Bo Henriksson: The Great Reputation of ABB Estonia Creates Growth Opportunities
Text by Holger Roonemaa / Life in Estonia, photo by Priit Simson / Scanpix
ABB opened for business in Estonia twenty-five years ago and has continued to grow over the years, currently employing over 1000 staff in its company campus in Jüri, in the vicinity of Tallinn. Last autumn the company opened its regional business service centre in Tallinn. Bo Henriksson, Managing Director in ABB Estonia and Baltics, says that the great reputation of ABB in Estonia has created opportunities for the entire group.
In terms of Estonia’s recent history, ABB is a significant company. It was one of the first corporations to come to Estonia after our restoration of independence in 1991. Do you still recall how it came about?
Indeed, we registered the company on the 31st of December 1991. Some foreign investments had already come to Estonia back then, but we were definitely one of the first large corporations. I started here in April of 1992.
How much of a risk was it back then to come here with a company to such an unstable country?
The years 1991-1992 were critical years in Estonian history — the question in the air was will we make it as an independent state or not.
Percy Barnevik, our CEO back then really wanted to expand to Eastern Europe. ABB started in Poland even earlier than in Estonia. In Russia, which was still part of the Soviet Union, ABB had an office but no production unit. When the Soviet Union collapsed, we got the order that we would now expand to all these countries. I had a connection with Estonia already as I came here for the first time in 1989. So I got the offer to go and establish the company in Estonia. This is how it all began. We hired engineers and started to sell gradually. Together with a joint company with Harju Elekter we began to produce in Keila and export to Finland. Back then ABB was also active in the field of air handling and we also began to produce those appliances. In 1993, we started wholesales and service business a year later. We continued to expand. In the beginning of 2000, the production had grown so large that I decided we needed to build a proper new factory. This is when we invested in Jüri. At first we established the motors and generators factory and, in 2005, the drives and renewables factory. In 2007, we added the compact substations factory. Then came the economic crisis, which really had a big impact on us. From 2009-10, things picked up again and as we would have needed to grow the production area in all factories in Estonia and as our office was based in Tallinn, we decided to establish the entire campus in Jüri. Currently we employ over 1,000 staff in Jüri and operate an area of 50,000 sq metres. But there is still room to expand.
The development of ABB in Estonia has been very dynamic. Have the decisions to expand been part of a longer-term strategic plan or have they been prompted by circumstances?
It really has been dynamic. We have expanded the motors and generators factory three times and the drives and renewables factory also three times. Everything is dependent on need. If there is a need to grow production, because demand is up and the business is doing well, then we do it. If the conditions are the opposite, we cut down. In those business areas decisions are made on a global level. As we have demonstrated good indicators and enjoy a good reputation, we are usually able to do more in Estonia.
When you came to manage ABB in Estonia in 1992, could you have ever imagined the situation 25 years later?
Definitely not on such a scale. Before coming to ABB, I also worked for a production company. It started off as a family business and one of the founders of ABB, Asea, bought it. When I came to Estonia, I had a concrete vision and goals of what I wanted to do. That prescribed continuous growth and this is what we have been doing.
These days it is not so common for one person to remain as the head of a company of such proportions. How have you managed to do that?
In fact, I was in Estonia until 2000 and when the expatriot managers of Latvia and Lithuania left their posts, there was the question of whether the companies of the three countries should be united into a Baltic structure. I felt that would work well and we would be able to make the three countries cooperate. This is what we started to build in the summer of 2000. I then moved to Riga for a couple of years. So I have not been in the exact same post for the entire time. Changes are what give energy. The next interesting step is the opening of the ABB regional business service centre at Ülemiste City business campus. I have had quite free hands. When you have the ideas and you manage to sell them to the group, you have the freedom to act. You need good arguments.
What does the Estonian branch mean for the entire ABB corporation?
We form about one percent of the entire corporation. Currently we have perhaps slightly more than one percent of employees. We are below one percent in terms of turnover. We run many activities but the turnover per employee is low. It is large in terms of motors and generators but in terms of drives we only have the assembly plant. In strategic terms our importance has always grown. Jüri is an important production unit for the ABB group. The regional business service centre only employs brains and hands – we produce services.
What does the Ülemiste service centre do?
It’s a back-office: finance, human resources, supply chain management. Just three years ago we had a small service unit for the Baltics in Estonia. Finland had one for Finland and Sweden had one for Sweden, and so on. The trend in other companies has been to move back-office services to places with cheaper labour costs. ABB used to have 68 such shared services centres all around the world and then the plan was made to only keep six global level service centres. Two are totally global in nature – in Poland and in India. Then there are regional centres, one of which is based in Estonia.
At the time of opening the service centre, I had talks with Estonian politicians and officials working in economics, and they were really pleased with us bringing the regional centre into Estonia. It was considered very important for Estonia — a symbolic step even. What were the arguments in favour of bringing the service centre to Estonia?
I was linked to this decision in a way, promoting it within the group. ABB Finland also supported us. It is also easier for them to have a regional centre nearby. Labour costs are definitely an argument in favour of Estonia. We also already had an efficient service centre. We managed to convince them that the labour force is highly qualified, people have good foreign language skills etc.
How is it working so far?
Currently the centre employs 230 staff and this year we will add another 100. It surprises me that we have had no problem finding people. Some employees must speak Finnish, Swedish, Norwegian, Danish, Russian, Latvian and Lithuanian and, of course, English. And we have managed to find almost all the people in Estonia. It is only during training days that we have had some help from abroad.
The development of ABB in Estonia has been very consistent. What are the next steps?
It is quite difficult to predict. Development depends on the market. Some things have been added gradually, like the whole development side. In the early 1990s, when we commenced with production, people used to say that ABB only makes simple products and subcontracting. I said we have to start somewhere. It is impossible to have everything ready on location. We have to train people and then put up production. We need to do it step-by-step, getting more complex on the way. This is exactly what has happened. Now we also have a lot of engineering work. Production has increased and the local factories demand R&D.
So you are increasing the share of Research & Development?
It is a gradual process, one cannot start with R&D and then start production. When we began with producing motors and generators, we trained all our staff. The skill did not exist here back then.
Are you aware of the growing popularity of global trends regarding renewable energies and energy efficiency here in Estonia?
This has been one of our most important directions for a long time already. Product development and targets are directed to the goal of being green, energy efficient and environmentally friendly. Those goals have for a long time been part of our everyday business. And we also demand that from our subcontractors.
What share of your production is already directly linked to renewable energy?
A half. And it will definitely grow. The current theme is digitalization. This will take everything onto another level. Component parts have become so cheap that you can install sensors in everything and receive data on the computer. This provides huge opportunities in terms of energy efficiency.
Can you give some examples about renewable energy and energy efficiency which you produce in Estonia?
We produce frequency converters in Estonia. There are three main types of those: those used to regulate electric engines in an energy-efficient way; frequency converters in wind generators which help get energy to the electric grid in the most efficient way; and solar inverters for solar plants. We produce wind generators, diesel generators. The development of compact substations is here. What is unique is our reliability centre where we test appliances in order to make sure they are 100 percent effective and in working condition. It is like a testing polygon.
Is the triumph of renewable energy here to stay? Last year was symbolic – in many Western countries, it was just as cheap to produce wind and solar
energy as energy from fossil fuel.
Wind and solar energy used to be expensive. Making the first investment really demanded a huge sum. The gap has been closing and, for example, solar energy which used to be very expensive has really become much cheaper fast. These days we speak about establishing micro grids. It brings great wins. The investment sums are not that large anymore. You can put up solar panels in your private home for 5 000-10 000 euros. So why should I take non-green energy from fossil fuels? There is of course a lot of room for development but people’s mind-set is starting to change. Green politicians have of course been active for a couple of decades, but twenty years ago it was very expensive to be green. Normal people could not afford it.
So it may soon happen that green energy will be even more efficient in terms of money?
Absolutely. Energy companies have also become softer as they see they have no way out. It is a good process for us because we also develop network managing systems. Energy companies have to start investing more in those. Before there used to be one large power station. There was the question of how to manage it. Some want to sell energy into the network, others want to buy it. It is a challenge to make the new system work. It is very expensive to build cable networks in comparison to the income that electricity grids would get. The idea is to create islands. If we go 50 kilometres out of Tallinn to a small village, we do not need a cable there. Let them produce their own energy! The main share of energy would come from wind, sun, and land. You can have a spare diesel generator. Ideal!
What is the next big challenge in this field?
Reaching the creation of such energy islands would be a dream come true for our engineers. Having five different production options and to make them all produce and work together. That would be amazing. Energy storage, or batteries, is another question. We build battery containers. There are many places where the energy is very cheap, for example, at night. This is when you charge the batteries. When the energy cost goes up, you can use energy from the batteries. The battery volume is still an open question, therefore, it is currently quite expensive to operate such a system. But also battery technology is developing rapidly. In ten years the world will have changed completely.
Donald Trump, the new President of the USA, seems to be a supporter of fossil fuels. How much can that impact on the entire field?
Only time will tell. I think it might influence something in the short-term, but not in the longer term. On the global level, green energy provides many more jobs than fossil fuel power stations.
ABB in numbers
132 000 employees
33.4 billion dollars worth of orders in 2016
1.5 billion dollars in R&D investments in 2016
50% of turnover linked to energy
efficiency and renewable energy