Facing static European markets and opportunities carried by megatrends, Ensto’s new CEO Ari Virtanen leads the charge toward growth.
“Twenty percent of what we do is about definition,” says Ensto Group CEO Ari Virtanen, who has spent months leading strategy development since he joined the company in April 2016. “And the remaining eighty percent is about execution.”
Ensto’s strategy is in service of Ensto’s larger set of goals, termed “10 x 10 x 10 x 10” by Virtanen. “This is a shorthand way of expressing our year 2020 goals of ten percent operating profit, ten percent sales growth, ten percent of sales from new solutions, and ten percent of sales from geographical regions new to Ensto.”
What are the drivers behind these goals? “It’s partly internal,” says Virtanen. “Currently, our business shows negative organic growth, and our operating model is highly complex.” And there are external drivers, too, the megatrends that are changing the business environment in which Ensto operates.
Urbanization is the first megatrend impacting Ensto. “By 2050, seven out of ten people will live in cities,” says Virtanen. “Over the next 20 years, China will construct as many new buildings as currently exist in all of Europe.”
Since Europe is not a growing market, Virtanen notes that “Ensto’s choice is to find its way in the markets that are growing or seek new growth opportunities in current markets.”
Another megatrend closely linked to urbanization is the shift in economic power to Asia. “Ensto can benefit by being properly positioned,” says Virtanen. “Geographically positioned of course, but also solutions-wise.”
Digitalization is a third megatrend which will impact Ensto’s business, and Virtanen says most Ensto products and solutions will eventually need to have a digital component in order to stay competitive.
Social change is a multi-faceted megatrend. “The over-65 segment of the world’s population will grow rapidly and want to stay in their homes as long as possible,” says Virtanen. “But we also have younger people who, due to social media, are forming their view of the world in a completely different fashion than their parents did.”
Virtanen says it’s critical to understand how Ensto’s business will fit into this new paradigm. “Older people want to own cars, but the young are happy to share. Also, what channels do we use to speak to these different customers?”
Finally, Virtanen notes that sustainability is a megatrend with more than one face. “Or course our products must be environmentally friendly. But ‘sustainable’ has an ethical dimension. Do our suppliers behave according to the same ethical principles which Ensto follows?”
Given these megatrends, Virtanen believes a large part of Ensto’s future will be in smart cities. “We’re not ignoring rural areas,” he says, “but smart cities are powered by smart electricity, and this is Ensto’s strength.”
Specifically, Ensto will play in three ecosystems within smart cities: smart buildings, smart transportation, and the smart grid. And Virtanen emphasizes that a lot of business will take place at the intersections of these ecosystems. “Electric Vehicle charging stations can be a part of a smart building, or EV batteries can serve as demand response capacity for the smart grid.”
“Ensto can’t be everywhere at once,” says Virtanen, “so we’ll choose the ecosystems where we have strengths and knowledge and focus on those.”
Given these megatrends, Ensto will achieve its 10 x 10 x 10 x 10 goals by fighting on four fronts between now and the year 2020. Virtanen calls these “must-win battles,” or MWBs, a term popularized by global consulting firms.
“These are transformational battles,” he says, “each led by a high-profile set of people within Ensto. And when we’ve reached our goals in 2020, we’ll then replace these MWBs with a new set.”
The four MWBs are:
(1) Customer connection. “At Ensto we have a diverse set of teams, processes, and tools for our customers,” says Virtanen. “But we need to transform this into holistic customer channel management.”
(2) Product portfolio renewal. “Ensto has a very diversified portfolio, which we need to simplify,” he says, “and we need a better balance between products and solutions, ‘solutions’ defined as when we combine a product with a service.”
(3) Winning services. “Ensto’s digital maturity is low,” he says. “We must develop cloud capabilities and IoT platforms. Digital technology will enable us to build new services that have very high value.”
(4) Agile delivery capability. Virtanen points out that Ensto is not the largest market player and should not try to be. “We cannot compete in volume, but if we have the best delivery capability then this is a major differentiator for us.”
Virtanen admits Ensto’s 10 x 10 x 10 x 10 goals are challenging, which makes definition and execution all the more critical.
“Luckily,” he points out, “we’re not starting from zero. We’re not leaving everything behind. We will build our future on what we’re already doing well. It’s nothing dramatic. We’re just taking action to be more competitive and sustainable for the future.”
Virtanen’s vision is an Ensto recognized as the electrical solution provider for smart cities. But he says that to achieve that Ensto must maintain and cultivate its employee-first culture. “If we can offer the best employee experience, then this translates to the best customer loyalty and sustainable profitable growth.”
“When our strategy has been executed,” adds Virtanen, “when we’ve achieved our goals, then we will see that our smart solutions truly make lives better.”
Text: Scott Diel
Image: Kaupo Kikkas