Committed to unlocking value
Next Level strategy – stage 3
On October 4, 2016, ABB launched stage 3 of its Next Level strategy to unlock additional value for shareholders and customers.
Building on the focus areas of profitable growth, relentless execution and business-led collaboration, stage 3 consists of four actions:
- Driving growth in four market-leading entrepreneurial divisions
- Quantum leap in digital
- Accelerating momentum in operational excellence
- Strengthening the global ABB brand
Driving growth in four market-leading entrepreneurial divisions
A key objective of ABB’s Next Level strategy is to be #1 or #2 in all businesses, something the company achieved with the focusing of its divisional structure into four market-leading divisions effective January 1, 2017: Electrification Products, Robotics and Motion, Industrial Automation and Power Grids. With this structure, ABB’s divisions are positioned as partners of choice in their respective markets.
In stage 3 of the Next Level strategy, the divisions will drive growth as entrepreneurial units within ABB, in line with the company’s values of “ownership and performance” (see Living our values). This is reflected in an enhanced performance and compensation model, which focuses on individual accountability and responsibility.
The divisions benefit from sales collaboration orchestrated by ABB’s regions and countries, as well as from the group-wide digital offering; ABB’s leading G&A structure; common supply chain management; and corporate research centers.
ABB will continue to strengthen its divisions through active portfolio management. This includes pursuing strategic additions, transforming business models and pruning non-core businesses.
As #2 in the market for the electrification of consumption points, the Electrification Products division brings together all electrification components in a one-stop shop for customers. The division now includes the solar inverters, electric vehicle chargers and power protection activities, which were transferred from the former Discrete Automation and Motion division.
Demand for electricity consumption is growing faster than overall energy demand, as more people gain access to electricity and the take-up of electric vehicles accelerates. This presents significant opportunities to digitalize and innovate around our current offerings.
Robotics and Motion
The newly shaped Robotics and Motion division, based on ABB’s Discrete Automation and Motion portfolio, is focused on the fast-growing robotics segment, and on industrial motors and drives where ABB is #1 globally.
ABB’s robotics business, currently #2, has the clear aim of becoming the market leader, while the motors and drives businesses will focus on fast-growing segments and moving into light industry and emerging growth areas such as Asia.
Intelligent services and a leading digital offering are already a strong pillar of the division’s performance and open significant growth opportunities. ABB will strengthen divisional profitability through continued focus on operational excellence and value chain optimization.
Formerly the Process Automation division, Industrial Automation builds on ABB’s #1 position in control solutions for industry, and will drive digitalization across industry sectors through ABB’s unique combination of domain expertise, and software and services.
By focusing on growing segments and bringing together maintenance, operation and control in industries as diverse as pharmaceuticals, mining, shipping and oil and gas, ABB will drive penetration of strongholds and create differentiation for customers.
Finally, the transformation of the Power Grids division continues within ABB, with the focus on high-growth segments and digitally enabled services and software. As part of the ongoing transformation, Power Grids will continue to de-risk the business model while tapping growth opportunities through strategic partnerships, such as those with leading EPC (engineering, procurement and construction) companies, Fluor and Aibel, announced last year. In addition, ABB will continue portfolio pruning, as with the sale of the high-voltage cables business to NKT Cables. As a consequence of the transformation, ABB is raising the operational EBITA margin target corridor for the Power Grids division from 8–12 percent to 10 –14 percent effective 2018.
Quantum leap in digital
As the world leader in control systems for industry, ABB has more than 70,000 installed systems connecting over 70 million devices, making it a “hidden” digital champion. In addition, more than half of its sales come from software and digitally enabled devices.
In stage 3 of its Next Level strategy, ABB will use its profound knowledge of its customers’ domains to plan, build and operate a unique digital offering to deliver true operational differentiation for customers. The newly launched “ABB Ability” offering combines ABB’s portfolio of digital solutions and services across all customer segments to deliver unprecedented improvements in uptime, speed and yield. With this digital offering, ABB will cement its leading position in the fourth industrial revolution and support the competitiveness of ABB’s four entrepreneurial divisions.
To drive its quantum leap in digital, ABB has entered a far-reaching strategic partnership with Microsoft, the world’s largest software company, to develop next-generation digital solutions on an integrated cloud platform. Customers will benefit from the unique combination of ABB’s deep domain knowledge and extensive portfolio of industrial solutions and Microsoft’s Azure intelligent cloud as well as B2B engineering competence. Together, the partners will drive digital transformation in customer segments across ABB’s businesses such as robotics, marine and e-mobility.
ABB’s digital transformation will be led by its Chief Digital Officer, Guido Jouret, a pioneer in the Internet of Things, who joined the company on October 1, 2016, reporting to CEO Ulrich Spiesshofer (see Unlocking value for industrial customers).
Accelerating momentum in operational excellence
ABB continues to build on its existing momentum and is further accelerating its operational excellence by raising the cost reduction target of its 1,000 day white-collar productivity program by 30 percent to $1.3 billion. This will be achieved as planned by the end 2017, with lower total restructuring and implementation costs. The 1,000-day working capital program, focused on improving inventory management and optimizing other net working capital measures, remains on course to free up approximately $2 billion by the end of 2017.
Strengthening the global ABB brand
To communicate its quantum leap forward in digital and to ensure it is perceived as a pioneering technology leader at the forefront of the digital revolution, ABB is transforming its global brand.
Over the next two years, all corporate brands will be brought under the single master ABB brand. This will make it easier for customers to understand what ABB does and to navigate its portfolio, and to increase customer loyalty and purchase probability as well as price premiums. In addition, one master brand allows ABB to better present its strategy to relevant stakeholders and emphasizes its customer-first, digital-first thinking.
The unified ABB brand will have a new visual identity that clearly communicates the company’s digital capabilities as well as its direction and unique market position to customers, shareholders, employees and all other stakeholders. ABB’s heritage as a pioneering technology leader and the three focus areas of its Next Level strategy are reflected in its new brand promise: “Let’s write the future.”