This is an era in which only "change" is "invariable," and now it seems to be a time of turmoil in which everything must be redefined.
This is an industrial manufacturing company that has been changing for 15 years. It is a power company that will never stop the transition.
This is a typical American old man. Coca Cola, who is at the same time "most representative of the American spirit," has never "served" for more than 30 years in this "change" theme.
As a giant with more than a century of industrial product manufacturing, Eaton brought different growth methods with different business combinations and business models. In particular, the transformation began in 1994 and made Eaton use trucks and spare parts as raw materials. The main manufacturing company has successfully expanded its business development space and has become a big winner in aerospace, electrical and hydraulic business, and has avoided the global decline in the auto parts industry.
“The financial crisis certainly affected us, but Eaton’s performance in 2008 was still satisfactory.†Ma Kaijie, Asia Pacific President of the world’s top 500 and the world's leading manufacturer of industrial products, compared the figure to last year Demonstrated due appreciation. Who can say no? The $15.4 billion (Asia Pacific region has reached nearly $2 billion) and 18% annual sales growth are indeed rare for an industrial product manufacturer. All this must be attributed to the transformation - the "transition that has lasted for 15 years and will continue."
"Transformation and diversification are the core drivers of Eaton development," Ma Kaijie told reporters. "In the future, you will not hear the completion of Eaton's transformation because it will continue." The transformation of Eaton that began in 1994 is precisely Jack Welch led GE to turn M&A growth into an era of “rumors†in the US business community. Together with U.S. industrial giants, Eaton never stopped his own M&A pace—more than 100 M&A and business spin-offs in more than 100 years. Even in the bad fourth quarter of 2008, Eaton’s M&A deal still contributed 13% to its sales growth contribution. Last year’s two major acquisitions were the acquisition of the German Muller Group and Taiwan’s fly. Swiss company.
The growth of mergers and acquisitions and the endogenous organic growth are all derived from Eaton’s diversification strategy, which is also the secret of the success of giants including GE. In the face of the crisis, Eaton’s diversified strategic advantages appear undoubtedly: it greatly diversifies the business risks and avoids severe fluctuations in the company’s development due to the economic cycle. When Jack Welch preached sermons in China, countless Chinese entrepreneurs were trying to get the secret of diversification success from the most successful CEO. Unfortunately, many companies only learned the fur, and eventually became Another "martyr" on the so-called diversification road.
Eaton, as a typical representative of success, has precipitated a practical understanding of diversity. “Our diversification includes three aspects: First, diversification of business, which is known from our extensive product line; First, geographical diversity, early Eaton’s business is mainly in the United States, and now the United States Revenues accounted for only 45%, while other regions accounted for 55%, especially in emerging economies, the share of emerging markets in the Eaton business has increased from 10% in 2003 to 21% in 2008; the third diversification Based on the diversification of the investment in the economic cycle, Eaton divides the business cycle into early, medium, late and non-cyclical periods, and arranges investment in advance according to the different impacts or degrees of different business cycles.†Ma Kaijie Told reporters.
A diversified strategy provides Eaton with the best conditions for the effective deployment of global resources. Although globally, the truck and auto parts business is no longer the main business of Eaton. Currently, the proportion of these two businesses is less than 1/4 of the overall, but in the diversified region, the Asia Pacific region is in these two businesses. However, it has shown a good momentum of growth. Ma Kaijie stated that Eaton still maintains investment in these two projects in the Asia-Pacific market.
Not long ago, Warren Buffett voted a firm vote on this century-old company by buying Eaton stocks. Ma Kaijie made no secret of his excitement. However, for him, the establishment of the new Eaton Asia Pacific headquarters near Hongqiao Airport and the establishment of Eaton’s second R&D center in China will be more valuable.
â—Ž Dialogue Ma Kaijie
Never-ending transformation
Reporter: Eaton hasn’t stopped transitioning since 1994. Eaton has evolved from the former truck- and component-based company to today’s diversified industrial product manufacturers such as electrical, aerospace, and hydraulics. What is the purpose of Eaton’s transformation? What kind of goal does it mean to end the transformation?
Ma Kaijie: The fundamental purpose of Eaton’s transformation is to help the company maintain growth while the economic cycle is poor, and eliminate or reduce the adverse effects of economic turmoil as much as possible. Because everybody often sees that a single-business business is developing rapidly when the economic environment is good, and the business is growing rapidly, but when the environment deteriorates, the survival of the company immediately becomes a problem, and many companies today are the same, and these single companies have an economic cycle. The resistance is very poor. Diversified companies can precisely spread the impact of this cycle.
In 2008, our financial statements showed that the end-market conditions were relatively weak and growth was slow, but electrical, hydraulic and aerospace business growth was strong. This resulted in overall business growth of 18%. This is our diversity advantage.
The transition has been going on for 15 years. This 15-year transition is the basic strategy for our growth. The reason why we have to continue for 15 years is because our transformation has two ways: one is through mergers and acquisitions, and the other is the growth of our own business. For example, it takes a long time to make successful mergers and acquisitions. It takes time from the early negotiations to the later integration and adjustment.
Fundamentally, continuous business transformation and diversification are essential for us to maintain growth, so we will not tell you that one day our transformation is over. Because we will continue the transformation and change forever.
Reporter: Eaton, as a manufacturer of industrial products, has also been pushing for efforts to become a solution provider for the system. Taking IBM as an example, it successfully completed the transition from manufacturer to solution provider. What are the considerations for Eaton’s transformation in this area?
Ma Kaijie: When people ask me this question, I will definitely give a positive answer, because this is also the direction of our efforts. In fact, many of our business groups have already transformed to this aspect and are providing system solutions to customers. This is a good job for the Electric Business Group. They have already provided customers with the entire system of design, installation and service. Solution: In the aviation field, we not only manufacture parts for customers, but also design products and provide customers with the most cost-effective application solutions at what voltages. For example, in China’s large-scale aircraft project, we It has been involved from the earlier period.
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Diversification is the basic strategy for growth
Reporter: At the beginning of the year, Eaton undertook a new business reorganization and was reclassified into two major business groups: electrical and industrial. Among them, aerospace, automotive components, hydraulics and truck parts business were all placed under the industrial group. What is Eaton's business restructuring?
Ma Kaijie: The most important reason for reorganizing the organizational structure is that the electrical business has grown tremendously. Therefore, the organizational structure must be changed accordingly. The proportion of electrical business in the Asia-Pacific region is even more than 50%.
The first is the Electric Group. In the past, this business was mainly in North America. Last year we conducted two major acquisitions. One was the German Muller Group, and the other was Feirui of Taiwan. After the acquisition, nearly 60% of Eaton’s revenues were in the United States. Outside contributions. Another reason is that in the electrical business, we always want to promote the concept of power chain, and always hope to provide customers with a complete product line, such as China Mobile and chemical companies, steel companies, etc. They can use a range of products from computers. Servers, power supply centers, and a range of other products can all find matching products on Eaton’s product lines so that they can better extend product lines and sales lines. In addition, the various business units under the industrial group, such as aerospace, hydraulics, truck parts, etc., can actually share customers because they are facing the same type of customers and put them into a system that can cooperate and play Scale effect.
The third is to facilitate the development of new technologies and integrate the technical capabilities of each group. For example, hybrid power technology, which can be provided by our trucks and hydraulic groups, will give customers more choice.
Reporter: Eaton, as a typical representative of diversity, has survived many economic cycles in a century-long history. How does Eaton understand diversity?
Ma Kaijie: Eaton’s understanding of diversification has three aspects. One is geographical diversification. Before Eaton’s business was mainly in North America, especially in the United States. In the later transition, Eaton’s business was gradually diversified, and now the US market accounts for To 45%, the market outside the United States is 55%. Among them, the growth rate of emerging markets outside the United States is obviously faster than that of the domestic market. It increased by 10% in 2003 and by 21% in 2008.
The second is the diversification of business, Eaton from the original industry with trucks and auto parts to the current business composition: electrical group accounted for 45%, industrial groups accounted for 55%.
The third is to diversify according to the business cycle. According to the business cycle, we divide the business into early cycle, medium cycle, late cycle, and no-cycle business. For example, in the early cycle of business, residential electrical, single-phase power protection devices, heavy trucks, and automotive business, they actually showed a downward trend in 2007, a serious recession in 2008, but aviation in the late cycle Businesses, etc., have only shown signs of decline until the recent period, and the 2008 performance is still quite good. Therefore, it can be clearly seen that the time for the late-cycle business cycle to decline is 18 to 24 months later. This enables the diversification of capital investment and business deployment based on the cycle of business decline.
In general, Eaton’s growth strategy is mainly supported by three components. The first is the optimization of operations, the second is the optimization of the organizational structure, and the third is how to manage and utilize good suppliers to achieve the capital structure. The optimisation reduces capital occupancy and reduces the concentration of capital, which is very important in the current period.
Execution power is the constant power for sustained growth
Reporter: Regardless of whether to transform or maintain the continuous growth of diversified businesses, the executive power of enterprises is particularly critical, and the Eaton Business System (EBS) plays an important role. How does Eaton keep its execution in change?
Ma Kaijie: We use the Eaton Business System (EBS) to play a role in the entire business system. EBS, like a loop, incorporates all kinds of good tools and conducts continuous assessments of various businesses. (The Eaton Business System includes companies. Its core values, policies, business operations, and processes for continuous evaluation and improvement of benefits, it provides a platform for the company to optimize management within the company, link different cross-industry products, and develop project development, engineering technology, and manufacturing Links, increase management efficiency, reduce management costs, reduce management risks). For example, we use the Eaton business system to integrate new acquisitions, which is a very important part.
Then, in the process of application, the effect was continuously assessed and the effect of the assessment was incorporated into Eaton University for optimization and promotion. Eaton University is basically an online university. It also has face-to-face courses. Most of the training content is jointly developed by the global team. It shares Eaton’s global practical experience with various regional languages ​​in a timely manner to share with various regions. Eaton’s business system also has a very comprehensive assessment mechanism. I’ve been an evaluator for more than ten years. The assessor can come from all aspects and levels. The business evaluated is not a counterpart business. For example, I just arrived in India last week to evaluate a research center. Such an assessment allows the leader to maintain continuous familiarity and attention with the business and to know how to use this system to help employees improve their execution.
Reporter: Eaton entered China in 1993, and its business in Greater China has maintained a sustained rapid growth. The important factor that can achieve growth is a good localization. How do you understand the locality of a manufacturing MNC? Chemical?
Ma Kaijie: For a manufacturing company, localization does not only mean manufacturing products locally, but also designing products suitable for the local market. It needs to know the needs of local customers, and must have engineering and technical capabilities, research and development capabilities, and local Such as supply chain management, is to have the ability to provide systematic, integrated, localized solutions. Only with these qualities can we stand up in the local market and continue to grow.
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