Several members of the executive committee are based outside Zurich, and their meetings are held around the world. The executive committee consists of Swedes, Swiss, Germans, and Americans. The group, which meets every three weeks, is responsible for ABB’s global strategy and performance. ABB’s global matrix holds the two dimensions together.Īt the top of the company sit CEO Percy Barnevik and 12 colleagues on the executive committee.
Along a second dimension, it is a collection of traditionally organized national companies, each serving its home market as effectively as possible. Executives around the world make decisions on product strategy and performance without regard for national borders. Along one dimension, the company is a distributed global network. Yet its organizing principles are stark in their simplicity. The Organizing Logic of ABBĪBB Asea Brown Boveri is a global organization of staggering business diversity. The interview was conducted at ABB’s Zurich headquarters by HBR associate editor William Taylor. He reckons candidly with the political implications of companies such as ABB. (See the insert “The Organizing Logic of ABB.”) He describes a new breed of “global managers” and explains how their skills differ from those of traditional managers. He explains ABB’s matrix system, a structure designed to leverage core technologies and global economies of scale without eroding local market presence and responsiveness. In this interview, Percy Barnevik, 49, offers a detailed guide to the theory and practice of building a “multidomestic”s enterprise. The company has 10,000 employees in India, 10,000 in South America, and is one of the most active Western investors in Eastern Europe. And ABB’s business activities are not limited to the industrialized world. Although ABB remains underrepresented in Asia, which accounts for only 15 % of total revenues, it is an important target for expansion and investment. The company also generates annual revenues of $7 billion in North America, with 40,000 employees. Germany, ABB’s largest national market, accounts for 15 % of total revenues. Europe accounts for more than 60 % of its total revenues, and its business is split roughly equally between the European Community countries and the non-EC European trading bloc. It is well balanced on both sides of the Atlantic. Today ABB generates annual revenues of more than $25 billion and employs 215,000 people around the world. That same year, it spent $1.6 billion to acquire Combustion Engineering, the manufacturer of power-generation and process-automation equipment. In 1989, ABB acquired Westinghouse’s transmission and distribution operation in a transaction involving 25 factories and businesses with revenues of $1 billion. ABB has acquired or taken minority positions in 60 companies representing investments worth $3.6 billion-including two major acquisitions in North America. The creation of ABB also turned out to be the first step in a trans-Atlantic journey of acquisition, restructuring, and growth. And soon more than a metaphor, Barnevik’s bold moves triggered a wholesale restructuring of the Continent’s electrical power industry. Barnevik initiated a wrenching process of consolidation and rationalization-layoffs, plant closings, product exchanges between countries-that observers agreed will one day come to European industries from steel to telecommunications to automobiles. The creation of ABB became a metaphor for the changing economic map of Europe. In August 1987, Barnevik altered the course of both companies when he announced that Asea, where he was managing director, would merge with Brown Boveri to create a potent new force in the European market for electrical systems and equipment. Brown Boveri, which took shape in 1891, holds a comparable industrial status in Switzerland. Asea, created in 1883, has been a flagship of Swedish industry for a century. Headquartered in Zurich, ABB is a young company forged through the merger of two venerable European companies.
He is working to give substance to the endlessly invoked corporate mantra, “Think global, act local.” He is moving more aggressively than any CEO in Europe, perhaps in the world, to build the new model of competitive enterprise-an organization that combines global scale and world-class technology with deep roots in local markets. Percy Barnevik, president and CEO of ABB Asea Brown Boveri, is a corporate pioneer.
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