Power Transmission Functions
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Q1) At your next steering committee with Baker and Gundemark, how are you going to deal with Comsys issue that has been giving you so much concern?
Answer: Come September 1990 and a report was submitted to the BA management team by the nine-member task force carved out by Gundemark, which comprised high potential task managers. The report focused on seven core elements of relays business future development viz. total quality, customer focus, technology, human assets, organization, image and growth, all of which were in conformance with the broad vision of the organization. As a consequence, the rootage of “Strategy 2000” took place, and the worldwide relays management meeting got a first glimpse of it. “Strategy 2000” majorly focused on developing COMSYS (Common Systems) as an evolutionary process for creating modular, locally acceptable products by the use of common tools, methods and design. In 1990, Gundemark threw a challenge to the relays R&D council to come up with a common platform for future product development across units. For the implementation of COMSYS, a cross-country team was devised comprising technical experts from each of the four production centres. Further, nine sub-project teams were also formed. Implementation of COMSYS was not an easy task. There were the following problems.
a. Early 1992 saw the nine sub-project teams still shaping up the details of product design, operating standards and overall project implementation and the attainment of tangible results was a distant task.
b. To implement the COMSYS project, the funds received by the managers of profit centres were not sufficient.
c. The operating margins of local development centres were taking a serious beating due to the diversion of resources from local development priorities.
d. The difference in framework, standards and regulatory structure in the B2B segment in North America created problems in acceptance of a product due to non-conformity with the American standards despite being welcomed in India.
e. ABB, Sweden has an idea about the markets of developed countries and thus can apprise the R&D council operating from Sweden about the demand in these countries.
f. Gundemark asked Don to invest in people and take the long-term technical development forward but Joe Baker pushed Don towards operating profits of local Centre.
g. Any R&D expenditure has to be in line with the guidelines set by US GAAP, which erodes the operating margins of US Holding Company. Further, Allentown and Coral Springs witness the highest S&A expenses.
h. Standardization of relay products was a monumental task due to the fact that the bids were for individual relay products in North America, Europe and Australia.
i. Therefore, the standardization of relay products in developed markets would take a lot of effort. Complementing the above scenario is the difference in value chain of each country that makes it difficult to standardize the resources and suppliers across all countries.
The implementation of COMSYS had been going on for a couple of years but its success still seemed a distant dream. Therefore we need to look at the implementation of COMSYS. A business horizontal that supports the relay units across the world, it should engage the local units in making customized products catering to their local market. Being a good strategy, it will help achieve synergies across various relay units and economies of scale for ABB. Swedens business horizontal COMSYS HQ should play the part of knowledge repository throwing light on problem solving and product development in relays. Relays division in Europe facing any problems in product development should check the repository for solutions in say ABB, US via COMSYS HQ. Integration is a steady process and dedicated resources will provide COMSYS a move ahead. The marketing and sales department should work in coordination with COMSYS HQ to fathom the demand in developed countries and carve new solutions for the development of innovative products. The expansion of the same to other markets will lead to flexibility in catering to markets across the globe. Fig 1: COMSYS IMPLEMENTATION
Q2) What is about ABBs global matrix that allows it to succeed when so many others have failed?
Answer: The twin principles of decentralized responsibility and individual accountability were the major concerns of the management model of ABB. Thirty percent of the personnel moved to front lines which resulted in the corporate HQ operating with a small staff size. Further, transparency in the system of reporting aimed at free flow of information was coupled with the practice of managers at profit centres being entrusted with the responsibility for their balance sheets. ABB wanted to focus on three things. Being global and local, big and small and radically decentralized with central control.
a. A matrix system was adopted by ABB where a group executive council was formed as the top management and they were responsible for the global business focus.
b. The reduction of bureaucracy in HQ resulted in increased accessibility to top management and better quality of communication. The functional councils of R&D viz-total quality and purchasing emanated by Gundemark developed a framework that captured “best practice”. This created synergies among specialists across the four major centres. Cross-fertilization was achieved as a result of the sharing of knowledge among specialists across various geographies.
c. During the pre-merger days Asea and BBC followed a matrix structure, and even post- merger ABB followed the same matrix structure. It gained flexibility and co-ordination among horizontals and verticals. A glocal strategy was adopted and benefits were achieved both in the areas of geography and products.
d. The inception of BA board took place for BA areas with the BAs supposed to report to the assigned group executive of that business segment. The individual BA boards of Cables N Capacitors, Distribution, Electrical Metering, HV Switchgear, Network Center, Power Systems, Power Transformers, Relays reported to G.Lindhal who headed the Transmission business segment. This resulted in constant communication, synergy, clear expectations from top, linkage of the world capability, collaboration among managers, strong ethics and decentralization of responsibility. Using the above, it scored over one of its contemporary Westinghouse, which adopted the matrix system but didnt entrust enough responsibility with its profit center managers. They hired the best of the lot but a highly authoritarian structure was a big roadblock in their working.