Businessmodel of ABB

Customer Segments

ABB has a niche market business model, with a specialized customer segment. The company targets its offerings at utilities, industry, and transport/infrastructure customers.

Value Proposition

ABB offers two primary value propositions: innovation and brand/status.

The company has embraced innovation throughout its history. It pioneered HVDC technology over 60 years ago and maintains in-house manufacturing capability for key HVDC elements. It also introduced the world’s first power-from-shore solution for an offshore rig. In 2015, it unveiled YuMi, the world’s first dual-arm robot that can work collaboratively with humans while ensuring their safety.

The company has established a strong brand as a result of its success. It bills itself as the world’s largest supplier of transformers and industrial electric motors and drives, as well as a leader in high-voltage products and substation solutions. It operates in approximately 100 countries and ships more than one million products daily. Lastly, it has won many honors, including recognition as the most valuable B2B brand in Switzerland by Interbrand (2014), one of the world’s top 100 innovators in 2013 by Thomson Reuters, and placement on MIT‘s 2013 list of “50 Disruptive Firms“.

Channels

ABB’s main channel is its direct sales team; the company also acquires customers through distributors, system integrators, machine and panel builders, and original equipment manufacturers (OEMs). The company promotes its offering through its website, social media pages, seminars, workshops, exhibitions, and conferences.

Customer Relationships

ABB’s customer relationship is primarily of a self-service nature. Customers utilize its products while having limited interaction with employees. The company’s website includes a number of self-help resources, including white papers, case studies, videos, and answers to frequently asked questions. That said, there is also a personal assistance component in the form of phone and e-mail support, and a community element in the form of forums where customers can connect.

Key Activities

ABB’s business model entails designing, developing, and manufacturing its products for customers.

Key Partners

ABB has “Authorized Value Partners”, who include the following groups:

• System Integrators – Primarily offer software and hardware integration
• Channel Distributors – Primarily engage in license sales and services
• Channel Resellers – Primarily engage in license sales
• Service Providers – Primarily offer consulting and implementation services
• Solution Providers – Primarily offer product solutions
• Technology Partners – Primarily offer technology services Benefits for these partners include training and certification; access to various tools, knowledge bases, and resource libraries; and sales, technical, and product support. Specific partners include B&D Technologies, Malloy Electric, APDS Limited, Gibbons Engineering Group, and Halcyon Drives.

ABB also collaborates with universities to develop mid- to short-term evolutionary innovations for its products and services, as well as disruptive long-term technologies. It partners with over 70 institutions worldwide, including Carnegie Mellon University, University of Zurich, Massachusetts Institute of Technology, Cambridge University, North Carolina State University, and EPFL Lausanne.

Key Resources

ABB’s main resource is its group of 8,500 “technologists” (scientists and engineers) who design and develop its products. The experts operate out of nine corporate research centers in seven countries – China, India, Germany, Poland, Sweden, Switzerland, and the United States. The company also places a high priority on its intellectual property, with 25,900 patent applications/registrations, 7,700 of which are pending applications, and over 3,500 utility model and design applications/registrations.

Cost Structure

ABB has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. Its biggest cost driver is cost of sales, a variable expense which primarily consists of labor, component, and raw material costs. Other major drivers are in the areas of administration and research/development, both fixed costs.

Revenue Streams

ABB has three revenue streams: revenues generated from the sale of products, the sale of services (e.g., installation, maintenance, field service), and the sale of software licenses.