ABB Final1

8/13/2019 ABB Final1

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Case Presentation

Beyond the global matrix

brought to you by:Jens, Alberto, Lars, Shantanu, Jirka


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10/02/2003 International Organizations and Management 2

Theory Behind the Matrix

Connected to the transnational MNC, thematrix is a way to organize when trying toachieve:

Local responsiveness, i.e. diversification,with learning as a key requirement

Scale and scope efficiencies in productionetc

Matrix Theory

Introduction to ABB

ABBs

Implementation

Corporate Culture

Key Learnings


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The Matrix

Basic philosophy: Operating decisions pertaining to particularproduct should be shared by the product division and the variousregions of the firm.

Ex: Product offering in Country 2 for the products produced byProduct group 2, determined by consultation between Country Mnand Product Mn.

Operational Mn report to both!

Matrix Theory

Introduction to ABB

ABBs

Implementation

Corporate Culture

Key Learnings


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The Matrix -Pros and Cons

Combine efficient

global integration and

local response

leads to scale, speed

and lower unit cost

Customized products

More flexibility tochanges in nationalneeds.

Better decisions (?)

Complex the dual-hiererchy could

lead to confusionandconflictsoverresponsibilities anddecision making

Time-consuming,clumsy and bureaucratic

consensus takes timeand could create aninflexible org.

Hard to ascertain

accountability Strong need for acommon cultureandinformal Mn network.

Matrix Theory

Introduction to ABB

ABBs

Implementation

Corporate Culture

Key Learnings


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The Company

Engineering company

Emanated from merger between BrownBoveri (Switzerland) and ASEA (Sweden) in1988

Key figures (1997): 215000 employees in more than 100

countries

Revenue $31.3 billion

Products

Matrix Theory

Introduction to ABB

ABBs

Implementation

Corporate Culture

Key Learnings


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BEFORE 1988ASEA & BBC

ASEA CONTRIBUTIONS

Superior ProfitPerformance

Sophisticated

Management Control Marketing

Agresiveness

BBC CONTRIBUTIONS

Strong Order Book

High TechnichalExpertise

As a result, it is created ABB that becomes worlds largestproducer of engineering Products & Services, based on the

principles of decentralization of responsibilities and individualaccountability

Matrix Theory

Introduction to ABB

ABBs

Implementation

Corporate Culture

Key Learnings


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Original objective was a transnationalmatrix structure

Reconciling three dilemmas to ... create real organizational advantage

Global and local

Big and small

Radically decentralized with centralized reporting and control

GLOBAL INTEGRATION

OPTIMISE A BUSINESS GLOBALLY: Specialization incomponents, economies of scale, worldwide rotation of managers

and technologists

LOCAL RESPONSIVENESS TO HAVE DEEP LOCAL ROOTS EVERYWHERE YOU

OPERATE: product differentiation, local recruiting processes,local entrepreneurship, local contacts

Matrix Theory

Introduction to ABB

ABBs

Implementation

Corporate Culture

Key Learnings


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THE STRUCTURE IN 1988

EXECUTIVE COMMITTEE

COUNTRY ORG. (150)BUSINESS AREAS (50)

COMPANIES (1300) AND DIVISIONAL PROFITCENTERS (5000)

Total company: 210.000 employees

Company average: 200 employees

Profit center: 50 employees

Matrix Theory

Introduction to ABB

ABBs

Implementation

Corporate Culture

Key Learnings


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Balancing regional andbusiness area interests

Business area focus

Geographic focus

Strategic taskLinking customersatisfaction with corecompetences

-Customer-based regional strategies-Regional results and profitability-Day to day mgmt of profit centres-HR development-Local relationships / networking

Efficiency and product focus:-Worldwide results and profitability-Development of worldwide strategy-R&D and product development-Worldwide market allocation and

sourcing-Price strategies and coordination-Purchasing coordination-Product and product allocation-Transfer of know-how-Acquisitions and divestments

Matrix Theory

Introduction to ABB

ABBs

Implementation

Corporate Culture

Key Learnings


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1988 - 1993:Organizational integration

Drivers for change:

EXTERNAL: Consolidation of industry. Establishment of the EU andNAFTA.

INTERNAL: Shift of focus from restructuring and integration to improvequality of products, services and customer orientation. Too complicatedstructure for employees to understand. Benefit from more permeable

country borders Growing challenges:

Make business segments more dominant

Increasing customer focus; improving process orientation, customerrelations and quality management

The new Matrix structure:

Adding 3 regions to allow for lateral linkages within regional areas.

Simplifying with 5 Business segments and 39 BAs

Simplifying with centers of excellence concept

Customer Orientation Program

1996: 4 Business segments.

1996: Introduce tools to enhance country level networking; Cross CompanyTeams Open spaces concept, joint data bases, personell transfers etc.

Matrix Theory

Introduction to ABB

ABBs

Implementation

Corporate Culture

Key Learnings


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1993 - 1998:The Network Multidivisional

Drivers for change:

EXTERNAL: Deregulation and privatization of utilities. Customers developinginto commercially-thinking market partners demanding complete turnkeyplants with a full range of services.

INTERNAL: Still lack of understanding of the matrix and growingmicropolitics (ineffective business segments, internal market mechanism,internal decision making), insufficient customer and sales orientation

Growing challenges:

Cooperation with internal market mechanisms to solve paradox ofcompetition and cooperation.

Solving conflict and confusion with decision making

Better definitions of large business segments

Structural change into a network divisional matrix: Dissolve regional layer and keeping the country dimension

7 Business segments become the dominant dimensionPRODUCTORIENTATION (product bias instead of country bias)

...however, it has not been a dramatic reorganization: CONTINUITY ANDCHANGE

Matrix Theory

Introduction to ABB

ABBs

Implementation

Corporate Culture

Key Learnings


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ABB in 2003

Drivers for change: EXTERNAL: Market saturation, Declining economic conditions INTERNAL: Drop in market value of ABB. Top management turnover.

Performance is declining. 2001 was the first year in ABB historyresulting in a loss.

Growing challenges: Product and segment orientation Develop total solutions Achieve critical mass in each business field

Structural change: More centralized the structure.

Business segments dominant line of authority. 2001: Replacing business segments with 4 customer segments to avoidsilos along product lines.

Networking among segments

Matrix Theory

Introduction to ABB

ABBs

Implementation

Corporate Culture

Key Learnings


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The ABB building process(an overview)

Change

Global matrix with

regional dimensions

(implementing regions,customer focus)

Network Multidivisional(critical mass in businesses,solution provider, financialservices)

Establishing merged

global matrix(Turnaround mgmt,individual profit centres,internal markets, localresponsiveness)

Continuity

Increased customer focus

Country level networkingCentre of excellence / Lead country concept

Focus on simplificationService business and total solutionsProduct orientation instead of country bias

Matrix local entrepreneurship and strict managerial hierarchyInternal global monitoring (ABACUS) and internal marketsResponsibilities, accountability, local freedom

CentralizingCustomer segmentation

1988

1993

1998

2003


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Corporate Culture - Criteria

Clarity

Continuity

Consistency

Communication

Matrix Theory

Introduction to ABB

ABBs

Implementation

Corporate Culture

Key Learnings


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Culture Related Issues

Think Global, Act Local

Customer Focus Program

Matrix Structure & Profit Center Philosophy

Networking Accross Segment

Performance Measurement

Matrix Theory

Introduction to ABB

ABBs

Implementation

Corporate Culture

Key Learnings


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Cultural Problems

Inability to understand the matrix

Internal negotiation led to micro politics

Strong autonomy of front line companies

Lead country concept to led tomicropolitics

Matrix Theory

Introduction to ABB

ABBsImplementation

Corporate Culture

Key Learnings


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Culture - Evaluation

ClarityFailed to achieve

ContinuityPartly fulfilled

ConsistencyBiggest weakness

CommunicationRecent realization

Matrix Theory

Introduction to ABB

ABBsImplementation

Corporate Culture

Key Learnings


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Key Learnings

A matrix is complex structure with manypitfalls

- locally: structure as simple as possible

- globally: complexity cannot be avoided

Organizations evolve over time

Adaption to and of the environment

there is no ideal structure

Matrix Theory

Introduction to ABB

ABBsImplementation

Corporate Culture

Key Learnings


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Key Learnings (ctd.)

Conflicts are inherent parts of a matrixand organizational changes

Importance and influence ofmanagement control systems

Matrix Theory

Introduction to ABB

ABBsImplementation

Corporate Culture

Key Learnings


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Open Questions

Learning possibilities served as mainjustification for diversification. Are thereknowledge synergies?

Is ABB too diversified? How big is beautiful?

Possibility of / need for a uniform corporateculture within a very diversifiedorganization?

Matrix Theory

Introduction to ABB

ABBsImplementation

Corporate Culture

Key Learnings

ABB Final1

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