ABB Corporate Culture - Winners shaped by history

Formed by the 1988 merger between Asea of Sweden and Brown Boveri of Switzerland, ABB was fueled by a series of bold acquisitions in the 1990's. The company won several business honors - "Corporation of the Year" (R&D Magazine, 1993), and one of the "Most Admired Companies in the World" (Fortune Magazine, 1998). By the turn of the century, revenues exceeded $35 billion, employment topped 200,000 and share prices were rising steadily.

The ABB Blahs

Clearly, the restructuring that led to the ABB turnaround was not without pain. ABB was historically a decentralized, entrepreneurial company with lots of managers calling the shots for smaller units. In crafting the comeback strategy, some 2000 customers were surveyed in mid-2003. The responses showed that while users had deep respect for ABB technologies, they found the company too complex for efficient business dealings. The new management team took swift action.

Restructuring for Success

Just 2 years ago, ABB automation activities spanned 3 corporate divisions and 11 global business areas. Today, just one division and 3 business-area managers direct the full portfolio of Automation Products, Process Automation, and Manufacturing Automation. A cross-functional team of about 15 people guides key decisions - bringing operational business heads, key country managers, and functional personnel together to reach consensus.

Focus on Fundamentals

Throughout the downturn, investments in R&D and project-related development held steady at about 5% of global revenues. The company has maintained research partnerships with institutions such as Stanford University, MIT, Carnegie Mellon, and Sweden's Royal Institute of Technology. ABB engineers and technicians contribute to more than 150 scientific publications annually, and average some 1,400 new patent applications every year.

ABB's public face to the automation markets stresses two key points: Productivity and energy efficiency. Squeezing measurable new performance from assets is a prerequisite; empty claims of "significant" have been replaced by real benefits for real customers, stated in numbers, percentages and dollars.

On the energy efficiency side, ABB's broad automation portfolio is well-suited to the era of $50 per barrel of oil: The company estimates that its variable-speed AC drives save energy equivalent to 10 average-sized power plants annually, while eliminating 60 million tons of carbon-dioxide emissions. On another front, ABB serves the marine market with modular, podded propulsion systems that cut fuel consumption for luxury cruise ships by up to 40 tons per week.

Emergence of a new winner

Today, ABB is a $20B company (versus $35B in the late 90's); employment has halved to about 100,000, and the core divisions are even considering acquisitions again to complement their portfolio. Juergen Dormann handed the CEO reins to Fred Kindle at the beginning of 2005. The executive management includes Dinesh Paliwal (Automation Technologies), Peter Smits (Power Technologies), Michel Demaré, (Chief Financial Officer) and Gary Steel (Human Resources). Underscoring ABB’s global culture, this five-person executive team spans 5 different nationalities who have collectively lived and work in 14 countries.

Dinesh Paliwal, a 20-year ABB veteran is a member of the ABB corporate executive committee. He heads the global Automation Technologies business and also group operations in North America, his dual role. He explains the ABB corporate culture change: "We decided early to abandon the ivory-tower approach of forcing decisions from corporate HQ. Our management meetings now take place in key operating locations. We come face to face with the people involved, experience their best practices, and give them a stake in the decision process. In two years, we've convened cross-functional teams in a dozen locations across 4 continents. Every player leaves the table prepared to live with the decisions."

Automation Technologies

Automation Technologies is now ABB's largest business, with 50,000 employees, about $11B in revenues for 2004 and an installed base of some $100B worldwide, including about $20B in process automation systems.

North American Focus

Some industry observers suggest that European companies can't make money in North America, but Dinesh Paliwal is defying that myth. He explains how they're doing it: "We have historically under-managed in North America, letting our European roots dominate ABB thinking in this, the the world's largest market. Today, we’re in position to leverage our local management strength and get our fair share of new business across the region - while still serving the installed-base customers who stood by us during hard times."

ABB Automation orders in North America are now growing in the double-digits, buoyed by such high-profile achievements as an $80 million process automation and offshore-platform outfitting project for Mexican oil producer PEMEX, and a full robotics body shop for auto giant DaimlerChrysler. Stand-alone automation products such as motors, drives instrumentation, and low-voltage devices provide a steady stream of revenues, with performance-based services catering to the large installed base.

ABB's roots in North America come from many acquired companies including industry leaders such as AccuRay, Bailey, Fischer & Porter, and Taylor. Though these names are no longer used, ABB has strengthened its marketing focus on "heritage brands" and pledges lifecycle support through strong services offerings. Globally, automation services are showing double-digit growth, accounting for almost 25% of revenues today.

Automation Business Strategy

Operational Excellence
With some 140 manufacturing, software and applications centers worldwide, the ABB automation team is constantly tweaking logistics, design and marketing processes. This includes combining locations, and moving some manufacturing operations to fast-growing emerging markets. Some of the most profitable units blend global sourcing with core operations.

Core Competencies
Learning from past failures, ABB no longer aspires to be all things to all customers. The battle for pure market share is less important now than focus on proven competencies. Application centers-of-excellence have been consolidated to key locations. Some 60% of automation revenues now come through qualified partners such as Systems Integrators, Distributors and OEMs.

Strategic Marketing
ABB trumpets its comeback story by aggressively showcasing its wins. Brand advertising has been stepped up in media such as Business Week, Fortune, and Harvard Business Review, plus key cable news channels and major airports worldwide. Expenditures for conventional trade shows have been scaled back in favor of captive events such as the "ABB Automation World" Conference in April 2005, when more than 1200 customers and the press converged in Houston for 3 days of technical sessions, exhibits and relationship building.

People Power
ABB executives and managers praise employees who persevered when times were tough. There are reward, recognition and development programs at every level - Dinesh Paliwal has personally nominated dozens of fellow professionals. There are incentive bonuses for most managers, which include a linkage to timely completion of employee performance appraisals.

The NEW ABB Culture

There's an old saying, "When the going gets tough, the tough get going." The ABB culture of diversity, perseverance and teamwork is achieving one of the automation industry's most dramatic turnarounds.

Related Links

"The ABB Blahs" chronicles ABB's previous downfall

ABB Automation Technologies Portal

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