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How we work
Our Business model
The business model describes how we work together in a decentralized setup to drive best-in-class performance, allocate capital and manage our portfolio to create systematic, long-term value for all our stakeholders.
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Decentralized setup
We operate in a decentralized setup, so we can stay lean, agile and take operational decisions as close to our customers as possible.
Our divisions are empowered with full ownership and accountability for their strategies, performance and resources. They are our highest operational entities.
ABB’s divisions are organized into business areas whose job it is to set the strategic mandate and govern the divisions and follow up.
Our headquarters and corporate functions are lean and effective. They set the frameworks for business, performance, portfolio management, capital allocation, people and culture, governance and brand.
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Decentralized setup
We operate in a decentralized setup, so we can stay lean, agile and take operational decisions as close to our customers as possible. Our divisions are empowered with full ownership and accountability for their strategies, performance and resources. They are our highest operational entities. ABB’s divisions are organized into business areas whose job it is to set the strategic mandate and govern the divisions and follow up. Our headquarters and corporate functions are lean and effective. They set the frameworks for business, performance, portfolio management, capital allocation, people and culture, governance and brand.
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Our business policies and procedures are either core, common, or distinct
Our policies define what we do and our procedures explain how we do it. At ABB, both policies and procedures support a culture of empowerment and accountability. They are divided into three categories: core, common and distinct.
Core policies and procedures are decided by the Executive Committee and are mandatory for everyone in ABB. Examples include our Code of Conduct and our brand policy. Topics for which no core policy has been defined are the responsibility of the businesses.
Common policies and procedures are those covering topics in which the businesses have decided to cooperate, either because the customer expects it or because it makes sense and is more efficient.
Distinct policies and procedures are business-specific.
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Our business policies and procedures are either core, common, or distinct
Our policies define what we do and our procedures explain how we do it. At ABB, both policies and procedures support a culture of empowerment and accountability. They are divided into three categories: core, common and distinct.
Core policies and procedures are decided by the Executive Committee and are mandatory for everyone in ABB. Examples include our Code of Conduct and our brand policy. Topics for which no core policy has been defined are the responsibility of the businesses. Common policies and procedures are those covering topics in which the businesses have decided to cooperate, either because the customer expects it or because it makes sense and is more efficient. Distinct policies and procedures are business-specific.
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How we work
How we work across our organization
The following pages contain the principles that underline our business model.
This is how we work. It’s what it means to be part of ABB.
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We work together... when it makes sense!
At ABB, we say "smart people collaborate". Our decentralized setup doesn't mean that we work in silos. Collaboration is a key ingredient for our shared success.
- We work across businesses, divisions and functions where and when it makes sense, to find synergies that create competitive advantages. It is up to the people in the businesses to decide where and when it makes sense to collaborate.
- We use collaboration to drive customer benefit and cost efficiency.
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We work together... when it makes sense!
At ABB, we say "smart people collaborate". Our decentralized setup doesn't mean that we work in silos. Collaboration is a key ingredient for our shared success.
- We work across businesses, divisions and functions where and when it makes sense, to find synergies that create competitive advantages. It is up to the people in the businesses to decide where and when it makes sense to collaborate.
- We use collaboration to drive customer benefit and cost efficiency.
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How we work
We work with accountability, transparency and speed
Even though we are a big company, we are not slow and unwieldy with long, complicated approval processes and a lack of focus.
Instead, we act like entrepreneurs, creating a culture of accountability, transparency and speed.
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Accountability
In every division, we take full ownership and accountability for our strategies, performance and resources.
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Transparency
Accountability requires transparency in everything we do. Good news and bad news – we don't hide anything.
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Speed
We make fast decisions close to the customer and respond quickly to changing market conditions. This drives innovation and performance.
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We work to lead...
We strive for market leadership, aiming to be first in the minds of our customers and every division to be number 1 or 2 in their respective market segments - performing better than their peers and acting as leaders.
To achieve this:
- We remain innovation leaders by investing in R&D.
- We get paid for the value we create.
- We utilize the benefits of scale.
- We drive profitable growth organically and through active portfolio management, acquiring companies that strengthen our business and divesting or spinning off businesses that no longer fit with our portfolio.
- We are always scouting for new technologies and complement our R&D efforts by collaborating with customers, promising start-ups, universities and other industry leaders.
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We work to build stability and profitability before growth
Our businesses are required to be stable and profitable before they focus on growth. It makes no sense to grow unprofitable businesses or try to build successful ones if the foundation is not stable.
We operate on the principle of ‘continuous improvement’, which means we always try to find better ways to do things.
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Stability
We always have “our house in order”, stabilizing operations and getting predictable in performance.
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Profitability
We achieve financial performance in line or better than the best peers in the market.
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Growth
We expand our business both organically as well as inorganically while holding best-in-class performance.
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We work on the same performance management framework
We use a systematic and transparent performance management framework for short-, medium- and long-term planning.
For short-term performance management, we use scorecards.
Scorecards show the same set of key performance indicators for each division and are the key operative tool for our management.
The data in the scorecards are updated every month so that we can see at any time how division is performing as well as monitor trends over time. This allows us to take action quickly if necessary.
For medium-term performance management, we use 5-quarter-rolling-forecast.
Each quarter, we update our forecast for the coming 5 quarters, which ensures that we have the most up to date estimate of our medium-term business performance.
This approach is simple, fast and allows us to be more agile. Having a 5-quarter-rolling-forecast means that we do not have yearly budget process. Instead, the rolling forecast that we make in October forms the basis for the following year’s annual plans.
For longer-term performance management, we use portfolio management and long-range planning processes.
These are updated once a year. We manage our portfolio in a systematic way by analyzing both markets and our performance in the markets.
This ensures that we gradually move towards better markets with best-in class performance at all levels of ABB. Our long-range plan provides us with a picture of how we expect ABB to perform financially for the next 5 years.
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Accountability
In every division, we take full ownership and accountability for our strategies, performance and resources.
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Transparency
Accountability requires transparency in everything we do. Good news and bad news – we don't hide anything.
—
Speed
We make fast decisions close to the customer and respond quickly to changing market conditions. This drives innovation and performance.
—
We work to lead...
We strive for market leadership, aiming to be first in the minds of our customers and every division to be number 1 or 2 in their respective market segments - performing better than their peers and acting as leaders. To achieve this:
- We remain innovation leaders by investing in R&D.
- We get paid for the value we create.
- We utilize the benefits of scale.
- We drive profitable growth organically and through active portfolio management, acquiring companies that strengthen our business and divesting or spinning off businesses that no longer fit with our portfolio.
- We are always scouting for new technologies and complement our R&D efforts by collaborating with customers, promising start-ups, universities and other industry leaders.
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We work on the same performance management framework
We use a systematic and transparent performance management framework for short-, medium- and long-term planning. For short-term performance management, we use scorecards. Scorecards show the same set of key performance indicators for each division and are the key operative tool for our management. The data in the scorecards are updated every month so that we can see at any time how a division is performing as well as monitor trends over time. This allows us to take action quickly if necessary. For medium-term performance management, we use a 5-quarterrolling- forecast. Each quarter, we update our forecast for the coming 5 quarters, which ensures that we have the most up to date estimate of our medium-term business performance.
This approach is simple, fast and allows us to be more agile. Having a 5-quarter-rolling-forecast means that we do not have a yearly budget process. Instead, the rolling forecast that we make in October forms the basis for the following year’s annual plans. For longer-term performance management, we use portfolio management and long-range planning processes. These are updated once a year. We manage our portfolio in a systematic way by analyzing both markets and our performance in the markets. This ensures that we gradually move towards better markets with best-inclass performance at all levels of ABB. Our long-range plan provides us with a picture of how we expect ABB to perform financially for the next 5 years.