Next Level strategy – stages 1 and 2
In 2014, ABB launched its Next Level strategy aimed at accelerating sustainable value creation and laying the foundations for future growth. At the time, the company was facing pressing operational issues, and needed to develop a new growth mindset, simplify its organization and strengthen its customer focus.
Three focus areas were defined to address these challenges: profitable growth, relentless execution and business-led collaboration, and for each focus area, clear action plans were put in place.
To drive a growth mindset, ABB adopted its “PIE” formula of penetration, innovation and expansion, with a focus on greater competitiveness, organic growth, and reducing risks by aligning business models more closely with ABB’s core competencies. Organic growth was complemented with strategic acquisitions and partnerships with other leading global companies, such as Philips, Hitachi and most recently Microsoft. Today, ABB is well positioned for growth, with four market-leading divisions and a world-class portfolio of solutions and services.
A key objective of the Next Level strategy is to achieve world-class operational excellence at all levels of the company. In stages 1 and 2, the focus was on turning around underperforming units, improving white-collar productivity and cash performance, and improving accountability and performance of both teams and individuals.
By 2016, Power Grids delivered and continued its journey of transformation; the white-collar productivity savings program had outperformed expectations, allowing its cost reduction target to be increased by 30 percent to $1.3 billion; and the working capital program was on course to free up approximately $2 billion by the end of 2017. On top of that, ABB’s regular cost-savings programs continued to achieve savings equivalent of 3-5 percent of cost of sales each year, and a new performance-based compensation model had been implemented for 70,000 of the company’s 132,000 employees.
Finally, over the past two years, ABB has dramatically simplified its organizational setup, reducing the number of global regions from eight to three, and the divisions from five to four. In addition, many business units have been relocated closer to their key markets and customers, leading to a far more responsive, customer-focused organization.
The work is not over, but today ABB is a simpler, faster and more agile company, positioned at the heart of the energy and fourth industrial revolutions, and ready to take advantage of the exciting growth opportunities that are emerging across its markets.