ABB Electrification business – future direction
ABB Electrification President Tarak Mehta explains how his business is using new technologies to differentiate itself and create value for its stakeholders
During the recent ABB Electrification Investor and Media Days, our leadership team had the chance to present the vision and strategy of the Electrification business to a collection of the world’s leading investor companies and media houses. During the course of the two-day event, insights on our solutions for safe, smart and sustainable electrification were shared with 50 investors and more than 20 media titles from across four continents at our facilities in Bergamo and Dalmine, Italy.
We showcased how our business is delivering growth through high-performance segments, differentiating through technical innovation and value-added digital solutions, and creating value for our customers, employees and shareholders through operational excellence.
Electrification market overview and key trends
The Electrification market is approximately $160 billion, projected to grow at 3% CAGR. The pace of change in the market will accelerate, and Electrification must be agile to keep in step with key macroeconomic and technological trends:
- Digitalization – Demand for data is increasing, driven by Industry 4.0, 5G deployment and the digitalization of processes, procurement, and services.
- Urbanization – Cities across the world are experiencing a new wave of accelerated population growth and associated infrastructure development.
- Shift to electricity – Electricity use is growing at two times the rate of any other form of energy. This is being driven by new consumption modes, such as electric vehicles and data centers, and enabled by more efficient use, integration of distributed generation, and energy storage
These megatrends are creating high-growth pockets within the electrification market such as data centers, electric mobility and commercial buildings, which we are positioned well to serve.
Electrification team provides safe, smart and sustainable electrification
Our strategy drives growth and performance by differentiating through technological and digital innovation. We aim to deliver an outstanding customer experience through operational excellence.
Innovation at the core
Electrification will focus on innovations that maintain our leading position in core low- and medium-voltage products, solutions and services. With approximately $400 million R&D investment per annum, we continue bringing innovation to the market from the fastest EV chargers in 2018, to revolutionary switchgear in 2019, and beyond.
Out of 10 million connectable devices in our installed base today, 3 million are connected in the field. Embedded connectivity and intelligence in our portfolio help customers improve their costs, productivity and efficiency.
Digitally enabled solutions
Energy, asset and building management digital solutions that use our smart connected products deliver up to 30% energy and operational costs savings to our customers. These subscription-based SaaS applications are hosted on the ABB AbilityTM platform.
We are committed to growing our digital portfolio with end-customers. For example, in mid-segment commercial buildings, we reduce energy and enhance comfort and security through the use of our innovative IoT platform, while also reducing capital investment.
ABB AbilityTM Marketplace, ABB Connect Partner Hub customer portal and e-commerce are aimed at making it easier for customers to find, configure, buy, and install our products.
Execution – delivering outstanding customer experience
Speed, simplicity and quality are at the center of the continuous improvement philosophy that delivers more than $200 million of annual gross cost savings. This same philosophy extends to our integration of GE Industrial Solutions. A strong focus on cost, portfolio and manufacturing footprint optimization will help us deliver approximately $200 million of cost synergies by 2022. In parallel we are prioritizing the turnaround of our Installation Products business, with operational improvements and a more selective market approach.
The ABB-OS simplification program drives faster decision-making, simpler structure and clearer accountability. It enables us to reduce reporting units, simplify supply chain and optimize manufacturing and R&D.
All of this has one single objective: to deliver an outstanding customer experience.
Our market leading business lines are well aligned to deliver on our strategic priorities.
- Distribution Solutions is creating scalable, modular and replicable solutions to meet customer needs in focus segments across the whole electrification portfolio, while optimizing performance and profitability.
- Smart Power builds on a strong product portfolio with innovative connected products that aim to become the cornerstone of electric distribution.
- Smart Buildings, with a strong installed based, works to create disruptive solutions for building automation.
- To drive performance improvement, the GEIS portfolio, and its installed base and people, are now part of Distribution Solutions, Smart Power, and Smart Buildings business lines.
- Installation Products will focus on operational improvements, portfolio optimization, and selectivity.
With our differentiated products, solutions, and services we aim to deliver above-market growth, while optimizing the portfolio across our business lines and staying firmly focused on continuous improvement. We expect to reach the Operational EBITA margin corridor of 15-19% during 2020.