Shaping a global leader in power and automation
As one of the world’s leading manufacturers of power and automation technologies, we work to ensure reliable and efficient transmission and distribution of electricity and increased productivity in industrial, commercial and utility operations, at the same time as lowering our customers’ environmental impact.
We necessarily work and interact with a wide range of business partners as part of our efforts to deliver sustainable profitable growth. Our approach to value creation is based on partnerships and exchanges – of goods, services, skills and information – which benefit both ABB and our industry, utility, infrastructure and transportation customers. This is sometimes described as creating shared value; it is mutually interdependent.
Our success is based on constant and innovative interaction: with our researchers who provide the backbone for technology leadership and enable us to serve our customers better; with our suppliers who commit to providing their services in an economical, high quality and on-time manner, using the materials and processes agreed with ABB; and with our employees and contractors who are responsible for developing and delivering the systems, products, solutions and services to our global customers.
Our operating parameters are determined by partners such as governments, which provide the regulatory frameworks for our business, and investors, institutional and individual, who provide the lifeblood for our operations. We need to satisfy their demands to prosper.
Central to our ability to maintain technology leadership and create value – for ourselves and for society – is our ability to attract, develop and retain the right people in the right jobs. Our interaction with different parts of society helps us to attract the best employees and secure our standing in the communities where we operate.
These are some of the factors which help us to derive value from and create value for our customers, through whichever channel we serve them, and they underscore our daily efforts to create “Power and productivity for a better world.”
ABB value chain
In 2014, ABB laid the foundations to take the company to the next level, with a new strategy aimed at accelerating sustainable value creation to deliver attractive shareholder returns. To provide us with a systematic and robust approach for value creation, enhanced earnings per share and cash return on invested capital, ABB defined three focus areas: profitable growth, relentless execution and business-led collaboration.
Our Next Level strategy is built around ABB’s vision: “Power and productivity for a better world.” This describes what we stand for: Power, because we are a leader in addressing power infrastructure and control needs for utilities, industry, and transport and infrastructure; and Productivity, because ABB is a leader in operational asset effectiveness – supporting our customers in achieving high uptime and speed while reducing waste.
“Better world” refers primarily to our value proposition to decouple economic growth from environmental impact. Based on our offerings and technologies, we are well positioned to enable growth with less relative energy consumption and make the energy supplied cleaner and more sustainable.
To achieve the next level, ABB is targeting profitable growth by shifting our center of gravity – through strengthening competitiveness, driving organic growth and lowering risk.
We are enhancing competitiveness in areas such as technology, service and software. We will expand our customer value proposition with new engineering and consulting services and advanced software-based services. Our offerings are also addressing the big shift in the electrical value chain – for instance with more efficient, long-distance power transmission and micro-grids – and we are innovating to help our customers derive the benefits of the “internet of things, services and people.”
ABB’s strong global presence means we are well positioned to access high-growth segments, where we are driving momentum by selling more of our existing offering to customers, developing innovative new offers and value propositions, and expanding into additional, high growth segments.
Alongside our focus on organic growth, we are also reducing intrinsic business risks by, for example, aligning business models more closely with our core competencies.
We are complementing our focus on organic growth by targeting incremental strategic acquisitions that contribute value in line with the new strategy. We are also extending partnerships with other leading global companies.
Relentless execution and business-led collaboration
Our second strategic focus area is execution. We have been successful in our programs to reduce costs and improve customer service. We intend to broaden those efforts by developing a leading operating model across ABB, starting with the areas of white-collar productivity, net working capital management and quality.
Our third focus area is aimed at simplifying how the organization works together and at achieving a more market focused organization. We have introduced undiluted and clear business-line responsibility as the core of ABB, along with strengthened cross-business collaboration.
Big shifts in power and automation
ABB’s future business prospects are promising, thanks to the big shifts taking place in the electricity value chain and industrial automation. The rise of the emerging economies is also a tremendous opportunity; in Africa and India alone, nearly one billion people are waiting for access to electricity.
Electricity supply is undergoing seismic changes as the power generation mix shifts towards renewables and more feed-in nodes increase the complexity of the grid. By 2035, renewables are expected to account for 40 percent of new power generation, meaning electricity will have to be transported over longer distances and at higher voltages. Renewables are also making stand-alone grids possible for remote, off-grid communities and innovations in power storage technology promise to dramatically expand the application of these micro-grids.
Thanks to the internet, the world is on the cusp of a new revolution in digital technology. The next step will be the optimization of industry: from a central control center and using algorithmic reasoning, we will be able to help our customers get more out of their devices and maximize the performance of their plants and machinery. A new era in industrial automation is just around the corner.
In terms of markets, emerging economies are expected to account for two-thirds of global GDP growth in the next five years. We can expect demand for electricity to soar as incomes rise and economic development advances.
The long-term demand outlook in our three major customer sectors – utilities, industry, and transport and infrastructure – remains clearly positive. We are well-positioned to tap these opportunities for long-term profitable growth, with our strong market presence, broad geographic and business scope, technology leadership and financial strength.