President & CEO, Hexagon AB
The days are over when geospatial was just a map with processors presenting pictures of glaciers today and 20 years ago, says Ola Rollen, President & CEO, Hexagon AB. He believes people need much more updated information as he talks about his vision of dynamic GIS and complete workflows
Hexagon grew by 5% in the first quarter of 2013 in its core business of measurement technology, with the lion’s share coming from the emerging markets. You have vowed to continue investing in markets like Brazil, Russia, China and Africa. What kind of commitment does Hexagon have in these regions?
Emerging markets do not have set structures in the government; they are developing the structures. They are open to trying new solutions. In fact, certain emerging markets are adopting new technologies faster than the mature markets. Take China for example. The Chinese are trying to define their infrastructural expansion so that they can have control over their infrastructure in a better way than developed regions like Europe. Whether it is the high speed rail programme or optical fibre cable laying, they are starting afresh.
Africa is taking off now. For the first time ever, Africa represented more than 2% of the sales of Hexagon in 2012. Africa is not one country or one region. It consists of several sub-regions, all with their unique problems. Hexagon is committed to helping all the emerging markets with its new technological developments.
Though growth rates are relatively low, Western Europe and North America constitute the majority of Hexagon’s revenues (about 61%). What is your strategy in giving momentum to these markets?
If a company wants to grow in the mature markets, which are currently facing depression with very little flow of money, it needs to develop next-generation technologies that are so good that users cannot resist buying them even if they don’t have much money. That is exactly what Hexagon is doing. With our next generation products, a user can enhance his productivity with lesser resources. This phenomenon spurs growth in mature markets.
Hexagon has been thriving on acquisitions — big and small. What is the vision behind so many acquisitions?
About 10 years ago Hexagon did not exist in the form it is today. To get the full picture, it is important to know that Hexagon sold about 70 companies, bought 100 companies, basically changing its skin, so today we are a completely different company from what we were 10 years ago. That’s how dramatic the change has been.
Our strategy regarding acquisitions, as we call it, is ‘make or buy’. We have the resources to develop the technology required for our future but sometimes it takes too long to develop. Sometimes it is quicker and cheaper to buy a company that has the technology we need rather than spend a lot of time and develop the new technology required.
Hexagon has done so many acquisitions. That’s a huge change of character for a company in such a short period of time. How have you managed to oversee this change?
We buy top class companies that are number one or two in their respective markets. So, they will survive. And there is no alternative to hard work and communication.
Would it be right to say Hexagon’s offerings now encompass the entire geospatial workflow?
We are not defining ourselves as a traditional GIS player. We are currently preoccupied with designing solutions that are comprehensive and based on complete workflows. But we still lack certain technologies that we might acquire or develop to fulfill our vision for our customers.
How is the integration and synergies between the various Hexagon companies opening up further areas of innovation and business?
We want the acquired companies to continue with the businesses they were in before we acquired them. Otherwise we would lose a lot of money. On top of that, we take a small group from the acquired company and a small group from the core Hexagon organisation and they start working together developing new solutions for the future. That is how we operate.
At the beginning of the year, we heard you saying that Hexagon will now focus on organic growth. But after that, we have seen several acquisitions. What is the reason behind these decisions?
Distribution is vital to our business model. Unless we have local sales and service people, who work very close with the end user, we cannot sell our future solutions. This is about consultative selling rather than book selling through distributors. So, we are transforming Hexagon from having the traditional distribution model of selling finished products into having local consultants who discuss the problem with the customer and then come up with a solution.
At present, geospatial business comprises 30% of Hexagon’s revenues. And there has been a consistent improvement over the previous years. Going further, will we see a change where geospatial contribution will be more than the rest of the business components of Hexagon?
It depends on how you define geospatial. We have another definition. We say we work with the real world and the manufacturing world. This way, the revenue sharing would probably be 50-50. Manufacturing solutions include automotive, aerospace and everything that is manufactured. The real world solutions deal with everything from a police department to a defence body to a utility company. We will continue to focus on real world applications, which are closer to geospatial, but not necessarily geospatial in the strict sense. They will probably outgrow manufacturing activity in the future.
You once said, “The geospatial industry will eventually move from being a horizontal industry to a vertical one focused on certain industry applications.” Can you elaborate on the rationale behind this thought?
Take the case of defence. Security forces are not interested in a plain map. They need the map to know what they are encountering, what they can expect in the next few miles and they need to know where all their tanks are in relation to each other and the enemy. If one could have map as a background, with real-time sensors that could convey positioning in real time; and be able to update the map every second as the enemy approaches and actually see the enemy moving on that map, they would get excited. So, it is not the technology of creating the map that will excite them, but the technology that allows them to scan and see what the enemy is doing. Security forces need to know how many drones or planes are just now approaching their territory. They also need to know where the drones are at the moment, with their speed and their direction. They can then intercept and shoot them down. That needs the coming together of a variety of technologies, not just geospatial.
When I say future is in the verticals, I mean to say that the days are over when geospatial was just a map with processors presenting pictures of glaciers today and 20 years ago. Our customers need much more updated information. Mapping is great and that is the prerequisite. But we now need to invest, not in GIS but in the layers that describe the activity in the real world — [what we call] a dynamic GIS.
What are the verticals of Hexagon’s interest?
We want to focus on four ‘smart verticals’— smart infrastructure, smart protection, smart resources and smart manufacturing. Let us take smart protection for example. It could include public safety, security, defence or even natural disasters. And smart infrastructure could be transportation networks, power and water systems, construction, city and urban planning. Smart manufacturing is the metrology system we are building on.
What is your assessment of the current day’s geospatial industry?
Geospatial technology will be increasingly important, simply because life is getting more and more complicated. We need to be more careful about the resources on this planet and I believe 3D technologies will enable mankind to smarten up in using resources. And the verticals we are looking at – infrastructure, resources, manufacturing, and protection — all enable us work towards sustainable development of the planet.
We, as a company, aspire to be a great partner to our customers by developing meaningful solutions that in turn translate into good productivity achievements for our customers. Otherwise we do not have a reason to exist.