User Input Key to Making Future Now Says Emerson CEO

“We are significantly increasing our investment in the next generation of technology.” Emerson Electric CEO David Farr explained the company’s strategic imperatives for the future.

Farr made his remarks during the first major keynote address on the opening day of Emerson Global Users Exchange 2007 conference and exhibition on Monday, Sept. 10, at the Gaylord Texan in Grapevine, Texas, near Dallas.

Business leader of Emerson Process Management from 1997 to 2000, Barr expressed his amazement at how the exchange has grown since that time and explained that it’s his enormous passion for competing, winning and making things happen that fuels his awareness of the critical nature and value of user input. He says this is because user input helps direct Emerson’s investment in creating new products and solutions.

Farr says Emerson’s sales for its soon-to-end 2007 fiscal year will be a little over $22 billion, and that the company is devoting $2.8 billion in operating cash flow for investments. “We focus on generating profit and cash flow to invest in the future, and so we can do what we need to do in both good times and bad,” he says.

Outside U.S. Sales Grow

Notably, this will be the first year that Emerson’s sales outside the U.S. will outstrip its inside-U.S. sales. In fact, the company’s 140,000 employees worldwide now include 34,000 at 40 facilities in China. The company has invested $4 billion in the Asia/Pacific region in the past few years. Consequently, Emerson’s sales in emerging markets will total $5.3 billion in 2007.

As the company begins to once again reposition itself for the future, Farr said Emerson’s leadership is concentrating on four strategic imperatives—Business without Borders, Energy Efficiency, Communications and Resources for the World. “We don’t talk about being green. We just do it,” said Farr.

Farr explains that to accomplish these goals and deliver customer value amid a variety of shifting global trends, Emerson also is concentrating on four primary activities, including:

• Strengthening its business platforms, resulting in growth rates that continue to hover around 5% to 7% per year;
• Pursuing technical leadership, especially by continuously developing and launching game-changing products and solutions;
• Globalizing assets by investing in emerging markets, which are already playing an increasingly crucial role in Emerson’s overall success;
• Driving business efficiency by using “speed, speed, speed” to exceed customers’ expectation more quickly.

Fueling Future Investment

Emerson Process Management has grown at about a 10% to15% compound annual growth rate (CAGR) for the past five years, and now totals about $5.6 billion in sales per year, which is fueling further investments in the future, Farr reported. The business’s sales by region include 36% in the U.S., 24% in Europe, 19% in Asia and 21% in the rest of the world. Its sales by product group include 44% in measurement devices, 31% in valves and regulators, and 25% in systems, solutions and services. 

“During the downturn of 2002-03, we hired more engineers and invested in more technologies,” added Farr. “We have more than 7,600 engineers working on new products at 130 engineering centers worldwide, so we were able to introduce 648 products in 2005-07.”

To keep up with and surpass these gains, Farr added that Emerson is continuing to work with its customers to identify and invest in those game-changing technologies. “We share technologies across all out businesses and invest to transform our industries, so we can create value for our customers and increase returns for our investors, which means I get to keep my job,” said Farr. “This is why user feedback is so important. It keeps us from becoming insular. It helps us plan, gives us a compass for where we want to go and measure how we’re doing.

“We also build on acquisitions and internal investments, but we do not buy businesses to strip and milk them. We buy businesses, invest in them and take them global. We intend to be a global player for years to come.”   

Farr added that Emerson also is making long term investments in its PlantWeb architecture and other technologies, so it can bring more leading products and solutions to its users. This includes a more than $500 million investment in more than 250 engineers, who have produced 60 major products in the past five years, including more than 400 patents and 7,600 project wins. These gains are being made mostly in four main technology areas—including safety instrumented systems, rotating equipment, PlantWeb for remote access and wireless PlantWeb.

“I’m not retiring anytime soon, and as long as I’m here, Emerson Process Management will get the investment it needs to win,” says Farr. “We’re no longer the asterisk we were in the 1990s. We’re the leader, we set the trends and we intend to continue to do so.”