Management Case | Decentralization benefits Otis India
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Otis Elevator Co., the manufacturer and service provider of elevators, escalators and moving walkways, regained its No. 1 position in the sector in India last year. A unit of United Technologies Corp. of the US, it had lost its No. 1 position to Johnson Lifts, a Chennai-based company, six years ago.
In India, Otis’s legacy began with the installation of the nation’s first elevator at Kolkata’s Raj Bhavan in 1892, which is still running in its original birdcage form. Ever since Otis India’s inception in 1953, the company has enjoyed a high market share and top-of-mind brand awareness. However, as competition (both local and global companies) entered the market, with faster deliveries and cheaper products, Otis India started losing its market share. In 2008, the company lost its No. 1 position. One of the reasons for slower response at Otis India was that operations were centralized and, therefore, a lot of activities went under the scanner of the head office before they saw any traction. This led to delays resulting in customer dissatisfaction.
Otis India realized that it needed to change the way it operated. The organization needed to revamp—to become quick-footed and nimble. Decision-making had to be fast and intuitive. A strategy had to be designed keeping the Indian customer in mind. In 2012, Sebi Joseph, the current India managing director, stepped in and developed a strategy for Otis to reclaim its No. 1 position. Joseph divided the organization into four geographical regions, each led by a regional head or director with an independent team consisting of finance, sales and service heads, enabling them to operate like independent subsidiaries.
The regions were transformed into “profit and loss” entities with the independence to make decisions themselves. This led to faster and intuitive action, which drew the customer closer. Cross-function independent teams in the regions coordinated sales, installation and service divisions.
The teams also collaboratively came up with a specific go-to-market strategy for India. This decentralization energized the regions to ensure service excellence and faster response time. It meant that each region was responsible and accountable now.
Decentralization has drastically improved the response time as decisions are now taken at the local level with all employees reporting to their regional bosses, with the directors at headquarters playing an advisory role.
New equipment orders have jumped by 44% over the one-year span from March 2013 as a result of the reorganization. Otis has regained its No. 1 position in terms of order bookings value. The company also won many large orders, including one from Hyderabad Metro Rail Ltd—the single largest contract in the Indian elevator and escalator industry. It also won the escalator contract for the Delhi Metro Rail Corp. Ltd for 222 units. And there’s been an 8% improvement in employee engagement scores over the past two years. By P.R. Sanjai