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Case Presentation
Beyond the global matrix
brought to you by:Jens, Alberto, Lars, Shantanu, Jirka
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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