Wärtsilä Corporation Annual report 2014

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ONE STRAIGHT LINE

A single, strong, company-wide purpose defines Wärtsilä's actions in 2014.
Scroll down to explore the year's stories​ and browse our facts, figures and analysis.

The gas ambassador

John Hatley, Americas Vice President, Ship Power, expounds
on Wärtsilä’s past, present and future role in the gas value chain.

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The gas ambassador

John Hatley, Americas Vice President, Ship Power, expounds on Wärtsilä’s past, present and future role in the gas value chain.

Born and raised on the coast in Seattle, Washington, John Hatley’s life was always going to revolve around the sea. Boating ran in his family and he would see commercial traffic such as coastal freighters and barges passing by their home daily.

“I was indoctrinated from a very young age to the water,” he describes, “and all the activities related to it. And as a young man I was fortunate enough to receive a congressional nomination for the US Marine Academy at King’s Point.”

Thus began an education that would provide John with the perfect springboard into a career in the marine industry. After graduating from King’s Point in 1976 with dual licenses as a Deck and Engineering Officer and a deep understanding of entire ship systems, from bridge to engine room, another unique opportunity arose: a graduate scholarship from the Society of Architects and Engineers. He used this to pursue his developing interest in ship design, entering the University of Michigan Master's programme to study Naval Architecture and Marine Engineering.

Achieving his master’s degree at Michigan in 1980 (with high honours), John began his career in a combination role, working for shipping companies and a well-known naval architecture firm. “Combining my design background with ship operations knowledge has been the give and take of my working life, and I’ve experienced career roles amongst several of our current customers,” John explains. “So I’ve had a rotation in the ship operations field, in the ship design field, with ship owners, investors, business development, and at shipyards, providing insights across these business windows.”

On land

In the 80s, John became more and more involved in ship operations internationally, including a period in ship construction at Samsung with sailing time as a Chief Engineer in global shipping trades. Having worked on the move and overseas a great deal, it was around this time that he began to hear the call of the shore.

“In the late 80s I found a wonderful companion for life, my wife Stephanie. At that time, I pretty much decided a good marriage is one where you can be more at home than at sea or around the world. So I came ashore and went to work for a pension fund investment company that held a portion of assets in the shipping segment for diversification.”

With work experience covering virtually every perspective possible on the marine industry, the only unconquered territory for John was management. A helpful nudge from an executive of a Fortune 500 company provided the entrance he had been waiting for.

“In the late 90s,” he says, “one of my mentors said to me: ‘John, you need to complement your deep operations and technical expertise with a business degree, and then carry this forward, merging them into business development.’ So I followed his advice, went back to graduate school and got my MBA at the University of Washington while working full time.”

Following a unique project at GE, John soon found himself in a position to exploit his entire range of skills. The offer of a senior position at Wärtsilä was both a logical step and a form of renewal. “Now I could go back and put everything to use: my naval architecture training, my knowledge of ship design, and my experience with ship operations ranging from large, two-stroke engines – the most powerful engines in the world – spanning all the way down to four-stroke diesels, electrical automation, and propulsion. I went from handling a slice of the pie to a whole menu of items. So I took the opportunity and it’s been terrific.”

Home at last

To outsiders, Wärtsilä’s position as a supplier of LNG-related technologies and services in the current gas-centric climate may seem like a strategic risk paying off. With his decades of experience in the marine industry, John seems uniquely placed to explain the company’s series of fortuitous decisions. How did the role of gas in shipping shift during his career?

“In the 1970s,” he begins, casting his mind back to the start of his working life, “for the US, steam was slowly undergoing a transition to diesel replacement, and in the 80s large-scale shipping relied exclusively on heavy fuel oil. There was really no thought of LNG other than as a cargo for the large ocean-going carriers, principally transporting from sources in the Middle East to the demand areas of Japan, Europe and the US.”

During that era, LNG had no standing as a marine fuel, and LNG carriers utilised natural gas boil-off as their cargo tanks slowly warmed up during the extended ocean journey. As John explains, these ships also made alternative use of the gas to assist in their propulsion, initially in steam boilers, and then later, during the mid 1990s, as a fuel for reciprocating engines. This remained the case until the year 2000, when the first coastwise vessels in Norway, small ferries and off-shore supply ships, began to run on natural gas as a fuel.

“That’s really when I think the coastal and port area vessels began to inherit a lot of the technologies and knowledge from the larger ocean-going carriers that, at that time, had been operating successfully for a number of years already.”

John has a way with metaphor, and sees the progress of LNG technology as generational: “The largest 50-centimeter bore gas engines were designed for the high power needs of LNG carriers crossing the oceans. That’s the grandfather. The father is represented by the 34-bore gas engines, which were originally intended to serve as generator engines for steam ships running on natural gas, but soon became the choice for power generation on land. And then today’s grandson: the 20-series engine, a lower-power solution for both smaller vessels and generator set applications. This latest series completes a power band that now spans a broad market: the smaller river and lake vessels, much larger vessels along the coastlines, and, with our newest low pressure two-stroke addition, the large ocean-going vessels.”

The conversation, of course, soon turns to the environmental benefits of LNG, currently driving interest and activity worldwide. “Wealthy populations’ demands for stronger environmental stewardship are reflected by the politicians in their regions, and they’re charting our future direction. It’s predicted that soon the Baltic and North Americas control areas will be joined by Japan, Australia, the Mediterranean and that others will also adopt similar measures to reduce emissions. So our customers around the world are seeing a clear structural and societal change aimed at becoming better environmental stewards for the sake of future generations, and this expanding opportunity is moving the market growth trajectory rapidly and continuously.”

Wärtsilä addresses the whole gas value chain from market source to consumption, covering the entire energy spectrum.

As well as the development of gas in the marine sphere, John is equally keen to point out Wärtsilä’s parallel work with gas in land-based power generation. “I wasn’t here in the 90s when the company really went in to reciprocating gas engines,” he says, “but I’ve spoken with those that were, and our initial ambition was to target the large ocean-going carriers moving LNG around the world. Gas was a substitute for lower efficiency steam-turbine engines that had been the choice from the 70s and 80s.”

“That was the traditional choice,” he explains, providing historical perspective. “However, that technology and market space can equally apply to power utilities, where the generation of electrical power would enjoy similar benefits from the use of gas. This is why we’ve seen gas become such a popular choice for balancing renewables. And you have to remember: the engine doesn’t know if it’s afloat at sea or on solid ground. It can function perfectly well in either case. So, in joining this company, suddenly a new market opened up to me in power generation.”

There is an infectious zeal to the way John describes the current business environment for both shipping and power generation, along with Wärtsilä’s potential within it. It’s little wonder he has earned the nickname of “gas ambassador” for the company. John’s newfound capacity to exploit the full quota of his skills evidently arrived at an exciting moment for the marine industry in general.

At Wärtsilä, he found himself in a position to witness the convergence of diverse expertise on the LNG value chain. “This company is now uniquely positioned globally, with an incredibly expansive breadth,” he enthuses. “We address the whole gas value chain from market source to consumption, covering the entire energy spectrum. Wärtsilä spans the entire range from gas receipt to liquefaction, marine transport logistics, storage, regasification, and consumption in power plants for electricity production.”

A short talk with John Hatley demonstrates that Wärtsilä approaches the market with more than just this expansive technology offering. There are passionate experts behind this story, and their actions are navigating the industry toward a new course: its destination is the sustainable age of shipping.

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Entrepreneurs of innovation

Wärtsilä gains a competitive advantage by introducing innovative industrial design solutions.

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Entrepreneurs of innovation

node, noun, a point at which subsidiary parts originate or centre

Stepping from the campus thoroughfare into the building that hosts the Wärtsilä Innovation Node at Helsinki’s Aalto University, your first impressions are of a light, airy space. A large cafeteria dominates the lobby, and calmness seems to prevail over all the students in sight as they read, have quiet discussions over lunch, or seemingly drift quite unhurriedly from place to place.

But this superficially relaxed exterior belies the importance and intensity of the work that takes place here, just as the Finnish education itself has consistently been ranked as one of the world’s best, despite lacking the near-manic pace and rigidly enforced discipline seen in other countries seeking similar results.

The location of Wärtsilä’s R&D hub on this site is no accident, as Ilari Kallio, Vice President of R&D at Ship Power’s 4-stroke business line, explains to us.

“The Innovation Node’s placement is one way for us to get fresh ideas and maintain a connection to society in a wider sense. For example, this is where we work with student product development programmes at the university.”

“We’ve seen some great results,” he enthuses. “We provide them with a topic related to our strategy and the students explore it from an entirely new angle – always with the intention of developing a concept that could be translated into a new product, service or business model.”

If this sounds like the introduction of entrepreneurialism into academia, that’s exactly what it is. This isn’t innovation for innovation’s sake, as a recent project providing smartphone-based assistance for service engineers demonstrates. Using the advanced communication capabilities of handheld devices as an alternative to the storage of paper manuals and written notes to instruct new service operators, the project might very well soon see fully-fledged development into an integral component of Wärtsilä’s service offering.

user experience, noun, the overall experience of a person using a product such as a website or computer application, especially in terms of how easy or pleasing it is to use

This emphasis on user experience – while it has netted billions for certain consumer technology companies – is rarely seen in the industrial sector, where performance as measured in megawatts is a more acknowledged barometer of desirability.

Juhana Arkio, Ship Power’s Manager, Industrial Design, emphasises that this will not always be the case. “End user understanding is critical in modern business,” he tells us. “For Wärtsilä, this means gaining a competitive advantage by introducing innovative industrial design solutions.”

He goes on to outline the industrial design procedures that his team and himself have instituted, product by product, to bring the end user closer to the centre of solution planning.

We begin with a number of annotated diagrams collectively known as a comprehensive design specification. “This is the result of deep research into the environment in which the product will be used,” Juhana explains. “It demonstrates both the perspective of the customer and the end user. In preparing this study, we need to ask the core questions: ‘What is needed?’ ‘What are the boundaries of our planning?’ It’s not just legislation or regulations, though of course these play a part. This specification takes into account the user, the market and the technology to bring together all the ‘design thinking’ Wärtsilä brings to the table.”

We go on to look at the products that have profited from this in-depth research. In Wärtsilä’s new 4-stroke engines, not only do we see the outer visual identity of the engines, but also the design work encompassing every aspect of how human beings encounter and interact with the product. This design approach also includes the new LDU-30 local display unit, used for controlling and monitoring an engine. The UX design also covers software interfaces, even going so far as to detail the software used to configure the programme that service engineers will use in their daily work.

As you can see,” Juhana continues, “this is a truly end-to-end approach to design. Everything that can be considered and optimised for the user in this product has been. We’re really adding value through design.”

identity, noun, the qualities, beliefs, etc., that make a particular person or group different from others

Optimisation for the user is one of the most important dimensions to industrial design. Another is the product identity, and the way it reflects Wärtsilä’s values and ambitious goals. Juhana sees this as descending directly from the company strategy.

“In industrial design, we aim to distil Wärtsilä’s strategic-level drivers – lifecycle efficiency, reliability, serviceability and safety – into one strong product identity. When considering the implications of design on perception, this goes way beyond colours and where you put the logo. This is about what these devices represent and how their identity talks to people. In a way, we’re giving the strategy a voice.”

Pinned down to a single value he’d like to see Wärtsilä's customers perceive in product design, Ilari Kallio proposes reliability. “Establishing the idea that the company can be counted on to deliver and our products can be counted on in the field is hugely important. Everyone across the organisation works with that in mind.”

entrepreneurial, adjective, having the spirit, attitude or qualities of an entrepreneur; enterprising

The fact that both Ilari and Juhana work under the banner of Ship Power’s 4-stroke business line, yet have done extensive work on innovations bridging each of Wärtsilä’s other business areas leads us to enquire precisely how R&D functions in the organisation.

For Ilari, the key phrase is ‘entrepreneurial thinking’.

“If I see an opportunity or synergy with some other business line, there ́s nothing that hinders me from capturing that synergy. Even if we have our own responsibilities, it doesn’t mean we can’t collaborate proactively. Entrepreneurial thinking is our route to the easiest, most productive and most economical ways of working. Organisational structure doesn’t have to limit collaboration if you see there is a benefit.

“It’s just like running a small company: you need to find out who the best partners for you are. They could be internal partners or they could be externals. You don’t have to share budget in order to share knowledge and do collaboration. It’s a win-win.”

Juhana picks up the thread: “We’re a very small team and our agenda is innovation. The nature of industrial design is such that we often see a use for our competence across all of these business areas. Why should we restrict ourselves to a single product line? We do a huge amount of work for service business innovation, for example, where industrial design is playing an increasing role. If you look at a typical service design agency you’ll find UX designers, end user researchers, GUI designers: these are the skills we have right here.”

Design innovators evidently do not see corporate structure as any barrier to inventing and implementing new, beneficial solutions, but Ilari reaffirms that company strategy provides the direction for their work.

“The broad strokes are,” he explains, “decided at the management level. Directions like gas, fuel flexibility and Smart Power Generation are established there. But as they pass down through the organisation, finding application in each of the different divisions and then, in turn, the business lines, these decisions translate into a huge variety of different opportunities."

“One strength we have in Wärtsilä is the capability to see where the potential lies and understand where we want to be as the market changes and new needs become visible. What kind of products do we need? What value do we bring to our customers? How do we position ourselves? There’s only one quality that can help you answer these questions: customer understanding.”

Juhana confirms that in the world of cutting-edge industrial design, the very same principle applies. In fact, it’s the basis of a powerful trend: “At any innovation seminar, at least 80% of the core content is about end-user and customer studies. In our case, though, we have to go beyond even what the customer, or anyone else, is able to tell us in the here and now.”

When all is said and done, the customer is the purpose of creating innovation. At the Innovation Node, this means finding new ways to add value at each stage of the product life cycle, and looking ever onwards to the solutions of the future.

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’Because I am a Girl’

Our personnel help to drive change for the better for girls in developing countries.

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’Because I am a Girl’

In early 2014, Wärtsilä personnel in Finland selected a charitable initiative for the company to support. The combination of a well-chosen partner, a strong group effort, and a unique internal initiative should help drive change for the better for girls in developing countries.

Supporting girls’ education is one of the single best investments we can make to help end poverty. Did you know, for example, that:

  • 62 million girls are unable to go to school and that every year in higher education increases a girl’s future income by 15–25%.
  • Every day, close to 40,000 girls get married and a third of them are under 18 years old.
  • 50,000 girls die yearly because of complications in pregnancy or delivery.

Plan International’s ‘Because I am a Girl’ campaign aims to support millions of girls in getting the education, skills and support they need to transform their lives and the world around them. Wärtsilä employees in Finland selected the campaign from a number of other worthy causes to be a joint initiative between personnel and the company as a whole.

Pushing for gender equality and improving lives

Plan International works with millions of children in 86,000 communities in 51 developing countries across the world and is continuously looking for new ways and opportunities to advance the achievement of gender equality and girls' rights.

Through the ‘Because I am a Girl’ campaign, Plan‘s projects will address the barriers to girls completing a quality education of at least nine years, as well as equip them with the assets they need to safeguard their future, promote gender equality and improve their lives.

“Collaborations like this really help to further the aims of the campaign”, explained Susanna Saikkonen, Plan’s Director of Corporate Partnerships in Finland. “This partnership with Wärtsilä and its employees in Finland is a very important one for us and will help both in fundraising and in spreading our message even further.”

“The issue of girls worldwide in need of further education and the guarantee of a safer, healthier life is one that has an emotional impact on many people, and we were happy to find that Wärtsilä’s people shared our strong feelings on the topic,” she continued. “Only real passion like this can motivate such a huge undertaking.”

The direct fundraising initiative

“This was one of the first pilot ParticipAid programmes in Wärtsilä. The results and positive feedback from employees showed the importance of and need for charity activity to which we all can contribute.”

MARKO VAINIKKA, Director, Corporate Relations and Sustainability, Wärtsilä Corporation

The practical arrangements of the donation programme were launched for personnel at Wärtsilä’s headquarters in April, and continued onwards to Vaasa and Turku in October. These took the form of what is known as a ParticipAid programme: a voluntary charity framework.

Personnel were invited to make either a one-time or monthly donation, which would be automatically deducted from their net salary. These one-time donations were then matched by Wärtsilä, who pledged to double every euro donated, passing on the final sum of € 27,146 to Plan in December.

"Girls’ education is the best and strongest weapon against poverty in the world. Thank you to everyone who participated in the campaign!"

OSSI HEINÄNEN, Secretary General and National Director, Plan Finland

This arrangement of deductions from employee salaries for charitable purposes is one of the first of its kind for Wärtsilä. Both parties hope that the combination of a well-chosen partner, a strong group effort, and a unique internal initiative will drive change for the better for the girls affected by these hardships.

“I am very glad that our donations will go to girls in developing countries. They are in a key position to develop their societies and get rid of poverty.”

BJÖRN ROSENGREN, President and CEO, Wärtsilä Corporation

Get involved

Find out more about the ‘Because I am a Girl’ campaign and make a donation: http://plan-international.org/girls/

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