technology is integrated into the building's lobby turnstiles and at each elevator entrance, allowing occupants to identify themselves and select their destination using preprogrammed access cards or a touchscreen interface. PORT then automatically directs passengers to the elevators that will get them to their destinations in the shortest time, using the least amount of energy. By identifying passengers and their destinations, PORT technology also provides access control throughout the building, limiting travel to authorized visitors and destinations.
Schindler recently developed a mobile app called myPORT that provides the same type of destination dispatching (and security) with a reader that recognizes individuals' smartphones at building entrances and elevators.
Foundation for future innovations
Schindler's digital transformation isn't done yet. The company continues to deploy IT-driven capabilities throughout its global operations, Nilles says, and his team is focused on developing and delivering more innovations for Schindler's clients.
To that end, in 2013 Schindler created a business unit, called Schindler Digital Business AG, to foster innovative, tech-enabled projects. Nilles is the CEO of that unit in addition to being CIO.
Nilles and other Schindler leaders declined to reveal projects in the pipeline or the business unit's long-term strategy. But Schindler is always looking at ways it can use its platform to enable more insights and more efficiencies to benefit clients--"so we can always be one of the front-runners in this industry," Nilles says. Don't be surprised if Schindler finds ways to integrate smart elevators and smart buildings into broader smart city systems, working with partners in the urban ecosystem to exploit the company's sensors and data. That, Nilles says, could be the fourth phase.