ABB Smart City Outlook: Both Challenge and Chance

Tue, 2013-06-11 09:57 -- Jesse Berst

Q&A with Jochen Kreusel, Head of sector initiative Smart Grids, ABB

Jochen Kreusel is an exemplary German technology expert -- someone who combines deep technical proficiency with strong managerial skills. His conversations are often marked by a short pause, followed by an answer delivered with careful precision. His full title is Prof. Dr.-Ing. Jochen Kreusel, which reflects his doctorate in electrical engineering from Aachen University of Technology (Germany) and his continuing role there as honorary professor.

He joined Zurich-based ABB in 1994 and soon held managerial positions in power technologies. Later he set up a new software subsidiary and then a group to identify new business ideas. In 2011, he started in his current position, where he leads a cross-divisional effort to connect directly to the rapidly evolving smart grid and smart city markets.

ABB describes itself as "a global leader in power and automation technologies that enable utility and industry customers to improve their performance while lowering environmental impact." Most of its revenues come from two areas, 1) automation (industrial automation, process control, motors& drives robots) and 2) power (T&D components, substations, switchgear, transformers).

When I asked Jochen to name some of his favorite cities, he brought up Vienna. In the early 20th century, Vienna was reputedly the fourth largest city in the world with strong thought leadership. It did a lot of early work on building infrastructure such as public transportation that still benefits citizens to this day. As a consequence it is regularly mentioned as one of the places with the highest quality of living in the world. Jochen cites Vienna as a valuable example of a culture of long-term thinking.

Jochen also appreciates Vienna and similar European cities because they are big enough and small enough. He personally prefers mid-sized cities surrounded by small towns versus the megacities that are springing up in some parts of the world -- they have the benefits of city life but are missing many of the problems.

I had previously encountered Jochen a time or two on panels and advisory boards, since he actively seeks to give back to the industry. (For instance, since 2008 he has chaired the Power Engineering Society for the German Association for Electrical, Electronic & Information Technologies.) When we sat down to talk at length, I once again found him insightful and thoughtful. For instance:

  • It's not enough to deploy technology. True smart city projects are those that integrate technology between sectors to gain synergies.
  • One of the biggest barriers is the lack of a single customer set. Most cities are ecosystems of independent actors.
  • Rather than trying to convince customers that it has the ultimate solution, ABB differentiates itself with a flexible, future-proof approach.

Read on for these and other observations. -- Jesse Berst 2013, Smart Cities Council Chairman

Why the increasing attention to smart cities?

A mixture of reasons. One is the strong growth in urban population and the migration to cities. This growth severely strains city services and infrastructure. Another is the growing focus on sustainability and quality of life.

Other reasons differ from region to region. In the "old countries" it is about competition between cities to attract talent. In the emerging world it is to manage growth in a reasonable way. Meanwhile, technology is evolving to be better, cheaper and more efficient. A lot of smart city ideas start with a higher, better use of information, so ICT is an important enabler.

I call it "both challenge and chance." These are problems but also opportunities due to the concentration of people and economic power.

Has the smart cities market hit the tipping point?

There are a lot of new ideas but we're not at a tipping point yet. It will be a slow but steady evolution.

We must be careful not to declare every solution a smart city. There have always been innovations. If an electric power utility deploys innovative distribution solutions, that's not a smart cities project. It's only a real smart cities project if different departments coordinate to get synergies that can't happen if the independent actors stay in their own turf.

What are some of the barriers to rapid adoption?

There's no one customer. It's more of an ecosystem with a lot of independent actors. And that is a challenging task in the complex environment of modern cities. In some political systems it may happen faster. But democracies are not famous for fast response.

There is also a lack of trust. Some city officials have been trained never to talk to suppliers too early. As a result, they don't find what is really possible.

What areas of the world are leading the way?

There is a long tradition of long-term thinking in European cities. The Chinese also do fairly well compared to other megacities with major growth. Beijing may not win a beauty prize with its new districts, but consider where they came from and the huge amount of growth they had to manage.

How important is the smart cities market to ABB?

If you look at the ABB portfolio, it is oriented to utilities and industry. Cities represent a major segment of that market, one that is growing faster than average. It's important for us to be there. But it is difficult to find the actors, the decision makers. And no one company can provide it all. Cities are evolving, so we are still shaping our approach. We believe the Smart Cities Council can be part of the solution to both issues.

What is ABB's role in the smart cities ecosystem?

We have numerous areas where we can supply solutions -- the electric grid, water grid, transport, buildings, heating and cooling, communications. For the latter, we acquired Tropos, which is interesting because it's the part of our portfolio that is enabling infrastructure that comes very early in the development. Other of our solutions are later in the process, such as demand response.

When ABB wins in a competitive situation, why does it win?

We win where we create business value for our customers from information collected in the field. In addition, there are few if any companies that have as wide a portfolio across electric power and also wide coverage geographically.

One thing we have learned not to claim that we are the sole solution. We don't try to give the ultimate answer under all circumstances. And that is against all traditions in sales. Instead, we try to show that we are good at dealing with the uncertainty of a transforming market. We design systems that are open for future improvement, that are future-proof.

Utilities aren't used to dealing with uncertainty. Traditionally, if they didn't know exactly what was coming they didn't do anything. But that doesn't work anymore; you will miss important opportunities. The world of power is changing, thanks to distributed generation and renewables. You can't wait for the ultimate solution before you deploy.

Are there any common misconceptions about ABB and its smart city capabilities?

Sometimes even our own people don't always realize that we have so many things to offer to cities. People know that we are strong in industry and electric power utilities. But we also have solutions for water, for district heating, for EV charging, for rail, for transit, we even have a solution for catenary-free electric bus networks based on fast-charging, battery powered buses.

How are you coordinating your different divisions?

When we started to take a structured look at smart grid, in contrast to other players who reorganized their businesses, we decided to build a small, flexible team within the company. For all its power, the main ABB organization can be very focused and specialized and reluctant to jump on new developments. We deliberately created tension inside the company to apply the strengths of ABB to this new market. In retrospect, it was a good approach. Our approach to smart cities builds on this by creating a community of interest that brings in more parts of the organization.

This light organization helps us understand what areas to pursue, where we have gaps and to coordinate our efforts. It tells us where to work to develop future-proof solutions. And who to work with. Thanks to that knowledge, we've had a great track record of valuable acquisitions. It has been very effective.

What is the favorite smart city pilot or project you've seen so far?

The Royal Seaport project in Stockholm. The city has set itself the goal of becoming carbon neutral in 2030 and said it wants understand what technology can provide and what it can do with limited means. The city realizes it can't dictate everything, so it has to encourage residents to adopt intelligent, integrated solutions.

A city is a place where many actors have interests. By definition, that makes things more complex. The synergies that make a city truly smart come when those actors start to be better coordinated and integrated. So authorities need to think about what they can do to encourage that cooperation. Otherwise things will stay in mode where everybody tries to improve strictly within their own specialties.

We're also proud of our Tropos subsidiary, which supplies communications networks. In a number of cities in the U.S. and elsewhere, a single network is used to support multiple applications.

What is the single most important thing a city leader should do today to position his city for leadership and success?

First he needs a clear understanding of his targets -- what he wants to achieve and why. Then he needs to build a robust roadmap to get there.

Otherwise he can end up addressing an urgent topic but in the end nothing will have changed. Creating structural, sustainable change takes a long time. For instance, Mannheim, Germany was an early adopter of district heating and operates today one of the biggest networks in Germany. They started deploying in the 1950s. And then they consistently worked on it, because it affects so many aspects of building design, licensing, codes, heat supply. It takes that kind of long-term vision.

Different cities will have different goals. For instance, one European city came to us with a goal of making city administration more efficient and customer oriented, to make Genoa a more attractive place to live and work. Their administrators were not treating citizens like customers and they wanted to change that. There was a technology aspect but it also required better processes and a different culture. If you don't change the culture you won't get lasting change.

What do you want city leaders to know about ABB?

We are a company with a long tradition of striving for efficiency and sustainability in electricity and infrastructure. We have broad global experience, so we can share learnings from all over the world. Through us you can learn from other regions.

And we are open minded and interested in exploring with our customers. We are ready to cooperate with cities and other partners and bring our contribution. We're highly interested in getting involved early and building a long-term relationship.