CEO DIALOGUE #44 - Morten Wierod, ABB

Thank you for having me.

Yeah, at ABB, we are really looking at how we can make the world more efficient and also more productive and also to decarbonize industries. These are some keywords of what we do, and it's through our leadership in electrification and automation are how we do it. And we organize the company in four different business areas, electrification being about half of the company, which does everything kind of from the source to the socket back home. That means from utilities and giving electricity available and buildings and industries and also electrifying transportation. Another, the second largest, is our motion business, which is electric motors and what we call variable-speed drives that controls the speed of those motors, and that goes into everything that moves today. That'd be trains coming here in big cruise ships or tankers on the sea but also everything that moves inside production, for instance in steel mills, pulp and paper, and mining. So just to name a few example. And then we have our process automation business area which does everything around advanced control system that normally about making big manufacturing plants work on the top level, the software and everything that controls the production process and how that plant works. And finally, smallest, and another important part of ABB is robotics and discrete automation which is about robotics. You know that. We all know about moving, kind of putting cars together, but also working in sorting in the food and beverage industry as an example. And then also our machine automation, making machines more precise and faster. We do a lot of things at ABB. It really makes the world turn every day. But then we also try to help saving energy, and we help industries to outperform or what we call at ABB, to outrun, and make them leaner and cleaner. That's really a bit ABB in a short.

Yeah, we have many competitors in our space. We have a few, like Schneider Electric and Siemens that we play in many parts, for instance in electrification, in motion, while more the Rockwell Automation, the Emerson, maybe, is more familiar name in the process side of it. And then, in robotics, it's very much the Japanese, the FANUC, the Yaskawas, and also some of the new Chinese players coming up in that field.

They are often on our lips when you're looking at who we compete against on projects, yeah.

I think it comes to the core of the purpose of the company, you know, helping industries to become more efficient, that means leaner, but also to help them to reduce their carbon emissions, which is the cleaner part of it. And most of the time these two things goes together, so it's not one or the other, it's an and equation. So we're helping them both become more efficient but also to become cleaner.

No, I think this is really at the core of people's mind, I would even say, when they wake up in the morning. It's another day to help our customers and help them to outrun. That goes really to the whole engineering practice at ABB. We've always been a technology company. Sometimes maybe a bit in the past, maybe too much of technology only, but now it's really technology for our customers and help them to outperform. I think getting that external view to it has really also helped inside the company.

So customers don't buy hardware or software, of course. They buy solutions that helps them become more efficient and become leaner and cleaner. That's kind of the core of it. So when you look at the balance kind of from mechanical engineering and over to software, what we do today, this has been a journey for many, many years, and we see that the shift there now, and more than 50% of our R&D engineers are software engineers, and that's a trend that just will continue over time, but we still need really good also design engineers because nothing, no software is working without also really good hardware. So it's the combination, as I say, that is the magic.

Yeah, the ABB way describes really how we operate in ABB. We have a decentralized business model, which means that decision-making is moved down from me on the CEO level and down to our division presidents. That is, we have 18 one of them, and they sit with their own strategy, their own P&L, and also they own the performance of that part. So that is the core of element, but it doesn't, and people sometimes take mistakes, thinks that a decentralized business model means anarchy. It's absolutely not. It is all about that you have to create core processes for the company that everybody in the company follows. It goes around performance management, around people and culture, around brand and governance. So these are the four topics-

of the ABB way. That's kind of the glue that holds all of us together that it's described. So take the performance management. We have one set of rules when it comes to how we measure performance, how we do our target setting, incentive plans, and so on. Same on people and culture. We have one set of values for the company. Four Cs is about care, courage, curiosity, and collaboration. These are the four values at ABB that everybody, I think, if you travel the world of ABB, most people in the company would easily, if you ask them what's the four Cs, they will tell you what it stands for, and that's something that has been there for the last five years, and it's not gonna change either. So I think it's all of these are common elements that brings all the ABB team together, but then you have freedom when it comes to your strategy, how you go to market. Even on the technology side, there is a lot of freedom how to operate, but we don't need creativity when it comes to accounting or how we use our brand. The ABB logo is always ABB, and there is always red. So there are areas where, you know, we want creativity, and there are other areas where you say, 'No, this is the ABB way. This is how we do it, and everybody in the company do it this way.'

And decision-making further down in the organization, close to the customer. That's the main part because we always want the speed is what we are after.

Yeah, and it's really ownership to performance. Over 18 division presidents. They own the performance of their division, and these are businesses, like $1 billion up to the biggest is $6 billion. So these are pretty large companies in some way, but they own their cost, they own their profit levels, they own everything about how they operate when it comes to go to market, how they serve customers, and what are the technologies that they develop. So that is kind of the freedom that they have, but also it goes with an ownership to accountability, and that's what we have seen a strong change in ABB over the years. This ownership today is very strong, and that's what really drives also the performance of the company.

It means really that you decide. We have decided on a corporate level, the cost and the function that sits there. We have defined that as a certain level. For us it's about $300 million of cost. We're not allocating that to the businesses. They own their own cost. So there is not kind of, there is no invoices coming from above.

So that means that they own everything they do. Smart people collaborate is another saying we have in ABB. It means that they will look across and do things together in areas where it makes sense. But if you think you're better at doing it alone, you're okay to do that. But often they work together.

That's fair. We always say that culture eats strategy for lunch. That's an old saying. But I also say that speed eats synergy for lunch. So that's another big part of it. We have, in ABB, tried also and, you know, we're kind of the inventor of the whole matrix organization. It became pretty costly, and it lacked the ownership to performance because if you have a lot of other people that is stirring in your pot, it's not your pot fully anymore. There is always other peoples to point at. That's what you remove in this kind of setup. There is one division president who is accountable, and that person will own the whole performance. As I said, when we're looking at synergies, for instance, in account management, in sales, then, as I say, smart people collaborate which means that divisions work together where it makes sense.

So the answer to that is what we call the communities of practice, and that is how we work together inside the company, and we have more than 50 defined communities of practice with leaders, with sponsors, and also a set of kind of rules how they agree to work together. This is not, again, a top-down decision. It's about areas we have identified it does make sense to work together. So we have an AI community where we have 6,000 people in a company signed up in the AI community with their own team site, and they can share information. And we have a data repository on the more 400 AI projects we have ongoing inside ABB today. And what I want to avoid always is the, 'Oops, if I only knew,' reaction, so that people make conscious decisions. They know that nobody else in the company is doing this, and therefore we start a project to address it, and then we're gonna post it in the repository so that people see we are doing it, and then they will contact you and say, 'Hey, can we be part of this? We have a similar problem. Can we piggyback on your project here or be part of it.' That's how smart people collaborate in ABB.

You need to always to feed the communities, create meeting places where you can create new energy. So like every year we have a technology forum where the top 200 technology leaders in the company comes together to present what they do, some of the best practices and the areas of improvement, and I think you need to have these marketplaces where people come together, and you need also some sponsorship, not because you have to report back to the CEO but more because people want recognition. They want to say, 'Is this important what we're doing, or are we doing it just for ourselves?' And that is where us, in the executive and the leadership side, comes in and need to be also those sponsor for events, for meetings, and also to give some awards and recognition and even show it with, could be with remuneration that this is appreciated, and it's really creates value for the company.

Yeah, and this is an area we have, also during the last year when I've started, it's been one of the key things that I've initiated, and I think that's also will continue to drive that because this is a balance to say the focus in the division, and you need to balance it somewhat to kind of, to get this across the organizational learnings. So, but you don't want to to remove the ownership or the accountability, but you need to show, and I think the next step, or what we also show is the kind of, when you do the people selection for promotion. I always say you need to have high performance, but you also need to have the high behaviors, the right behaviors, and it's the people in that upper quadrant who shows both the high performance but also the strong behaviors and the right behaviors driving collaboration, doing the one level-up thinking, they are the ones who will be promoted into key roles in the company.

Now we have a clear mandate definition. So people know, based on where you are on your profitability ladder, so to say, and this, again, is then reflected not only in, you have a mandate, but as reflected also then in target setting and later on also in bonus or incentive plans. So this follows, and if you have profitability mandate, it means you will be asked to improve your profitability, but you don't have the same expectation when it comes to growth. If you're in stability, you're not even allowed to grow. You need to get your house in order first before you come to the next level. So this is then used, as I say, in target setting, and it gives a clear expectation, and we do that now on the 18 divisions. So that's what we have done on the last years. But the last year we have even going a step deeper, and we go to the business lines. One division consists of multiple business lines because we see some that has even a profit or a profitable growth mandate that have business lines that are in profit improvement mode, and those teams need to have a clear target and clear accountability gain for their performance, and they need to be incentivized, so they feel what they are working on is also how they're measured and how they are rewarded. So that kind of accountability sits also now much deeper in the organization, and I believe that will drive both growth, and it will drive profitability improvement because, as I said, this is not an or equation, it's an and.

Correct. That's how it works. You're not allowed to grow before you have put your house in order because we know bad-run businesses, you can never grow yourself out of the problem. You need to fix and become efficient, and then you get to scale. That's when you make real money. And we see that in so many I always talk. So I always hear the same kind of, 'If you only would sell more, we would be okay.' That is normally a bad excuse that doesn't work at ABB. Get your house in order, get your profitability level up to the expected, and then you really go for the growth plan.

Robotics is a good market for the future, as you say. The labor shortage, it's a problem that will become bigger and bigger. But what we're doing here with a spinoff, we're giving the same shareholders of ABB the same percentage in the new companies. We believe that their shareholder value will be higher on both companies when you have a streamlined ABB working on electrification, on motion, and automation, and the robotics team working purely on robotics. They are the leader in robotics in their field, doing well with a very broad and highly upgraded product portfolio both from robotics to the small guided guided vehicles on the factory floor and one of the best at implementing AI into those solutions. So I think this is a great business, and, in some way, when it becomes an own company also, I think a lot of investors will get their full eyes up for this great opportunity.

We had over what we call local-for-local strategy for many, many years in ABB. It started even more than 20 years ago. I spent four years in China which was part of our local-for-local strategy already then, building up R&D and technology development but also local manufacturing in China so we could support Chinese customers with products and solutions being produced in China. Later on, we have now come up to more than 85 up to 90% of local for local in China. We are on that kind of level, similar level, in India. US, we are there a bit short. About 75-80% of what we sell in United States is produced in the United States, but if you take the USMCA agreement, you're also there more than 80. So this shows that we are very local for local, and that helped us during COVID when we had trouble, you know, with shipping material. It has helped us also now when we look at tariffs. But also currency exchange rates, that also plays an impact. So you have to take all of those elements into the equation. And then this local-for-local strategy has served us well, and I think will be even more important because I don't think this will change well in the coming years. In some way it may rather become an even kind of bigger hindrance to be based in one geography and serve others.

The whole point here is to try to do as much standard as possible, especially on the technology front, that you have a common platform, but you need to produce it as close to the customer as possible, and then you're looking at transparency when it comes to what's the cost and landed cost at the different parts, and that's how we have used this. But it also builds resilience when you have many suppliers in different geographies making the same parts. And there, as ABB, of course, we are fortunate being a very large company, then you can afford to have multiple suppliers in different regions on most components that you use in your product. So that is a really scale advantage, and then you have to balance it with risk that you don't have, kind of, so that you have enough suppliers to deal with that uncertainty.

I don't see it as a headwind for us as a company when we already we've done really well when it comes to reducing our own emissions. Just an example, for the last five years since we started in 2019, setting the baseline of the 80% reduction by 2030, I was happy to see that last year we were already at 78%. So we are getting closer already to the target tier, and it shows that it's possible to do this inside, and why we do because we are not a large emitter as a company, but why we do it is to show this what we call mission to zero for our site, we show that it's possible to do this not just in a sustainable way but also in a profitable way. Energy efficiency has a good business case. Wasting energy doesn't make kind of good business sense in any geography. You have to link this, as I say, as between getting leaner and cleaner. It's not one or the other. It's an end equation. That's where we have to get even more focus on this topic because in United States when I'm there visiting customer, there is nobody who is pushing back on saving cost or making more money. If they can also save emission, there is nobody has anything against that either. So it's all about how can you save more money and you do things in more efficient way, and like energy efficiency can have a really strong business case in a very short payback. And I would like to give an example there, for instance from India, where they are using coal on their furnaces in steel production today, how to be able to compete with Chinese steel import was to drive real productivity in the steel production and go into electric furnace because, and, again, the use of electricity in this process, instead of coal, a big saving opportunity for Indian steel producer. They will also save carbon emissions. I have to say, meeting with those customers, the main part- was the cost, yeah.

I think the bigger change, of course it was a big change. On the other hand, I'm still the same person, and I think my behavior, how when I was part of the team kind of as a peer compared to being the leader of the team, cannot change that much because who I am is still who I am after the transition. So here it was more about being clear on what I expected from the team and be clear also what I can offer, but then listening also, what do people need from me because making a change, there's an always an opportunity for an improvement, and I think here to ask, you know, what's working well and even better if very simple way then you can get quite a lot of input of how you can build up an even stronger team, and that's always what I do when I come into a new team. It's about listening and talking one-on-one with everyone and then to try to kind of create that common way of working within that team because the team spirit and the team togetherness, it, for me, is something which is also driving performance. I see that as a big part of running a professional and successful business, having a strong team performance and team spirit in the leadership team.

Yeah, yeah, I have the same kind of mantra throughout my whole leadership career there, and I even use the same slide when I start every time in a new team because what I give and what I expect hasn't really changed. It's about that people take ownership to their performance and that area of responsibility, and I do expect full transparency of how it work because I hate surprises, but you always know that if you come with a request for help, I will always support, and I will always help. So you will also have that, I will not explode when you come with a problem, but I do expect that you own a problem, you come with also a proposal for a solution, but I can also help you or be that kind of coaching partner to make it happen. So I think there it goes. This has to go hand in hand.

Yeah. I think that's how I am. (laughs)

Yeah, because I think you've heard the same. Most people say, 'Oh, what's your areas of improvement?' Most leaders will tell you, 'Oh, it's I'm impatient.' But I don't see that as a bad thing. I think impatient drives performance. Impatience for results now and improvement now, that is this continuous improvement that we need to have in the organization. I think that's kind of the need for speed, the hunger to do more now, it's what drives the organization. So I think that is really a good thing, but it has to come across, of course, reasonable. And I say that's why what I mean that it also come with an intent that we are also in this together. It's not just more more more now. It has also to come with some benefits for everybody.

Yeah, because I know that results takes time at times especially we talk about startup, maybe new businesses. You cannot mention the measure dose on a three months or a quarterly even on an annual basis, but you should looking at that we are moving in the right direction, that we agree milestones. So kind of tell me what success looks like in three months, in six months, in nine months, and then we hit those milestones, we are on track, and that's okay even if we make losses if that's what we agreed, and we have it under control. Predictability is important. Means that you're in control, you know what's gonna happen, and you can foresee and kind of you can describe success of the future. I think that's really important.

Yeah.

Yes, and I think there it comes with feedback, direct feedback, but with good intention. That's always something I add when you're talking about. It needs to be good intention behind direct feedback. It's not about kind of just telling you something, and it's up to you to take it or not. If I say just for me to get it off my chest, and I feel better, but it doesn't help you, that's not with good, so it needs to be with good intention for growth, and that's what I want to see in the teams and in the organization, that we are early to give feedback, and it needs to be very honest, very direct, so it can be actionable, but it always have to be with good intention for personal growth. I think if that's the core, people can take very even harsh feedback because they know you tell me because you want me to improve. It's not because you think I should be fired. That's not the intention. It's because we want you to perform better and be even more successful in the company. That's the good intention behind.

Yes, I think that goes in everything you do. You are accountable, and so saying ABB to make it happen, but you're not alone. That means there are people to help you, but you need also to a responsibility is also to acknowledge that here I need help and you come and ask for help. I think that comes also an expectation to leaders. We don't want people who just master everything alone because we see there are problems you probably cannot handle, and if you try to kind of sweep them under the carpet, not address it, it just gets bigger, and then often, when you then ask for help, it's too late, and that's what we want to avoid.

Yeah, it was around the summer now when I had one one year in the company. It's very much kind of what I'm focused on this first year is very much to build a stronger executive committee, a stronger team on that side. We are team of individuals, but we have to work together and closely together, and that people feel that we have each other's back, and for me has also really helped. They always say that it's lonely at the top, but at ABB, I haven't really felt that. That first year has really been a team spirit. Then it is all about time allocation, and that is tough at times because you are pulled in all directions, and there are times where also if ABB has to be present, there are kind of the name on the business cards that decides if you are invited or not. So it's not everything you can delegate. And then also is to really to remain focused on what are our priorities. I say when you're pulled in all directions, you need to stay firm and also be willing to say, 'No, we're not gonna do it. I understand it's important for you, but right now it's not the right timing to do it.' So good things has to happen at the right time, and so at the wrong time even good things is wrong. So being able also to say no, that's probably also one of the bigger, the more important than just saying yes.

That's in the short summary.

I think what remains is the curiosity and the people interest. I would probably ask you the same. Again, I want to find out what you have done. That curiosity remains the same in people and to learn new things. Probably what has changed, I would be more firm, probably a bit more direct than before, and I think that comes just from the jobs over many, many years, and also I grew up in Norway, which is a bit of a different culture than when you're exposed to international cultures all around the world. So it gets probably not the typical Norwegian manager anymore.

No, some of it is, I think it comes with a conscious kind of, I would not call it a roadmap, but at least it's about asking for feedback. One of my team members asked when I started, say, 'Are you the ones who say that you ask for feedback, or you really want feedback?' And I say, 'It's up to you to decide after a year.' And she told me after a year, say, 'Yeah, yeah, you are the one who wants feedback.' And I think that is how I have been through my career, and I asked my team members to give me feedback, especially the improvements one and the painful one. And then I've learned to bite my lip and not protest or oppose, and then kind of to take that in and see what should I change. And I think especially around being more precise on feedback without, as I say, and dare to be direct on feedback is one area that I've worked on because I know from so many who have talked and say, 'Thank you for telling me. I'm just a bit disappointed that never nobody ever told me this in the last 10 years, and this cannot be anything new that what you told me now.' So I think those are the moment again that we want to avoid in the company. So there we have still an area of improvement.

But I think the main point here is kind of the inner acceptance, and this is hard, that's something I struggled with early in my career, the acceptance that everybody will not like me. That is a kind of fundamental truth, I think, for all leaders. You will not be the most peer. There will always be someone who thinks that 'You're not the best boss I ever had,' and that's okay. So, having that acceptance, but you should be respected and accepted, but you cannot, and you don't need to be loved by everyone, but it should be fair, and that is something which is kind of deep in my roots that things has to be fair and that I should treat people fairly but also to accept that you don't need to be the best friend or kind of that everybody needs to tell you, 'You are the best boss I've ever had.' That was a problem.

I think it's of course just maturity. I became a manager first time when I was 27 years old. So it was only a couple of years after I started working, and I think, in the first year, especially when you have people who are much older than you reporting to you, that could often be a challenge. I think it has also to do with age, getting a bit more experience. Many people will think you're doing a great job, and there will be some who will always be a bit skeptical. That goes with the territory.

Yeah, it's what I tried in my career, but also I try to teach to my team members that they should always put their themselves in the position one level above, so that you think, when you've come to me with an organizational change and say, 'If you would have my role, would you make the same proposal and do the same thinking?' So it's really looking at the bigger picture. Take one step up in the organization, a bit more of a helicopter view, does the landscape look the same then? And I have had even people asking that question say, 'No, I probably wouldn't.' And say, 'Yeah, why do you do it then when you are in this position, and you wouldn't if you were one level up?' So that's what I want people to take a wider view, and I try to do that myself as well. Would this be seen from a board - board perspective. or from a shareholder or from our customers? You know, the outside in and the one level up, normally it makes it, because then you take the I equation out of it, and you're looking more about how does the whole business landscape look like?

I mean, staying at peak performance is kind of not easy all the time. So we all have our ups and downs, but what I think helps first of all is about sleep. I need sleep. Normally I do these 90 minutes kind of intervals, so I need six or seven and a half hours sleep. And I try also to plan when I go to bed. So I know that I can get that. So sleeping is important. Exercising as well. I have all my running shoes with me. So I want to go to the gym in the hotel when I'm out traveling, and I do like to stay out outside and be active. I think that also help. And then it's to reenergize and meet people to get more, because, for me, and I know this is different kind of on how we are as personalities, but meeting people, learning new things gives me energy as well.

I'm not very, based on all the profiles we done even here at IMD. I'm not a very extrovert. I am more in the middle, but I do feel that energy, I do get energy from being with people. So on that side I am extrovert, but I also kind of enjoy at times sitting down alone on an airplane, and be able to have some off time and be able to reflect and plan the next steps.

Oh, I really love my job because I can work on big topics that I believe is important for the world, and I can do it together with an amazing team and people at ABB.

Thank you.