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The real leaders of net zero: Powering the transition through electrification and cross-sector collaboration feat. ABB

On the second episode of this miniseries, host Mark Wiedman talks to Peter Voser, Chairman of ABB, about why the global tech company is focused on electrification and automation, the importance of cross-sector collaboration and how they are helping industrial sectors become more reliable, more efficient and less carbon intensive.

 

  • Description:

    (New music lead)

    MARK WEIDMAN: What are the technologies you need to power a wind turbine, an electric car? How about an entire city? Everything I just mentioned requires countless integrated digital components, chargers, software, even robots. Yes, robots. And the company at the forefront of these technologies is ABB, the global tech company that's helping industrial sectors become more reliable, more efficient, less carbon intensive. How are they doing that, and what does the future look like for a tech company that is helping to actually create the future?

    Welcome to The Bid, where we break down what's happening in the markets and explore the forces changing investing. I'm your host, Mark Weidman.

    On this mini-series, we're meeting with CEOs from around the world who are accelerating the transition. We're asking, why are you doing it, how, how are you going to make money while serving all your stakeholders? We'll explore these questions in our mini-series, The Real Leaders of Net Zero.

    (Music interlude)

    Joining me on the second episode is Peter Voser, chairman of ABB. ABB is a major industrial tech company based in Switzerland. They have a market cap of $77 billion, over 100,000 employees, worldwide operations in 86 countries. They're huge. And they have their hands in everything, electrification, automation, robotics, and smart motion. What does the transition mean for ABB and for ABB's customers? Peter, thanks very much for joining us from Zurich.

    PETER VOSER: Thanks for inviting me to this discussion. I really look forward to it.

    MARK WEIDMAN: Peter, let's start with the basics of ABB. What do you do?

    PETER VOSER: ABB is really a technology-driven company with a very strong purpose, and what we really do is we are driving technology together with customers and societies to develop new business models, to develop really sustainable business propositions, but also increase performance. And we do this really in two areas. One is electrification. The other one is automation, including robotics. And with both of them, we are actually in the middle of the very big trends of the world. One is climate change. That's where electrification comes in. And the other one is really demographic issues across the world. We want to get supply chains to move from being efficient only to also being resilient, and that is where automation comes in. It increases productivity. It allows you to invest in various manufacturing places instead of only one.

    MARK WEIDMAN: So connect electrification and automation to decarbonization if you can. Why are those related concepts?

    PETER VOSER: Let's use electrification as an example. So we are in private homes. We are in commercial homes. We are in transport, being in passenger cars, being in trains, being in buses or also lorries. That's where we bring electrification products in, in order to optimize energy consumption. This is about energy consumption, generating a safer environment for the workers as well, but at the same time, also driving mobility, for example, into new areas. On the other side, on automation, it's kind of the same. If you automate a full factory with using machines only, you are also optimizing energy consumption. But you can produce more at the same or lower costs. And that, again, helps to drive actually sustainability, so we are consuming less natural resources of the world. We help our workers actually have a safer environment, because the more, let's say, dangerous work is now performed by robots rather than by humans. But in the high-quality work, we have robots and humans working together in order that they can actually also still have their jobs, which do actually need their skills.

    MARK WEIDMAN: You and your firm touch many, many sectors as customers of your products, all the electrical and automation tools you give to your clients. Which sectors do you see as having the most rapid change in the next 5 to 10 years?

    PETER VOSER: I think here one has to mention the automotive sector. Very clearly, with the big shift in electromobility-- and I concentrate now on passenger cars. The way they have responded to develop new cars - I think this change has come much faster than anticipated. Yes, it was pioneered by one company in the US, but now, what I call the "big boys" have caught up with this one and are developing. Now, this gives us quite significant challenges in other parts of the industry. And for example, we need to have a charging infrastructure. We need to have a reliable network of power, which is not there yet today.

    MARK WEIDMAN: Peter, you mentioned the role of one attacker that helped to change a whole industry and how the incumbents have completely reinvented themselves or are reinventing themselves. How do you see that dynamic playing out across all the sectors that you work with? So whether it's everything from hydrocarbons to cars, how are you seeing the role of incumbents and attackers?

    PETER VOSER: I see this as a very healthy development, because I think we need these breakthroughs in terms of technology. Because I have a very firm belief that disruption in technology will actually set the scene for the incumbents then to jump onto that as well. And given their domain expertise they normally have, they can then actually accelerate the change even further. So the attacker has a key role to play, in simple terms, to wake up the incumbents to actually start to move forward and don't rest on what they have been doing for 30 or 50 years but actually develop something new. And I think the electric car is an excellent example. It is no longer about the combustion engine and the fine tuning of that, getting more horsepowers in, et cetera. Now, it's all about software. Hence, you have ripple on effects into many other industries, even including e-commerce, other software providers, other convenience providers. And I think we will see a lot of that happening over the next 5, 10, 15 years. And it has all been actually triggered by disruptor or an attacker, as you say.

    MARK WIEDMAN: Disruptors, attackers, interestingly-- actually, the right word is "innovators" who are serving client needs in a new way. What do you see as the sectors with the most interesting innovations over the next 5 to 10 years, if you have to guess?

    PETER VOSER: I think around the e-mobility, we have only scratched the surface. I think this will be further developed. It's all based on electrification, but you will clearly see hydrogen coming in. You will have multiple with different technologies over time coming in, which we don't know yet today because the innovators will drive this. So I think that would be a second one all around mobility. And it's not just the innovation side, but it is also the behavior of consumers which will drive this innovation quite clearly over the years and decades to come. And the I will mention chemicals. Because if you really want to have a society where fossil fuels will play a much smaller role, whilst it will still play a role for many decades, many materials which we have today coming out of chemicals, they are still fossil fuel-based. And we do not have solutions for that if we don't want to do that fossil fuel-based. And hence, I think there will be, in material science, material development. There will be huge kind of gigantic steps needed over the decades to come.

    MARK WEIDMAN: Why do innovators drive the transformation of industries as opposed to incumbents?

    PETER VOSER: I think, if you are an incumbent, you would normally have a size. If you have a size, your complex and your process driven many times-- what I call the out-of-the-box R&D gets actually killed by going through very complex processes and stage gates analysis. And it takes years to actually get something new into the market. An innovator, which is kind of a startup plus, they move much faster. They bring the right scientific knowledge together. They bring the right bright kind of brains together, not just on the subject itself, but also in the way they want to go to market, et cetera. And I think they're just faster. They are less risk-averse. Any big corporate starts to become, over time, more risk-averse. And the younger companies, many times younger entrepreneurs, they just accept more risks and may run with 60% clarity whilst the corporate runs with 95% clarity. And I think that's a big difference.

    MARK WEIDMAN: When one core part of the economy changes, it alters multiple businesses around it. How does that connect to the alliances that you've been striking across industries to help drive decarbonization?

    PETER VOSER: It is no longer possible that one company can really deliver the big change. So the ecosystem approach, which does not only include corporates and startups and academia, it needs to include governments as well. Because policy setting and legal frameworks are extremely important so that we can drive this. So I think to deliver the long-term values to our society, to have a more sustainable world, there is no way around, that we need to break down some barriers, get out of our silo thinking, and actually collaborate and work as industries together. And I see great, great progress on this one. Because whenever we talk to companies or customers or even suppliers, there is no longer a need to convince them to actually work together to get a better outcome, a win-win solution, if we work as an ecosystem together. And I see this in ABB, but I also see this in the other boards I'm in. I think isolating yourself from the trends is a dangerous game.

    MARK WEIDMAN: Let's talk oil and gas. You built your career in oil and gas. You ran Shell. What have you learned about the transition to a low-carbon economy that helps us understand where oil and gas is going?

    PETER VOSER: I think what I learned, over the 30 years I worked for Shell and the last years as a CEO, is that the transition is not a question of one or two or three years. A transition needs decades. At Shell, what I learned is actually that the switch from oil to more gas because of CO2 thinking started actually 20 years ago. So you need that time to develop technology, to develop the markets, to convince your ecosystem, you convince the governments. So that's the clear thing I've learned. It takes time to change in this case, the energy system, which is a complex piece across the world. To change that, you need to be pursuing in a persistent way over most probably one or two decades in order to get to the stage where we are today. I take an example, not out of oil and gas, out of the wind industry. A wind turbine, when it came to the market in the early '80s compared to the wind turbine today, the one today is 100 times more efficient and is actually bigger from a capacity point of view. So therefore, it needs time to develop technology.

    Now, there is a but. What I also learned the last 5 to 10 years is actually that the technology change is accelerating at a tremendous speed. And that was maybe not the case 20, 30 years ago. But I think the new technologies in terms of software, we talked about artificial intelligence, about data, quantum computing, high-performance computing, has clearly changed the speed of the evolution of innovations. And I think that is, for me, a big surprise, because I didn't have that in my playbook, not at Shell, but also, I think I learned in ABB now that this is much more and much faster, and the companies need to adjust to that.

    MARK WEIDMAN: Let's say we meet again in 20 years, and we look at the use of gas in northern Europe or Europe for electrical generation and for heating homes. What do we see? Is it gone? Are we still using it? Are we capturing carbon?

    PETER VOSER: I think let me start with a general statement. I'm quite disturbed by the fact that we are now kind of putting the fossil fuels into one corner. I think fossil fuels will actually be with us for quite a while. Because the change, as I said before, will not happen as fast as we think at the moment. So the fossil fuel companies or the fossil industry companies are actually not the problem. They are part of the solution, and that's how I would approach the gas question. And I think Europe has made a big step just before the end of the year by actually declaring gas as a green fuel, because you can actually take gas as a green fuel if you optimize including carbon capture sequestration, the gas side. Renewables will need a partner in terms of power generation over the next few decades, because we are not there that we can cover 100%. Now, you can take oil. You can take nuclear. You can take gas. You can take coal. Now, let's leave nuclear aside, which has its own dimensions, but nuclear will form part of it. But the other ideal candidate is gas. Because, a, gas has a much lower CO2 footprint. You can sequester it. But also, the gas power plants, you can actually switch on and off. But if you have enough renewable capacity, you may not need the gas power plants. But you want to have it once it is needed, when the high demand comes in or when the wintertime is cold and you don't have wind or solar. So I think some rational thinking has to come back into the framework setting and the policies by governments. So instead of prescribing the technologies and the elements to be used, they should actually formulate the objective and leave it actually to the businesses and the industries to develop the mix, the mosaic of solutions for power generation for e-mobility going forward. And I think that's where gas has a big role to play the next 20, 30 years. Is it still there by 2070 or '80 for electrification? I doubt it. Because by then, I think technology has evolved. Renewables is at full scale. Hydrogen most probably will be part of it. And hence, it will be no longer there. But for the next 20, 30 years, there is, in my opinion, no way around it.

    MARK WEIDMAN: The role of capital, of finance, and supporting decarbonization, where do you see capital playing a constructive role and what do you think needs to change or perhaps a new perspective taken?

    PETER VOSER: I think capital is, in my opinion, extremely important. And it's kind of two phases. The absolute immediate phase is actually using today's technology, which is available. We talked about charging infrastructure. We talked about electric motors, who have a big energy saving element. We talked about infrastructure in general, modern commercial buildings fully equipped, et cetera. I think that's where we need capital to actually make the first big step in our decarbonization efforts in the world. And I think there companies will need capital and will also need investors kind of buy-in, including the buy-in that their sustainability agenda and the targets they are setting themselves to reach certain goals. I find it absolutely mindboggling that investors are now trying to get out of fossil investment strategies or investments. Because as I said, they're part of the solutions and not actually part of the problem. And I think, yes, let them be accountable for delivering a sustainability agenda, the decarbonization agenda. But give them the capital to actually develop that but also develop fossil resources. Because let's face it. If we starve them of capital, there will be less investments. That means prices of fossils will go up. Now, that will have a direct impact on delivering the renewable side and some other new technologies.

    And on what investors should do, I think there is a huge need to invest in innovation, future technologies. Because whilst is the big incumbent companies can improve current technologies because they have the domain knowledge and optimize them, further increase capacity, bring costs down, we also need an engine to actually develop new technologies. On the e-mobility side, more efficient batteries. And I think that's where investors can contribute, by investing in early stage, mid-stage, late stage, whatever the stage is in terms of technological development of alternative energy and alternative automation technologies for the future.

    MARK WEIDMAN: Electrification. Automation. Decarbonization. That leads to a lot of change in jobs. What's the responsibility of a private company, private sector company, in working with employees as those jobs change?

    PETER VOSER: I think it's significant, the responsibility and the accountability. We should all work collaboratively and also in an ecosystem. And when technology make actually jobs no longer necessary, I think it is for the ecosystem of companies an absolute must to contribute to the reskilling of the employees, irrespective if they are 30, 40, 50, or even 60 years old. The ecosystem approach is very important, because the reskilling may not result that the same person comes back to you in your company. But they may have a job in the ecosystem, in the value chain, because others may actually be very, very of a need to have those newly-acquired skills mixed with the old skills in their company. So,I think this is really something where the companies need to work together. But we also need the government, because we have to redefine, let's say, the curriculum, the education system. I know you will gain share price improvement if you announce tomorrow that you lay off 10,000 people because you're restructuring. But I think, in the future, I hope you make a few percentage in your share price if you announce that you are going to reskill a few thousand people and you will take care of their future.

    MARK WEIDMAN: Peter, last question. What do you think is the single most important thing that needs to happen to get the world to net zero?

    PETER VOSER: It's something which the world hasn't actually achieved that much in the past, and you need actually a global alignment on how to get there. And we have seen all the COPs with 10,000 people trying to find out. I am very skeptical that you will find any solution with 10,000 people plus trying to sort that out. I think we need a global alignment between companies, the academia, government, and society on how to drive this forward and achieve the objective. I know this is very difficult, because national thinking comes into it. National boundaries play a role again. Competitive behavior comes into it. But I am afraid we will not achieve the results which we want to achieve for future generations if we don't get, in some shape or form, a global alignment on how to reach the endpoint of decarbonizing the world in the right way.

    MARK WEIDMAN: Peter, thank you very much for joining us.

    PETER VOSER: Mark, thank you very much for having me.

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