ABB shows new strengths at Automation Users Conference

I wasn't there personally, but all the industrial automation editors were, and some of them were blogging furiously, spewing out the news as fast as it was presented. Here are extracts from some weblogs:

Gary Mintchell, Editor of the magazine "Automation World":

"ABB Group CEO Fred Kindle delivered the opening keynote - thankfully devoid of flashy PowerPoints. Fred Kindle, who joined ABB just about 10 months ago, said that he had done his due diligence before signing on and found a lot of core strengths in ABB - market position, good products, relationships with key customers, strong brand recognition and good people.

"Acknowledging the downturn from about 2000 to 2003, Fred Kindle stated that ABB has now fully emerged from past problems. Revenue is about $22 billion, with 9% profit in automation and 7% in power products. The only thing holding its bond rating below investment grade is the continuing asbestos liability from the Combustion Eng. acquisition, which is moving towards final resolution. The stock rating is now investment grade."

"Dinesh Paliwal heads ABB's global automation business and ABB Americas, and is a member of the ABB Executive Committee (and clearly a candidate for bigger things at ABB). He noted that ABB has posted 9 straight quarters of both revenue and profit growth, and claimed double digit growth, 21%, in N. America in 2004, vs 3-4% for the market as a whole.

"ABB understands that N. America is their biggest market and has the highest ABB installed user base. The HQ of ABB global automation and ABB Americas is now in Connecticut. This is a huge change from just a few years ago, when everything ABB did in North America was calculated to make operations run from Switzerland.

"Greg Scheu, senior vice president for automation products (drives, motors, and instrumentation products) reported that 2004 was the first full year return to profitability for the instrumentation group, since the consolidations that killed ABB's heritage brands like Taylor, Fisher and Porter, K-Flow, Kent, and all the others. The drives business is growing at 3-4 times the market, which should make Siemens nervous.

"Roger Bailey, responsible for Process Automation (ABB's systems business) reported that Process automation too, is growing faster than the market. ABB believes that they are taking market share from the smaller players, the tier 2 automation suppliers.

"Bo Elisson, group VP for Manufacturing Automation, reported on robots. He noted that the group did 35% of its business in N. America in 2004, including several large refurbish projects in the automotive market. Also, the non-automotive share of robot sales was up to 34%, mostly through partner sales, which increased 82% in 2004. So robots aren't just for making cars anymore.

"Regarding ABB's Performance Services business, Dinesh Paliwal noted that ABB is No. 1 in performance services in Europe, and will bring that same skillset to the Americas."

One of the editors commented privately, "After nearly going under, ABB is back. It was refreshing to see happy faces uniformly at the top. One of the things that is most impressive about Dinesh Paliwal and ABB management is that they are the most honest, self-critical and revealing bunch of senior managers in this industry."

ABB has always been an innovative, well-managed company. It's easy to look good when times are good. ABB's multiple acquisitions got them into serious problems; but they have managed themselves out of trouble and are now clearly headed for growth and success.

As part of the JimPinto.com "Corporate Culture series", watch for a review of the ABB corporate culture soon. Dinesh Paliwal and senior members of his management team have promised to contribute personally, openly, and directly. Stay tuned....

The weblogs phenomenon

According to Business Week and many others, weblogs are the most explosive outbreak in the information world since the Internet itself. Blogs are shaking up just about every business - including yours. In this period of accelerating change, weblogs are not a business elective anymore - they are a prerequisite.

JimPinto.com has had weblogs for a couple of years, generating a lot of traffic and commentary. Please recognize that these are not "open" blogs, or chat-boards - where people's comments are automatically inserted online (Yahoo and others handle that well). Instead, we try to calibrate the input, to make sure it is NOT simply disgruntled employees sounding off. We review comments, sometimes edit (removing overly negative material and stuff that simply looks like rumors). Most blogs are anonymous, unless the sender specifically wants a name and email included. Weblogs are put online - typically within a couple of hours, or at most the same day.

Why does JimPinto.com sponsor these weblogs? Because we have had a lottttt of requests. Apparently, many people don't have any other way to communicate within their own company. We have invited senior people to weblog positive comments, and sometimes that happens. It's very evident that senior management in all the automation companies read these weblogs regularly. Some weblogs attract more than 1,000 visits per day.

I'll appreciate your POSITIVE feedback for my positive efforts. And, if you care about your company, perhaps you can encourage more people to weblog positive inputs.

Tom Friedman - the 10 forces of flatness

I'm busy reading and re-reading sections of the book, a lot of which rings true. I've always followed Friedman's article in the NY Times, and liked his last book: "Longitudes & Attitudes". This latest book is significant in that it synthesizes a lot of seemingly disjointed events and trends.

"Flatness" is not simply about Outsourcing and Offshoring - those are just symptoms of the much broader global shift. Here's my summary of Friedman's 10 forces of flatness:

1. The walls came down, windows went up: The Berlin wall fell, the barriers blew open, everyone was talking to everyone else through a common platform, computers and software.
2. Internet browsers: Suddenly everyone could browse the web, showing significant and prolific content, allowing instant publishing to a world audience.
3. Workflow software: Common web-based standards; software applications "taking" to each other.
4. Open-source: Self-organizing, collaborative communities; the decline of closed, proprietary developments.
5. Outsourcing: Business suddenly realizing that everything did NOT have to be done in-house. The rise of outside specialists, part-timers and homeworkers.
6. Offshoring: Sending manufacturing to wherever it could be done - good, fast and cheap. With the availability of worldwide high-speed communications, knowledge work can be delivered fast from anywhere.
7. Supply-chaining: The development of fast, efficient and effective supply-chains to deliver good from anywhere. A good example is the rise of Wal-Mart to become the largest company in the world.
8. Logistics: UPS doesn't just deliver packages - they do logistics.
9. Informing - web search: Google & Yahoo deliv information quickly and effectively, anywhere, to anyone. The rise of Groups and Weblogs.
10. Digital, mobile, personal, virtual: Everything shaped, manipulated and transmitted by computers and instant communications.

1. The creation of a global, web-enabled playing field that allows multiple forms of collaboration, the sharing of knowledge and work, without regard to distance or geography, and soon even language.
2. Global companies lose walls, floors and buildings. Employees are now a vast, global pool of specialists, assembled (and disassembled) according to needs.
3. New opportunities are created for individuals to compete against anyone, anywhere in the world using the new, "flat" rules.

It's a new game out there. Don't complain about it - join it and enjoy it. If you are not good enough to play in this different kind of game, you'll simply be sitting on the sidelines, watching others play.

Inventor Woody Norris wins Lemelson-MIT prize

This month (April 22, 2005) at a ceremony in Portland, Ore., the San Diego inventor, Elwood "Woody" Norris received the $500,000 Lemelson-MIT Prize for his inventions, including HyperSonic Sound.

Woody Norris, who lives in Poway, a few miles from my home, was the subject of a segment on CBS' "60 Minutes" on Sunday, April 17. CBS showed Woody's Air Scooter, a lightweight, personal helicopter that he says anyone can fly after a little training. He expects to sell several thousands, at about $50,000 apiece.

Woody Norris had an inclination to tinker around since he was a boy and his knowledge is mainly self-taught. He has developed all kinds of inventions - in medicine, transportation, entertainment, and electronics. He draws on the latest technology as it evolves, combines it with radical new concepts, and then develops exciting new inventions from his unusual blend of technology and vision.

Woody's HyperSonic Sound (HSS) invention is said to be the first big improvement in acoustics since the loudspeaker was invented some 80 years ago. He filed a patent for it in 1996 and the first commercial version became available in 2002.

HSS allows ultrasonic waves to be created at more than 50,000 Hz, keeping them in a focused beam above the range of human hearing. As the ultrasonic waves mix in the air, the frequencies break down so they can be heard. By simply stepping into the "beam," people can hear the sound as if it was generated inside their heads.

Applications: Imagine four people sitting in a car, enjoying four different musical selections or radio broadcasts at once, with no headphones. Think about displays in shopping centers which direct sound to only to one customer at a time. The cacophony of competing sounds in crowded trade shows will be replaced by focused beams of sound confined to specific exhibits. Rather than using a megaphone, police officers can control crowds by directing orders only at the people creating a disturbance.

Breaking the industrial automation mindset

Most people think that high volume and low price means lower margins. Simply lowering prices does nothing but initiate a competitive and debilitating downward spiral. But that's not necessarily true - low-priced, high value, high volume products could generate healthy margins. The key, of course, is to market a balanced value proposition.

Industrial automation is indeed a specialized, fragmented market with a tremendously broad range of applications and environments, overlapping and diverse products and industries. Perhaps the biggest growth constraints are the sales channels.

A significant problem is that annual business plans are typically extrapolations of previous budgets. So, everyone continues to market products at established prices to generate revenues that meet the business plan - the self-fulfilling prophesy of low volume.

During difficult economic periods, the confluence of all the problems outlined results in healthy weeding out of poorly managed companies; short-term thinking shows up in poor follow-through results. Companies that can adapt their mindset to suit the changing business environment will continue to generate growth and success.

eFeedback

"One of the major drivers for the perpetuation of outsourcing myths is software tech support. Nearly everyone has a computer these days, and those computers will inevitably have some problems. So a huge portion of the US population talk at least occasionally to outsourced tech support professionals.

"I work at a software company that employs a technical support team based in Bangalore, India. Our guys are great tech support guys, but they still get abused by customers on the phone all the time. It stems from the idea of perceived value. People seem to think that when they're talking to Dilip or Satya that they're somehow getting shortchanged. We recently fielded a call where the customer was ranting and raving that we didn't declare "beforehand" that we employed Indian tech support. They feel that if they were to talk to an American that they would somehow get better support.

"My point is that this issue is very more pervasive and touches everyone. It's not a terribly serious issue, but because everyone has dealt with outsourced tech support it gets far greater coverage than it should. People who make the "unpatriotic" argument don't understand how much more expensive everything would be if we didn't transfer jobs abroad.

"Our Indian tech support is far superior to the American tech support we previously employed. They are nicer, more competent, and they don't try to rip us off. Yet they take far more flak than the Americans we previously employed."

"The outsourcing myths mix two perspectives. American companies may benefit from outsourcing, as in closing down a plant in Ohio to move the jobs to China. The American company will make more money from this transaction; managers will get their bonuses. However, if you ask the workers in Ohio how much benefit they received, you will get a different answer. There are typically no local jobs to absorb the employees that were "outsourced". Many small towns in Ohio are suffering, as are many cities in the USA, as the jobs go out. Somewhere in China there's a happy group of people. US workers' losses are balanced by the Chinese workers' gains.

"What's good for a company isn't necessarily good for the country or the individuals that make up our country. The "net balance" mentioned, in favor of the USA, ignores the long-term impact on the economy and the individuals that are losing manufacturing jobs to become Wal-Mart greeters and siding salesmen.

"I know it is "old school thinking" to advocate an economy that actually makes something. When I was working for ABB and Foxboro, I saw that the third world companies were finally understanding that you have to add value to create true profits.

"We seem to forgotten that the USA got its economic strength from the conversion of its resources into more valuable products. While nano-tech may be exciting, how many people does it take to make a motor that fits on the head of a pin?"

"I believe there's another "fly-in-the-ointment" regarding old computers. It used to be you could obtain a reasonable deduction on your Federal income tax for donating computers to schools or other charitable institutions. Now, you can only claim the "street value" of the computer. So, if you bought a $1500 laptop 3 years ago, it's current street value might be around $100. If you're in the 38% income tax bracket, then you would realize a $38 reduction in your taxes.

"Some states might also allow some kind of income tax deduction, but in the current fiscal crisis, many states no longer allow such deductions."