with Vladimir Kozlovski, General Manager, Atlas Copco Compressor Technique Scandinavia
The European debt crisis and the Asian slowdown are casting dark clouds over the world economic outlook. But Scandinavia as a region has been very stable. How is this market been performing relative to your global portfolio and how much emphasis is being placed on Scandinavia within Atlas Copco globally?
One of the main strengths of Atlas Copco globally is that we have a highly diversified customer base. This has afforded the company stability over a challenging economic period. The portfolio of compressors that we have and the project cycles we operate vary a lot which has offset the economic ups and downs. Our compressors are being used in the smallest of workshops all the way up to the big oil and gas refineries, ships and commuter trains, they generate snow on ski slopes, provide source of breathing air in the hospitals.
In Scandinavia, Atlas Copco is developing nicely and we see a lot of further opportunities for us going forward. We are not only bringing new products into the compressor industry, but we are entering new businesses. One of the interesting ones for us is biogas upgrading where we see trends developing in Sweden and Norway. It’s a relatively new field for us and we have a couple other new technologies that we can try out. We have our own in-house gas generators, which are used in the oil and gas industry as well as new vacuum products. These are new sectors which help us grow and can potentially offset any downturns for traditional Atlas Copco users.
With about 25% margins globally, how has performance been in Scandinavia?
It is hard to assess these dynamics in this market because some of the profits are generated locally and others we can only see on a consolidated level. We are always under pressure in a competitive market. But the pressure for us is not really coming from the margins, but instead from understanding customer specifications and finding a proper solution which is accepted by the customer and still reasonable to manufacture. Requests from oil and gas customers tend to be for highly specified equipment. We are good with customer interaction and finding a cost-effective solution, which we find very interesting from a business point of view.
In Scandinavia Swedish mining has traditionally been a strong area for Atlas Copco. To what extent would you consider the Norwegian oil and gas boom to be its replacement for Atlas Copco?
For us it won’t be the new mining. The difference between mining and compressors is that we provide front line equipment for mining and because of that our activities in mining are very visible. By contrast, a compressor is a utility. Because of that very often it attracts a low focus and has a low visibility. In oil and gas, no matter how much we supply, our equipment will not be as visible as in mining. Never the less Compressor Technique is the biggest business in Atlas Copco group.
Atlas Copco is indeed investing in extra resources in oil and gas; however, growth is limited by the speed with which we can hire qualified human resources. Moreover we have no opportunity or right to make a mistake in this market. We are very careful when we bring in new resources in terms of educating them and insisting on quality. That takes time and for us it has been the main limiting factor to faster growth.
We have gone a long way in the past two years to reorganize our oil and gas structure globally and to bring it closer to the customers. Before it was handled by a central design and manufacturing hub, with a few outlets. Now we are creating regional centers where we do packaging, design and application support that is all intended to bring our service closer to the customer. We will soon have the same setup in Norway as well. Before we were supported by our oil and gas center in the UK. But we wanted a more proximate location to our customers.
How do you find the differences between offering your services to a variety of industries and the oil and gas sector? Are oil and gas customers particularly demanding?
Every industry is specific. There are different challenges and requirements and the oil and gas industry is one of the most demanding of them all. They require highly specific requirements in design, manufacturing and even documentation. This is the biggest difference.
Also the amount of time it takes to agree on the actual product is a challenge. This is a market where standard products are not accepted so each project will be somewhat specialized, which requires a lot of interaction with the customer. We have to be very efficient in our interactions, revisions and paperwork.
Many companies say that although Norway does not typically have R&D centers, it’s quite often an important platform in their global innovation strategies. How do you see Norway’s role in Atlas Copco’s global oil and gas innovation?
Today our designs are done in the UK and Belgium. But we are expanding our engineering resources in Norway, mainly to be closer to customer specifications and to better understand their needs. Our challenge is to bring the innovations available from Atlas Copco’s industrial markets to oil and gas markets. This requires working a lot with customers as oil and gas is such a high-risk area.
Based on the feedback that you have received, would you say that in your innovative model your projects are defining the markets that you go into? Or the markets define what types of products you innovate?
We would certainly prefer the first case to be true. Our innovative process begins with analyzing the specifications of the market in order to begin a conversation with the customer. Then we incorporate market-specific improvements into products, which we believe are beneficial for the customers. Sometimes these improvements are accepted and in those instances we are driving the market. In some cases they are not, in which case the market drives us.
Innovation can sometimes play a negative role by cannibalizing a company’s product base. What are the challenges that you face as an innovative company?
I believe that first we have to challenge ourselves no matter what. If we do not challenge ourselves then we become stagnant, lose our markets, lose our customers and lose their trust. We have a long history of innovation and it is our intention to continue this tradition. Personally I have not seen the negative impacts on our company of bringing innovation to the market.
In some parts of the company we challenge ourselves internally by bringing new products. So far the contribution from these processes has been very positive. In the oil and gas industry we are going from a supplier to becoming a true consultant. We are now looking not only at the equipment that we supply but also at how it is integrated into the customer’s process.
By understanding customer applications, we can increase safety, reduce our carbon footprint and contribute a host of other positive benefits. For example in the cementing industry we have a very specific compressor, which uses 30% less energy than its similar technologies. But when we integrate it into a customer’s process, much more energy is saved.
As a company, our goal is to be first in mind, first in choice with the customers regardless of whether it’s a drill rig for mining operations, an assembly system from the industrial tools division, or a small compressor. Our values, which emphasize innovation and our goals, connect all of our products. Internally, the target is to either be number one or have a reasonably short timeframe to become number one.
What is the case for the Scandinavian market in terms of being first in mind, first in choice?
We are lucky here having started as a Swedish company and on February 21 we celebrated our 140th anniversary, which gives us a tremendous advantage. In terms of being first in mind, we are very close to the target in Scandinavia. In terms of first in choice, this is a very competitive market but our products have long been considered at the top of their class.
Indeed if you go back far enough, Atlas Copco actually has a telegram from Roald Amundsen thanking us for our contribution and services to his Arctic voyage in 1926. The company is really a part of the history in this region.
How do you see the next few years for Atlas Copco and what will you bring to the oil and gas industry in Norway and to Scandinavia?
The biggest change in our operation is that we are becoming closer to the customer, which gives us more opportunities both in terms of the business and customer value. We have a really good understanding of Norwegian oil and gas specifications, having been a supplier for many years.