Swiss-Swedish multi-national corporation, ABB, says its new governance policy will dictate the direction of its activities.
In a virtual webcast with its customers on Wednesday, the company’s CEO, Björn Rosengren, indicated that the company’s technology and products are well aligned to key market trends and customer needs such as the electrification of transport, automated manufacturing, digital solutions and increased sustainable productivity.
“We will now leverage this strong position to create superior value for our customers, employees and shareholders. We will do this by evolving our decentralized business model, strengthening our performance management culture, putting stability and profitability before growth, and driving active portfolio management.”
The company’s mid-term financial targets of a 3-6 percent comparable revenue growth per year, an operational EBITA margin of 13-16 percent, ~100 percent cash conversion rate, 15-20 percent ROCE and EPS growing at a faster rate than revenue growth, remain in place. An update on the strategy, including long-term 2030 sustainability targets, will be provided later this year at the Group’s Capital Market Day in November 2020.
ABB has successfully discontinued its longstanding matrix organization over the last 18 months, with more responsibility shifted to the four business areas of Electrification, Industrial Automation, Motion and Robotics & Discrete Automation.
“Going forward, a new operating model called ABB Way will provide a governance framework of processes and policies, connecting the business areas and divisions to the corporate center and uniting the Group under the ABB brand. ABB Way is evolving from the current ABB-OS, which is on track to deliver the targeted $500 million cost savings, with the full run-rate benefit during 2021.
“After having been successfully launched in 2016, the ABB Ability™ digital platform will also be managed by the business areas and no longer in the corporate center. This will enable them to create software solutions more efficiently and quickly. ABB Ability™ has more than 160 digital solutions, boasting top-tier software partnerships with Microsoft, Hewlett Packard Enterprises and Ericsson, for example,” Rosengren said.
In a further step of moving operating activities even closer to the customer, ABB will empower 18 divisions comprised within the four business areas. More details on the divisions, as well as updated strategies for the business areas, will be provided at the Capital Markets Day in November 2020. ABB will continue to report its financial results based on the four business areas.
“We will strengthen our performance management through a new scorecard system based on a very transparent and standardized set of KPIs. Here, I expect our management to focus on having a stable structure and profitability before embarking on growth,” said Rosengren. “The benchmark is for each of the divisions to be number one or two in its respective market segment.”
