| "Crafting
Lynx Services from PPG"
Feb. 1, 1999
Issue of CIO Magazine
Senior Writer Polly Schneider
The view from Vice President of IT David
Smith's corner office at PPG Industries Inc. in downtown Pittsburgh has changed a good
deal over the years: Sparkling high-rises, parks and trees grace what used to be a dingy
industrial riverfront. Smith is also overseeing a transformation at the $7.4 billion maker
of glass, chemicals and industrial coatings, born in 1883 as The Pittsburgh Plate Glass
Co. When Smith joined the company in 1992, one of his first responsibilities was to help
craft a new line of business, which came to be called Lynx Services. Part of PPG's
Automotive Replacement Glass business unit, Lynx was essentially a claims processing
network serving three market groups: its traditional customer base of glass installers,
insurance companies and car owners.
Lynx was formed in response to changes in both the insurance and glass
installation businesses. In the early 1990s, in order to both cut costs and improve
customer service, insurance firms began to look at a way to offload the processing of
claims in the comparably low-cost but high-volume area of auto glass replacement, which
accounts for 20 percent to 25 percent of all automobile claims. Traditionally, insurance
agents managed glass claims on a case-by-case basis within their own market; they'd
research the claim and set prices. This decentralized process was not only tedious, costly
and error-prone for the insurance provider, but it also resulted in wide disparities in
reimbursement pricing for the installers. Service was also poor: Consumers often had to
make several phone calls to the agent and local installation shops in the course of filing
just one claim.
As a result, national glass chains began to consolidate, forming their
own EDI networks for processing insurance claims as a competitive advantage. This posed
two problems for PPG: Large glass chains had negotiating power to drive down glass prices,
and they had the potential to push the smaller, independent glass shops (which were unable
to set up their own networks) out of the market. PPG's marketing department came up with
the idea to launch an independent network for loss reporting and claims management that
would provide the streamlined and centralized solution insurers needed while at the same
time leveling the playing field among the installers.
With Lynx, the consumer makes one phone call to his agent, who then
connects the call to a Lynx representative. Through PBX and file server integration, as
well as messaging software and detailed scripting in the user interface, Lynx
representatives can file a damage report, receive coverage approval online and schedule an
appointment at an installer in the consumer's neighborhood—all in about five minutes,
on average. That's it. No additional phone calls or paperwork. On the call center side,
calls are answered within 20 seconds 90 percent of the time3/413 percent better than the
industry standard, according to Peter Cole, director of national customer service centers
at Lynx.
Though it turned out well, Lynx was initially a risky venture for a
traditional manufacturing company like PPG, selling industrial products like automotive
paints, chlorine, eyeglass lenses, fiberglass and windshields. The concept was not an easy
sell. Some of PPG's national chain customers saw Lynx as a competitive threat, or worse, a
harbinger of PPG's entrance into the retail business. "Not all our customers viewed
our direction as appropriate, and we lost some business as a result," says Garry
Goudy, vice president of automotive replacement glass. Inside PPG, managers questioned
whether the company should veer from its core competency as a glass manufacturer and
distributor into the claims processing business, Smith recalls. Yet the idea had strong
backing from PPG's board of directors, so in 1994 the first call center was launched in
Overland Park, Kan.
Today Lynx employs 600 employees, maintains two regional call centers,
connects 50 insurance providers and 15,000 glass installers and processes nearly 2 million
auto glass claims a year. Lynx is also giving PPG better access to insurance providers,
which account for 65 percent of auto glass replacement orders—a $3 billion market,
according to company estimates.
"It has allowed my business to unleash technology to the benefit
of our customer base and opened up a mind-set for further opportunities in a business
that, five years ago, was really quite foreign to our normal product line," reflects
Goudy, a 28-year veteran of PPG. John Storck, an MIS professor at Boston University, calls
PPG's move into claims processing "revolutionary" for a manufacturing business:
"I was very impressed with the quality of their strategic thinking," he says.
"In retrospect, it seems deceptively simple. The people at PPG tracked the
information flow down to the end of the value chain, they saw some gaps, and they filled
them. Where this has happened in other industries, the firm acting as the solutions
integrator ultimately achieves very significant financial returns."
Market Share Captured
For competitive reasons, PPG would not disclose ROI statistics for Lynx, a limited
liability corporation owned by PPG that derives its income from transaction fees. However,
Goudy says the company is paying for itself. Lynx has captured an estimated 17 percent of
market share for auto glass claims processing, right behind market leader Vista, a network
operated by the three largest glass installer chains, says Sergey Vasnetsov, research
analyst and vice president with BT Alex.Brown Inc. in New York City. Equally important,
Lynx is helping its participants—the installers and insurers—improve their
bottom lines. Outsourcing has allowed State Farm Mutual Automobile Insurance Co., the
nation's largest insurance provider, to move over 200 customer service agents to other
jobs in the company and speed up payment of invoices, according to Bill Hardt, State
Farm's assistant vice president of auto property claims.
Glass installers benefit from free referrals through the network (Lynx
waives the processing fee if a transaction is made electronically) and faster turnaround
on payment, according to Larry Halliwell, director of information technology for PPG's
glass and fiberglass business unit. PPG developed EDI interfaces for the major
point-of-sale systems in the industry; now, 70 percent of all Lynx installers are
submitting invoices electronically. The system's detailed auditing capabilities have
boosted the number of error-free invoices, Halliwell adds; where previously half of all
invoices submitted from installers had errors, now only 1 out of 10 is incorrect.
Making a complex business transaction easier and more efficient for all
three parties—consumers, insurers and glass installers—was no easy task. When
Lynx won the State Farm contract in early 1996, PPG had less than a year to build a second
call center in Fort Myers, Fla., hire the staff to run it and rewrite the Lynx software to
handle the increase in volume and functionality that State Farm required. PPG couldn't
have pulled it off in time without the commitment of 11 cross-functional teams of sales,
marketing, human resources, operations and IT personnel working 70-hour weeks.
Tight collaboration between IT and the business was another necessary
ingredient. Smith and his staff helped develop the original concept, negotiated contracts
and made sales calls—which IT continues to do today. "IT is now such a integral
part of our business," Goudy observes. "It's causing us to look across the
corporation in terms of how we can expand the services to the insurance industry through
Lynx."
Branching into services is increasingly important for companies like
PPG with maturing product lines; competitive pricing has resulted in flat glass sales for
the company since 1995. PPG plans to open a third call center this August in Kentucky, and
the company is already handling a small number of claims outside auto glass. Lynx is a
lesson both in relationship-building and progressive thinking in the face of a changing
marketplace. Smith says the ultimate value of Lynx is a closer partnership between PPG and
its glass installers. The bigger message, he believes, is one of transformation:
Industries are finally learning to operate in networks. "Systems like this that tie
together various businesses to serve consumers will be the wave of the future."
CIO Magazine - February 1, 1999
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