Good day everyone, and welcome to another episode of the Momenta Podcast, and today we have a special guest, its Rob Massoudi who is the Global Head of Digital Transformation at ABB. Rob’s one of the most interesting presenters that I’ve heard, at a major industrial conference last fall at IoT Solutions World in Barcelona we got a chance to hear him talk about the vision that ABB is articulating, and what’s helping them shape their strategy in the future. It seems like we have a lot of intersecting interests between the Momenta team, and what Rob’s doing, and what Rob is helping to articulate for ABB.
First of all, I want to thank you for joining us Rob.
Thank you, Ed. It’s a pleasure to be here and speak with you today, looking forward to our conversation.
Terrific. Well, I’d like to start with just a little bit of context and learn a little bit about your background. Talk about what’s shaped your view of technology, the markets, and what has brought you to your current role at ABB?
My journey started as a computer science graduate, I have a minor in mathematics, and I landed in the land of mainframes, developing software and real-time operating systems, and from there it was downhill! I actually have over time transitioned into the business-to-business strategy, management consulting, and ultimately start-up company, and now here I am in this big industrial mega company, driving digital transformation.
So, my background is predominantly computer science, I was weaned on IT, and have gone through many phases as you can imagine, the internet phase, the YKK phase, and now the next big phase which is digital, and this is really where computer science has come into the industrial companies, in a much bigger way than it has in the past. It’s a beautiful place of thought to be in, I always like to be in the cusp of disruption, transitions, and transformation, the new and the new as we call it in the industry. So, with the background of computer science, IT software, networking communications, hardware, and of course my last start-up company was a start-up in IoT, platform and advance machine learning, analytics applied to asset intense in industry, sort of positioned me well to join ABB, and really bring that experience and knowledge in helping ABB create new value from the use of digital, and innovation in digital, and really figure out how to monetize that value in the longer run.
So, that’s the culmination of things that happened, if you will, the various junctures in my career that brought me here today.
Oh, that’s a great combination of both industrial and IT experience, and business experience as well. When we touch on the term digital transformation, I’d like to get a sense of what that means to you from your perspective at ABB, and it’s become a term that’s very popular, but would love to get your take on the term and really what the broader implications are.
That’s really a great question Ed, and you know a great question is one that I have a flight for, good questions are one I have an answer for, we’ve got multiple plays on this! You know it’s really simple, it comes down to one thing, and one thing only, and that is how can we leverage digital technologies, and in essence digital technologies meaning it has software, its connected, and has intelligence, that’s integrated into the assets. How can we bring digital innovation from technology, digital technology, to drive business innovation in our customer-base, in order to create value? And that value could come in a number of different ways.
It could come from the way that they deliver their products and services to the market, and the products and services that they deliver as a result of use of our technologies, and most of the companies that we work with have infrastructure, there are infrastructure companies. Or, whether that is from optimization of their infrastructure, or getting business agility or competitive advantage. So, it’s really all about that, it’s about how can our customers use digital technologies to innovate in their business, and create and extract value, thereby give ABB the ability to also create value for their customers and extract value.
Then of course there’s another very important dimension here, everybody is very focused on the technology, my group in particular we’re focused on where technology meets business, and where technology delivers business results. And to that extent digital has also opened up an entirely new way of monetization, we call it the Maslow’s Hierarchy of Evolution of business models and commercial models, where you go from basic product doing what it’s doing, to now product as a service, in other words these assets now become a service within themselves, to ultimately product as an outcome. There’s evolution in the commercial models that that parallels that.
So, it’s really about the two, it’s about a digital innovation and technology in the business, how that changes the business, and then how do you really monetize it through the business models, and commercial models. So, innovation on both sides, and they’re tied together. And at the risk of saying too much on this, I’ll just give you an example; so for example today you could sell a motor, and a motor does a motor what a motor does, and it just turns. Well, as you digitize this motor, in other words as you create what we call… I’ll throw another buzzword out, I love this, that’s what we really do well – buzzwords! So, as you create a digital twin, which means really a virtual representation of that asset, and you can model the behaviour, you can measure it, but you can also model the behaviour, you can also predict the behaviour.
Now you have the ability to take this motor and put it in the context of a bigger system, and a pump, and then expand that operational model to be the whole pump, and maybe pump is part of a water system. So, now you go to the next level, and you’re now creating incremental value, so that motor is no longer a motor, that motor is an intelligent component of a system that you can monitor, manage and control, and even predict its behaviour. So, now you’re creating all this additional value, as a matter of fact, it was one of my friends that said, ‘You know, at some point the data around those assets become more valuable than the assets themselves, in terms of value creation’. I said, it’s actually certainly what we are living.
So, digital transformation is really about that, it’s about working in identifying those innovations that digital technology brings, how it changes the business, and how it changes the business model, and what value it really starts to create for the customers, and their customers. And of course, what capabilities we need on the backend to be able to make that happen.
I’d be interested to get your perspective, as an industrial company, a bit of color on the state of the market today as it relates to context, this evolution of IoT, and really to frame the thinking here; if we go back say five or six year ago when we first started to see the big push toward IoT, we had a lot of very large companies spending a lot of money to build big marketing campaigns around industrial IoT. The reality is, I would say rather than seeing a big inflection, we have had steady growth and steady adoption, and maybe some misalignment of initial expectations with real outcomes. And of course, a lot of these technologies certainly harken back to early connected systems, and M2M systems in the nineties and the 2000’s. But from your perspective I’d love to get the sense of where the market is today, and some of the important insights along the way over this past – we’ll say this half decade, that you believe are really laying the groundwork for what we see coming over the next decade. Is that broad enough!
That’s pretty broad, it’s actually really good because it helps me come in from a macro level, and then we’ll get down to the macro hopefully pretty quickly. No, it’s great because you said the market, and I’m saying well what is a market? What is the market, market is various industries really adopting this technology, and the critical driving factor’s always been in adoption technology, other than the fact that it’s a beautiful shiny object and people want to play around with it; the true adoption only happens really when there’s business value that’s being generated from these technologies. I think if you look at IoT in particular, in that sense there’s a bunch of technologies that have been deployed in the consumer world, and then over time they’ve been hardened so that they can actually operate in a commercial world and harden even further to operate within an industrial world. And if you really look at it, the consumer world is probably the most agile flexible market, in adoption of these technologies and the application of these technologies like cloud, and analytics, and VR technology, and so on and so forth. Computers are getting cheaper, memory is getting cheaper, the all factors.
But if we sit back and say, ‘Well look at what happened’, financial industry was the first adopter after the consumer market, they’re the closest to the consumer, the business is closest to the software. Then of course after that we saw adoption coming to other companies, and ultimately it hit the industrial sector, and the industrial sector to discreet manufacturing industry is probably ahead of the rest of the industry. So, they’re ahead of the process manufacturing, they’re ahead of utilities and so on and so forth, so there’s actually an s-curve that you can look at that basically maps these industries. And the reason for that is pretty natural, it’s because as you get more into the industrial companies, you get heavier assets, and these are asset intensive industries, and these are infrastructure intensive industries. The reality is that these assets are built to last, so you have assets out there that are expected to last anywhere between 30 to 40 or 50 years, especially as you get to hit the industries.
So, it’s not that you can flip a switch and move, and there is a law of infrastructure upgrade that needs to happen, and of course you need to have business cases, you need to have use cases, and I always say it’s always driven by the business in the use case, that adoption. If you want to see where adoption’s occurring, look at the use case, look at the business case, see if it makes sense for adoption of technologies, and particularly as you have to go and super-impose a new infrastructure. So, a lot of these machines, devices, assets were not even connected, and that’s one of the first basic principles.
First you put sensors on them, but then you connect these sensors, so you can connect the data, so you connect it to a network where you can collect the data, and then be able to bring it in, to whatever solution application.
Of course the second factor is the readiness of the platform as a service, and so for a period of time in the industrial side there was quite a bit of fighting like you said, a few people had gone out there ahead of time and spent a lot of money on marketing, and way ahead of their schemes in terms of delivering a platform, but a platform that really exists until now, about a year ago we’re seeing consolidation of platform and service providers, and that’s actually helping them accelerate the adoption too.
So, there’s all those factors, there’s the factor around how do we justify the cost of this infrastructure based on a few small used-cases, and these are companies that they expect a return on equity and the investment, RIC of capital equipment in 24-36 months.
So, that’s been the main challenge, use cases, how do these aggregate in a way to justify the infrastructure and is the infrastructure really available. So, the good news is the technology is available now, and it is getting more and more mature. The good news is that the use cases are emerging increasingly in terms of how you really apply this to my business. For example, if I’m a manufacturer, in essence…
- How do I get to total lights-out manufacturing?
- How do I get to flexible manufacturing?
- How do I really get to until walling production of one?
- How do I get into mass customization?
This is where my value needs to shift.
So, as these use cases begin to emerge, and the technology and the need that matures or is ready for adoption, and there’s a business case to do it, we see that adoption occur. And where its failed is, it’s failed in the strategy in not having the right use cases; we call it the pilot purgatory, people just play around in the sandbox with it, and the business case is not really clear, and the cases where that’s happened, and there are many instances of that happening, and it’s happening more now where the business case and use cases are clear, and the technology is there, it’s beginning to move.
So, I think we’re in the cusp of that movement, but it’s a journey, and it’s not a 1-year, 2-year, 3-year journey, it’s a multi-year journey because of the nature of the assets in these industries.
And that’s a great lead in, because I wanted to focus on the areas where you and ABB are focused, which is around this broader transformation of energy and transportation. I’d love for you to share a bit of what you see is the big forces that are defining a massive tectonic shift that I think is leading to some of the most interesting things that you’re thinking about and working on with clients. So, if you could just frame a bit of what’s happening in energy and transformation, and how that’s impacting the work and the thinking that you guys are doing.
That’s a topic near and dear to my heart Ed, so thank you for picking that! We’ve been looking at this for a while now, we entered the market asking the main question, a question anybody would ask which is…
- How is this market going to evolve?
- What are the driving forces?
- When is it going to evolve?
- What is it going to look like when it evolves?
- And, how do we really get out there and create value and help accelerate and drive the growth of this market.
So, the convergence of I think electricity and transportation happened a while ago, when the first EV car came out, and it’s got a very slow – very slow progression of adoption, and that’s sort of what’s raised the question for us which is, if we look into our crystal ball, we look in the future, that’s the future; but where is that future, how far is it, and what’s going to help accelerate it, and what are the forces to your point that are really driving it?
So, as we stepped back and looked at this, we found out that there’s six major factors that impact the adoption in this market, the growth, and the acceleration and the growth in this market.
First and foremost, battery technology is definitely there, today its one of the most expensive components in electric vehicles, and increasingly as electric vehicles become autonomous, the energy demand increases because its fundamental they’re going to be data centers on wheels, so energy demand is going to increase. Of course, battery technology is not on the same illusionary path as some conductors, it’s not logarithmic in any sense, its material science, and then you add some computer science to it. But it’s getting better, the prices are coming down, of course there is a chicken and egg with batteries, so the more vehicles out there the cheaper the batteries, the more expensive the batteries. So, that’s probably a factor. The cost of the battery in itself as a component of the total cost of ownership of the vehicle is still a pretty significant component, enough to throw off the economics. So, that needs to be taken a look at seriously and carefully.
The next thing that we realized as government policy and incentives the governments are putting in place, we see some governments are being extremely aggressive, some not so aggressive. We’ve seen that they’ve sort of been pretty much focused on the carrot, in the past of couple of years we’ve seen that they’re now focusing on the carrot and the stick, meaning incentives to adopt, and at the same time putting regulatory measures in to encourage people to not go the other way. These are mostly around emission standards and emission air quality etc., etc., and being imposed in various cities around the world. Actually, the city governments are really leading this, not the federal governments but the city governments.
The third component of course was the value chain. There’s a shift from the hydro-programme value chain to electrical, or electron value chain, and so there’s an entirely new value chain, and a new infrastructure that needs to be built out. So, we call it the charging infrastructure, or let’s call it the electrical infrastructure, that’s required to ultimately charge and power these vehicles. And so that’s a complexity in itself because we’re talking about infrastructure, who is going to pay for it, how is it going to be deployed, or is it going to be deployed? How is it going to be affected by the overall adoption, and what happens with the vehicles etc. etc. and there’s urban issues and so on, and so forth. So, there’s a lot of challenges around the infrastructure.
The fourth element that we identified was the electricity demand, what happens to electricity in aggregate, not just because of the vehicle, because the vehicle’s now being attached to a building. So, now what we’re seeing is, we’re beginning to see a shift in the electrical and load profile of the buildings as a result of electric vehicles; which by the way will also happen as a result of automation like putting more robots and automating various things in the commercial-industrial sector. But now the building low profile is changing, so how is that shifting the demand, and that’s shifting the demand how is that impacting that value chain we talked about?
And of course, vehicle use, that’s a really critical competent here. Looking at the vehicle use itself, how often, where, how, when we have all these mobility services that are coming online, shares and they’re going to very significantly impact the use which subsequently impacts everything else. And of course at the end of the day it’s also about the commercial models, without the right commercial models in place, we are not going to see the acceleration of the growth, and I’ll give you an example of that. If the only option for us is to pay time and a day charges for electricity, in order to charge our cars and vehicles, the economics are such that that’s just not going to work. And of course, who provides it and how much they get paid in the value chain is really key.
So, we looked at the value chain and the money flow, and the potential need for commercial models, and there’s of course new elements in this value chain, what we call the replacement for the hydrocarbon value chain, and there’s needs for new commercial models in this area, even from financing these vehicles. Of course all of this digital technology is a huge component of this, and the underlying infrastructure, the digital capabilities within the underlying infrastructure are going to be very significant and a determinant in the commercial models, and how you address the electricity demand, all around the infrastructure itself, and battery technology, so on and so forth, even the vehicles.
So, what we see is, there’s a convergence that is occurring between connected data and electricity in this world, and they have technological implications, and has commercial implications. Now we can get into that a little bit more if you like.
No, that really interesting, and I thought what’s so interesting about the work you do at ABB is that you really sit at the nexus of this convergence of electricity or power, and information technologies. Would love to get your thoughts on how broader adoption of electric vehicles and the different types of clean generation which are say non-continuous when we’re talking about the difference to solar and wind, and then of course choreographed storage. How does that change the whole way you think about the electrical grid? I’d love to hear a little bit about what ABB is doing to address the different stakeholders in the value-chain.
I think when we step back and look at this, we see there’s another trend in another industry that correlates very closely and needs to be looked at very carefully, or actually plays into this, and that’s decentralization of generation. With the advent of PDs, and battery storage etc. increasingly we are seeing a shift from central generation and then transmission distribution, to more distributed generation and consumption, so what we call the emergence of a prosumer market. It’s all about energy, it’s all about the energy, at the end of the day it’s about where we get it from, how’s it produced and ultimately what we pay for it, and how’s it produced – is it green or not green.
So, that is a very significant trend, and what’s happening is that while the demand is increasing on the edge of what we call the electric utility network, back into the network itself that demand is dropping, and the demand is increasing but so is production of energy on the edge of that utility network. So, think about on customer premise just behind the meter or on the other side, just on the other side of the meter where the utility ends and your building begins. So, is that white space there being addressed by distributed generation, and micro-grids and so on and so forth, so that’s a very significant factor to the point that you’re making Ed, and how this is going to impact the adoption and the source of energy, how is this going to impact the commercial and adoption of AVs?
So, the answer is what we’re seeing is there’s an increase in energy demand, and there are a lot of technologies that could address that, and increasingly more and more our customers are looking to put microgrids in, and become a prosumer in order to manage one thing, and one thing only, and that’s to optimize their low profile in aggregate, as a result of adding these electric vehicles. So, we’re adding electric vehicles, we’re driving increase in energy demand, that energy demand right now based on the current utility model has a massive cost, because there is unmanaged and variable low profile associated with electric vehicles. And so, the ability to optimize that load for any given customer.
For example, I’m DHL and I have 100 trucks, in my depot I probably have maybe a total use of 500kW per month, and as soon as I add these 100 trucks at 85, 100, 125 kW my demand is going to go to Megawatts, and first of all is the utility going to be able to supply that to me?
Second are the models going to be such that it’s not going to cost me an arm and a leg, because at the end of the day my business is to deliver packages, it’s not really to do anything else. And so, I’m measuring my success based on a cost per kilometer of everything in, my vehicle, my energy, fuel, my labor and all of that. So, that then begins to have a significant impact, that variable low profile begins to have a significantimpact on the total economics of electrification of the vehicles. Therefore, there needs to be another solution, I’m going to go to the utility company, they’re going to build a substation, they’re going to charge me millions of dollars to build a substation. It’s going to take them two-and-a-half years to do it, and then I’m going to have to pay the peak demand charges that is just going to bankrupt me in a sense because of this massiveunmanage and very low profile.
So, that’s really the main problem that we’re trying to solve. And to your point, the convergence of this distribute energy resources, the availability and the ability to do that is a big part of the solution here.
That’s a very multidisciplinary problem as well. I would love to get your thoughts, as ABB being a global company, are there countries or cities, or even companies that you’re working with, which you believe are helping to lead the way or establish best practices. Because what you’ve described requires a fairly delicate orchestration of incorporating new ideas and new technologies, but also ensuring that traditional service levels, and reliability of infrastructure is still maintained, working with private sector, public sector, and innovative technologies. I’d love to get a bit of perspective on where there’s some differences, if there’s some folks that are doing things that you find exemplary?
You’ve hit the nail on the head, it is complicated isn’t it? It is pretty complicated, very multidisciplinary, so to make it simple and less complicated one of the things we did was, we sat back, and we said, ‘Okay, if you look at all these six factors, where is the lowest resistance, where is the lowest resistance for adoption occurring?’ It became clear to us very quickly that the lowest point of resistance was in short haul, regional urban delivery initially. So, these are basically fleets, the transformation of fleets was going to happen much faster, and the reason for that was 1) They’re not necessarily reliant on a public infrastructure for charging. And 2) Most of the major cities in the world are basically passing zero emission zones, which means if you do not have an emission friendly car, you can’t actually drives in those parts of the zone, and they’re generally in the central parts of the cities, which means that a good portion of your business is going to go away if you don’t have an electric vehicle delivering packages for you. So, that was another determined driver.
So, there’s two elements there, and you’re not really subject to regulation beyond that, so you can do what you want on your premise in order to do that. Then of course the total cost of ownership of vehicles in between an ICE vehicle which is Internal Combustion Engine vehicle, and an electric vehicle is an order of magnitude apart. Vehicles have 2300-plus parts in them, an average EV has 20-plus parts in it, so maintenance is much slower, and they are much more durable in that sense, again the only thing being the battery. So, we see that market’s moving first, the fleets are moving first and that’s where the adoption is happening in a much-much further way, because again the lack of dependence on a public infrastructure for charging.
The second thing of course is the main thing was the battery, and the battery capacity to be able to do what they’re doing. So, those elements as we looked at it; the business model made a lot more sense, the infrastructure deployment was a lot easier, and there was regulatory pressure on these companies to move, and there you have it, there was a converging…
So, that actually has taken off, all the companies – you saw DHL bought Streetscooter an EV company, so these have got out there even buying EV manufacturing companies to do this. We know La Poste is deploying EVs because you can’t go in central Paris unless you have an EV, we see that happening with the likes of UPS and DHL etc. So, that’s where we see the first movements occurring. And of course the other fleets are the next likely targets, so these will be more the passenger fleets, and so on and so forth in terms of the next growth. Again, success has been a bit slow, but will be definitely forthcoming in this year, and there are a few factors that are going to drive that, one is the cost of batteries, the cost of batteries is continuing to decline which is phenomenal, that helps the commercials There is availability of these vehicles, by the end of 2019-2020 automatic manufacturers, traditional auto manufacturers, not your Tesla’s, etc., they’re going to be introducing over 300 new models of EV-enabled vehicles. So, we’ve seen that the traditional manufacturers are stepping in and they’re going to provide the supply, which is a big component, and of course at the center of all this is still the cost of battery.
That’s another factor that I think is going to hopefully put the little need in our S-curve of adoption between 2019 and 2020.
I was interested in how you were working with the traditional auto-companies, companies like Volvo and Jaguar, but to the extent that you can align what you’re doing which is really necessary to have that kind of infrastructure. How is this impacting those traditional manufacturers
Do you mean traditional OEMs that are not going to be in EV business?
No, the autos that are looking to make that transition to EVs.
So, just to be clear you’re talking about OEMs that are looking at converting the business, to EVs from ICE vehicles?
It’s interesting, I don’t think they have a choice frankly! It’s happening, and the market is going to pull that, and what we’re seeing is that almost every other manufacturer that we know of has either released or planning on releasing electric vehicles. As a matter of fact, if you look at some of the work that Tony Seba has done in his analysis, I’m a big fan of Tony, he basically thinks that by 2040 80 percent of vehicles on the road are going to be electric vehicles. His analysis I think is pretty good, he’s looked at it as multi-dimensions, he’s looked at it as emergence of right sharing, immobility services and the like in coming to that conclusion. We did our own independent analysis and came up the same.
To answer your question about auto manufacturers, the auto manufacturers see that, I think the challenge for them has been getting their heads wrapped around some of the things you would imagine they would, internal struggles, internal challenges of convincing the existing business that’s producing ICE engines and ICE vehicles that there is money in this, when there is no market, yet, to speak of! But the market is evolving; convincing that they need to shift, it’s a transformational thing, they need to shift their revenues, or the investment of the company from ICE to EV. So, those internal challenges struggle with these traditional auto-companies where they’re sat around in their boardrooms, I’m sure, and they looked at them and said, ‘There’s not a market there yet, and so why would we move resources from here to there?’
That’s beginning to happen, those battles have been fought over the past year or two, and those battles have been won, and most of the other manufacturers that we are working with buy the new divisions that are going to be generating EVs.
Look at Ford, last year Ford basically announced their Etis division, which is going to be purely focused on EVs, so on and so forth, and that was an $11 billion investment for Ford to do that. Jaguar, Volvo, all of them are pretty much going through this process and have gone through that process and pretty much landed where in the next couple of years they are going to be creating a platform, a single platform that they could deploy in multiple PVs. So, big investment and of course there is change over in their manufacturing, all this stuff takes a lot of time and money, but it’s happening, and we’re seeing it happening. So that’s from an Auto EM perspective. Again, their main challenge has always been in the cost of the battery, and the secondary challenge for them has been, ‘Well how do we really monetize a vehicle now in this new environment’, because electric vehicles are not traditional vehicles, you can actually put services on top of these vehicles, so what value are we going to be able to generate, and how are we going to monetize our value, and what part of value chain do we want to play in. Then of course, last and not least, who is going to pay for the electrical charging infrastructure, and how’s that going to happen, how’s that going to evolve? So, that’s the auto EMs perspective based on our engagement with them, what we understand in terms of the challenges and opportunities.
As you’ve provided some examples of some of the early more forward-thinking cities and folks that are putting together plans for electrified fleets, you mentioned European cities and I would love to get your perspective on which regions seemed to be ahead of others, and what some of the obstacles are in the US that would maybe allow EDs the virtuous cycle of clean energy and transportation to really take hold in the US?
I think to your point I need to step back and look at the world picture and see who is doing what, and how is that working out. Again, looking at the data we’re seeing that China is going to lead the adoption, they’re going to lead innovation, they’re going to lead destruction in this field. What we’re seeing now is that Europe is going to rapidly consolidate and unfortunately US is behind in that. The reason is first of all whether this is a high priority or not, and of course you could argue that China is really one government, and it’s the kind of government basically that decides and defines what happens, and it happens, so they don’t have some of the challenges that other countries have. But China has made this an ultra-high priority, that’s a very strong government push for electric vehicles, and they’re driving to total cost of ownership parity by 2025, that’s not too far. They’re providing not only incentives but they’re also investing hundreds of billions of dollars in the infrastructure to make that happen, as a government. Of course, for everybody else it’s a challenging market to access, but for China it’s a brilliant market.
In terms of Europe to the point you made earlier, what we’re seeing is that there’s actually strong regulation, and improving EVs in the European Union, and Europe in general. We’re seeing that a lot of city governments are really aggressively forcing and putting punitive measures in place if you’re not carbon neutral, or if you’re not environmentally friendly, so there’s that. But the challenge there of course it’s a fragmented EV structure market, so that’s one of the challenges. But we’ve Europe really consolidating and moving a little bit faster, and of course certain countries are going move a bit faster than other counties in Europe, like Germany, UK, France, etc. they’re ahead of countries like Italy and Spain in terms of imposing those regulations, as well as putting in the incentives to drive that.
So, now we look at US as one country, the biggest challenge we have here is the regulatory challenges, the regulatory uncertainty, and the challenging total cost of ownership and the economics of this. But what we’re seeing is white model selection and strong progress in select state. So, we’re seeing select states move aggressively ahead of the country, and the expectation or the aspiration I believe is that other states will see the example and the successes, and then they’ll follow suit, but that’s what’s happening in North America, it’s the regulatory uncertainty and the challenge in total cost of ownership of economics.
That’s really helpful. So, as you look forward, I always like to ask, as you’re articulating a very complex vision, but really compelling over the next several decades with this essentially once in a century type of transition, what are you most optimistic about, and where are your biggest concerns?
I am optimistic that we’re going to save the planet! That all of this is an effort to save the planet. I’m really optimistic that in this particular instance the convergence of the government and the market forces is coming together finally, and really driving this. This is not something that we should be doing, this is something that we haveto do, there is no other choice, this is about the planet. I’m very optimistic that these forces will come together, and it will happen. It gets pretty complicated, if you look at the value-chain you have OEMs involved, you have telematic companies involved, you have grid connectivity, you have energy management services, you have analytical and digital services, you have charging infrastructures, by the time you get to the customer. So, it’s a very complicated environment, but it’s coming together.
It took they hydrocarbon industry how many years to build and make that entire hydrocarbon value chain as efficient as it is today? So, we’re actually moving at a much faster pace when it comes to electric vehicles. So that’s what I’m optimistic about is that technology, evolution technology has been such that we’re seeing improvements we need to see in both price, performance, and availability, that’s really ultimately driving the commercial value, which is ultimately going to drive this transformation.
What keeps me up at night is a few things, there are things we can control and there are things that we cannot control, and one of the challenges we have is that the regulatory environment is uncertain, and regulatory environment has a pretty big impact on what happens here. So, say tomorrow we decide that we’re fine with how much carbon energy we generate, and that there’s no need or desire to have EVs, which is somewhat the state that we live in right now, is that’s going to dramatically impact and slow down the adoption. So, that’s one of the things.
The other thing I’m really losing sleep on is, it should be happening a little bit faster, but some of the challenges in the infrastructure, and that again ties back into the regulatory policy and regulatory pressures and incentives, that’s not going to happen as fast as it needs to. That’s actually a reality today, the who’s going to pay for this infrastructure question hasn’t really been resolved yet, so the oil company has built the entire infrastructure for ICE vehicles, but who is the oil company that is going to build that entire infrastructure for electric vehicles? The regulated utilities aren’t going to do it because they’re regulated in a way that prevents them from doing it! So, who’s going to build this infrastructure? That’s the piece that we lose sleep over as well.
Again, I hate to keep pointing back to the regulators and to the policymakers, but that’s where most of our concern is. The technology is there, the commercial models are evolving, the companies that the commercial models are proving to be viable for moving forward are going to do it, regardless of whether the government asks them to do it or not, because they’re getting the economic benefit of doing it. When it comes to the broader consumer market adoption, that situation becomes a little bit more complicated, and that’s where the whole question around who’s going to build the infrastructure, who’s going to manage it, who’s going to operate it? Who’s going to regulate it, how are you going to do it, who is going to make money off it? Those questions haven’t yet been resolved.
I would say that every quarter that Tesla meets its production and shipping targets, means that there are that many cars that just become demand drivers, and the infrastructure is going to have to respond to that demand.
This has been super-helpful Robin, I think we’re very much in concert in terms of our views at Momenta, we’re big believers in the big energy transformation that’s coming, as well as EVs. I always like to ask finally if you could make a book recommendation, or any other resource recommendation for our listeners?
Absolutely. We talked about it a little bit earlier, Tony Seba’s book, ‘The Clean Disruption of Energy’ is a must read I think on everybody’s lists who is interested on what’s going on in this industry, how it’s going to evolve, and what’s going to happen. I would say that Tony Seba must have a beautiful crystal ball because he’s been pretty dead-on in his prediction so far, so I would love to have a piece of his crystal ball. It’s a great book, ‘Clean Disruption of Energy’, Tony Seba, I highly recommend it.
Tony’s one of our favorites here, and I think anybody who’s listening to this that hasn’t got the book needs to rush right out and order it immediately. It’s amazing, we’re very much in agreement.
Again, it’s been an absolute pleasure, again this is Ed Maguire Insight’s partner in Momenta, and our guest has been Rob Massoudi who is Global Head of Digital Transformation at ABB. And Rob, I want to thank you once again for taking the time, it was incredibly interesting and informative, as always as I would have expected from hearing you speak before.
Thank you, Ed. It’s been a pleasure.