ABB Ltd (SWX:ABBN)

CMD 2016

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Oct 4, 2016

Welcome. We're very excited today to be here with our CEO, Ulrich Spieshofer and our CFO, Erik Alvik for an exciting day about the stage 3 of our next level strategy, committed to unlocking value. So the day will actually entail a couple of presentations at the very beginning with Uli and Eric, a Q and A session, a lunch where our EC will actually join us for a networking session, Power Grids presentation, execution, digital and finally a wrap up at the end of the day. One thing that I would like to remind you is that there are no fire drills scheduled for today. So if you actually hear the fire alarms going up, I'd ask you to please get up in an orderly manner and exit through the doors on the right and left hand side. With that, I would like to also make you aware of our anything for our Safe Harbor statement and forward looking statements. And with that, let's start the day. Enjoy. Machines speak a complex language. But progress starts with understanding. So we involve them in a dialogue to generate insight for our experts, partners and customers around the world. Together, we create solutions that were once is the beginning of a new era. Let's write the future. Together, ABB. Good morning, ladies and gentlemen, and a very, very warm welcome to all of you that have come here to Zurich, close to the headquarters of ABB. You might not believe it, but I'm really happy that all of you are here today and join us here in Zurich. Today, we are really excited to share with you where we're taking our company in the future. There's tremendous opportunities for ABB. It has a lot of change happening, and we will share with you how we will create and unlock additional value for our shareholders in the years to come. A lot is changing in the world of ABB. A lot is changing with our customers. But what will not change is ABB's underlying identity. We are the pioneering technology leader serving utilities, industry and transport and infrastructure all around the world in an unmatched balance between Europe, the Americas and Asia, Middle East, Africa, which today is our largest region. What is changing is a lot in the key areas where we're active. The Energy Revolution and 4th Industrial Revolution are impacting everything that we do for all of our customers. The energy revolution. If you look at what's happening with the electricity grid, 40 years ago, you switched on the power plant in the morning, you switched on the user, the paper factory out in industry and that was it. Today, we have renewables kicking in at the bus. We don't know when the sun shines. We don't know when the wind blows. We have more feeding points than ever before. They need to be transported. The power needs to be transported over longer distances than ever before. And we have new consumers of electricity. Electric vehicles are coming at a very high speed. Data centers are one of the largest consumers of electricity. So there is an unprecedented complexity increase in electricity value chain, which offers tremendous opportunity for us as a technology leader. And at the same time, the 4th industrial revolution is in full swing. Through digitalization, any business in the world will be impacted and the winners will create opportunities out of this massive change. If we take the 3 customer segments that ABB is active, Let me just share you some facts why I'm really excited about all three of them. In the utility sector, more than $7,000,000,000,000 will go into the renewable sector until 2025. 300 HVDC projects, high voltage direct current projects, which are projects a couple of €100,000,000 each, are in the pipeline going forward, connecting this renewable power to the points of consumption. Microbit, while still small today, is coming up at pace. And energy storage out there on different levels will change the pattern of the electricity grid as well. In industry, in only a couple of years' time, there will be 4 times the amount of devices connected in industry than we have people on this earth. ABB is already strong underway in this field. It's a fantastic opportunity for us to do more. If you look at robotics as one of the key growth opportunities for us, it's a mind boggling dynamic in that market that we have in front of us. And in transport and infrastructure, very soon twothree of the people in the earth will live in cities. They want to have convenience. They want to have smart buildings. They want to have individual and public sustainable transport. And here is another opportunity for ABB. So altogether, we are uniquely positioned to benefit from these dynamics. Our pioneering technology puts us really at the heart of the Energy and 4th Industrial Revolution. So the opportunity is now, and we are ready. Over the past years, we have done significant homework, and we delivered on the ambition that we had. In 2013, the year before we started Next Level, we faced significant challenges. Before I took off as CEO and since then, I want to be an active listener. Before taking office, I met many, many customers. I met many investors. And I got also through discussions with our own people where I spent more than 170 hours preparing for the CEO role after the announcement. Got a clear understanding that we had significant challenges to be addressed. One of them was organic growth. And today, whilst you don't see it on the overall top line yet because we have dampening effects from contraction in certain industry sectors, we have the growth pattern back. We are delivering organic growth in many areas of the ABB portfolio. Couple of years together when we were in this room or a comparable room together, you all were very and rightly so concerned about the performance of certain elements of our business portfolio. Power Systems was off track. And we had put ourselves it was not the market. We had put ourselves in a very unpleasing situation. All four divisions are today back in the target corridor. And I'm proud of what the team has achieved all around the world. We are delivering on our efficiency programs, white or whether it is our white collar productivity program that addressed the historically grown, pretty fat and inefficient white collar organization. So we are really draining the muscle at the moment by losing fat to become a more efficient MVB. And it was also clear out of the listening exercise that I did and I'm still doing that we were perceived as far too complex. So we simplified it. I started in my own shop. When I started, I had 5 divisions, 8 regions and a Head of Global Markets, meaning I needed 14 people reporting to the CEO of 1 level below to run the world. We cut that by half. Today, it's 7. We have 3 regions and 4 divisions. So we have fundamentally made ABB simpler and faster and more agile over the years to come. This change finds its way into our numbers. Without coming over arrogant, we need to stay humble. We have delivered 7 consecutive quarters of improved margins. And it's firmly our ambition to do this also in the future. We have improved our cash culture. And if you look at the cash generation capacity that ABB has today and the cash that we have freed up, it's a very strong result. And Erik, our CFO, will talk more about it in a minute. We have also let you participate in this journey. We returned $8,700,000,000 despite some very difficult markets and a full transformation program to our shareholders since 2013 in the form of dividend and buyback. So all together, we delivered on many dimensions, but we cannot be satisfied because we still have a significant challenge ahead of us. We need to deliver on growth. Growth is the element which we have not done what we wanted to do altogether for ABB and that finds this result then in our earnings momentum. We have an ambition to grow earnings per share by 10% to 15%. And we need to get growth going to really deliver on this earnings momentum sustainably going forward. So a lot of homework is done or in good hands today. We have delivered in many dimensions, but we are humble enough to say there is still a significant challenge that we need to address and that is getting ABB back to growth despite a difficult market and a market outlook which is not too positive for the near term and medium term future. So let me share with you how we get into 3rd stage of our next level, the growth momentum going, which will help us to deliver on our commitment to unlock the value that we have in ABB for our shareholders going forward. Next, Leder Stage 3 builds on our focus areas of growth, execution and collaboration. And we are sharpened what we will do in 4 key action points. Number 1, we will drive growth in 4 market leading shape for market leadership positioned entrepreneurial divisions. Number 2, we're announcing today a quantum leap in digital. You have probably seen the press release. I come back to that. I'm really excited about the opportunities that we have out there and the strength of ABB that we can play much better as a team going forward. We will not forget what got us to where we are today. We need to make sure we need to accelerate further operational execution. So you see a strategy in front of you that has the power of the end, the growth momentum on the one side and on the other hand, the focus, the continued focus and commitment on operational improvement of ABB. We will play better team sport externally by bringing ABB together. And to articulate that stronger in the future, we are strengthening the ABB brand and I'll talk later on about the exciting decisions that we have taken to really strengthen our external positioning. So let me start how we will drive growth and how we will shape 4 market leading businesses going forward. The ambition is very simple. When I took office as CEO, I made a commitment to all of you to have all businesses in a number 1 or 2 position in the foreseeable future. We have delivered and I will show you now how the future setup is reaching exactly that ambition. In Electrification Products, we are bringing together everything in ABB and Electrification Products will be in the future the division whose purpose is very simple. It's the partner of choice for electrification of any consumption point of electricity. It's a significant market opportunity. We are number 2 in this field with that alignment, and we are clearly lined up against the top 3 competitors in this field. We are shaping a division called robotics and motion based on the previous discrete automation and motion portfolio. And we will really focus much stronger than in the past on a sharp setup in robotics, which is one of the most exciting and promising growth opportunities for ABB and playing our strong position in motion that we have built over many years as being the number 1 in Industrial Motors and Drive. Industrial Automation will be the new frame how we articulate our strength on having control solutions for industry. It will build on the previous Process Automation division. And it's already number 1 today in Process Control as external studies all the time confirm. And last but not least, we will shape Power Grids to be the partner of choice for a smarter, greener and stronger grid going forward. So with this setup, you see here very clearly, all these businesses are number 1 or 2 in their respective fields. All of them are in growth markets. And all of them are much better lined up and easier to be communicated and managed with the alignment that we're doing now against the top competitors in their respective fields. Having done so and looking at the competitive dynamics, it is very important that we empower our divisions to act as fully empowered entrepreneurs. You know that we have started the transformation on the performance culture on ABB right when I took office by the introduction of Relentless Execution Dashboard and many other activities. We changed the compensation system towards stronger individual accountability. And what we're doing now with the next step is we are living entrepreneurial culture in ABB even stronger. Our 4 division heads will be empowered as entrepreneurs running their businesses with a strong degree of freedom and with a much reduced corporate intrusion in daily operations, refuel cycles and similar. Tara came recently to me and said, why Oli, that means I have about 5%, 6% more time with customers in the future if we do this. This is great. And that's exactly what we want going forward. We are also changing really the key activities that we have in that field and empowerment. So how do we really shape the activities and what will be under the portfolio of each of these businesses? Electrification Products will get the share of discrete automation and motion, which is basically electrification. So solar, EV charging, power quality moves over to electrification and Tarak will be the one stop shop for electrification. Robotics in Motion will be simplified and focused, as I said before, and we have the firm ambition to become number 1 in robotics in the world, having achieved already a number 2 position after a pretty tough turnaround and transformation of this business in the last couple of years. In Industrial Automation, we will further shape our digitalization efforts to really work with our customers creating unique value. And in Power Grids, we will focus on high growth segments. We will drive digitalization as a part of the Power Up program that we will come back to later on stronger. We are pruning the portfolio, making it lighter, taking out niche businesses that don't make sense in the context of ABB. And we have changed we are changing the business model fundamentally, and I come back later on to that more in detail. So as I said, the guiding spirit will be the one off entrepreneurs. The performance management will be changing. The compensation will be changing, in line with the ambition that if you run a business within one of the divisions, your compensation, your short term incentive is tied to the performance of the team that you're partnering within the division. So that's a massive change that will allow people to run hopefully faster and feel more and stronger ownership than in the past. Now one of the questions that you have come here to get an answer on is the Power Grids question. So let me take that and share with you what we have done, what the results are and what the decision is. On the market attractiveness, we looked very carefully. Is this an underlying market that has an opportunity to for us to grow? And the answer is yes. There's tremendous growth opportunity in the field and the markets that we are serving with Power Grids. So first question, it is a highly attractive market. 2nd question, what is the right offering? How can we shape our offering to be not in the threat of commoditization? How can we make sure that we drive differentiation? And there is an opportunity to take our already leading business and differentiate stronger, one of the key levers being digitalization. A transformer that speaks about its health and communicates the well-being to the asset health solution of ABB is something else than copper and iron that gets installed with our customer and never touched anymore. The business model, Wesen, was a really important one to look at carefully because quite frankly, the problems that we had in Power Systems in the past had nothing to do with the market. It was self inflicted. We took on too much. We had an omnipotent aspiration of engineers and we took on too much risk too quickly without having the appropriate resources and competence. So in this field, we will drive and we already have taken some very decisive actions, massive transformation to help grow better and derisk the power grid portfolio. And the ownership question, look, we got a lot of questions, why does it take a year? If you want to go through an ownership discussion fully fledged in the right detail, it takes a while because we had to go through taxation, for example. So what's the tax effect if you pull out of a 75% shareholding in India? What happens when you really divest all the joint ventures that we have around the place? Well, what really happens when you drive different ownership options? We looked at all the options with a very non emotional lenses. And we said, we choose the option that has the most significant value upside for our shareholders. Having done so, we had last night did a Board meeting. In the Board meeting, we took the decision, joined it between Board and management with full support of our anchor shareholder to move forward and run this business in the future with a continued transformation under ABB's ownership. There's tremendous value creation possible in this field. And that tremendous value creation will be tapped with the program and with the strategy that we are learning out today. And that Claudio Fakini, the business leader on this business will share with you later on in much more detail. So let me go through these 4 questions in a bit more detail. We looked at all the options in terms of ownership for this business. We looked at spin. We looked at sale. We looked at joint ventures. We looked at IPO. We looked at transformation. There was one option that we did not look at. And here I expressly agree with Cevia. Running the status quo is not a good option. And we ruled that out and said clearly this is not an option. So we looked at all the other options and said what can we do with this business and what is the best ownership structure? And as you can see here, the value creation potential that we have for our shareholders, for you, under continued ownership of ABB with a massive transformation program came out the highest regarded option. We took this program very serious. We worked with McKinsey. We had Credit Suisse and Goldman Sachs advising us and the Board. We had some very, very detailed discussions. We went back and forth when new questions came up. We considered all arguments of all shareholders. We listened very carefully to the arguments made. Whether they were made loud or not so loud, we listened to them very carefully and made sure that we addressed them with our answer. Because it's very clear, we have a responsibility towards all of you to deliver the best possible option. And the best possible option for our shareholders is the transformation under ABB's ownership. I already talked about the market dynamics, but what I did not talk about is the growth that is in this market. There are many growth segments, high growth segments within the Power Grid spend. If you just take the opportunities around HVDC, where ABV is the number 1 in the world, high voltage direct current technology where we transport electricity over long distances. It's a market that grows at about 3 times GDP. If you look at grid automation and software, again, significant opportunities. In the microgrid, which is basically happening on different levels, sometimes on the lower electrification level than it's with Tara, sometimes on the large scale utility base, is a small market that will not move the needle overall for ABB, but it is fast growing as well. So to attract these opportunities, we are massively transforming the portfolio of PowerPoints. We will emphasize stronger consultancy, I mean, technical consultancy, services and software. So we will be a partner with our customers in the planning, operations and maintenance phase of Tech Grid. We will digitalize and drive digitalization in a massive way out there in our offering with our customers. And just to take one thing right at the beginning, if you look at the competitive environment, Siemens, GE, ABB, we are all large scale industrial with large scale digitalization activity. Taking the business out and running it separately would be very, very dangerous for this business because the scale and digitalization scales horizontally would be lost totally if we have it stand alone only. But we are not only transforming the offering. As you have seen this morning in our press release, we have taken decisive actions to derisk the business model and to go for growth in a different setup than in the past. We have announced this morning 2 partnerships, one with FLOR on substations. You all know FLOR, a fantastic company in the EPC space. We're working together with them. We are changing the business model. Flor will do the EPC part. We are doing the systems and we do the classic technology packages and the system integration and they do their concrete in the earth, they pour it in where we got very often in trouble in the past. We are changing this fundamentally. And that's a paradigm shift within ABB running this business in a different way. Exactly the same pattern will be adopted in Offshore Wind. In Offshore Wind, Abel, the leading Scandinavian platform builder for many industries is our partner in the future. They will build the platform and we fill it with our offering. So the order for ABB might be smaller, but the volatility, the RAS risk profile is more attractive because we don't have the same scale of competencies as Able has in that field. The second element that we're doing on changing the business model, we are pruning niche businesses. The divestiture of cables is a clear articulation of this constant pruning. You might remember when I took office as the CEO, I announced the portfolio pruning exercise. We sold about 13 businesses that were niche or smaller businesses. We got them out And now the cables business is another one. We could have sold in an act of nervousness 3 years ago the cables business. At that time, this business was not performing. And people came to us and said, dump it. We said, no, we see an opportunity to create value. So the first phase of the transformation of cables was that we transformed it. And now as you have seen, we sold it for more than €900,000,000 because it came to a quality where we said now, the next step of quality and the next step of development is better in other hands with a player at scale. We kept the touch and the reach into the technology, but at the same time when we sold it, we formed a strategic partnership with MKT, the new owner. So we will have access to the technology. The business will be in a better home. We got fair proceeds for the divestiture, and we have a new business model operating in that field. You will see this kind of actions not only in Power Grid, in ABB altogether as one key pattern of our active portfolio management that we're living. The transformation of Power Grids will be articulated in a program that we are starting today, which is called Power Up. And the commitment in this program is to get the business well within the group growth target corridor and to deliver significant further margin enhancement. Don't forget, 2, 3 years ago, the business was hovering about 4%, 5%. Today, it's at 9%. And now we are making a commitment by 2018, we will enter the corridor of 10% to 14% EBITDA margin range for this business. By changing the business model, by transforming the portfolio, by really focusing on high growth segments with lower risk and better returns like digital offering, like software like services that will drive more in the future. So ladies and gentlemen, the journey of the portfolio review is over. Decision is taken. Annoyancy between the Board and management, this business will be transformed under ABB's ownership going forward. This is the best way to create value for our shareholders. Now I already talked a lot in the Power Grids part here about digitalization. And digitalization, together with the energy revolution, is really impacting all of our customers. It's a fantastic opportunity out there. And therefore, as a key pillar of our 3rd phase of our strategy, we are launching a massive quantum leap in digital. What does it really take to be successful in this field? You need to be in the control loop. You need to be somehow the partner of your customer that works directly in operations with your customer, building on asset health information, building on control information and encompassing the overall planning of the operations, the daily operations and the maintenance as well. ABB has done not a very good job in the last years articulating how strong we are in this field. So let me lift the curtain and share with you some numbers because we are in fact a truly hidden digital champion. We have more than 70,000,000 devices. Let me repeat it, 70,000,000 devices connected in industry, which are digitally enabled through our control systems, more than 70,000,000. And by the way, we do this in an open way. A significant part of that €70,000,000 is not ABB devices, it's 3rd party devices. We integrate them in our control systems already today. We have more than 70,000 control systems installed out there. That control mission critical processes right on our oil platform, in a pharmaceutical plant, in a chemical plant. We have more than 6,000 plant wide solutions installed, and we have targeted 50 solutions on our overall platform base for specific industry verticals like you have seen in marine, and later on we're going to talk more about that, like we have in robotics in many other places. So if you look at this Swiss toplaron of ABB's offering in digital today, it is strong, but it's very clear, it is not articulated sufficiently as our overall offering of ABB to our customers. So we have done our homework and here is how we're going to run this in the future. Today, we are launching ABB Ability. ABB Ability will be the digital offering of ABB, bringing together everything, the overall platforms, the control systems, the connectivity of devices in one common managed set of offerings that we will drive out there in the industry. We are leading in this field today already, but we haven't articulated it well enough. So we're bringing together under ABB Ability. And what does Ability really do? It helps our customers to drive uptime, speed and yield. And it gives our divisions, our 4 focused entrepreneurs, a really significant unmatched scale in terms of tapping the installed base of more than €400,000,000,000 tapping the opportunities in a horizontally leveraged capability that spans across the $36,000,000,000 company that ABB is today. So let me become a little bit more concrete and let me give you a concrete example what this means in real life. Let's assume you are the manager of an offshore oil platform. For an offshore oil platform, uptime is everything. Reliability and uptime is really important. In the past, we came to you and said, we have a wonderful new bearing for a motor, and we can physically differentiate with our motor, and we make it more reliable. This offering has diminishing returns when you invest in it. It's already very, very good. And for every dollar, yes, you get a return, but the returns are diminishing. Now as you have seen in the Hannover Fair this year, we make our assets big. So the motor has a sensor on it. And instead of waiting that a very well designed motor with the greatest steering of the life needs some menus because it's breaking down, we make the motor speak. It tells our control system, hello, I'm starting to shake. We take that pattern into the cloud based platform and we compare it to the repository of all motor data that we have stored and say typically within a couple of hours this motor or a couple of days this motor might break down, send the maintenance crew in. We put that information into the automatic maintenance scheduling system, which is part of our control architecture that we have for our customers today, and we help the customer to get uptime. And just to give you some numbers, just for the single asset, uptime or downtime might be reduced by up to 70%. And that's real money if you are operating on our platform. Lifetime expectancy increases by 30% and energy consumption goes down by 10%. So altogether, ability will bring together the speaking devices, the control system, the cloud based platform that ABB offers to really give the customer a differentiation opportunity in a very competitive environment that he is in. Now we learn from the pack. Sometimes we have an omnipotent aspiration, as I mentioned before, and we try to do everything to everybody. So we will drive ability in a very strong partnership approach. And I'm very, very pleased to announce today that we will form a global unique partnership between Microsoft and ABB, the leading software player in the world and ABB are teaming up. Microsoft brings intelligent cloud, but they bring also B2B specific engineering teams that will work with our teams on vertical specific solutions. We are mastering the control room. We know the domains. We have the process know how. Microsoft has great cloud experience and great analytics, but also certain engineering capabilities for verticals such the robotics environment. So I'm very excited about it. We have been working on this for quite a couple of months. Today is the D Day. We are coming out with the announcement and I would like to have a good friend speaking about that one as well. Hi, I'm Satya Nadella, CEO of Microsoft. Thank you very much Ulrik for the opportunity to address everyone at your Capital Markets Day. At Microsoft, our mission is to empower every person and every organization on the planet to achieve more. Key to empowering every organization in every Key to empowering every organization in every industry is forging strong partnerships with companies, including ABB. Microsoft and ABB have a long history of collaborating to provide comprehensive solutions to customers and industries spanning energy and smart grids, marine and port logistics, electric vehicle charging infrastructure. Today, I'm thrilled that we are expanding our relationship to bring the power of Microsoft Azure and the Intelligent Cloud to ABB's IoT and industrial collaboration platform. Think about it, there is an exponential amount of data and information that's being generated from computing in computers around us. But this data is merely an exhaust without the ability to reason over it and convert it into a fuel for every team, employee and business system within an organization to gain new insights and drive faster decision making, it's of no use. So together, ABB and Microsoft will empower utilities, industrial transportation and infrastructure companies to accelerate their digital transformation with the power of a hyperscale trusted and intelligent cloud with ABB's industrial IoT platform. We are excited to build upon our long standing partnership with ABB and moreover the opportunity it represents to help our mutual customers transform their organizations and seize the opportunities ahead. Thank you all very, very much. Thank you, Satya. We're working together on this one. This is a CEO to CEO sponsored exercise. We started last year by collaborating in the EV charging field and in robotics. We learned to learn to walk together, and now we are getting up and running and will combine the 2 companies. And why am I so excited about the opportunities in digital? Let me share with you the situation in our customer field. This curve shows the maturity S curve of digitalization in different industries. And you see that the ICT, the media field is already very, very far advanced in terms of maturity of digitalization. Now when you look at the red dots, you see many of our customer segments, which are starting to work in the digital environment. There is a tremendous opportunity to team up with our customers and to team up between ABB and Microsoft to provide unique value based on the learnings that were achieved in other industries and bring that to our customer base in an accelerated way. I'm very pleased to share with you that Guido Sheree, who sits here in the front row, IoT pioneer that spent 20 years with Cisco and set up many, many new businesses in the IoT space has accepted our offer to join us as our Chief Digital Officer reporting to me. Giro started couple of days ago. He was already in discussions with us before. And he is a guy that has lived this S curve. He has lived his S curve, and he knows what it takes. He has worked with our customers already. He knows what it takes, but he also knows what best practice is. And he will be fully empowered to really drive the digitalization effort in ABB. If you take this opportunity and ask yourself how relevant is it, over the years to come, not tomorrow, not next year, but over the years to come, there is a €20,000,000,000 revenue opportunity for ABB in this space. And later on, Guido and the team will give you more granularity that shows you that this is a number which is for real. This is not out of the air, just some thinking. We have this afternoon representatives from our businesses ranging from robotics, mining, the building electrification. We have marine here. And he will share with you what we already do and how we are driving it, how we create value for our customers and how we drive that in the future going forward using ABB Ability as the key differentiator in our offering. So I'm very excited about the growth opportunities that we get through the divisional sharpening and the digitalization effort. But I'm also conscious and humble enough that I know we did not get here through growth. We got here through very good execution. Therefore, accelerating execution is the 3rd element of the 3rd phase of next level. We have delivered year over year more than €1,000,000,000 cost out through supply chain management and operational excellence. And as you can see here on the left side of the graph, we have played the group very smartly. Take copper, take field and look at the spend pattern of ABB. Overall, we have about a €16,000,000,000 third party spend. And you see that large spend categories are spend categories where power grids and the other parts of ABB are working together with our suppliers to develop leading edge cost situations, to really take cost out jointly. What would we lose if we get part of the business out and what would we gain? Here is one of the areas that we would definitely lose if we would not be able to drive this in this way going forward anymore. But in addition to the supply chain management and operational excellence, I said at the beginning, we took effort to make ABB simpler, faster, train the muscle and reduce the fat. And that's basically our white collar program. The white collar productivity program has the ambition to take €1,000,000,000 cost up by the end of 2017. We are really well on track. We are so well on track that we are raising the targets today from the historic €1,000,000,000 target by 30% to €1,300,000,000 with the same time line, the same cost to execute the program. So altogether, you see an ABB that is conscious that operational execution and growth will get us into the future target corridor that we want. And it's very clear we need to deliver on both. Our commitment is we will continue to take €1,000,000,000 cost out plus every year through OpEx and Supply Chain Management, which is about 3% to 5% cost of sales equivalent. We will deliver on the €1,300,000,000 in working capital. Erik will show you later on the great momentum that we have created in taking down net working capital and freeing up cash in ABB. And we will continue to change the pattern from an initiative driven program to an overall operating model. You know that we regularly benchmark ourselves and we regularly benchmark ourselves against the best operators in industry, 2 of them are Honeywell and Danaher. And when we did the benchmark, we realized, wow, there are companies that are doing better than us. So we hired Pasquale, who was one of the guys that in one of the 2 companies was in the core team for more than a decade driving the transformation there. He started in summer in ABB. His 100 days are over soon. And then we will put him in front of you that you also get a feeling what the opportunity is from his perspective going forward. So we talk about growth and we talk about execution. What we also should talk about is how do we play the strength of ABB in an even better way going forward. And therefore, I'm very happy to share with you and you can already see it in the visuals, you can see it in our overall identity, we are strengthening the ABB Global brand. There are 2 dimensions to that. The one is we are initiating a brand migration program. We have today more than 1,000 product brands. We have more than 20 company brands, and a lot of that came through acquisitions. So just imagine, you run a world class soccer club and you acquire a new player. And when he gets on the field, he wears the trickle of the old club. What would that do to your team? So we need to make sure that in a responsible way, without giving up the equity, planned equity value that we got through the acquisitions, we are transforming that in a sensible way into an overall master brand architecture of ABB. The second dimension of our strengthening of our brand is very simple. We will reflect our strategy of growth, execution and collaboration in our future brand promise. So the brand promise of ABB is changing and here it is. Let's write the future together. It articulates the fact that as a pioneering technology leader, we have already written the future for more than 125 years again and again and again with many technology firsts. But it also articulates our strategy. Future stands for growth. Writing stands for execution. And let's and together embrace in a collaborative way what we want to do in terms of playing team sport in ABB. So ladies and gentlemen, next level stage 3 here, 4 key actions, clearly defined, bring a lot of simplicity in AVP, a lot of momentum. With these actions, we are in a position that we can confirm today to you all of our targets on group level. We will deliver with this strategy going forward. Now with delivering these targets, we are already creating a lot of cash and we will continue to create a lot of cash. Some people might be nervous about the capital allocation priorities of ABB. They remain unchanged. There are exciting opportunities to drive organic growth going forward through investments in technology and digitalization, we will continue to drive that. We commit to our dividend policy that we have delivered on for many years before. We will continue to do value creating acquisitions. So far, we have done a couple of smaller strategically relevant bolt on acquisitions. We are ready to do larger ones, but we will stay very disciplined. We will not get nervous because all of our targets are tied to organic growth. So if the right target comes along, we will hit and we will go, but we are not desperate to drive them. And last but not least, returning additional cash to our shareholders has become a pattern of ABB. The last share buy program has been successfully completed last week. And now we are planning the next one starting in 2017, running until 2019, returning €3,000,000,000 to our shareholders in the future. So if I sum up, ABB is right at the heart of the Energy and the 4th Industrial Revolution. Our 4 market leading businesses led by empowered entrepreneurs drive sustainable value creation. When I started as the CEO, I made a commitment that our businesses would be number 1 or 2 in their markets. We would shape and deliver on ABB this way. Today, we are in this position. And these businesses will be supported by the activities in the regions on customer collaboration and what we call group oxygen. We need to make sure our sports guys that run the 4 divisions get additional oxygen through on the growth side, through digitalization platform that we use across ABB, on the cost side, through our supply chain management and our leading SG and A structure. Because if you compare today Rockwell against ABB, we have about 500 basis points lower SG and A than Rockwell. So there is an opportunity to give value to our businesses going forward. So with that, I would like to thank you for your attention and hand over now to Erik, who will give you the CFO mirror to what I said before where we are going. Thank you very much. Thank you, Ole, and good morning to all of you. Let me now take you through how we will build on the momentum we have created to deliver and to unlock further value in ABB. I will take you through where we are against the targets and the plans we discussed in the last two Capital Markets Day. Short glimpse on the market conditions and where we are today and then how we will deliver in Stage 3 and unlock value for our shareholders. If you look at Stage 1 and Stage 2 of the next level strategy, we have clearly shown that we are delivering on the cost starts and productivity improvements. We have turned the thinking internally, but also their focus externally from operational earnings and margins to earnings per share and operational earnings per share, which is the key item for delivering shareholder revenue. We clearly have improved our capital allocation and capital efficiency, and we have a very strong cash flow. I will come back to that in much more detail later. All in all, this has helped us to deliver €8,700,000,000 of cash back to the shareholders since 2014. As we now move into the 3rd stage of the next level strategy, we are firmly committed to unlocking more value in ABB. Looking at some of the key performance indicators. On the margin side, you already heard we have 7 consecutive quarters of margin improvement. This is coming from the cost saving programs and lately quite a bit from the white collar productivity program. It should also be clear that we have achieved this in the last quarters basically on flat revenues. So there is a lot of hard work and a lot of change behind the numbers as you see here. When you look at the return on capital measured as capital return on investment, it used to be below 13%. We have been able to bring that up to 15% and even slightly above 15%, which is exactly our long term target. So I'm very pleased to see this development, which a lot is helped by the capital efficiency from the net working capital program. On cash flow generation, we have been performing well. And if you compare us to our peers, we are in the upper end of the league table in terms of free cash flow generation to revenues. Also in a little bit longer perspective, here, 20 to 2016, if you look at the amount of cash we have returned to the shareholders measured as dividend and buybacks compared to market value, we are at the top of the list. So we have really lived our principle to make sure we run ABB in an efficient way also from a balance sheet point of view. Looking at our targets that we issued 2 years ago and where we stand against those targets, 18 months into the 6 year period, We have a good momentum on the operational items. You have seen the margin improvement. On operational earnings per share, we are on a compounded annual growth rate basis after 18 months at 7%. We had 10% in the first half year 2016. So we are clearly moving this in the right direction. Cash is very strong. Return, we have heard about already. So we are on a good move on the operational side. But we are obviously not happy that the revenue is not yet where it should be. And I will come back in quite some detail how we will achieve that in the future. But before we go there, let's take a look at the markets around us today. We are operating in quite challenging and difficult markets. It's hard weather failing, as we have said at quite some occasions beforehand. It's still a lot in the process industries around oil and gas, around mining, which is difficult, specifically also in the large markets in U. S, in China, in Middle East, specifically also now this year in Saudi Arabia. And at the same time, we have some good and positive areas which are going quite well in construction, in T and D, in food and beverage where we put a lot of efforts in. And then Europe has been growing quite well so far. But I must say now in the Q3 with all uncertainty around Brexit that it is putting more uncertainty in the market like also in the United States with the uncertainty in front of the election. So all in all, there is not a strong momentum. We are still in hard weather sailing and we are operating in that condition. Looking further out into midterm and long term, we see a much more positive picture. The growth drivers that we have spoken about in this room or with this audience many times are firmly in place. And you can see how we see the different industries moving in the 4 year perspective on the arrows in the upper part of the chart. But then in the lower part, it's quite important that we have 3 quarters of our markets that we are operating in, which are in a growth mode, some in fast growth, some in a bit slower mode. And we are putting a lot of effort to grow more with our penetration efforts, with our growth programs and also in specific actions, for instance, in food and beverage. We are reallocating resources into these areas in order to catch and take the growth that we have there. And last but not least, the opportunity in digital is very, very big. So the number Uli showed before, we will go much more in detail in that later today, but that is a clear growth driver for the future. And then in the piece, which is not growing so fast, we obviously are taking all the appropriate action in terms of adjusting capacity, in terms of changing the footprint and making sure we are competitive and successful even in the current market condition and being ready for the day when those markets are coming back again. Turning to relentless execution. We clearly are on the track and have a firm target to be in the double digit operational earnings per share growth per year. It is based on the proven cost out programs, which are securing that we match price pressure and other operational conditions in the market with the cost takeout from operational excellence and from supply chain, which we heard about before. The white collar program is clearly helping us to drive the margin up. Net working capital is helping with the capital efficiency. And we are driving a very active portfolio management. We have done it for quite some time, and I will now tell you in a while exactly how we do that. But first, let's take a look at the 2 big execution programs, the white collar productivity program, where we last year, when we announced it said we will have gross savings in the calendar year of 2016 to the tune of approximately SEK 400,000,000. We are making very good progress on this program, both in terms of speed and in terms of effect. So we will today say that we are going to get above €550,000,000 for the full year. And as you can see on the left side, it contributes from all the part of the program. And on the right side, you see quite some examples of good achievements we have done on the sales side. In the Global Business Services, which includes finance, HR, IS and supply chain, We are already operating with significant resources out of the 2 global business service centers. And we are serving today about 24 countries out of those centers and more and more is now coming over the quarters as we move into 2017. And we will be finished with the whole transition there by the end of next year. We have simplified organization as Ulrich already alluded to. And then on the white collar side, between productivity improvements and the program, we have reduced the resources on the white collar side by about 8% since 2014. And it's clearly one of the key reasons why the operational performance has improved in the group. I said last year and I'll say it again, I will be disappointed if not at least half of those gross savings yet to the bottom line of ABB. If you look at year to date numbers for first half this year, we are clearly above that 50% level. We are also, as Ulrich already said, lifting the longer term target, which is the run rate of savings from this program by the end of 2017 by 30% from EUR 1,000,000,000 to EUR 1,300,000,000. And we are doing that with the same time frame and with the same cost envelope between restructuring cost and implementation cost. We have been quite successful to execute some of those actions with less restructuring cost. So at the end of the day, we'll have a bit less restructuring, but more implementation where we do it in a broader sense. But all in all, it's a better payback because we have more savings for the same cost. Turning then to the working capital program. We have been successful to bring down sustainably the level of net working capital as a percent of revenues by about 200 basis points. And you can see in the chart on the left that compared to 2014, it is quite consistent between the quarters. And it means we are successful. We're doing this down in the value chain in a sustainable way that sticks. And not just by the end of the year when somebody is pushing hard for a lot of cash. It really sits in a big change in the organization that's been on it. So this has resulted in about €800,000,000 of cash freed up from net working capital with the majority coming from inventories, which we are then able to use for other investments in growth or other capital allocation priorities. The improvements are coming from all divisions. So this is not only a result from 1 or the other corner of ABB. Also here, we set a longer term target last year, dollars 2,000,000,000 by the end of 2017. And with the trends and the actions we have, we are firmly on track to achieve that target. You can see on the left side also how we compare against our peers and against benchmarks. We were worse than the average on the benchmark. I said already 2 years ago that we want to be among the best in this and we are a good way in that direction to achieve a top quartile performance by the end of 2017. The additional savings that will come from where we are today until the 'seventeen comes from quite a few corners. There is more potential in the front end. There is more potential in sales and operations planning. Receivables and payables, we have worked on quite a bit, but there is much, much more potential there. And we are using also more advanced analytics in order to see how do we operate the value chain and how do we achieve those benefits. Now on active portfolio management. That is part of what we have been doing in ABB for a long period of time. One very good example is the robotics business, where we made a clear analysis a couple of years ago and we turned it from not very strong performer to one of the stars in ABB. The way we are doing it, we are looking clearly on the strategic side from a portfolio point of view. Is it an attractive market? Is it an offering that we have in place to be successful? Does it help us to move the center of gravity of ABB as we have discussed in the Capital Markets Days before? And then matched, of course, with the financial criteria. And on that side, it's very important that we are not looking only at top line and margins. We are also looking at the return on capital. Because for me, that is the most important parameter. The capital we have from the shareholders, we need to provide great return from those. So with that analysis, we have looked at businesses on larger scale, on medium scale, on smaller scale in the group and that's what has resulted in quite some of the portfolio changes we have done. One example is the cable announcement we did 2 weeks ago, which is a quite capital intensive activity in a niche business, which ABB does not have to have in our portfolio. We found a better home for it, where we had then set up a partnership, where we can still deliver the complete scope to the customers including the cables. So the outcome of this analysis can have different results either strengthening it, fixing the business like we did with robotics, divesting or even partnerships. Overall, including the pending sale of cables, we will have pruned the portfolio to the tune of about $2,000,000,000 of value since 2014. So overall, we are set to continue delivering. We are accelerating the growth. We see the markets being more positive. We are activating even more growth programs to drive firmly into the target range of 3% to 6%. The cost programs are helping us to deliver and we see that we will move inside the target range by 40 to 60 basis points per year upwards. And finally, of course, the working capital program that helps us to streamline the balance sheet and minimize the capital we are needing to run the business. And all in all, this leads us to the double digit earnings and earnings per share growth. Group targets are confirmed on the group level, especially the growth target of 3% to 6%, as I said before. And on the divisional level, we are confirming the targets in the 3 divisions, and we are raising the targets in Power Grids as already explained and Claudio will go much more in detail to that later today. But it's important we are taking it up by 200 basis points to show what the transformation plan will deliver that we are executing in Power Grids. On the other divisions, as you heard, we are moving a package of growth businesses from the Robotics and Motion division into Electrification Products. These are businesses we are investing in and which are early on the growth curve and they are also then dampening the margin effect. We have seen it in the current Discrete Automation and Motion division and that will now have some dampening effect also in electrification products in the short term. The target for Power Grids is valid as of 2018 as we move into that direction. Our capital allocation priorities remain unchanged. We have a strong cash generation. We have been generating about SEK 3,000,000,000 of free cash flow every year in the past. We see now a much stronger cash generation coming with an increased margin, the higher volumes and the better even better execution. But let's look at the capital allocation and where we put that cash. The organic growth is the first priority. That's where we typically find the highest cash flow return on investment projects. We invest about $1,000,000,000 in CapEx every year and about $1,500,000,000 in R and D. And all of those projects are evaluated with the same technique and the same requirements on capital return on investment. The dividend yield today is at 3.5%, so quite an attractive yield. And we are firmly committed to our policy of a sustainable increasing dividend over time. On acquisitions, I come back on the next chart. And you have seen today that we are committed also in the future to return additional cash to the shareholders that we don't need for the operations in ABB. But let's first look at the acquisition side and value creating acquisitions. We have a pipeline of acquisitions in all the 4 divisions. And what is really, really important here is that we have enough of them so that we can be picky and choose the right ones with the right returns before we execute. And we will always do it in a disciplined way. We have seen quite a few situations even public where we have stepped away from transactions and we have not met the criteria that you see on the right side of this chart. The areas we are looking into on the left side are quite complete for the portfolio, but they are for instance in additional products for our Process Automation business, better geographical coverage in electrification product and also within the discrete portfolio in motion control and things like that. So we have quite some active projects. We have not done much in the last 12 months because mainly because of the discipline, but we will see what now happens in the next 12 months if there are some projects that we will be able to pull off meeting the criteria that we have. Then to the last part or the last chapter of the capital allocation priorities, which actually is something that needs to be balanced with the acquisitions, because we have a certain amount of cash available. And actually, if you look forward for the next 4 years, it's about $13,000,000,000 to $15,000,000,000 of free cash flow that we will have available for dividends, M and A or returns to shareholders. On the buyback side, we are then announcing today that we have a plan to put a $3,000,000,000 buy back in place for the year 2017, 2018 2019. And the reason for doing that is we need to have all the levers of the capital allocation priorities in place, so that we can manage an efficient balance sheet for ABB. We will do it in a very responsible way in line with the cash flow development, in line with the needs that we have on the inorganic growth side and obviously also to maintain our credit rating on which we base ABB's business. So we are firmly committed to unlocking value to drive the operational earnings per share up based on growth, based on the execution program, the active portfolio management and also the performance model that Ulrich went into detail today With the 4 divisions and a much stronger focus on ownership and performance and accountability by the divisions will also help us to drive the performance higher. And we will continue to drive the return on capital measured as cash flow return on investment in the mid teens. It is a good level. It's an attractive level. And we do not have the ambition to drive that extremely much up. We should rather develop the business and provide a good level of return as we are doing this. So there is massive potential for attractive shareholder return from ABB going into the latter part of their strategic period. So let me close by repeating why ABB. We are clearly positioned with very strong positions in attractive markets. There is growth there and there is good growth drivers where we are active. We have the technology both in the core business and also even on the digital side in a quite massive way as we heard earlier today. We have a crystal clear transformation agenda, how to transform the business including Power Grids, and we are committed to an efficient balance sheet. And with that, we are committed to unlocking further value of ABB. Thank you for your attention. And now I will hand over to Alana for questions. While they're moving the desk up here, I had a couple of people asking me earlier that you got this nice box. What is really in this box? Well, it's not empty. It actually in line with our digital direction, It actually has all of the presentations, all of the press releases, the fact sheets, which I'm sure many of you have been waiting for and would love to look at. So please, it's not just only a gift or a giveaway. It actually has a significant amount of data on it where you can actually graph all the information for the day. So no more handouts. We are going digital, electronic. So please take a look at it. It's got a lot of information for you guys. And there is another important aspect of the iPads. It is cheaper and more cost efficient than all the paper and all the printing. So this is great also for the P and L. Okay. So I ask that everyone that wants to ask a question put their hand up. And then Mark, you got it first there. And the lady with a microphone will come to you. Thanks very much, Alana. Mark Trotman, Bank of America Merrill Lynch. Three questions I've got here. Firstly, Udi, the Power Grids review, obviously, you've done a comprehensive review of that business. Should we assume now that the portfolio there is going to remain as it is ex the cables business that's been disposed I. E. There's no further pruning. I've noticed I think on slide 20 in your presentation you talk a lot about offering a different mix within that business with a lot more digital product systems and automation. So I guess what I'm asking something like medium voltage transformers maybe the lower margin parts of that portfolio. Is that going to remain? Or if it and if it is, how are you going to do this transformation of mix that you highlight on your slide 20? That's on Power Grids. 2nd one, I think you said you had an ambition to be number 1 in robots. Can you just go a little bit more detail on that? Is that inorganic, organic? What are you doing there? And finally, Eric, I think you said you had a pipeline of M and A in all four divisions. That's quite interesting. Maybe a bit more color in some of the gas, particularly Power Grids. So I'm not sure we've heard that before. I could be wrong. But where you see the gaps in Power Grids? Thank you very much. Okay. So, Marc, first of all, thank you very much for being here. Thank you for your question. Now, look, the transformation of the Power Grids portfolio is one of the key value creation drivers that you have experienced so far, and it will continue in the future. So we will live as we have done since I took over and previously in ABB, very active portfolio management. And no, the portfolio is not set for the next 20 years and say that's exactly it and that's it. We will continuously shape our portfolio for more value creation. We will continuously shape our portfolio in direction that I laid out. So if you take the engineering piece, the working with our customers in the planning phase, there are tremendous opportunities to do more for ABB. And we will do that and Eric will talk more about it. We will do that pulling all means of growth that we have available. We will also, when the time is right, prune certain activities of our portfolio. You have seen we have constantly added and pruned pieces, and we got a clear plan laid out. I mean, the time is right. We will also share more on the details on that one. What will happen of the portfolio overall? We have committed to a 10% to 15% earnings growth to you as our community, as our owners of this company. And what we will do is we will do this active portfolio management in a sensible way that we deliver on these activities. If we see it makes sense to do larger moves in terms of adding or divesting, we will absolutely do them. And in the portfolio review, I can tell you all of the options for ownership were really on the table. We went through what would it mean spinning, selling IPO in this business in a lot of detail. That's one of the reasons why it took quite a while because if you talk with the tax guys, when Eric talks with the tax teams, what does it really mean if you get our 75 percent shareholding in India out of many joint ventures that we have? In China and many other places, what would that mean in terms of taxation? You want to have a sensible answer before you do that. So Mark, the answer on the portfolio management in PowerPlates is very clear. We will that will be an ongoing pattern in a very active way, both receiving, pruning and transforming. And I'm not ruling out any of the means of activity in there. The second one is the number one in robotics. Look, it's really interesting. 2,009, many of you gave a strong advice to divest robotics. And we did a strategic portfolio review there. We said this ailing business at that time, a little bit more than €1,000,000,000 turnover €200,000,000 operational loss has tremendous value creation potential. And we went through against mainstream with that decision. And today we have a rockstar in the portfolio, which is Rockstar in the portfolio, which is already number 2 now globally. And there is no other robotics player in the world that has a digitalization platform like ABB. There is no other robotics player in the world that has 30,000 service people all around the world. There's no other player in the world in robotics that has access to distribution like we have. And there's no other player that has the scale that we have on artificial intelligence collaboration with Microsoft that we are creating now with our new partnership where, for example, we bring Microsoft HoloLens, that's a 3 d visualization product, together with robotics to visualize future robotics situations out there in the market. I'm tremendously excited about the robotics opportunities. I'm really proud of what the team has achieved. Pervega Neilsen, our Head of the Robotics business sits here in the audience. He will present to you later on a case of digitalization robotics that you get a little bit of a feel for it. So this will be the path going forward. With that, I hand over to Erik because on the easy M and A question. So thanks for the question, Marc. And I think it's a really good one because we have been nurturing a pipeline across the four divisions for a long period of time. But it's also clear that with the transition we are doing or transformation we are doing in Power Grids, we have not been so focused on that. But we are nurturing also a pipeline in the Power Grids area. With that, I would just like to make sure that everyone leads it to 2 questions that we can get as many people answering as possible. Andrew? Morning. It's Andrew Carter from Royal Bank of Canada. Thank you for the opportunity. I was actually going to really just ask one question, which was on targets. And I thought that might make you happy. Just in terms of the sales growth and the margin targets for the period, the I guess one of the things that I noticed was that you do seem to be talking about power grids growing a bit more quickly than perhaps you previously did. I think you talked about 3% to 6% now, whereas a year ago, I think it was 2.5% to 3% or something like that. So it does look as though there's a sort of an argument that maybe the group sales growth targets might want to move up a little bit. And perhaps sort of similarly with what you said about where margins go on Power Grids and also on the working sorry, on Power Grids and the white collar productivity, there's also a little bit of an argument there that you might have raised the margin targets over the period. I wonder if you could talk a little bit about those and perhaps explain sort of perhaps why you haven't? Let me take the growth and Erik takes the margin. On the growth side, I've shown you there are some very exciting fields in the market space of power grids. Claudio this afternoon will spend quite a bit of time running you through the dynamics of that market and what we will do to drive growth in this field Because there are certain parts which are pretty slow and there are certain parts which are excitingly growing and we will position this business in a smart way to tap the opportunities there in terms of growth. Look, at the moment, coming from where we come from, I think we need to stay humble with our growth targets before increasing 3% to 6%. Let's first deliver on that one. And with the band that we have put together, we are really firmly believe that we get into the target corridor in terms of growth for ABB overall. With that, I hand over to Erik on margin. Thanks, Ole. So on the margin side, we have the group target 11 to 16. We have raised the power grids from 8 to 12 to 10 to 14. That will help us with the confidence to drive the group margin up in the upper end of the corridor. But there's no reason because of that to change the Group target. And it's clear, as you correctly said, we are helped in that margin accretion very much by the white collar productivity program. And that's why we have said today that we see a 40 to 60 basis points improvement per year on average inside the core loan. Andreas? Andreas Willi from JPMorgan. Two questions, please. The first one on M and A. You maintained the criteria for a return above cost of capital in year 3. We have seen a lot of deals in the industry recently, even some of the companies you admired earlier have called 5 the new 3 in terms of getting to cost of capital or companies reducing cost of capital hurdle rates given the lower interest rates. What's your view on ability to do deals whilst digging to these relatively strict criteria as compared to what peers are now doing? And the second question on the approach to EPC and risk sharing, how does it actually work if you get a big project with Fluor, for example, if you use an offshore wind substation in the North Sea, for example? So you win it together, but what exactly happens to risk sharing if it's delayed, if there's a problem? A year ago, there was a comment, I forgot from whom it was within ABB, who said customers don't really want to break up these projects. They look for an integrated solution and obviously Siemens offers that. So what gives you the confidence that you can come with a different approach there, which is not in line with customers historically look for? Thank you very much for your question, Andreas. Look, I said I think very clearly that admire certain competitors for their operational excellence performance. And you mentioned now the same in terms of the M and A activity. That's a different bucket of consideration. We will stick to our criteria and we will act accordingly to them. You have seen us absent on some of the larger deals because they were not right for us. It wouldn't have been right at the time, it wouldn't have been right for ABB. And lowering the hurdles in a way that it becomes long term a difficult value proposition for our shareholders, we will stay disciplined going forward. Now on the EPC activity, it let me give you an example on activity that we already have today where we have recently got first orders on a partnership. That's the one with Hitachi. And similarly, Fluor and Able will be set up. So basically, what happens in that case, we jointly go for a project, we articulate our capabilities, ABB takes the part of delivering a package of Powered Electronic Solutions to our joint venture that we have formed a joint venture to our joint venture. The joint venture that's the engineering configuration where we need the Japanese insight combined with the ABB engineering capability. And then we hand it over for execution to Hitachi on the EPC side. Later on, when a customer needs service, it's very clear that we are still there for our customer working with him. Similarly, will floor be set up? Similarly, will April be set up? So basically, what we do is we take the strength of our partner that is very strong on electrification, procurement and construction. We leave him the turf on that space and we bring prepackaged solutions that we sell then into this project to our customers. In the offshore wind area, we went Claudio and I went personally to the CEOs of our customers. And we sat down and say we are fundamentally changing the business model of ABB. And if you would not choose to work with us on that one, we accept it. But this is the way we will run the company in the future. Now it's interesting because every industry goes through different maturity curves and we see now more and more unbundling of the different packages in an offshore wind activity, and that's an opportunity for us to drive this business model. There are other competitors that choose different business models. That's okay. This is the way we run ABP. Go ahead, James. Yes. Thank you. It's James Moore from Redburn. I've got two questions. 1 on the fast bits of growth in BG. You said there's some slow and fast bits and you mentioned facts, grid automation, HVDC software, microgrids. I wonder if you could help us with 2 things on that. 1, which is the size of the business within BG because it would help to think about this fast and slow. And also, currently, are they broadly similar profitability or higher or lower? The second question relates to the EPC revenues. I know since your decisions a couple of years ago in the North Sea, etcetera, you've come out of some EPC revenue. I just wonder with some of these arrangements you've announced today, whether we should think of some revenue decline and to think about scaling that and the margin effect of that in the coming period? Look, James, we're not disclosing details too much granularity of the different activities. If you look at our new fact sheets that are part of the iPad that you got in front of you, you will see much more granularity because we have listened not only to our shareholders, we also listened to the analyst community very, very carefully and we understood that we need to give you more granularity. Alana has been really nagging us very strongly. So we got now a much more granularity on that one altogether. If you look at the HVD business, HVDC, for example, it's a very large part. It's a very significant business for us today. If you look at the largest project that we have under execution, that we have just completed successfully the first phase is Northeast Accra, where we bring 6 gigawatt of power from the Himadaya. It's hydropower from the Himadaya. We bring that over 1200 kilometers to the center of India, and that has been completed successfully in the first stage. Now the second stage comes. These are the type of projects. They are very, very significant. They are very material. And in certain areas in that, we are making good money in the areas where we feel we need to partner up like the substation space, like the offshore piece. We do a partnership model. So you should see an underlying positive effect both on the top line and on the bottom line by this massive change of the portfolio action and the business model going forward. Erik, you want to complement? Yes. I think that's right. And if you look at some of the chart that we showed this afternoon, on Power Grids, there are details on the size of the market I believe is about 1 third that is represented by those high growth areas. So it's quite a substantial part of the overall market. Ben? Thank you. Ben Hugler, Morgan Stanley. I appreciate that the whole Power Grids review has probably been a fairly tricky process between management, the Board and shareholders. What I'm curious about, I understand the desire to retain it, but you've got into a kind of risk sharing structure along the Offshore and the substations business. Were there any conversations? Were there any scenarios there any scenarios where you thought about the core product areas I. E. Risk sharing in areas like transformers and high voltage switchgear, which I guess are the parts of the portfolio where the biggest concerns are visavis commoditization. So that was question number 1. Question number 2, I'm sure we're going to hear lots more about this probably not just today, but for a while. But the ABILITY initiative, Orec, how is that how are you thinking about that in terms of management? Are we going to be having a separate center? Are we going to be having specific numbers of engineers? How are we going to do that? And I guess ultimately I realize not today. How do we think about that financially? Have you at what point could we talk about a digital P and L for ABB? Okay. Thank you very much for your questions. The answer on the question number 1 is yes. We have looked at all elements of the portfolio in quite some detail. I can tell you, Claudio, we can probably talk more about this afternoon. We went down to the single product line. We didn't stop at the product group. We went to down to single product lines. And then we commit to a transformation that will move the target range by 200 basis points and has the upper end of the target range at 14% at an attractive growth that we are putting forward. We have done our homework. So we know how we will get there and we know the transformation path going forward and absolutely will it also include a continued active portfolio management. When we did this review, there were no sacred cows on the table. We would have sold the business if we would have convinced this is the better option for our shareholders. So we went really, really thorough and deep and we come up with a clear conclusion that running it the way and transforming it the way we have articulated is a significant upside for our shareholders similar like we have already delivered over the last couple of years. Now on the second question on ability, look, you can probably sense I'm really excited about it and I'm really excited to have Guido running it. He will later on talk a little bit more about it. We will not hire hundreds of thousands of people that are outside of our business lines. What we will do is Guido will have a significant budget, a significant amount of money to spend together with the divisions to really unlock the opportunities in this field. He will have some central resources that work with him, but we will have a lot of the resources in the respective businesses where really the activity happens. Look at one element of ability is to drive vertical specific applications building on our common platform. And that should happen within the business enabled by Guido's team that we have then built centrally. So it will be a collaboration between division and Guido's team driving that forward. And if you look at it, if you look at a comp with which you brush your hair, ABB historically had very strong teeth. And on the horizontal side, the digital is now really changing the way we work because there is strong horizontal leverage capability that offers tremendous oxygen and tailwind to our businesses if you played it right. So Guido's task is to provide oxygen to the businesses to make sure they're growing faster by tapping the ABB digital platform that we developed jointly and that will be at its in home between the business where the major will be and the central team, where from a resource perspective, the minor will be. And I see Guido here nodding fiercely. You can later on probably try to catch up with him. On the financials, look, we are moving to a more granular disclosed ABB. Again, if you look at the fact sheet, if you look at the amount of closure that we give you, there's a right time for everything. Now is not the right time to disclose more in terms of the financials, but I wouldn't rule it out that in the not too distant future this is coming. Go ahead, Will Mackie. Thank you. Will Mackie, Kepler Cheuvreux. A couple of others took questions to follow-up. With regard to your software partnership, I mean, we face a world which is seeing huge software companies dedicating And To what extent was Guido involved in that decision? And then as you build that business, how do you envisage that the value created whether it's in software or services or in the specific applications is shared with ABB shareholders rather than Microsoft? Thank you. Well, I think these are excellent questions. Look, when you look at the space of digitalization and horizontal providers, at the moment, there are some that have tremendous success and some others which are a little bit slower. We looked at the whole universe, but we narrowed down very quickly to a couple that will be the right partner given our global reach, given where we play, given the size of ABB, given the investment requirements that we have also on our partner side. Microsoft has a very clearly articulated business model, very clear. The delineation line between ABB and Microsoft are crystal clear. And when Satya and I sat down and said, how do we work together? We said, okay, here's a business model. And then we tried it first in 2 areas. We saw it works, our teams fit from a cultural perspective. And then we got going. We had the same going on with other providers. And at the very end, it was a mix of the clarity of how we would work together, the commercial agreement, and I come back to that in a moment, the strength of the partner and the capabilities that the partner brings, for example, for vertical engineering. When you later on have Per Vega here on stage, he's working today with Microsoft already on the robotics side. We are working on the EV charging side. So that's an active program. We choose a little variant because we felt it's the right fit with us. And naturally, the term sheet that we have signed in the partnership concludes contains also a fair value sharing. So our domain expertise, our deep process know how, our installed base, our close relationship with many B2B customers that we have will be properly honored in the commercial model that we have set up between Microsoft and ABB. So we will not be taking to the cleaners. This is a true partnership approach that we have also in terms of value sharing. I think I saw Jeff Sprague. Thank you very much. It's Jeff Sprague from Vertical Research. Two questions. First, just back on digital. One of the things that I just struggle with analytically is if you look at the competitive landscape, your competitors are all big global players. These are oligopolistic industries. So really understanding how one gains an advantage over the other and drives a new profitable business model or some new element of growth is challenging. Some of this seems like kind of the new table stakes, if you will, to play the poker game going forward. I know we're going to have a presentation on this this afternoon, but maybe some high level thoughts on that. And then the second question, perhaps I'm reading a subtlety which is not there, but changing the name of process automation to industrial automation would imply a broader definition of that space. And I was wondering if you could just kind of comment on kind of your strategic imperatives for that segment in particular. Thank you. Hello, Jeff. Thank you very much for your question. Look, on the digital side, you caught it right. The way I described the situation is you have a participation requirement and you have a differentiation opportunity. If our products don't speak and are not connected, we will not be a Tier 1 supplier in 5 years' time anymore. So there is a need to make digital natural as a Tier 1 player in our product offering. This is something that we have to do. There is no question about it. If we would not do this, we would allow this intermediation of our relationship with our key customers because somebody else would go in between us and them and put intelligence in our products. And we have to make sure that the installed base, the customer relationship that we have is combined with a leading edge offering on products that are able to participate in the new roles of the game of the market. So you first catch absolutely right on the money. The second piece is differentiation and how do we differentiate. If you look at where the true value is created for our customers, it happens in the control room or in the control loop of a machinery. Now in the control room, ABB is very strongly represented. We have more than 70,000 installations all around the world. If you go down to Sadara, which is the largest downstream investment in oil and gas that has been currently recently commissioned. It's a €27,000,000,000 plant, 3x6 kilometers and ABB does the entire automation for power and the processes out of 1 control room setup. In this control room, there come the asset health data, there come the control information, there come the requirements on output that we all put together in the control system. Now we don't have that many competitors there in this field. There's one very vocal American competitor who is outside of the control room. They will have a hard time matching ABB with its strong installed base inside the control room, its deep domain expertise and the customer trust. It's much easier for us to go to a customer and say, look, in addition to telling your products what to do in this process, we put sensing capability on it, we listen to this product and we optimize maintenance in the way I have described it before. If you are not in the control room, you will have a hard time matching up with us in the future because we have that domain know how and we have the trust of our customers. Now you should never be arrogant about it. We need to take decisive actions to maintain that, but that's a pattern. So you will see the participation element is 1 where certain companies will fall out because they don't have the muscle, the strength to really provide us across that. And here, the horizontal play really plays a role. Sensing scales with mass, communication scales with mass. So our 400,000,000,000 installed base will make a big difference in the size of ABB as well. Industrial Automation division? Yes. And then PA to IA, yes, look, we moved last year our PLC activities within Peter's business. You have probably seen it. And we have absolutely the ambition to do more in the discrete side as well. Good catch. Daniela? Just very quickly on the power grid, on why is the target only effective from 2018 given you're already very, very close to it and then cables is going out of the portfolio soon. Is there something on the backlog? Just some clarity. Thank you. Look, no, Daniela, you want to take it? I can take it. No, you are right. We are moving in the right direction. And we are also saying that we are making investments to bring the next step with the continued transformation. So we are not far away, but it is a clearer and better target to say we are entering that in 2018. Natalie? She's right there. Thank you you so much for taking my question. Nathalie Pfalzmann from Carnegie. Two questions. The first one on your focus or refocusing maybe on digitalization. Do you feel that you already have internal infrastructure in place to drive that? Or might it be so that R and D cost would need to be increased in order for you to become a leader in that area? And the second question is on electrical vehicle in charger infrastructure. How fast do you see this market growing? It is very fragmented market right now. But could you just mention what market share do you think you will have in 5, 10 years? And how you drive that? Thank you very much for your question. Look on digitalization, we are since more than 40 years active in that space. Half of our product offering, half of what we sell to our customers is software based. So this is not something where we start from scratch and do a little startup. This is something which is absolutely core to ABB today already. And we have fantastic resources in place. If you look at the embedded software piece on our product, if you look at application software, if you look at control software, this is where ABB is already strong. I admit that we have been lousy in communicating how strong we are and we do a better job on that one. I admit we need to bring that better together across the team, but we have very solid strength in this field already. You will see as the business portfolio shifts, the content of R and D will also be prioritized in line with that. So I don't expect that we spend much more on R and D than we do today in terms of a percent of revenue. But I expect as the portfolio shifts and the intention is to shift the portfolio, we will drive that stronger in the future going forward also as a matter of clarity. Now on EV charging, you catch the right guy because I'm excited about electric cars. I drive 1 myself. When you look at the Paris Motor Show that just happened last week and if you look at the amount of electric vehicles that were launched and if you read them the press releases that large OEMs come out with, it's an absolutely substantial market opportunity. Look at the announcement of Volkswagen, look at Renault Nissan, look at Ford, look at Daimler, all of them are coming with a mass avalanche of new models. The EU emission targets will not be met if you don't bring electric vehicles on the street or must. So there is a regulatory element that will drive the growth. There is also the realization on the OEM side that you can do some quite interesting cars, some very, very fantastic cars on the EV side. I recently saw a prototype of the new Porsche Panamera electric fully electric vehicle that comes. I tell you, when you drive one like this, you will never drive anything anymore because it's an exciting experience. And the consumer at the very end in this industry will call the shots. All of the communities said a while ago, Tesla will be a failure. If we look at the growth of that momentum and the way Elon has really created that market very strong. So I personally believe we will be all sitting here in 5 years' time surprised how fast this market takes off and how fast it will go. Now ABB did a startup a couple of years ago in EV charging. Today, we are the only company in the world that has an installed base in more than 50 countries all around the world with DC fast charging. Under the leadership of Tarak, who will in the future bring this consumption point of electricity to scale, we have the firm intention to stay also in the future the number 1 in this field. If we look at the success so far, if we look at the technology, we are well positioned. We have a cloud based platform to manage fleet data for EVs already today with Microsoft. That was one of the 2 pilots that Sathiya and I sat down and said, let's try it in that space. So that's up and running. So it's an exciting growth opportunity. We are number 1 today and we have the firm commitment to beat it also in the future. James Stettler? Thank you very much. Sticking with software, can you talk a bit about your feeling of the need to have PLM software and how you could actually get access to that whether it's through partnerships or potential acquisitions? And then Power Electronics obviously moved to EP, looks to be loss making. Can you talk a bit about again what is driving that? Is that all due to solar? And how long you think it's going to take to fix that? Thank you. Okay. I take the software piece and Erik takes the profitability piece. On the software side, look, we're looking at all means of continuously growing our software activities. If you look what we have today, in embedded software, there's no much need for us to go shopping. We are very strong in embedded software, whether it's in our drives, whether it's on the robot side. We work together with players, for example, on the sensing side. Look at the smart sensor that we brought out. We are working here with Nick Hayek and his team with Swatch here in Switzerland. And we have established a joint offering that combines electronics with software on that activity. We will absolutely on the control software play the strength that we already have. If you look at the model of ABB in control software for process, we are very well positioned. And I would not expect us to do anything massively inorganic. This is an organic way, maybe some bolt ons on certain vertical capabilities that we're going to add on and drive going forward. On the discrete side, having software for discrete OEM machinery would be interesting. But at the moment, ABB is not that active in that field. And then if you look at application software, on the planning side, there's tremendous opportunities to work closer with our customers on the planning software side. However, if you look at that space and how it's populated today, it's either one of the very few large players, which are, in my eyes, prohibitively valued at the moment for us to make a move or in smaller companies. And we have bought some of them and we will continue buying teams or smaller companies to work on the planning side. On the operations side, I already talked about the control piece. On the maintenance side, the asset health capability that we have is amazing. Later on, Yuka will present what we're doing in marine, for example, in terms of the software capabilities that we have where again we work with Microsoft together. So altogether, James, we will take all means of growth organic. We will do more partnerships and we will do selected disciplined acquisitions, but without going in a space where valuations would not be acceptable in this room anymore. With that, I hand over to Erik on the margins. Okay. So look, on solar, we are moving a set of businesses across from the current DM division, in the future the Robotics and Motion division into Electrification Products. We're also moving some other businesses the other way. So what you see in the pro form a and in the factory, it's just the net of all those effects. It is clear that the solar business is quite challenging. When we bought it a couple of years ago, we said it would be a rocky road in this market. There's a lot changing in the market dimension dynamics And there is quite some price pressure in this market. That is exactly happening now what we had seen from the beginning. So the point is that this is a very attractive market long term with good growth where ABB is positioned in the right place from a technical point of view to be successful. And we are continuing to invest and we are turning this into the right direction. We have also strengthened the management around this business and that is part of the plan. We're going to have to close out the Q and A, but I just saw a couple of hands here and I was just going to give you guys the floor earlier, so I can see okay, for later on. So you guys get to ask the first question in the afternoon session. So I'd like to end the Q and A as of today or right now for the morning. We now have lunch being served outside. You have 1 hour. So I'd ask that everyone please be back at their desk at 1:45 and look forward to a great afternoon session. Thank you. For a great afternoon right now, we're going to start off with Claudio and then we will go into the execution section and then we have about a 20 minute break again and then we go straight into the digital and close out the day. So with that, I ask Claudio, please come on stage. Thank you, Alana. So good afternoon, everyone. And I'm pretty sure that the session would be interesting. So I'm not concerned about you guys having just lunch. I'll you heard from Uli and also Eric the decision. And I will run through how we see that with the next level Stage 3 of Power Grids, we will unlock significant value for our shareholders and for our customers. Let me start by setting the scene of where we are today. We're playing in a $100,000,000,000 $110,000,000,000 market and we are undisputed number 1. And that's not just by size, market share globally, but also in terms of footprint, also in terms of technology. I'm going to come back to that. We are very well balanced from a regional perspective. And obviously, the large share of our customers is in the utility. And that's one of our strengths. We really have a deep understanding across the geography on what utilities, what power grid customer need in terms of technology, in terms of services and we are pioneering technology leader. And definitely on the Power Grid side, just few examples here, the way we see it is, we enable our customers for a stronger, smarter and greener grid. And from a stronger point of view, the most case obviously is HVDC technology, which allows to transport bulk energy, more and more renewable energy from long distances and war breaking that we're just record that we're just breaking now. That's basically transmitting 12 gigawatt worth of power, which is the equivalent of 12 large conventional power plants in one link, in one line over 3,000 kilometers. And we are developing that together with our customers in China as we speak. Then on the Smarter, obviously, the digital substation is right at the center. We will hear more about that in the session that Guido will address on what does the digital technology, how do we help our customers in that space. And it's about less outages. It's about lowering the CapEx in terms of also doing installation and so on in a smarter way and optimizing the asset management piece. And then last but not least, we also invest a lot in terms of R and D in an organic way to develop products that also make the whole growth more sustainable. We know the electricity demand is growing. There is an underlying growth. I'm going to come back to that. We need to make sure that the technology that is required will also sustain and sort of decouple the growth from the environmental impact. And few examples are, for instance, the eco efficient GIS or lower losses on transformers, which actually help in addressing also the efficiency of the grids. So once again, we're really at the center of all the key building blocks of what is required today, but more even so in the future from a power grid standpoint. We also have delivered so far. I'm really proud to say that the team has done a fantastic job. It was not an easy journey. You all know that we had quite some legacies. Uli mentioned some of those. But we took the chance. And I think the key important point here, the key takeaway is that it was not just about looking at addressing the legacy projects, but also looking at the structure, the processes and changing the way we approach the business. Some of the things that you already heard that we communicated today already generated in terms of changing business model back then when we were addressing the turnaround of the system business. So Q1 2014, 3.8% EBITA margin last quarter after 2 years 9%. I think it's a strong delivery that the team committed to and we're on the right way. Now I will show it to you later. We're not yet done. We want to do more. But we're confident that the foundation is there, is solid. By the way, the whole step change program that you remember we introduced to address that part of the turnaround, we will continue with those initiatives. We will continue to drive the changes to solidify our engineering centers. We're building up back end engineering in places like India, where we're doubling our capacity to support in a much more structured, standardized and modularized way the engineering that we need on the front end in the different places. And we'll continue to do this to make sure that we do continuous improvements in our processes. So solid foundation. Now we need to do the next step. Uli presented the strategic portfolio review, what we have done. I won't spend time to go through that again. The key point is that it was really comprehensive. This was an extremely detailed exercise. Eric showed in one of his slides the bubbles in that chart where we look at the relevance of the portfolio of each and every product line. We did this on product line level. We analyzed all the products across the portfolio, how are we performing today in terms of margins, in terms of growth, in terms of C Roy, in terms of working capital and also what is the relevance of those single product lines within the Paragris portfolio today and also in the future. We had leading external partners account in that process. What I'm going to now spend time is to show you how we then define based on the analysis that we have done, the transformational program, where is it that we're going to focus on and how are we going to implement this and what is this going to deliver at the end of the day. So the program pillars very simple is 2. 1, it's the offering, the portfolio offering and then the business models. And those are very much connected. I'll come to that later on to explain why the rationale of some of the announcement that you saw today. But basically, it's looking at, first of all, where is it that we have the buckets of growth. Udi already alluded to some of those. Obviously, the whole digital area, it's a key element for us. I'm going to come back to that. And then strengthening the core. It's important for us to make sure that we continue to serve our customers while we are transitioning on the new business mix. And definitely a lot of areas to continue strengthening on that way. And then last but not least, leveraging the partnership so that we basically concentrate on what is really we're really good at, concentrate on our technology, on our R and D, on our innovation capacity and allow our partners to do what they do best in areas where we obviously are not strong. Then the second pillar, which is as important, is driving the world class execution. We know that we have room for improvement across all the businesses, across the geographies and across the value chain. So the way we see this is, obviously, we want to be industry leader in cost and quality. And we have identified a number of areas with very detailed initiatives on what needs to be done in order to really become a leading industry player in those two areas, cost and quality. But it's not only about that. We also want to make sure that we address operationally how do we execute our services in a way that we can leverage our scale and we can tap into our installed base much stronger and much better than what we do today. And last but not least, because of all the changes we see in the market, we will also have to address in a different way and want to be world class on the front end performance as well. So those are the 2 pillars. Let me then walk you through, starting obviously from the market point of view. Where is it that we see the buckets of growth? The energy revolution, I think it's clear to everyone what is going on out there in the market. It's a huge transformation. And as we said it at the beginning, once we put together the new division, Power Grids. We also said that's not going to be enough because the market is changing dramatically out there. And I took the time during also this last 12 months to spend a lot of time with the customers, certainly a lot of utilities, a lot of TSOs, and understand from them how do they see that we serve them today, but even more important, how do they see them that we can help them support them in this transformation that they are facing themselves. The supply is changing. The renewable penetration is driving dramatically changes in how we operate the grid. The demand, EV charging, someone asked a very important question there. That is also driving changes in the grid and fundamental ones. And then obviously, the whole emerging story on the emerging market story on the grid as an investment, but also the upgrade, retrofit and lifecycle services for the existing mature market where investments are rolling. Now what is also important, we saw roughly 3% average market growth in this €110,000,000,000 market that we're covering. That is on the medium to long term. But we also have areas where this market is actually or segments of this market are actually going 2 to 3 times what we see in compared to the average. HVDC, one example. The grid automation, roughly 5%, the whole software space, 7%. And obviously, we have even though smaller from a size point of view, but microgrids growing at double digit. Now this is a relevant part of our portfolio. The more important piece also to keep in mind is this will be even more relevant in the future. The DC links, the capacity of managing those links, the power quality with fax devices and so on, all of that will be more relevant going forward because of the increased complexity that we talked about. And also to answer one of the earlier questions, that part of the market and that part of the opportunity, the growth well above market, is representing for us roughly onethree of the growth that we are reflecting in our plan. Now that's not over. What is happening out there, the Industrial Revolution and the Energy Revolution, it's also impacting from a digital standpoint across the value chain. That's a very important key element, which actually when we went through the exercise of analyzing all the components of this transformation, we really spend time to understand how do we drive this part. I will come back to that. But basically, this is also what our customers see. They see that challenge and also that opportunity from their side, and they're actually expecting us to support them in that area, to support them on the equipment level, to be able to deliver transformers, to deliver breakers that actually are able to connect and to speak and to send signal back to someone and then can use those signals in a smart way to optimize the maintenance, to reduce the outage. Then also on the system level. On the system level, we can use digitalization to reduce time for installation, to improve the management of the increased volatility that we have in this market. And then last but not least, on the other extreme, what Uli mentioned at the beginning, the heart of our know how is in the control room. And that's very much the case also for Power Grids when it comes to the control rooms where we have our SCADA systems, where we have our network control, where we have with our EMS, meaning the energy management system, that basically take into account large grids out there and manage all the power flow, but also manage all the data. So we are in there and we need to make sure that we connect all that. So differentiation will come also for the power grids by connecting intelligent products through communication and leveraging the software. It's happening now. And for the customers, it's basically improving productivity, same as in any other industry. They look at uptime, they look at yield, they look at speed, And all of this will help in that direction. On the sharpening of the portfolio piece, we have announced today 2 new partnerships. Obviously, you've seen the cable divestment. I think the rationale there is clear. We want to divest to a partner that will also secure the future collaboration with us. And that's why as part of this divestment, we also signed a strategic cooperation agreement with them so that we can continue to collaborate on the innovation side, for sure on the HVDC aspect, so that we can continue also drive innovation for our customers and make sure that, that technology will continue to support, for instance, renewable integration. On the partnering, it's very simple. We started the journey by saying we want to focus on our key competence, delivering engineering, delivering system integration, but we need to strengthen the way we approach the market when it comes to the EPC turnkey large project. So we created that consolidation within ourselves and now we are taking the next step. We're taking the next step where we find a partner and I'm really happy and proud to present that we have one of the strongest if not the strongest partner when it comes to EPC globally. Fluor has all the experience. We have 100 years of experience in dealing with designing equipment, transformers, designing the automation system on a grid. They have 100 years of experience in dealing with large complex projects. So great starting point for us to strengthen and make sure that it's not just about de risking that part of the portfolio, it's also making sure that we can continue to leverage that as an access to the market because some customers are still requiring from us a turnkey approach, but we want to do it with new business models. And very same one for Abel together with us when it comes to offshore wind connections. There was a question on how do we do that, where one the example Uli gave is exactly what we're now doing with Able. In that case, we actually have decided and yes, was not a business model that was accepted just 2 years ago, but we're driving also the market toward that approach. Able will take the EPC responsibility, will be in front of us, and we concentrate to deliver the HVDC technology in our core, while the customer will see a seamless system deliver, but yet from the party that knows how to do that from a contractor point of view. Last but not least, as part of this, we continue to strengthen our core. So what do we need to do in order to further leverage a strong presence that we have in transformers? We're by far the largest manufacturer. We're by far the best manufacturer also in terms of profitability and performance. We need to leverage that. We need to leverage the scale. We need to leverage the installed base. How do we do that? It's not enough to do what we do today. We need to add the digital element on top. We want to make sure that our portfolio will in the future be digital, meaning it can communicate and can generate additional revenues from an advanced service point of view and software applications. Last but not least, we definitely want to drive much stronger the installed base penetration. This is one of the single largest asset that we have, copying the buildup of an installed base that we've done in the last decades, if not 100 years. You don't do that overnight. Now we just need to make sure that we grab that opportunity, that we leverage the new technology, we leverage the digital, and we go through that. We go through that part and build that additional opportunity. So that's on the portfolio part and on the business model. Now partner is also about how do we do partner better with our customers, particularly looking forward as they are challenged in terms of business models, in terms of how to generate revenues in a totally different market environment. And here is in this chart you see at the center, this is what we do today. We're very strong in supporting our customers with our technology on delivering our products, our systems, our technology. But going forward, it's not going to be enough. So what we want to do is become also the partner of choice to our customers on the planning side. So expanding on the at the beginning of that value chain on the planning side. And connected to that, we will do the same at the end of their value chain when they operate and they maintain their assets. And by expanding on those two areas, while we keep on strengthening on our core, we will remain number 1 across the value chain. But we need to change also again our business model, our approach, and that's why the transformation plan addresses those elements. World class execution, the other building block of the transformation. This is a must. We will invest and I'm going to come back to that to also make sure that we invest in areas that help us in driving a fundamental change in how we execute our projects, how we execute our in our factories, how we deliver our products and how we deliver our engineered solutions. On just few examples, though, to give you a sense that we're not starting from scratch. We've been leveraging the economy of scale. We've been leveraging the leading position that we have for insulin transformers. We are the only one that basically have a global engineering platform that allow us to leverage across the globe the customization of the design of the transformers very close to the customers, but driving through the modularization in the back end and consolidating that know how to drive better productivity, to drive better also results in terms of performance of those transformers. We have a unique position because of the scale compared to any one of the players. Now the other two examples that are as important is for us to drive the cost. And when we do that, we also have a unique advantage, which is not only using locations like India to manufacture to take out the cost, but also using markets like India that are, as we know, very competitive and design those products for that market and making sure that we also leverage the whole supply chain. And once we have that, we have a very competitive product. This is just one example, a breaker, a high voltage breaker. We were almost nowhere a couple of years ago. The team decided to localize this fully. And now we have increased our market share by 15% in that specific product line. The other part, and that's the last example here, it's leveraging also markets like China and the footprint, the capacity, the knowledge that we have built over the last couple of decades in terms also of innovation to design products that will be also used for markets outside the emerging markets. And then in that sense, they also differentiate, for instance, by having smaller footprint, lighter and by the way, also more efficient in terms of greenhouse effect. So we're uniquely positioned because we can combine our global scale with the capability of not only manufacturing in country, but also design in country. And that's what makes us also differentiated from our competitors. What does this mean all when we put it together? It's basically transforming the business mix supported by the execution. And when we come to that chart, you've seen it already. Basically today, we have 1 third of our portfolio, so we're a bit behind in terms of average compared to what Uli showed. We have 1 third of our portfolio that is related to software at this point in time. And going forward, we will have to basically change that ratio. Going forward, we're targeting at least 2 thirds of our portfolio will have to be connected to software, will have to be digitalized. And that's not just about the services. By the way, on the service side, we also have set ourselves a clear target that we want to double in terms of share of the total revenues from the service in the next few years. And that is going to be fundamental for us not only to drive the business mix, but also to drive the profitability. As we know, service is accretive in all sense in terms of profitability. The other part that you see in the middle here is digitalizing our portfolio. And we will leverage our installed base. We will leverage our footprint in terms of manufacturing and so on to make sure that we will not only digitalize the new products, but also start digitalizing the existing footprint, what we have already delivered out there. How do we do it? Power up that our program. So the 2 pillars, clear, the portfolio mix, the business models, the world class execution. And we will concentrate on 3 key elements. The one is the leading in cost and quality. We need to drive that very hard. A lot of opportunities for us to further improve. As you've seen, we are already in that journey. But also, we need to drive this service penetration combined with the digital aspect. The 2 go hand in hand. And then last but not least, because of the changes that we see in the market and what I meant and what I showed you before in terms of more partnering, in terms of planning, in terms of OEM part, we want to drive also world class front end performance, which will mean for us to also change the way we approach with our customers and we get close to them. We will invest. That's part of the reason why we said we'll be strongly in that new margin corridor in 2018. When we did all this comprehensive review, we said we also need to invest in some areas. We can't afford to do this in 2 to 3 years. We need to start and somewhat do a quantum leap also in that respect. Part of those investments, by the way, are also related to the digital aspect, which Uli was mentioning, which will be between divisions and the group. We will run this program through the businesses. So this will be a business led program. We have more than 500 already identified people that will be dedicated to this exercise. Again, we're going to invest and we will make sure that we have aligned incentives so that everybody drives in the same direction. This is a holistic transformation. It's not only addressing one aspect of the business, it's addressing all the dimensions. Where does this will take us? On the left side, you've seen already the slide. Once we put it all together, we are convinced that this business should steadily be within the 10% to 14% EBITDA margin corridor. And we see that once we have invested, we'll be there in 2018. But we also see that by 2020, we want to target that to be on the upper range of that corridor. Now how do we get there? We also need the growth. The market is at 3%. We want to grow above the market. Therefore, we say and we see that we will be between or let's say, within the growth corridor that the group has defined, between 3% 6%. So we're going to drive both of that. And it's going to be a staged approach similar to what we showed earlier. This will unlock the value for our shareholders. And how does this happen? It's important to understand. If you look at the two pillars that we just talked about, the business model and the world class execution, those 2 are delivering the accretion on the margin to be well within the new margin corridor. And then obviously, we will have to drive the growth to be on the upper end of that corridor. So most of it, 2 thirds of it actually, it's in our control. Challenging, but that's why we're confident that we're going to deliver because we started already in that way. You see in the 1st two quarters, I think the team has done an excellent job to be on that trajectory, and we want to do more going forward in the next couple of years. Massive margin improvement, and it will be done with investments, as I mentioned before. To summarize, I hope it's clear to everyone that we are in an attractive market. There are changes out there. There are huge changes. The complexity of the grid is much higher than it used to be. Customers are asking us. I've been spending quite some time with customers in the last few years after I came back, and I was in this business before. I stepped out and I came back, and I saw a huge change on how customer approach us in terms of it's not just about how many transformers you can deliver, it's also about a lot of what we talked about. How can we partner together? How can we see where the business models are going from our perspective as well as from an innovation point of view? And making sure that we optimize that part also on the operations and maintenance. So the market is attractive, it's growing. And today, we're number 1 in that market. And with this transformation program, we want to retain our number 1 position, 5, 10, 15 years down the road. The transformation, it's a holistic one, as I mentioned. We will invest. We will dedicate resources. And that's why because of the granularity, that's why we're confident that we will deliver on that. Now last but not least, and I think this is a very important point, we could do this transformation in any of the scenarios that Uli has presented. But the chart that was shown before, it's basically leveraging the synergies within the group. And there is a baseline, which is the synergies on obviously supply chain. Eric showed one chart that basically some of the areas is a fifty-fifty. That scale. We have synergies on the R and D, which we are already leveraging today, synergies on the SG and A cost. So all of that give us already a very strong foundation, not easy to replicate. On top of that, we have the customer. The customer across divisions is a key driver for growth opportunities that can differentiate compared to many other players that don't have that customer base as we have. And last but not least, and this is really a key element that it wasn't seen probably as relevant just few years ago, and today it's not only relevant but is a must, it's fundamental for this transformation and for the success, is the digitalization piece. And leveraging the scale and the competence that the group can bring into this team and help us in driving that digitalization transformation for us as a division, as part of a group, is going to be a key differentiator. So with that, I think I have given an overall picture on where I believe and where my team believes that we can take this business within ABB, delivering significant value for our shareholders, for our customers and being there leveraging more and more the attractive market and leveraging more and more the resources and the great team that we have with us. With that, over to JC. Ladies and gentlemen, good afternoon. I'm very pleased to report on the progress made with our white collar productivity transformation program. And if I'm so excited this afternoon to talk about the achievements, it's because we're truly proud of what the teams across the world have done in this respect. Indeed, you've heard already today that the in period savings for the calendar year 2016 are going to be more than US550 $1,000,000 versus the anticipated US400 dollars and our target of US1 $1,000,000,000 is increased to US1.3 $1,000,000,000 run rate savings at the end of 2017. But it's not only about our cost reduction program. It is a full transformation of our company. We are today leaner, we are more agile, and we're closer to the customers. As you well remember, we have structured the program in 3 buckets, the support functions with the GBS, Global Business Services implementation, the business functions, as well as the organizational simplification. So I will walk you through these 3 buckets in showing where we started, where we are today, where we're going to, and more importantly, we will also go through 3 deep dives. I will hand over to Daniel Helmick, who is our Head of Supply Chain Management for a deep dive in his function. I will then hand over to Sylvia Hill, who is Head of Global HR Services and the HR Transformation for HR. And finally, to Haider Rashid, who is the leader of the White Collar Productivity Program, and he will walk us through the changes made in organizational simplification. Where did we start? With respect to the business functions, we had done quite some progress. However, we were still challenging with some fragmentation in front of us. Fragmentation is an example in the R and D function, whereas all our R and D resources were scattered around 2 60 locations. And if we take even the 100 locations where we had leased employees, in these 100 locations, we had less than 10 personnel in R and D. Another example is the tools that we didn't have enough and in particular the standardization and processes that were lacking. And as an example, I would mention our marketing and sales function. In the support functions, we had done quite some progress. Indeed, we had 68 shared service centers, but they were in the countries, so locally managed and very little in low cost countries. And finally, the organization had quite some hierarchical levels. We had more units and quite an important number of layers and the span of control that was quite limited. This was also represented in a way in the headquarter where not only the typically governance and control and strategic functions were represented, but also we had business functions within the headquarter, meaning business leaders and even some transactional activities. So that was really the starting point, which we also portrayed a year ago. Where are we today? Let me give you some snapshots. Marketing and sales. I've just said, not really enough tools and not enough time with our customers. Well, today, I'm very pleased to report that we have implemented salesforce.com, a tool that we've implemented at the speed of the light across 92 countries. Today, we have 20,000 employees who work with this tool and are able on their handheld to see what meetings have happened just recently, what opportunities we have with our customers across the beams. So today, we have a single customer relation management tool available across the company. Moreover, we have today a new customer model, which we call cost to serve that has been implemented in 2 of our divisions. That allows us to today be equipped across 16 countries already with an additional tool available for our businesses. If I move now to the support functions, what have we done in this respect? I will start with engineering. Obviously, the engineers are at the core, at the heart of our great company. But traditionally, we had our engineers more located in the mature markets. And not only do we need to put them into the growth markets, emerging markets, but also serve the more mature markets from the emerging countries. And that has been done. We have today 1500 engineers in the Czech Republic and in India. Also, we have today a standard tool, which allows us to plan better the engineering resources in 2 divisions to make sure that the right engineers with the right capacity, competencies, experience are at the right moment on the right projects. I move to supply chain management. Also there, we suffered from fragmentation. Well, today, we are transitioning, and Daniel will talk about this, 90 factories in 15 countries into what we call transport management centers. And finally, with respect to the global business services, we went from the 68, you've seen before, shared service centers, to 2 global and 4 regional centers. And we are very well on track for the implementation of these GBS centers. Indeed, today, we have already 2,000 people who are serving 24 countries across the world. So in summary, you've understand with these few examples that we are transforming all functions in the company, starting with R and D across the entire value chain to not only how we are distributing our products, but also how we're servicing our products and solutions. And all this supported by the support functions and the GBS. That's the snapshot at this stage I wanted to provide you with. We are working today differently and we will continue to transform to make ABB even stronger. It's now the time to go into deep dives. Daniel, Supply Chain Management. Thank you, JC. Good afternoon, ladies and gentlemen. My name is Daniel Helmick. I'm the Head of Supply Chain Management, which entails procurement and transportation and logistics. To give you a feel for that, we talk approximately $16,500,000,000 in terms of spend, plus another $1,500,000,000 in terms of commodities. We have in total about 4,000 people that are working in this area. So I joined about 7 years ago, after 20 years in the automotive industry and as well in the semiconductor industry. And I must say it is fascinating to work in ABB with the opportunities that are there. On the one hand side, we're working and sourcing out of 5 50 different actually have the ability to emphasize and drive basically quality throughout our own supply chain in total, which is fantastic. Now when we entered into the area of white collar productivity, we did it from a position of strength. Over the last couple of years, we developed an engine in terms of cost reduction. According to the Hackett benchmark, every year we are in world class with regard to cost reduction and we do this for quite some time now, which is a significant portion of what you overall seen over the last couple of years in the cost reduction that have been reported as such. We as well have been recognized as a leader in supply chain management over the years. Now when we then turned as part of the white collar productivity program a step back and looked at the opportunities that we still have in our organization, we found quite a number of things. And let me talk about the 3 different areas, which normally represent the area of my organization as such. We have on the one hand side Transportation and Logistics. There we have a spend of about $1,500,000,000 and done with over 3,500 forwarders. Now on the Air and Sea side over the last years, we consolidated very much already, But here on the roadside, we still have opportunity. Now if you think about point to point connections, plant selling or shipping to customers, plant shipping inside of the company, you have no optimization with regard to overall the capacity utilization of the trucks. That's something that we can fix. On the transactional procurement side, every day in this company, we produce 26,000 purchase orders and we do that locally. Now when you think about the opportunity that we have in terms of standardizing and optimizing the work patterns of these buyers, you see an opportunity right there. And then although we already have 50% of our plants connected with EDI, still the information data exchange that we have with our suppliers was patchy. On the strategic sourcing side, which overall is our engine to get to the cost reductions that we had on a regular basis, yes, we had great performance. On the other side, there were still a lot of elements that were done locally. Now if you have buyers sourcing locally, they do this with local suppliers. If you have local suppliers, you need to qualify them, you have to evaluate them, you have to classify them. All of that takes time, all of that takes a lot of resources as well opportunities for us overall. So we were clearly benchmarked and very good with regard to our cost reduction. But on the other side, we had clear opportunities. We were under par with our benchmarking on productivity. So let's see what we have done. Now together with the BUs, together with the divisions, actually we wrote our own future. We sat down and inside of Blueprint teams figured out, okay, how do we want to work going forward? And out of this, these three initiatives basically come about. And again, I will do it in the same kind of way that I've done it before. Transportation and logistics, we move into 10 transportation management centers. You can call them as well, control towers globally. Out of that, we are going to manage the whole transportation and logistics office company, and we do this via 21st century excellent logistics software that enables us to fully manage and control the transportation globally, providing us as well a lot of data that we can harness not only for ourselves, but as well for our customers. We already started with the Transportation Management Center in China. And since this is already live, about 30% of the cost could be saved in this area. And as J. C. Mentioned so far, already 90 plants are right now in transition and more will come very soon. On the transactional procurement side, we move to the Global Business Services together with our brothers and sisters from HR, from IS and as well from finance. There, we are going to consolidate and standardize our processes as such, and we'll have a better process as such. Now today, 26 plants already in transition or even in transition, they're actually already there and €60 right now in transition. Now in addition to that, we are going to roll out a fully digitalized communication platform with our suppliers that again enable us to take better opportunity with regards to the data that we can collect from each other. Last but not least, strategic sourcing. Together with the BUs, we have identified out of the 550 categories, 130 that we actually can rise up and can do on a larger level. That in total will represent 70% of our spend that is going to be managed by our 2 50 experts that are going to take care about the spend globally with great market knowledge and so on and so on. We again tried this already in a pilot with our indirect team, which is about $4,000,000,000 of our spend. And in the meantime, already have 25% higher cost reductions by overachieving on our productivity targets so far. So in summary, we are on our flight plan already well ahead in terms of achieving the 20% productivity that we would like to see. And we'll have additional savings that help us to fuel our world class performance with regard to cost reduction. Thank you very much. I'd like to hand you over now to my colleagues, Ilija. Thank you very much, Daniel. So hello. Good afternoon, ladies and gentlemen. I'm pleased to be here. So I'm Sylvia Hill. I'm the Head of Global HR Services, and I'm running at the same time the HR transformation for the ABB Group. So I've seen in my life a lot of changes, but this is a true transformation. I've been with ABB for more than 20 years. I've been a nature partner, a generalist in several businesses. I also actually was responsible for countries as well as I was responsible for region. And prior to I took the role in 2014. Prior to that, actually, I also headed HR of 1 of the divisions. So as said, this is a true transformation story. This is actually a story about HR moving from a localized, scattered and fragmented organization to a real global world class HR function, supporting the business with more added value and delivering at the highest standards with speed, simplicity and efficiency. So this is on our agenda since 2014. And what we have done, what we have found at the starting point, you see here actually roles and responsibilities. It was no wonder coming from a country organization that we had excellence in countries, but we did not really have consistent coherent roles across the group. In terms of transactional activities, our HR business partners who are at the course of the business actually, they're very much looking into day to day. They were very much into solving our talk questions rather than supporting the business in business growth and development. In terms of HR Analytics, you all know this is the topic today for the press if it comes to where HR can add value with. Again, good practices on the country level, less on the scope of the global group. The end to end processes for HR, this means the overall higher and retire process, starting with the recruitment, going over talent management all the way through to learning and development and reward. In these processes, we were lacking consistency and clarity across the different businesses across the globe. And last but not least, we also are looking into our vendor landscape, and we found only in learning and development more than 4,000 different vendors. So what have we done with all of that in the meantime? Roads and responsibility. As our colleagues of supply chain management, we have looked into our blueprint. We wanted to understand and also design how are we going to operate in the future. And we did that by basing ourselves on the 3 different strengths of HR: what is the HR business partnering, working very close with the business what is the centers of excellence, who should and are to deliver excellence across the globe. And then it's naturally the global centers, the delivery centers we spoke about who are looking into high volume the transactional activities to release the HR business partners from this work to make sure they can do what they are actually best at. The transformation has started already. And what I can report out to you today is that already today, 50% of our employees, so means more than 60,000 people, are served by the centers, the global and the local centers in ABB. And what we can also report out is that more than 30 that we are having showing more than 30% of savings in the different countries where we are migrating work, transactional administrative work to our global low cost centers. In terms of HR Analytics, we have established global reports, dashboards, KPIs. We are, as one of the examples, tracking now the progress of the white collar productivity program as the 100% source of truce for the Executive Committee here. The looking at the standardization of the processes has also helped us to automate some of our activities. And today, we have established delivery capability for 70,000 individual performance scorecards supporting the performance management culture that we have established here. And in alignment and collaboration with our dear colleagues in supply chain management, we have also been able to realize 25% savings on our expense, on our external expense. So just recently, we did a survey amongst our HR colleagues to say, so how do you feel about that one, what we are doing in terms of the transformation? And really encouraging was that we saw that the employees working for the early adopting countries, they were actually the ones that showed improved employee satisfaction. So also in that respect, we have the high commitment of the HR community in that one. So all in all, what I can say for today is ABB HR is committed and ready to partner with the business if it comes to speed, simplicity and efficiency. So thank you very much for your attention. And now I hand over to my colleague, Haider Rashid, who will speak about organizational simplification. Thanks, Sylvia. So good afternoon, ladies and gentlemen. My name is Heather Rashid and I lead the overall white collar productivity program. I've been in ABB for 13 years now, done a variety of roles. I started off as our CIO running IT for ABB, then did other headquarter tasks. I was responsible for finance and controlling our global accounting shared service, headquarter companies, even real estate. And in 2011, I moved to Singapore to be Regional President of our South Asia region, moving back in January 2015 to work on the White Collar Productivity Program. I'm going to give you one slide on what we've done on organizational simplification, which is the 3rd leg of what we're trying to do in white collar productivity. Then there will be one slide trying to bring together everything else that you've heard on WCP today. So let's talk about the sorry, let's talk about complexity reduction that we've done, market oriented complexity reduction. A year ago, we stood in front of you and talked to you about the complexity we have in ABB. We talked about an organization that was too complex. We talked about an organization that had was comprised of 5 divisions, 8 regions, reporting to the CEO. So 13 people managing the interface between countries and divisions. And today we have about half that amount managing that same scope of affairs. We've also reduced the number of global business units and number of local units. And overall, we've achieved a 20% reduction in organizational simplification. Part of the complexity that we had in ABB with the organizational complexity was also the number of layers we had at the company. And you saw last year that in many parts of our business we had up to 12 management layers between frontline management and our executives. And that meant by the time it took for messages to reach from senior executives down to frontline white collar employees and vice versa was far too long. Within a year, we've changed all that. And as of today, almost all white collar employees in ABB are within the top eight layers of the company. And the last part of organizational simplification that we'd like to talk about today is our headquarters. A year ago, our headquarters was a mix of classical headquarter functions. It contained business leaders as well and we had transactional services. In the last year, many of our business leaders have moved closer to markets. Much of our transactional services are moving or have moved into the Global Business Services and we focused our headquarters on the core headquarter task of strategy governance and control. As a result, as of July 1 this year, we were able to move our headquarters from 4 locations in Oerlikon into 1 main location, which meant a 30% reduction in the size of our headquarters, all achieved well ahead of schedule. Now let me try and bring it all together. You've heard JC give you an overview of the changes we are driving. Daniel has done a deep dive into supply chain. Silvia has talked to you about the support functions. In essence, these are the three cornerstones of how we do WCP. We're driving a transformation in the organization. Everything from the way we do R and D to the way we do engineering, the way Daniel's team delivers products to our customers, the way our sales people engage with our customers and even our service people will work in different ways to then service our solutions and our products after they've been installed with the customers. Supported by the support functions, finance, HR, IT were all transforming across the company. So that's the what do we do. Now comes the question of how do we do it? We do it 3 things. First of all, we invest. J. C. Has talked about how we've invested more than $90,000,000 in our Salesforce solutions. We're investing in our global business services. We've ramped up 2 large global centers in Bangalore and Cracow. We've built hiring engines for our global business service and training engineers training engines. We're building an organization of more than 4,000 people. We've invested in tools and processes to improve ABB throughout the company and we've invested in people. It's not just the 4 of us who are driving WCP. We represent over 300 people, 300 colleagues throughout the organization who are engaged full time in driving the transformation. So that's the first bit, invest. The second bit is we safeguard. While we're transforming ABB, we have to safeguard business continuity. So we've invested in a bunch of change management tools and a range of change management tools to make sure that as we transform the enterprise, we don't lose our focus on customers and we don't lose our focus on delivering results. And thirdly, we ensure. We ensure the savings and we ensure the transformation. We track the project. We track the program. We track the spending. We make sure we're delivering the savings. And even more importantly because WCP has to be more transformation by such things as tracking transformation markers, which measure month by month how we're transforming the company. So with what do we do and how do we do it, we've been driving ABB with a rigor and a result focus that has enabled us to find more savings than we had first anticipated and has enabled us to find those savings faster. As a result, and you've heard it many times today, we've managed to deliver these results and today we've announced an increase in the WCP target from $1,000,000,000 to $1,300,000,000 with the same scope as originally envisaged, with the same timeline as originally envisaged and with the same cost as originally envisaged. So on behalf of the team here and on behalf of the 300 colleagues who are working to drive WCP, we thank you very much for your attention. We will now have a 20 minute break. Take their seats, please. Now if you weren't already excited from the morning and part of the afternoon, I think definitely you will be excited in this next group here. I would like to invite Guido on stage, our Chief Digital Officer. Great. Thank you. Thank you, Alana. And I'm feeling the love. I enjoyed all of those questions about digital. So first of all, I'm going to talk a little bit about myself, what the opportunity is in digital for ABB and I'm going to invite my colleagues up on stage to help tell the story. So just a little bit about myself. I'm an electrical engineer. I'm also a doctorate in computer science. I know what transformers are, inverters. I've worked in pharmaceuticals. I've worked in the telecommunication industry. I've worked in a renewable energy company. And my most recent opportunity before coming to ABB was in the consumer side of the Internet of Things. And I have been involved with some of ABB's major customers. I was the corporate sponsor for Rockwell Automation as well as Duke Energy as well as Pacific Gas and Electric. I've done products in the smart grid space including a joint venture with Itron. I've built smart routers that push the computation from the cloud to the edge, what we call fog computing. We also built telepresence technologies. My team also developed the HoloLens technology that we licensed and sold to Microsoft that Uli mentioned earlier. So for the last 25 years, I have been building connected products. And these are all hardware, software and connectivity to the cloud. So now when you think about a company like ABB and you ask yourself the question, what does it take to become digital? What does it take to become an industrial Internet giant? And first, ideally you want a big install base. And Claudio shared with us this morning that ABB has one of the largest install base in the world in the whole smart grid space. Good point to start. But you also need this operational technology or industry expertise. You need the domain expertise. You need to understand how these technologies are used. And that's very important for the next point because as Unni was saying, mastering the control room, understanding the control loop. And all too often, a number of our competitors will talk about sensing information and bringing it to the cloud. But that's not enough. You have to sense, analyze and act. And the act is the automation. It's taking the human out of the loop. It's closing that loop that's important. And for that you need this industrial expertise. And then you need to be collaborative. You cannot do this all yourself. You need to basically invent industry standard protocols. For example, OPC, IAC 61850 and a number of other alphabet soups of acronyms that essentially represent a standard language in which devices can talk to each other because there will be multiple devices from many different companies. And lastly, in order to not reinvent the wheel every time, in order not to have the Toblerone of different pyramids that Uli showed, you ideally need a horizontal reusable platform of digital assets. And this is frankly where ABB has been falling short. The technology stacks that ABB has built are silos today. And that is why the ABB Ability platform is so important. And some of you might be asking the question, wait, you mentioned earlier today ABILITY, Microsoft, Azure, where does that fit in? Let me walk you through the stack. You first start with the devices. There's embedded software in there. There's intelligence in there as well. That is the beginning of the ABB Ability stack. Then you move up to the control systems, the automation in the control room, what some people would call an infinite of things gateway. And then you're in the cloud. And in the cloud, you have multiple components. There's industry standard web services to ensure reliable secure communication for example. But there's other services that actually act on the data itself. And that's an important distinction because in a moment I'm going to describe where Microsoft's Azure environment fits and where ABB's differentiation on top of that platform will reside because that was a question that came up earlier today. Now let's look at ABB plus Microsoft. And the interesting thing about Azure is not that it's a cloud. A cloud is just a collection of servers in different places that are connected over the Internet. The value is not in the hardware that Microsoft has built. The value is in the software. In the millions and millions of lines of code that standardize certain types of capabilities device management, security, hybrid cloud, how you can have a gateway talking to something in the cloud. All of that exists in the Azure environment today. And Microsoft has an unparalleled advantage in one major factor, which made them a very natural choice as a strategic partner for ABB. In the 90s, Microsoft proved that it could attract an ecosystem of developers like no one else and it made Windows the premier development environment. In the 2000s, it did it again, this time in gaming with the Xbox. It came from behind and became the leader in gaming, attracting more developers for its environment than anyone else. And now we believe under Satya's leadership that they're going to do so again in the industrial Internet space, specifically working with enterprises, attracting tens of thousands of developers onto the Azure platform. So for ABB, this means we can stand on the shoulders of a giant. There's tens of thousands of people maintaining, evolving, creating further extensions to the Azure environment. We can build our industrial applications on top of that. But it won't be directly to the application. We will have our own set of services, domain expertise in workflow, in protocol automation, in analyzing data that will be specific to ABB and that's our own proprietary know how. That is decades of accumulated industrial expertise codified into software. And the reason that I'm very excited to be at ABB is that I spent 20 years in advanced technology companies. And those companies are well on their path to being digitized today. Their internal operations are digitized. Their products are digitized. They are reaching diminishing returns on this journey. And Uli explained how the sectors that ABB is involved in, whether it's utilities or factories, transportation are still at the beginning of their digital journey. And there's many reasons for this. Some of them related to technology. Connectivity for example, if you're in oil and gas or in mining as you'll hear shortly that could be a challenge. So up until recently there were no good solutions for connecting these areas. Or in some cases, it's the cost of computing, adding a sensor, making a device smart was prohibitive. Now it's not. Or it's technology like machine learning that have the ability to look at terabytes of data and detect patterns that people cannot detect. These are massive industries and they're just getting started. And in order to make this less abstract, in order to make it very concrete, I'm going to invite my colleagues up on stage and each one of them is going to walk through one specific use case in their industry. And they're going to describe to you how already today we are providing digital solutions. Gentlemen, please join me. And our first solution is with Maximo. Thanks, Pito. Okay. So let me introduce myself. My name is Massimo Daniele. I'm running BU Grid Automation within Power Grids division. Today, I'm very excited to be here to tell you about a business case that we have, where we fully integrate end to end digital technologies from ABB to help our customers to run the transmission and distribution grid. So let me tell you firstly, very simple terms of what the distribution transmission distribution grid is. It's made of power lines, which transport energy in form of electricity to nodes, which are called substations, where this electricity is further distributed to consumers. 95% of electricity in the world runs through substations every day. So you can understand how relevant, how critical these assets are for US340 billion dollars of every year are spent to maintain, operate, build new substations. So it's a huge spending, but there are challenges. The bigger challenge is aging. Some of these substations are especially in mature economy, the complete infrastructure is there for several decades, 50, 60 and more years. That means that components out there are aged, old, they can fail at any time, but also there is very little visibility of the status and condition of these components. It's just unknown unless one goes in front of the component. A failure of these components means that the power can be interrupted. Only in the U. S, there is an estimation that about $80,000,000,000 every year are burnt in terms of $80,000,000,000 in terms of loss of production and the disruptions due to power interruptions. The other big challenge is that with the increase of renewables, which is integrated into the grid, these substations are now running in a much more dynamic way compared to what they were used before. That means more stress to components and also require more flexibility, which means more automation. So these are the challenges that customers are facing. Now what ABB does in this space? Well, as you heard from cloud, you have been a pioneer in technologies for grid since many years. We have been the 1st company introduced digital technologies in protection, control and monitoring in substations. So, we have a long experience there. But in recent years, we have stepped up further, introduced new technologies and components, which allow us to completely digitalize the substation. Now, we call it a digital substation. So, what that is, we have replaced all the conventional instruments with smart digital instruments, which allow to collect information with a much smaller footprint. They are more accurate. They also allow to collect more information about the condition of components. We have further connected this to our control systems with digital networks, which replace a lot of cabling, but also allows to have a much richer information in the control system. So now we have very rich control systems for substations, which can also be engineered and modified very quickly. But there are hundreds of these substations out there in the grid and they have to be controlled from remote because they are unmanned. And ABB provides the network control center software, which are very large software systems, allowing operator to manage the grid, to also interact with the grid in case of upset, in case of the outage of a substation or a power line divert the power flow. So very complex and sophisticated system. And you can understand how many information are sitting in this system. Millions of data points, which are every second collected. Now with all this information, the next step is that we have introduced analytics technologies. And now all this information can be made available on the cloud and can be consumed by our analytics software called Asset Health Center. Asset Health Center continuously compares the status and condition of components like transformers and breakers with the engineering computerized models and tells the operators if a component is working in the right condition or if it is deviating from an optimal performance. Now, maintenance crew know, well, this transformer is not working well. I need to schedule maintenance for it. Or it really can also be at risk of failure, so I need to shut this substation out and then move the energy to another substation. In that way, they can operate in a much more dynamic way the network. Now what does it mean to our customers? Well, first of all, by utilizing ABB digital substation technology, customers can execute their substation projects with lower cost. Lower cost comes from lower footprint, therefore, lower real estate cost, lower construction, civil construction cost. It comes and we can achieve up to 50% reduction in space for a substation. It also comes from reduction of cabling. Cabling can be reduced up to 80% with all the cost reduction which comes with it. On the operating side, because the operators can now focus on maintenance only where the condition requires it or where the risk is high, then they can reduce the cost of maintenance as compared to routine maintenance and the potential is up to 50% reduction. But not only that, because we focus on where the risk is higher, we can avoid outages, which means time up to 50%. Now, if we transform time up to 50%. Now if we transform this in U. S. Dollars, we're speaking about $360,000 that every year a customer can save if utilizes the full set of technologies for its substations. So what does it mean for ABB? And let me tell you why I believe that this is great. If we consider there are 65,000 substations out there today in the world and we consider this average saving. We are speaking about USD 23,000,000,000 of savings that every year the industry can harvest by utilizing this technology. About 20% of those substations utilize ABB technology in various forms because of as Claudio said, we have really a high penetration in this type of industry. The industry is under pressure to reduce cost to resolve the operating challenges. And we have a great opportunity to utilize these technologies, helping these 20% of customers to start getting their savings and their operating cost down and efficiency high. But not only that, by integrating the 3rd party technologies, we can tap into the whole €23,000,000,000,000 pie, because there is also other third party stuff out there. And further on, we can utilize the same type of technology in other industries. Take railways, for instance, very similar one. All part of these technologies can be utilized in other sectors. So let me conclude with this. I believe we have a sector here, T and D, which is growing, has challenges and ABB comes with all the set of digital technologies, customers to solve many of these challenges. And therefore, I believe that this is a great opportunity for us to penetrate it, to continue growing and to also reaffirm our leadership in this sector. Thank you very much for your attention. All right. And now Clive is going to talk about the mining industry and he's going to give us an example of a use case that we've developed there. Good afternoon, ladies and gentlemen. It's a great pleasure for me, Clive Colgate, to talk about ABB's experience in digital in underground mining. $230,000,000,000 is invested in operational expenditure in the underground mining industry each year. A lot of this investment goes to supporting the lifestyle that we have got used to. And 18 tons of minerals and metals is available to each person living in a developed country. This doesn't come for free. It takes roughly 7,500,000 people working in the underground mining industry to deliver this each year. The mining industry is not without its challenges though. Mines are getting deeper, ore bodies are getting more complex, and this has had an impact on the industry. The fact that we have to move material much further distances means that we consume much more energy. The fact that ore bodies have got more complex has had a negative impact on productivity. 1 of the issues that the industry is working very hard on is looking at how to increase the utilization of equipment underground. But this is also compounded by the fact that the industry has typically a lot of point solutions, which have created islands of data and information that are not really being used to support the optimization of the whole value chain. I'd like you to use your memory a little bit now. So how often have you been driving in the car, singing your favorite song on the radio? You enter a tunnel and you find out you're singing on your own. Or even more importantly, you have that critical business discussion on the telephone, drive into the tunnel and you lose the call, okay? So now I'd like you to imagine that you are responsible to move 28,000,000 tons of ore each year using 300 vehicles from 100 sources in a single mine, and they are 4 50 kilometers of tunnel. And you don't know in real time, are you achieving your goals? So what ABB did was it brought the digital truck into the mine operations center. By doing this and knowing exactly where the truck is at any one time, knowing the health of the truck and then looking at what is the plan, we can start to understand are we on target? Will we achieve it? Is the truck capable of achieving the cost that we've set it? Will it break down? Are there other disturbances that we can replan? This has led to about 10% to 20% increase in utilization of those pieces of equipment through not having to queue and wait for the next task. But even more importantly, if we know exactly where the truck is, we can deliver the right amount of ventilation to create a safe working environment for those people doing the work. This also implies that where we're not working, where there are no vehicles and no people, we can have the lowest limit of air required to support it. And this has a tremendous opportunity in energy saving through ventilation. LEB is also a major supplier for electrical drivetrain systems for grinding. Grinding is the art of taking large rocks, making them very small, exposing the metal and using that to liberate the downstream processing. If the grinding process stops, you have assets that are lying idle and not being used. So for the last 4 years, ABB has been collecting condition looking at the condition of these electrical drive systems, taking it remotely, looking at it and analyzing that, looking at it in the context of the work that it's doing in terms of the process and then giving advice back to the mine operations center so they can either reduce what they're doing to avoid an outage or to plan for the future maintenance in the system. If I look at ventilation, we've seen that we can reduce that energy consumption in ventilation by as much as 30% to 50%. And then that example that I gave you to think about where you were moving 28 tons, if you consider that, that mine has and consumes 100 gigawatt hours of energy for ventilation each year. If we take the Gilles Mill Drive application or grinding in general, we have seen over the last 4 years that we are able to increase the availability of the equipment by as much as 95 hours in a year. And it has an incredible relevance. What does it mean? It means we're an underground mine, we are able to have a savings of $5,000,000 per year per mine. And if we then look at that in the context of the opportunity, I believe that we have demonstrated that ABB has the capability to integrate other people's equipment, has the ability to break silos of data and has the ability to unlock potential for a customer. And we believe that this has a potential of about $7,000,000,000 in the industry looking at those two applications. What we also see is that there are many, many other opportunities out there. And the announcement of ABILITY today will help us to accelerate that so that we can unlock further potential for our customers. Thank you very much. Thank you, Clive. So next, a product which is already quite digital, but I think Per Vegat is going to explain how beyond what's already inside the robot, we can add additional digital technology. Thank you. Yes, my name is Pervega Neste, and I have the pleasure of running the robotics business in ABB. And I'm very excited to be given the opportunity to give you an overview of how our digital offering actually can help improve in the business in the automotive industry. Almost everyone today would like to have a car, and the automotive industry is really a strong growth engine in the whole global economy. And the business is still running very well and growing, and we expect also the business to continue to grow in the next foreseeable future. And robots and the robot systems is a very, very critical component for a car factory when they want to produce cars. And the good thing with this, and you can see here that we are already the strongest or the biggest installed base or robots in the automotive industry, and we expect that growth just to continue as we move forward. So the 2 main challenges that the industry has is all around the shorter launch cycles of the cars. This is very much driven with us as consumers, how we want to buy cars. We want to change our cars more and more frequent, and that is a big challenge then for the automotive industry. The second major challenge is around the cost for unplanned downtime. An average plant today produces about 1 car every minute. And then you can just imagine the cost it would be if that line is standing idle for a minute or 2. In fact, 1 hour idle at a time cost the car plant about $1,300,000 Our digital offering today are able throughout the whole value chain to help these customers in an excellent way. In the engineering and the commissioning, we help them to reduce the time spent. And during the operation and the maintenance, we can also help reducing the incidents and the downtime of the plants. RobotStudio is a simulation and an offline programming tool that enables the automotive customers to plan and reduce time when planning and installing a new line. But they could also actually when they want to introduce a new car model into an existing line, also do that without interfering with existing manufacturing and the production. If I then move over to the connecting services. We started in robotics and in ABB back in 2007 with something we call the remote services. And we have today already more than 5,000 robots in 30 countries and with 700 customers robots connected. And early this year, in fact in June, we introduced a new operator solution called Connected Services. And today, every single robot we ship out from our factories to our customers are then able to be connected to the Internet, and we are then able to send important information out to the cloud. By adding then analytics, we can get great information that helps the automotive both to improve the efficiency of the line, but also to improve the reliability of the line, basically avoiding unplanned stoppages. So by optimizing both during the planning phase as well as in the production phase, we are able to save 25% during the installation phase, and we are also able then during the manufacturing part or the production part to reduce incidents and the unplanned downtime. So how does this convert into financial benefits for the customers? Well, the time and the money it takes to plan and to install and commission a new airline is around $20,000,000 So shedding of 25% of that gives to then a saving potential of $5,000,000 just during the built up phase. But the story gets even better when we're moving over to the connecting services. Today, it takes about the cost of unplanned stoppages driven by robots or robust systems are estimated conservatively to around $80,000,000 per year. And again, taking out 25% of that time gives an opportunity for saving of $20,000,000 every single year of the time for the plant. And then finally, how can we then leverage that even further? Well, the first thing we can do is then to replicate or to penetrate this into every single car plant in the world. That gives you a saving potential of SEK 15,000,000,000. But we also have the opportunity to take the strong learnings from the automotive industry into other industries such as the electronics industry, the food and beverage industry, where there are 800,000 robots already today. The calculation I just took you through are based on today's installed base of 1,300,000 robots. You heard earlier saying that this morning, but also then other analysts and the International Federation of Robotics believe that by 2020, the number of installed robots in the market will be doubled. Thank you. Thank you very much, Perfrigal. So the next use case you're going to hear about is from Juha and this is from our Marine division. Good afternoon. My name is Juha Korskela. I'm Head of Business Unit Marine and Ports in Project Automation Division. I'm happy to be here to introduce our capability in Marine and Ports industry in the digital space. Let me start from the state of the industry, which currently doesn't look too good actually. 90,000 ships transport over 90% of the world trade. Spend €450,000,000,000 for OpEx and burn €400,000,000,000 tonnes fuel every year. Today, shipping lines are challenged by the overcapacity and the lower freight rates. There are some exceptions that are performing better like cruise shipping. But in general terms today, shipping business is struggling with high operational costs and low profits. There are also challenges in terms of disconnected and uncomplete information in terms of how the actual ship and logistics is optimized for the lower cost. New regulations for the emission control, energy efficiency safety are really good for the industry sustainability, but also represent a major additional cost item for the required technical upgrades. The good news is that digitalization and ever improving satellite communication respond to these challenges and provide with the industry a major savings opportunity. And we ABP, we have a unique position to change and digitalize marine industry as a major system supplier. Our portfolio to ships include propulsion, electrical power plant, automation, various kind of control systems, turbocharging and so on. Basically, we cover everything from the command bridge to the propeller. For example, the biggest and newest cruise ships are operating with ABB's leading ASEPOT technology. Offshore oil drilling rigs are keeping position while drilling with the help of the ABB's electrical power plant. The largest container vessels are planning their voyage with the help of the ABB software. The integrated operation system is our platform for digital production systems for the marine and post industry. It's end to end solution and it connects APP, customer store operations and SiP into the same cloud based ecosystem. APP collects vast amount of data with the sensors from the ship's equipment processes and operations. This data is collected into an onboard computer and transferred via satellite communication into a data cloud. With the help of the Microsoft Azure Cloud software, all three parties can access to the same data on real time basis. Now should there be any problem with SIPs Machinery? This can be solved without any delay in remote collaboration between APP specialists in the integrating operation center, ship crew on board and customers' fleet operations. This will increase the ship's uptime and reduces the repair cost. On the other hand, when all these equipments are monitored continuously and real time, maintenance can be scheduled based on the real condition rather than with fixed time period. We estimate that total savings due to digitalization and advanced data analytics in services and maintenance can be up to 20%. In addition to equipment monitoring and diagnostics, integrated operations include broad range of digital digital support services called Octopus Marine Software. Now imagine yourself as a captain of the cruise vessel of 5,000 passengers. You have 3 priorities. You want to, of course, reach the next destination point in time. But even more important, you want to take care of your customer comfort and safety so that they are enjoying their cruise without becoming seasick. So you want to avoid excess swing of the vessel. And the 3rd target that you have, you want to run this voyage with the lowest possible fuel consumption and emission. So our software helped the captain with all these three priorities. If you first of all optimize the energy consumption on board the vessel and based on the operational data collected and the weather forecast, it optimized the sailing route and speed to the next port, minimizing excess portion on board the vessel and fuel consumption. In addition to savings on service maintenance fuel by the help of data driven decision making and automation of work with the help of the software, there is also opportunity to improve the productivity at the back end of the operations, both in customer and APP side. So adding all these great customer values together, we estimate that the total savings potential on each vessel is $350,000 in average per year. We have already 650 vessels connected into the integrated operation system, and it's applicable to all 90,000 ships in the world, with the savings potential of $32,000,000,000 based on the services and software available today. We continue to develop new digital services based on the vast amount of data collected and the potential for the future is even greater. We are also able to integrate 3rd party equipment to the integrated operation system. And the next we are going to replicate this also in the support side of our business where we already have installed base of the grain and terminal automation. So by that, we are able to further optimize the entire cargo logistics all the way from the ship to the terminal gate. So Industrial Processes Industrial Decolacies continue to transform industrial processes, and SIP and logistics are no exception. This is a great opportunity for our customers and it's also a great opportunity for ABP. Thank you, Froyad Essum. Thank you, Johan. So last but not least, Mike is going to tell us about Intelligent Buildings. So good afternoon, ladies and gentlemen. My name is Mike Mustafa. I lead the business unit of Building Products in ABB. I've been in ABB now for 5 years. It's been a great 5 years. Prior to that, I worked for a company called Atlas Copco. I know a lot of you that know it for 21 years in 7 different countries. And always the mandate was the same, grow the business. I joined ABB and I've been also told to grow the business. And I'm going to talk about a topic which is nothing but growth. Smart buildings is a great potential and digitalization plays a big role in the growth of this business. If we look at some facts, urbanization is extremely important in Siqui. Today, 50% of the world population lives in cities. And as Uli said earlier, by the year 2,050, more than 70% of people will be living either in cities or working in cities, which creates a tremendous opportunity for this business. And this is one of the fastest growing business in my unit today. 60% of the world consumption in energy is consumed by buildings, whether it's residential or commercial. And more than $600,000,000,000 is being invested in this business on operating expenses on yearly basis. This is the growth opportunity, but there are some challenges as well. Energy use and management of these buildings is inefficient today, and digitalization is only scratching its surface. If we look at the growing business of building automation, which relies on the different communication protocols in type of buildings, on those buildings, being able to integrate the different type of protocols is difficult today. And the solutions to integrate this is quite difficult. And the speed of innovation is so fast that us and the different people in this industry, they need to develop business for the future. We need to scale this business for the future. I'm lucky to be responsible for a simple business, so I'd like to simplify it. And we will take you through a building and what type of products we have inside a building. Starting from the access control. When you come to a building, the first thing you see in a building is either a bell or some kind of a door entry system to get you into the building. And there's all the security functions that goes with it, whether it's the cameras or the videos. The cameras helps you to know who's at your door. It helps you to look at an image who's standing there. And if we're talking about a video, a lot of us travel in this room, and I see a lot of you traveling. If you're in a different location, you can have a video call with whoever is standing on the call, particularly you're receiving a package from somebody, you can say, please drop it on the 2nd floor and I'm out of town for a couple of weeks. So this is quite a strong thing for us to use. Looking at the temperature control, you come home, you're used to a certain temperature in the house. By setting up one button, you can control your temperature, your heating, your cooling, your ventilation in the house. Most of us like a certain temperature in the house. I see there's a lot of male dominant in this room. Always will like it 3 degrees cooler than our wife's. So when you come home, we don't want to get to any trouble between you and your wife. We will set it all based on what you want. And we can control the shutters and blinds inside the house to reduce your energy bill and also to be able to harvest on the daylight and to maximize the amount of daylight you can use into your house, keeping in mind saving energy. Also not to forget the very important parts is the emergency lighting. I think here you see there's a lot of green lights across the room. We are able to control from which door you can exit or enter in case of a fire. As you can see here, this flight is off. So in case of a fire, god forbid, don't try to go out of this door. We will try to maximize it for you. This is a great business that we can control it and interface it via a smartphone. It could be interfaced via a laptop, via a touch panel in a room or even voice activated. You can come back at home and say light on and the light is on. You can say light off and the light is off. Besides that, the strength of this is besides all what you see from the lighting, this hotel I checked and I can confirm it is controlled by ABB. So with a touch of a button, we can control the light and the scene in the room from a meeting or at home. If you want to have a romantic evening after a long day, you can push one button, the music is on, the light is controlled and everything there is easy and you can imagine what you want to do next. I don't want to discuss that. So this is a great opportunity for our business. And besides all this, there is 30% energy savings. I discussed the control, light control, temperature control, harvesting on the daylight. This 30% is energy savings and its money and the 20% lower maintenance cost. We build products that are long lasting. I live in Dubai and I run the unit out of Dubai. We have checked with lot of hotels and they say you guys build products that never break. And this is one of the major things in the maintenance cost that we save and on top of it the predictive maintenance that we do. And this is guaranteed with a lot of the hotel operators we checked. There is 2 powers very important points besides the savings of money and the benefits and all that that we're talking about is that 40 miles away from here in one of the elderly houses where there will be 100 apartments commissioned very soon, we can check from the irregularity if your parents or grandparents live in that house, if they're used to watch a certain TV channel at a certain time during the day, 6 o'clock the TV is not on. If they used to have a cup of tea at a certain time and there's a lot of English people, I know that tea is very important in the afternoon and the tea kettle is not on or off, we can immediately send a message to the concierge in the building to check on your parents. Today, more than 450,000,000 people are over the age of 70. And by the year 2,050, more than 1,500,000,000 people will be more than the age 70. Not to depress you, most of us in this room will be living in one of these houses probably by 2,050, but and if you are used to travel to the hotel, we all like to feel important in your hotel. So the guest management system, we can know what type of pillows you like, what type of light mood you like in the room, what music, do you like the TV on and off where you enter into the room and most importantly the minibar, what do you like inside, alcoholic or non alcoholic drinks. But again, I leave it for you. This is a huge potential. We have checked the top 10 hotel chains in the world. More than 5,800,000 rooms are available to be retrofitted. On an average, the saving per room is $2,500 per room per year. So if you multiply this, it's more than $15,000,000,000 of potential in energy saving. The payback is less than 1 year with our products. One country, which I know of, where we have more than 70% hit rate with all the hotels is Dubai. By the year 2020, more than 50,000 rooms will be available. On an average, any hotel of a 4 to 5 star, the CapEx is $3,000 per room. So alone, you can calculate it. And with a 70% hit rate, more than $120,000,000 so Frank, you should be very happy, will be from now till the year 2020 there. This is a huge potential for us. And if we replicate this and we look only on shopping malls, more than 400,000,000 square meter of buildup area will be constructed yearly in shopping malls. We have big references in big shopping malls worldwide. Airports, more than 2,300 airports are being constructed today. You could look at the top airports, Beijing Airport, Dubai Airport, the new airport in Saudi Arabia that's being built in Jeddah. Most of these airports are equipped with our products. We look further into offices. And today, we've been talking about Microsoft all day. The headquarter of Microsoft in Denmark is equipped with ABB. We checked with them and they guaranteed that from the 1st year of service they have more than 30% energy savings. We could look at stadiums, the Bird Nest stadium in China and Stadia in Rio that you just saw lately with the Olympics, all of them are equipped with ABB. This is a huge tremendous and we have noticed again in Dubai because of our good building automation relations with a lot of the customers and the owners, we've been able to pull a lot of other products for ABB from another division and another business units within our own division. This is a great opportunity. I'm very excited about this. And I think most of you had an iPad. This is the first part of the investment. Now you just need to invest in a bit of smart home functions, and then you'll have the complete operation for you. So we have some business cards for any orders after this meeting. Thank you. Thank you. All right. Thank you very much, Mike. JC from HR would like to have a little chat after. But okay, so let me bring it home. You saw a lot of different numbers, a lot of different benefits. Let me explain a little bit how we come up with some of these numbers. And in particular, if you look at what we just saw, this is just 5 use cases, just a little sliver of a digital pie for each of these customers. These 5 slivers create $90,000,000,000 of customer value, energy savings, reduced maintenance costs, higher productivity for their employees. We believe we can capture $2,000,000,000 of that in terms of products and services from ABB that are digitized, that have this digital component. But these are just the slivers. What if we captured or addressed the entire digital pie, other solutions for those very same industries? Well then the total value created for our customers goes to $315,000,000,000 And the ABV portion that would translate to revenues goes to 6,000,000,000 dollars But we've only seen 5 markets here today. ABB is present in 15 different markets. What if we create a digital solutions for all of these markets? Well, then we're looking at close to $1,000,000,000,000 of customer value. And ladies and gentlemen, this is why I came to ABB. All of our customers are in the knee of this digital S curve. Their digitization potential is ahead of them, not behind. It's yet to come. And when we put all of that together that translates to $20,000,000,000 roughly 50% above the current revenue of ABB. So this is why I'm excited. I'm excited about the platform. I'm excited by the fact that we have used cases we can sell already. This is not learning something dramatically new. And in fact, each of the division heads has either already spoken today like Claudio in terms of how important digital is to him. Or I've been having some chats with Sami. He's invited me to come and meet with his team. I'm not pushing a rock uphill. I'm not trying to get ABB to do something that it doesn't already want to do. So this makes my job very, very fun. So let me tell you what I'm going to do next. First, we have to take these systems that are not yet on ABILITY and start migrating them over, moving our applications progressively so that all future applications are built on top of Microsoft Azure infrastructure and ABB proprietary knowhow. But we can sell. We can penetrate the markets we're in already. We can sell these use cases that we currently have. We can expand. And then as we solve problems and these problems start to look very similar, we're doing asset management. We're doing integrated operations. We're doing preventive condition based maintenance. A lot of those become templates Because once you solve it in one industry from a code perspective, from a software perspective, it's fairly easy to then apply these templates and replicate them to a series of other markets. And so that's why I'm excited because I believe that with our customers, we can write a digital future together. Thank you very much. I'd also like to invite Uli back for Q and A. Thank you, gentlemen. Thanks a lot, Guido. Very good. Thank you. Now we have learned the true reason why you all got an iPad. We want to get you on this home automation system. You can hook up with Mike very easily on that one. So ladies and gentlemen, thank you very much for your patience this afternoon and during the entire day. I hope you are as excited as I am about the future of our company. We have made a commitment today that we will drive growth and continue the operational journey of ABB. And we are firmly of the opinion there's a lot of value to be unlocked, not only in the very exciting digital space that we just shared with you, but also in all the other areas that we discussed. So to sum it up, ABB is truly at the heart of the Energy and the 4th Industrial Revolution. You have seen today not a single presentation that this doesn't impact our customers, our businesses in a very, very significant way. I shared with you this morning the opportunities now, and you have hopefully realized what is out there, what tremendous opportunities there are. And we are ready. We have done our homework in Phase 1 and 2. We have very carefully orchestrated the first pilots on the digitalization side. We got the partnership signed. We have the team up and running. Guido has hit the ground running, worked together with the colleagues that are already active in that space. So we will unlock the value through driving our businesses in a more entrepreneurial way. And I think you have sent in Claudio's presentation today a true entrepreneur that really knows what he wants to do with his business going forward. And we will give him oxygen to really drive his business in a remarkable way and deliver the transformation that we have in front of us. The quantum leap in digital, ABB Ability will be the key enabler. Giro will be the leader working with our businesses in a natural way to really scale up and drive growth momentum in a significant way. And whilst doing all of that, we will not forget how important it is to deliver on daily execution. Lower cost, higher productivity, better cash, that's what we are committing to you. We are raising our target on white color. We commit to continued cost out to safeguard the quality of the margin of ABB. And today, you experienced a new visual identity of ABB. You experienced us as a new brand. We are bringing together to play team sport in a much better way our external positioning, and we are firmly committed to write the future together with all our customers and our employees. Thank you very much. So may I now invite the easy colleagues that were on stage today together with Guido to come quickly up here please, because we will letter the stop of your questions altogether. Okay. Guillermo. Thank you. It's Guillermo Pinhear from UBS. Actually first question to Guido and Ulrik maybe regarding the Microsoft partnership. I wonder whether the partnership is exclusive? And secondly, sorry, who owns the data in the new partnership structure? So how do you structure data ownership? So I take the formal part and let Peter then talk about the data. It's not exclusive and it should not be. We should be both open. We have great opportunities to work with others. Microsoft is a company that works with others. As my good friend Satya said today very clearly, this is one of the partnerships that are driving and this is one of the partnerships that we'll be having in the space of the IoT. So on the data, Guido, I hand it over to you. Yes. Thank you very much. So on the data side, the data belongs to ABB. So even though using the infrastructure of Azure, the data and the encryption keys as well are controlled by ABB. Thank you. Maybe a follow-up actually to Claudio as well. When I look at slide 7, I wanted to take a look at the dark side. So basically what's not growing in terms of basically segments of the market and if there is actually any of those segments overrepresented in ABB that you can highlight? Thank you. Yes, sure. Well, there is clearly an area where the growth is not as expected where we are also exposed and that actually not so much on the utility, but on the industry in particular on the oil and gas. We have the part of the distribution part of the portfolio particularly on the transformer side with distribution transformers, dry type transformers that is exposed more into that area and that one obviously is definitely a low growth for the time being. Okay. I think next one is with Jonathan Mounsey. He's in the back. Hi, thanks. It's John Mounsey from Exane. Just kind of one area of interest, please. In terms of Power Grids, the partnerships you've entered today, I guess there's people in ABB who are currently doing the kind of things that going forward your partners are going to do. And obviously with the order book, I assume that everything you've entered into is under the old regime. Going forward, as you win business, it's going to be in the partnership structure. I mean, what happens? How long does it take to transition? And when we have or during it, do we need to take more restructuring charges? Are these people needs to be repurposed? I mean are we going to have more costs in terms of restructuring to come in say 2 years' time as the new projects start to enter the P and L? Jonathan, in general when we enter these partnerships, we ramp them up over time. So this is not a process where you overnight go full steam right away. Typically, we ramp up, we do a couple of pilots, we get the people together, then we bring the teams together, we work it up, and it works very, very well. It is very important for us that we don't lose talent, because talent on both sides is scarce in very experienced workers. So this is the overall perspective. I hand over to Claudio for some comments for the specific ones. Yes, absolutely, Uli. And just to give you an example on these partnerships, this is not kind of a coming out of the blue. As I mentioned in my presentation, we started this journey internally to create the proper environment. So we basically consolidate units that are dealing with that type of business and we created a proper environment that with those units by being selected by being selected from a market point of view, from a process point of view and then finding the right partner to complement. Okay. One slight follow-up then sorry. You've asked the same question a different way. Say in 3 years' time, 5 years' time, how much of the EPC activity will be done through partnerships? A very significant part. Thank you. Next one is with Graham. He's also over there in the very back. Yes. Thank you. Graham Phillips from Jefferies. Two questions then. First of all, on the share buyback, I think you announced 2 years ago it was going to be €4,000,000,000 ended up being €3,500,000,000 you're now saying €3,000,000,000 over the next 2 years. Clearly what we've heard more about is more cash, possibly some assets to sell. So what's going on behind here? Are we keeping some money back for M and A? Or why not actually at least stuck with the €4,000,000,000 or increased it? So the buyback that we completed last week was originally a SEK 4,000,000,000 buyback with SEK 3,000,000,000 for cancellation, which is a real true buyback where the shares are getting canceled and SEK 1,000,000,000 to hedge employee share programs, ASUP, option programs and so on. There we have seen during the period that it's enough to go to SEK 500,000,000 and that is why we didn't go all the way to SEK 4,000,000,000. So that's the answer to the first part of the question. That means that the new scheme we put in place with the €3,000,000,000 for cancellation I. E. A real 2 buyback is the same size as we had before. Now we are playing the piano of all the levers of the capital allocation organic growth investments, dividend payments, inorganic opportunities as I described before and share buybacks. And we have judged that the size of the buyback is the right size in that balance. We can always adjust the size of a buyback as we move forward, but that is the judgment we have today. Okay. That's clear. Thank you. My second question is on the size of the markets. If I look at the size of the potential markets for each of the 4 divisions that you gave a year ago, they're a lot smaller. And I know there's been some rejigging of some of the assets from some of them to others. But just take for instance Power Grid, it's taken from £160,000,000,000 down to £110,000,000,000 now, okay, you're out of the EPC. But why have these markets shrunk? Is it because actually ABB, as you envisage going forward, is perhaps slightly shrinking? Or is it that there's something else going on here? That's a simple technical explanation. Last time it was the unconsolidated market and this time it's the consolidated market. It's in the front row. There is someone in the middle here. I can't see who actually it is, but second row. That was earlier. Thank you very much. Gael Dobre from Deutsche Bank. The first question really is for Power Grids. So it still seems that about 70% of the addressable market size is expected to grow below GDP and sort of 1% to 2%. And around half of the mix for the Power Grids division is probably still made up of traditional transformers and switch gears and the like. So I guess the question here is how quickly can you realistically transform and refocus the entire business on the most attractive areas without really dampening the top line for the division? And perhaps in relation to this, I'm not sure about it, but it doesn't seem too difficult to add connectivity features to transformers and the other high voltage products. And I would expect probably most of your competitors to do probably the same and add sensors to their products. So in the end, the real value added will probably still be in Data Analytics and not in the hardware itself. So, so far in your experience, as you've added already some connectivity features to your products, have you been able to raise prices for these connected products versus the other more traditional products? Or does the connected functionality simply comes for free for the client? Let me take the second one first and then I hand over to Claudio. You're going to connect the products in altogether. You need business model innovation as well. In the past, very, very long ago, we sold a kilogram of robot. Then we sold a robot with a purpose. And now we are selling a robot with a purpose that you as a customer get the benefit from using the way we use the data in the operation to get more uptime and reliability. And there is a standard you can have a standard fee you pay a certain amount of dollars per robot per year and we give you all the data, we give you all the planning for it, we tell you when you should do something on maintenance. So we help you to drive uptime reliability. And I think this is one topic that we haven't expressed that strongly today, business model innovation, Finding new ways to extract the value and extract the fair share of the value that we have created for the customer is one of the tasks in the digital space that will be on Guido's list quite highly when we had our discussions and started to sniff each other and see how we would work together. That was one of the key topics that I would like to see. What is the business model innovation? How can we extract that value? And all the big numbers that you have seen there will not happen with the traditional ABB business models only. There will be software as a service. There will be certain data utility. We might, in certain cases, give you a certain kind of an annuity instead of the product. So all of that needs to be worked on in a disciplined way. We have today use cases. Per Vegard is selling today. We smart sensor, the motors, it's coming out. So that's the direction that we're taking on the business model. Claudio, this should have given you enough time to now think about the answer to your first question. Thank you, Lucas. Two points. One is on the bigger picture what was presented earlier by Guido and Maximo on the digital substations. If you look at the way the digital substation technology allows customers to save both on CapEx and OpEx, it has a lot to do with what is reducing in what I would say the non core part of what we deliver from a technology point of view. So it's reducing 80% of the copper cables, which is not obviously our core technology. It's reducing installation time, construction because of the footprint and so on. So that's one way where then we should make sure that we and that's what we do with the team to grab higher value add within that core technology that we deliver. And another example very specific one is when we Massimo alluded to that the asset health center, we sell that solution with both 3rd party models and ABB models precisely to address your point. Our intention is there to support our customers not only for our installed base, but for their installed base. And they have then the ability to choose. And the feedback we got from our customers today is actually from a modeling point of view of the key core components, breakers, transformers, the automation part that Massimo deals with. They like much better our because they see the key domain competence. Guido mentioned that it's about installed base, but together with that is also how well we know how that installed base operates and lives throughout the operation. Thank you. Simon? Hey, we're almost getting through everyone that had questions earlier. Thanks very much. It's Simon Turner from Berenberg. You said earlier in your presentation that you didn't communicate your digitalization strategy well in the past. When I listen to some of your competitors, they talk a lot more about the size of the software business, the revenues they generate, the different software layers, margins, and not only saying margins are higher than the product business. We haven't really heard much about that today. Is there anything you can tell us? I mean, you did acquisitions like Mincom, like Spirit, in the supervisory control in the operations in the asset management layer. Is there anything you can talk a bit more about sizes, revenues in that area? And secondly, also some of your competitors seem to be quite active with startups, with innovation funds, with working together with venture capitalists, particularly in the digital space and seems like quite a big opportunity to work with these companies on that space. Is that part of your strategy as well to just be more engaged in that area? Thanks. I look to reiterate the second one first. 2,009, we set up ABB Technology Ventures and some of our competitors are copying that at the moment. So that's great to see. And we are active out there in quite some of start ups. We are, for example, invested in Vicarious, which is an artificial intelligence piece. We invested in multiple startups in the field of digital. And naturally, we drive it in the future even more. You know that we have moved the startup activity under Basmi Usain, our Chief Technology offer within Basmi and Guido in the future. I expect them to pointing that into the right direction that going. Looking on the software side, I think the one is to talk about the numbers. The other one is talking about the value proposition. We will do it in that sequence. 1st, we will articulate to our customers out there the value proposition that we really have on ABB Ability. And over time, we will increase the disclosure and will bring you more data and more granularity on the software space. So give us a little bit of time to work on that one now that we have the act together and we have the offering and that we will also communicate more in that field. Maarten? Thank you. It's Martin Milkey from Citi. The first question is just on the revenue and pricing model for the software side. 1 of your big U. S. Competitors seems to sort of give the software away for free and to make it up on spares. And I know it's obviously a bit more complex than that, but it seems to be a very different model than say one of your German competitors does, wears much more about subscription license and so forth. Now I know, obviously, very different depending on your divisions and your products and so forth. But my understanding from here or the impression is that this will be a subscription or you will get revenue for the software. If you could just clarify how it's competitor that is the first one, it's not in the control room. If you are not in the control room, you sell the data in an area where you say like a consultant, I give you a study on something. We are in the control room. We can influence directly to operations and the uptime, speed and yield of our customers. And with that, you expect much more value than just having data available. So you will see all kind of business models because it depends also on the customer's choice, how they want to work with us. But it's definitely a commitment that we will attract more of the value because when you have 70,000 control systems out there running, when you have 70,000,000 devices already connected, where you get the data today, where we are already doing something in that field, yes, absolutely, we can do more also in the classic and traditional software and new business models rather than just the utility side that some others are doing. And I believe the second question was just I know today is obviously all about the growth platforms and the strategy and so forth, but you must have in the back of your mind a sort of view of the cycle in terms of what would need to happen just to hit your organic growth targets. And if you could just give us some sort of sense as to what you're thinking, are sort of at a bottom and we stay there and that's enough to get to your targets? Just some ideas on that. First of all, yes, we have an understanding on that one, Martin, how we apply that. If you look at the situation that we are in, it's quite amazing. And I think the team should get credit for what it has done. Some of our most profitable segments have contracted prudently. At the same time, we held the top line stable by growing new segments, younger segments, which might not be as profitable. Number 2, at the same time, the transformation that we showed you today cost a lot of money. We're spending a lot of money making ABB better, more agile, putting systems in place. And despite that, we have better margins. So the money that we are spending on the transformation will come down. Hopefully, the bottling out of the contracted areas is now there and the growth areas are coming back up. And then the other areas come back at a time you do your models yourself, but it's definitely a pretty bright future. The only question is when. It's not a question of if. We are prepared for it. I think the team has done a really good job to get margin accretion going against all the headwinds that we have been facing. Let's assume the headwind stops. That will be a good one. If the tailwind comes back, then we're really rolling. Thank you. You're welcome, Nazzi. There was someone in the first row here that had a question or no? Yes. Thank you. Andra Ritchie Bank of Bellevue. Some of the applications that you highlighted in digital clearly go into the sphere of private sphere of customers like knowing when a kettle is on, knowing when the TV is on or somebody is at home. What's your position on data ownership, data sharing? And how do you make sure that this might not actually backfire on you because you might sound to be too intrusive? Thank you. Sounds like a question for 2 digital experts. Thank you. So I think this is a great question and I really look forward to that because you're right in many ways we will touch the private sphere. And I know that in particular here in Europe there's a lot of sensitivity to that. I think the best stance is that we should make it very clear when data is being asked from people. Ultimately people are in charge. Like if you're in this home, let's give the example that Mike was talking about, right? If you were signing up to live in that retirement home, they could not provide some of the benefits in terms of monitoring, making sure that people are okay if they don't gather the data. Data. But they have to make it very clear that that data is getting gathered. And one of the things that I think we can adopt in this area would be sort of a data privacy code of conduct, which is our preferred stance. And ultimately ABB is a provider of a system that goes into this home. At the end of the day the home is being operated by the customer. Clearly, we can't tell our customer exactly how to conduct their business. But I think what we can do is suggest best practices. And I think some of that best practice is to disclose when information is being gathered, what we do with the data and why we need it. And I think if that can then be exposed to the end customer, the person living in the house, then I think this will be a good way to go forward. Look, just if you go to the private houses, sometimes what we can do is give people their dignity back. If you are a 90 year old person that relies either on somebody permanently being around or living independent by giving up some data, the person might happily share this data and that gives me a certain dignity, a certain freedom to move around and a certain convenience and assertiveness of certain services that I pull in. It really depends on the situation on the specific customer and that's what we will be working on in a very segmented way. Hi, Alok Katri here from Socchain and thanks for taking my questions. I have a couple of ones. Firstly, just coming back to the growth targets. Clearly, if you assume the target is set at 3% to 6% still, 2006 still looks to 2016 looks to be quite tough and then we're probably getting nowhere to that number. To then get to the 3% to 6% annual growth rate for 2015 to 2020, you need to deliver something like 6% or over the next 3 years. It seems a bit of a stretch. So my question in this sense is a bit 2 part. One is, should we be thinking about the 3% to 6% as a bit more of a corridor in which you want to get to during the period? Or is it still a CAGR sort of target? If it is still a CAGR target, then if you could just elaborate a bit more on what sort of businesses do you think will get you there? How much of that is dependent on a cyclical recovery like you referred to earlier? And perhaps you could just use the fourteense125 grid that was mentioned previously and maybe help us out with that. So that was question number 1. The second bit was a bit on the purchasing side. I think the reference was there's about an 18,000,000,000 pool of sourcing, which you can target to take cost out 3% to 5% per annum. Now you've done a pretty good job over the last 5 years. And at some point, how much my question is, how much room do you really have to extract further savings within that €18,000,000,000 pool? Because at some point, we might start to hit the bottom on that. So that those 2 questions. Okay. Sounds like a CFO and a CPO question. So let me just get that for Erik and Daniel. Yes. So on the growth side, it depends, of course, which assumptions you are making in the near term. As I showed on one of my shorts, we are at 0% CAGR for the 1st 18 months. And we have 4.5 years to go in the strategic period. I don't think the number you mentioned is the right number for that period. But it is clear that the target is for the entire period as we set it from the beginning to be on a CAGR basis to be on an average basis excuse me to be on an average basis over the period on comparable numbers of 3% to 6%. Okay. With that, over to Daniel. So when you I give you just one number. Every year, we have about 900 and 70,000 new part numbers. And all of these part numbers, new products that are coming out, we have always new opportunities to go after the additional saving. Beside that, with the whole drive that we have in the SCM environment, I see for the foreseeable future no problem on this regard. Daniel, be careful. It's budget time. Andreas back there and then I saw someone in the very back next. I think it's Andre here. Yes. Two quick questions please. The one on digitalization and the opportunities you've shown. You talked about the CHF 20,000,000,000 revenue opportunity resulting in CHF 1,000,000,000,000 of savings for customers. We see a lot of these savings indirectly or directly come out again of providers like ABB that provide spare parts, services, traditional equipment, substations that are 50% smaller in the future and energy savings that hurt some of your customers. Have you tried to quantify compared to the €20,000,000,000 you want to gain, how much you're going to lose from digital taking away revenue opportunities out there because these are big numbers and they need to come from somewhere in terms of the savings for the customers. And the second question, if you have a specific example maybe for if a substation gets tendered in the Middle East And how is it going to work? So Fluor has to bid with you or Fluor can bid by themselves looking for 3rd party component supply or Chinese components for some of it and ABB for some of it. How does it work in practice if some of these bids come up now between you and an EPC partner? Or also you are still going by yourself in the meantime? I would suggest to talk to you. Okay. I'll take the first question and then I'm going to invite Claudio to join me as well because part of the answer is in his area. So first of all, it's not a zero sum game when it comes to some of these customer benefits. It's not like just because we win then somebody else has to lose. Some of the things like for example energy consumption, well clearly maybe a utility providing power, but overall power consumption might vary, the mix might vary. But I believe that in fact in particular when it comes to the power grid, some of the examples that Massimo shared the savings in terms of smaller equipment are in other areas like land and other things, which again is not detrimental to ABB. So I think when you look at all the potential value from the customer, it's everything from productivity, availability, just better asset utilization, longer asset life. In some cases that could be something where that could be an asset from a third party. But so I think it's not so easy to say, well, just because we save here we automatically lose in one of our businesses. I don't believe that that's straightforward. Yes. Maybe just one additional point. So yes, lower CapEx on a digital substation, but that reduction is mainly in non core MEB areas. The technology needs to still need to be provided. But on top of that, that lower CapEx also drives lower I mean, I'm sorry, the digitalization also drives lower OpEx. And of course, if we do it right with the support of Guido and the whole team, we're going to be able to capture a higher share of that OpEx for the services that we provide. That's a key important point and that's why we see that we can double the revenue share on services in Power Grids. And I'm pretty sure that's similar. Dynamics will be in other areas. On the EPC, the whole model is for sure not for us to compete with a new partnership on EPC. We do that because we firmly believe that this new partnership will be able to capture growth by managing in a much better way and enabling us to de risk our portfolio. Now we're going to keep a multichannel approach. So we're going to serve this partnership. Fluor might go out together with us. As you know, many of these you mentioned specifically the market in the Middle East. You need to be qualified. You need to be qualified with utilities. We today are qualified as ABB. We're going to go through a process where we will qualify this new partnership as we go. We will select the right projects, the right customers to start their journey together. And the more we do that, the more we will basically hand over the EPC approach to Fluor and we will concentrate with obviously delivering our technology in terms of products, system integration and automation. If I may just quickly go back to the digital substation. If we go together to the Mayor of New York and he needs to renew a substation, He can either choose a conventional one and get it from us or from an emerging market competitor or we can offer him a digital substation. And when he has about 30% to 50% less space requirements, he can do with the space a lot of things. He can build construction in there. He can build residential or commercial offices on the same space that he needed before for the same functionality. And that's true value added to this specific customer. A customer in the middle of the forest in Sweden doesn't pay us the same amount of money for it. And therefore, the whole segmentation, our approach where we are much better granular in understanding the specific customer requirements and how we change the value proposition to each our segments will be the key differentiator in the future. May I just ask that the clock has another 10 minutes put on please? So we have 10 more minutes. Andre first and then Ben here. Yes. Thank you. It's Andre from Credit Suisse. Can I just ask firstly on the RMB20 billion plus opportunity? How should we think about this by division? And then where do you expect that to make the difference earliest? And what we should monitor in terms of your announcements, product launches or other publicly available information sources to see that you are making progress in this? It's very well as all in Claudio's business. No, I'm just kidding. Look, you will have an equal split. Each of the divisions has an opportunity. And that's the reason why we picked the examples today for you that basically each of the divisions was presented today. You saw we can do a lot in Power Grids. We can do a lot around robotics. We can do a lot in industrial automation. And we can definitely do a lot around electrification. So what Guiller will now do together with his colleagues and the executive committee members that are once responsible for the businesses, we're going to draw up the plan and we're going to make it more serious. At the moment, yes, we have a lot of ambition in our budget, but I think we can do much more. Give us a bit of time and then we will come with a pretty material plan how to realize a significant share of that bond at a high speed. But bonding is very, very clear. The pace of ABB will be changing. We have already changed. If you look at the speed with which we got Yumi out, with which we got new innovations out, that is a drumbeat that we really needed to drive up to make sure we are staying ahead. If you take the scaling of applications, historically ABB has talked in some cases years. In the future, we will talk weeks months and we will get it out very, very quickly. And one of Guido's key task in his job description is get faster. Innovation and speed is one of our value pairs. We will lift this in this space in a completely different way than you're used to ABB. Ben here. It's a question for Claudio. It's been a while since we talked about commoditization etcetera in the Power Grids business. Can you give us an update? I know you're pretty familiar with the China market. How you see the pace of the Chinese competition at the moment certainly in the last couple of years? And when we think about the core areas, the higher let's call it the higher capability areas of ABB, thinking about HVDC and ultra high voltage. How significant is the challenge now from the Chinese companies? 10 years ago they were nowhere. Are they now knocking on your door? So that was question number 1. Question number 2, it's unbelievable that we're in ABB Capital Markets Day. We've really not talked about power pricing. If it feels like something's missing. Ben, we are there. Very hard to do. I'll tell you it's for you. How do you see price dynamics in the last say 6 to 12 months? Are they as horrible as they ever were? Are they improving? What's the general price landscape please? Should I start? Okay. So look you and I had this conversation for the last couple of years. Yes. The I would say in general the Asian players and particularly obviously the Chinese are catching up. They have technology. They have improved. They are trying to expand also beyond China. They find it probably a bit tougher than they thought. But all in all, we have to respect them. They've been investing. They've been learning, sometimes going back and forth in technology, creating also problems in terms of performance of the assets on the field. But at the end of the day, they will come up. Now how do we make sure that we maintain that delta, that differentiation is two points that I mentioned also earlier. One is, we are present in China as you well know. We have a very strong footprint from an ABB standpoint, but also from a progress point of view. The whole portfolio all the way up to the ultra high voltage DC technology, it's localized in China. We use local teams to also help us designing and optimizing the cost, leveraging the local value chain, the local supply chain. So that's one key element. The other one is, again, the footprint that we have, the global footprint and the installed base. As I mentioned before, whatever anyone will do, it will take us it will take them at least a few decades to build something that could be close to what we have today in terms of installed base. And that's why the whole story about how do we make sure that we shift our portfolio, we shift our mix to really capture a much higher share of that installed base, of that penetration combining the software, the services and the digitalization. If you do this right and I fully agree with Uli, we need to accelerate because some of those are coming up faster than what we thought. If we do that right, we're going to create the next step of differentiation. When you talk about the pricing, look, it's particularly in our field, it's same for every industry. But yes, in our field, there is a competitive landscape there. And when the market slows down, there is a higher pressure. As you know, we're working on that. We've been working with that price pressure on a pretty consistent way. We are driving all the savings that Daniel is helping us to get in terms of supply chain, all the savings that we're driving with the operational excellence, the examples that I gave you here in terms of improving the operational excellence, in terms of improving the quality, all of that is basically helping us in offsetting that price pressure. Will, Marquis? And I think that's going to be pretty much it for today. So Will? Thanks. I'd just like to explore again the partnerships around substations with Fleur. You've said you wish to keep or maintain a multichannel approach to market and yet you've partnered with Fleur. Naturally you'll become closer, but there are many other EPCs that you no doubt work with to reach the substation market. So really, I'm trying to understand what the advantage is for Fleur to partner with you given that they can multi source from many channels and this may end up being a preferred relationship, which would exclude them from those channels. Yes, that's the principal first question. And the second, which I think we've tried to ask a couple of times, but what are the resources that ABB today has tied up in the form of engineers quoting project proposal preparers and the like to address the EPC market in the substation space. And those what will happen to them? So on the advantage of this partnership is that we are today present in that market and we want to find a way to better execute and to derisk our profile. The advantage from Fluor is that they're not really present in that market. They are dealing with larger type of projects more complex and they're also not so present in the utility T and D type of turnkey business. They're more on the power when they talk about power is more power generation obviously and obviously all the industrial oil and gas refinery type of market. So for them, this is a growth opportunity. And as they are better placed than us in terms of managing that risk and delivering those projects in terms of EPC, we're going to join forces and leverage that thing. Yes, we will be we are in a process. As I mentioned before, we already prepared ourselves internally. And now with this new partnership, we will continue to basically hand over to them as a partner the EPC or let's say the PC part of it, so the procurement, project, why we will deliver to that partnership our products, but also our engineering. Now the difference will be with, let's say, our regular EPC channels what we do is generally we supply products. We supply technology. With this partnership, what we want to do is make sure that we create a channel that also adds into being more competitive. And when you look at also what we want to do in terms of delivering a value with a different business mix, this I'm convinced will be one of the ways to drive us. How many people or how many how much business we look at it? Today, we have created a team of roughly 1,000 people that is addressing that part of the portfolio. So with that, I would like to say thank you for the day. Thank you for your attention. And for those of you who actually flew in, really appreciate you making the trip in. One reminder specifically from the sell side for the sell side because I know you guys are going to be asking, we go into quiet period on Tuesday next week. So if you want to talk to us, it's now or never. Thanks again.

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