Self efficient - Interview wth Eaton's COO
Eaton COO Thomas Gross talks to Utilities Middle East
Eaton COO Thomas Gross talks to Utilities Middle East about the company’s new structure, its regional approach and energy efficiency.
When a senior executive enters the office, everyone sits up and pays attention. So when Thomas Gross, the chief operating officer and vice chairman of Eaton’s electrical division is on his way to the Middle East, it’s no surprise the atmosphere in the firm’s Dubai office is one of anticipation.
Last year the company went through a drastic structural rethink, with the firm now organised on a regional basis rather than a product focused one. But regionalised or not, when a top boss from the US visits, the local staff are always keen to impress.
As Gross enters the office, together with a supporting entourage, it’s clear any staff anxieties are misplaced. Appearing laid back, warm and genuinely excited to be visiting Dubai, it quickly becomes apparent that Gross is a man with a passion for his job.
“The thing that unifies Eaton is that almost the entire company, nearly 100%, is involved in power of some type. So there is electrical power, fluid power with the hydraulics and aerospace and there is the mechanical power so we are typically involved in engines and valve trains and things that generate power,” enthuses Gross.
“My responsibility is to run the electrical side of the business,” he continues,
“The electrical sector is broken into three pieces which are completely regional and so we have an Americas business, an Asia Pacific business and we have a Europe, Middle East and Africa business.
So we have a pretty simple organisation structure. We changed from having a technology organisation where we were organised by various product attributes and we changed in 2009 to a complete regional structure.”
The new structure has given the company many benefits, chief of which is the self sufficiency enjoyed by each regional hub in the various parts of the globe. The changes are also designed to make the firm quicker and more responsive to a client’s needs.
Gross admits the change was a big task, but believes the hard work is now completed: “We have had a big upheaval as a result of that, but it has gone very well so we are now essentially finished with all those organisational changes in the firm,” he states.
The Middle East represents an important part of the Eaton business, Gross says. “World figures for the electrical sector stood at $6bn with$3.5bn inside the Americas and $2.bn outside. And the Europe, Middle East and Africa region is bigger than the Asia Pacific region, but that’s all we can tell you.
The Middle East has been a good growth region for us and we are expanding our capabilities and that expansion is coming through normal product development but also through acquisitions.”
“The Middle East has become a very nice region for us, we think we have good growth prospects going forward and I would say it is important, but today I would still say it is too small and we want it to become bigger,” he adds.
In mentioning acquisitions it appears Gross is giving us a teaser of another topic he is proud of. Eaton in recent times has been prolific in the number of acquisitions it has secured.
In 2008 the firm acquired a portion of Schneider’s MGE business, the Taiwanese UPS firm Phoenix Technologies and the German and Austrian firm Moeller.
“And all three of those are what made electrical the size it is and doubled the revenue of the business,” exclaims Gross.
“Bear in mind most of those businesses had a sizeable interest in the Middle East already so it added to what we had here,” he adds.
At this point Frank Campbell, president of the electrical sector in Europe, Middle East and Africa, adds some more regional perspective. Campbell is based in Switzerland and is visiting the Dubai office at the same time as Gross – as if the secretary hastily arranging floral decorations didn’t have enough to worry about with one boss.
“In 2009, we also made an acquisition of sorts, we entered into a joint venture here in Abu Dhabi with a company called SEG Middle East, we are the joint venture partner there. This company is primarily involved in low voltage generator switchgear, obviously it is a platform from which we want to grow substantially into the low voltage and even the medium voltage switchgear here in the Gulf,” says Campbell.
“We have a manufacturing facility here and it is Eaton managed and will be called Eaton Middle East switchgear manufacturing company so that was another venture in 2009. It gave us a start from a manufacturing perspective in the region. Something we can look to grow on,” he adds.
With the large number of acquisitions in recent years, Eaton has become experienced in the process. “It’s never easy, the best way to think about it is that we are pretty diligent about standardising processes within Eaton once we have declared them a standard. Our acquisition integration framework is a pretty complete set of steps that we follow on each acquisition,” comments Gross.
“I think each one has some uniqueness around the culture but we have acquired more than 50 companies in the last 10 years sow e are pretty good at going through the steps in a logical way,” he continues, “With these three though, it was particularly easy because of the culture fit.
All three were very scientific and technical companies, very proud of their products and very good at developing their products. Eaton is also a very technical company so we tend to have a lot of people with engineering degrees. We don’t have so many business degree people but a lot of engineering people. “
When talking business in recent times, it seems no conversation is complete without mentioning the lingering, menacing elephant in the room, which finally appears to have one foot out of the window: the economic crisis.
“2009 was a very challenging year economically and most of our markets decreased and this was the first year in a long time where the world had a negative GDP. Our business was affected by that and we are still in the midst of that to some degree. So the challenge we face is understanding the rate of recovery,” explains Gross.
“However during this period I think the company performed extremely well, we had a loss for the first time in many decades within Eaton in the first quarter of 2008, then immediately in the second quarter we turned to profitability and improved every quarter since then. I think we responded quite well, we kept our research and development programmes all in place. We had to reduce our expenses in some ways but in general we were able to get through this economic crisis quite well,” he adds.
Eaton has had a very diversified past, but took the decision to concentrate power and according to Gross, has never looked back.
“That was a really good idea. We find ourselves today in the middle of some very contemporary issues like energy efficiency, power management, smart grids, these are very terrific markets and I think the way Eaton transformed itself was very thoughtful and it turned out to be a good thing to do,” reveals Gross with pride.
“What we do is demanded in a lot of sectors and a lot of places. The thought of power management is very pervasive across the globe. So we find ourselves in a very interesting spot. We are in the middle of some very interesting discussions,” Gross adds.
When he talks about energy efficiency, Gross appears most animated, and it is obvious this topic is one of great importance to him. And while he champions the smart grid concept, he also doesn’t make it the be-all and end –all of efficiency ideas.
“From my perspective I think there is so much we can do right now to save energy and quite often we associate energy conservation with longer term things like the smart grid. I think it will be enormously helpful to have a smart grid and distributed power generation. But if you look around today and see how much energy is being wasted, our message would be let’s get going on that now, because there are tremendous savings that can be easily financially justified without government incentives or incentives from the utilities,”
“I was at a North American Electrical Manufacturing Association event last week and we were sitting around talking about the smart grid and how we can accelerate the smart gird – the estimate in the US is that it will cost $260bn to develop a smart grid,” he continued, “As we are sitting around talking about it there is a projector just showing an empty slide, 50 lights on the room, it was hotter than it needed to be, these are simple things – lighting controls and HVAC.”
One of the new services on offer from the company is an energy audit, which sees experts go into a building and assess how energy costs can be saved. “They are broad suggestions of how to dramatically cut energy costs. Of course we are available to do these projects as well. The key point is that people need help with this, it’s not easy to do,” reveals Gross.
With energy efficiency Eaton clearly has a vision and the people in charge to take things in the right direction.
Gross’ assessment that while the bigger, long term strategies are important, there should still be a focus on smaller initiatives which can be done today, is one which has particular relevance in the Middle East. Sometimes in this region it can be said that industries have found themselves staring off into the distance at a bigger picture, and missing the vital points in the foreground.
As Gross is ushered onto a meeting with Dubai’s electricity authority DEWA, he states his ambitions for the next 12 months. “My hope is that we are absolutely viewed as local manufacturers and a local company and there would be no difference if you were in Europe, Middle East, or Asia.
That is our objective and we have been looking to achieve that for a long time. I think we are starting to achieve that status. That is or vision - to become a truly global electrical company,” he concludes.