Leg 8. From Itajaí to Newport (VI). The Phased Process of Corporate Renewal applied to ABB (1998 to 2018).
Hope you are doing well. The seven sailing teams have been moving forward to Newport, and there is nothing new to write about us at the moment, despite the area of sargassum weed we have encountered. The top trio teams are Team Brunel, Dongfeng and Turn the Tide on Plastic. All of us are sailing at around 22 Knots. There are only 2,300 miles between us and the finish line.
I have been preparing this example which I promised yesterday. ABB is one company which fits perfectly with the application of the Corporate Renewal Framework by Bartlett-Ghoshal. It also happened that I worked with ABB Financial Services between the years 1999 to 2000, and I knew the company from that time. I was hired to work for ABB Structured Finance in Zurich in 1999. ABB is a global company which has successfully renewed themselves during the last 20 years, and it wins the right to be on my blog to explain this theme.
After reading the slides. I will relate each of the phases of ABB Rejuvenation process with the Bartlett-Ghoshal model. Let´s follow the facts of ABB evolution during the last 20 years:
If you wish to see the last presentation in PDF format, click here please: Eliescalante Leg8 Corporate Strategy from the past to the future part 3.
- First Stage: Simplification: Instilling Discipline and Support. Between 1999 to 2008, ABB was simplifying their organization. From what I have observed, ABB installed a Value Added system which helped them to be lean. The divestiture of the Power Generation Segment was a massive shock for the company not just in terms of financial numbers, but also in terms of developing the right business model again. Two actions were outstanding during this process:
- Building Discipline: ABB replaced the majority of the corporate structure, and did a strong commitment to performance standards. I believe, ABB changed its old European reporting systems to an Economic Value-Added rigorous scheme. Strong norms of Self-discipline were tied to methods of raising transparency and developing a culture of effective feedback from the business units up to the corporate office. This process of educating management to a new way of thinking took a decade. It took them 10 years, and massive layoffs. In addition, the organization replaced a key number of nonperforming managers with outsiders, keeping only those who reached their commitments to meet their Value Added promises.
- Embedding Support: In parallel of the creation of self-discipline, the management was nurturing and supportive through providing access to resources for innovation, research, and development. Offering legitimate empowerment and delegation. There was a huge commitment to train new managers to become “delegators and developers of people”. ABB was not training robots, they dedicated 10 years of company´s life to educate management at the commercial and operational level, to breathe coaching and build supportive relationships with all the organization.
- Second Stage. Integration: Building stretch and trust. I believe once ABB was able to retake their value in the marketplace, in order to restart the growth engine again, the company had a precedent past school from the time of Percy Barnevik as CEO (previous the divestiture of ABB Power Generation). The organization inherited a cultured style of several dualities: “global-local, big-small and radically decentralized-with central control reporting”. I am sure, these solid foundations helped the company to re-ignite the behavioral context of stretch and trust to motivate the cross-unit collaboration.
- Creating Stretch: Stretch is an attribute of an organization´s context that enhances people´s expectations of themselves and the company. In order to create this, ABB has taken “hands to energize the organization”, to establish unifying values to reinforce each individual commitment to the company, and they gave their employees a sense of personal fulfillment by linking their individual contributions to the larger renewal process. Since I worked for them, I can reassure you, ABB is a pioneer in creating stretch at every level. It is in their own DNA.
- Developing Trust: After the first stage, between 2009 to 2014, in the middle of a global financial crisis, trust is something which doesn´t happen from one day to another. “It is built only slowly, carefully and with a great deal of time and effort”. Involvement is a critical prerequisite of trust. From my memories of my life in Zurich, I remember that strategy was developed always with global front-line managers drawn from the worldwide operations. In addition, I understand that ethics have started to become a core concept in ABB.
- Third Stage. Regeneration: Ensuring Continuous Learning. This is the stage in which ABB is right now. All the divisions are clearly in the middle of the “storm” of Industry 4.0. The fourth industrial revolution will generate new challenges for this company. In particular, because there is so much noise of the wrong consequences with the complexities of changing the old manufacturing ways so disruptively. Particularly, without a world which is not educated for it. As a pioneer, ABB will have a profound challenge: how to integrate this contextual frame of Industry 4.0 slowly enough to don´t make horrendous mistakes and maintain the dynamic imbalance of self-control. Sometimes to be a pioneer for a company of more than 6,000 innovator-scientists is a double-sided coin. The decision of balance, on how to push forward learning from the past without harming the present is wisdom. For ABB leaders, it will require a lot of “self-control” to don´t push beyond certain limits when the societies are still not ready.
Disclaimer: All the presentation slides shown on this blog are prepared by Eleonora Escalante MBA-MEng. Nevertheless, all the pictures or videos shown on this blog are not mine. I do not own any of the lovely photos or images posted unless otherwise stated.
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