Håkan Agnevall is no stranger to transformation. His tenure as CEO of Wärtsilä marks the fifth transformation he has helped lead, and it comes at a consequential moment for the Finland-based company. Its two core industries, marine and energy, are being reshaped by decarbonization, electrification, new fuels, and rapidly advancing technology.
Wärtsilä, which has approximately €6.9 billion in sales and 17,900 employees across 78 countries, is positioning itself around those shifts. New sources of demand are emerging as well. Data centers, for example, have quickly become an important market for its power generation business as their scale and electricity needs have increased. The company has sold its available power generation equipment capacity through the end of 2028 and plans to more than double that capacity from late 2025 through early 2029.
In this conversation with Pankaj Sachdeva, a senior partner in McKinsey’s Philadelphia office, Agnevall discusses what he has learned from leading transformations, where Wärtsilä sees its next sources of growth, and how focus, continuous improvement, and AI can create competitive advantage.
Joining the team and supporting the transformation
Pankaj Sachdeva: What are the major challenges in running a global business like Wärtsilä? Are they more difficult to manage now than they were ten years ago?
Håkan Agnevall: When you lead a big global business, you must get everybody to align and come together around a strategy and a culture. But how do you get traction in a big organization that spans many different time zones and different cultures? I think gaining traction—getting execution going—is typically the most challenging thing. Articulating the strategy and setting priorities aren’t easy, but they’re relatively easier than execution.
You have to break the transformation process down because you cannot be everywhere in the world at the same time. You need to be very focused about where and with whom you spend your time, and you always have to compromise. The increasingly volatile geopolitical situation requires you to combine short-term actions with long-term thinking.
Pankaj Sachdeva: One of the outcomes of the transformation you led at Wärtsilä is that it became a much more focused company. Say more about Wärtsilä’s focus areas and what benefits that focus conveys.
Håkan Agnevall: We have articulated our focus on the decarbonization journey of two industries: energy and marine. We clearly acknowledged that these industries are undergoing transitions that will take decades to achieve because they are striving for both environmental sustainability and financial viability. As we’ve chosen to become more focused, we have divested some business units that were acquired during an era that emphasized augmentation strategies.
The benefits of focus are straightforward. You divest and you free up time, leadership bandwidth, and capital. You can focus capital allocation on the core. I would also argue that focus facilitates interactions with external stakeholders—the board and investors—because it‘s easier to explain what you‘re trying to do when you’re focused. There is a balance, however. If you define your focus too narrowly, stakeholders will become concerned and ask, “What type of company will you be if you only focus on a small niche?” But for us, it’s about having a clear focus on being technology leaders in our two core industries and on growing our high-value services, supported by AI and digital tools.
Pankaj Sachdeva: You’ve worked at many complex global companies, with your career taking you from ABB to Bombardier to Volvo Buses and now Wärtsilä. Have there been any common threads?
Håkan Agnevall: My professional journey, at least the later part of my career, has been one of transformation. My current role as Wärtsilä CEO involves my fifth transformation. Some transformations have been triggered by technology, such as the growth of electric vehicles or new fuels. In other cases, the business dynamics in industries have changed. No matter what is changing, you need to focus on the core of your business.
You could say transformation is one of three red threads in my career. I’ve had the privilege of working and living in different countries in North and South America, Asia, and Europe, so international business and leading in different cultures is the second red thread. The third is that I’ve led businesses with a lot of technology content, and what really excites me is the intersection of technology, people, and society. We live in an era where technology development is obviously very rapid, which sometimes is a bit scary but also creates great new opportunities. In the two industries Wärtsilä serves, energy and marine, there will be more change in the coming ten years than in the previous 30 or 40 years.
The next wave of growth
Pankaj Sachdeva: You’re seeing record growth in both energy and marine. What’s driving this trend, and what does it tell you about where the markets are heading for the next five years?
Håkan Agnevall: For energy, we provide two solutions for our customers. One is baseload power, which involves delivering power, 24/7, in Southeast Asia, South America, and parts of the United States and Europe. Baseload power has traditionally been our strongest market.
Our latest baseload application is for data centers, which, in the past two years, has really taken off as a market. Our sweet spot on the power side is normally power plants ranging from 50 to 700 megawatts. Until recently, data centers were smaller and grids connected with their own backup power generation only. Our power plants were too big to serve them. Now that data centers are larger and often need to generate their own energy, they’re a major growth track for us.
Our other energy solution is what we call balancing power, and it is becoming more important as the share of renewables grows in the power system. Renewables are great, and they are often the cheapest power, but they’re intermittent. The sun doesn’t always shine, and the wind doesn’t always blow, so you need balancing power to keep the system stable. Our key technologies in this area include battery solutions and flexible thermal generation as complementary tools in a balancing power toolbox.
The marine sector is more stable than energy, with the industry typically expanding at the same pace as the general economy. Currently, decarbonization efforts are stimulating growth. In our core marine segments, which include cruise, ferries, offshore, and special vessels, growth is higher than the industry average.
The International Maritime Organization [IMO] creates global frameworks for regulations, including carbon emissions. Their efforts are giving us opportunities to help our customers navigate a difficult question: How do you undertake the decarbonization journey when you have assets that have a 30- or 40-year lifetime? There is limited visibility into how regulations and preferences for different fuels will develop over the coming 30 years, but the two key themes will be fuel flexibility and efficiency.
Another growth driver for us is our service business for both marine and energy. Our strategy is to move up the service-value ladder: from transactional service to service agreements and then to performance-based agreements. Under performance-based agreements, we make commitments to our customers about fuel savings, uptime, and reliability; we also agree to share both the financial upsides and downsides of the outcome of the agreed-upon performance parameters.
Pankaj Sachdeva: You mentioned the unprecedented growth of data centers. It’s a historic build-out of AI infrastructure that we are witnessing in real time—and there are a lot of supply chain concerns. Wärtsilä is helping to address the biggest binding constraint, which is power. But how are you able to keep up with your supply chain? How are you striving to satisfy data-center demand?
Håkan Agnevall: There is definitely a supply constraint when it comes to power generation, despite the numerous technologies available that could potentially provide energy to data centers. These include gas turbines, fuel cells, renewables, and engine technology. Power demand is growing so fast that equipment supply is a bottleneck.
But while data centers are a major growth driver for energy suppliers, they’re not the only ones. First, industries worldwide are trying to electrify to become more energy efficient and save money. Transport may be the most obvious example of this trend, even though sales of electric vehicles have slowed.
Another demand driver is the need for air conditioning in a warmer world. This is not a small matter in many locations—certainly not in Southeast Asia, or even in Europe, where it’s not as common to have air conditioning. I think demand for air conditioning will grow in many locations, increasing electricity demand.
Some growth in the United States will also come from its aging energy infrastructure for both transmission and generation. Finally, the growth of renewables will increase the need for balancing power. Those four areas together create an extremely buoyant demand situation that we believe will last for many years.
To serve our customers, we are ramping up our own capabilities and those of our supply chain. From now through the beginning of 2029, we will more than double our capacity compared with late 2025. We expect to continue providing quality service as we ramp up, but we’ve sold all our capacity through the end of 2028 and are now making sales for 2029 and 2030. I sense the frustration among our customers because they would like even more capacity sooner than that. The key there is to have an open and constructive dialogue with your current customers about project timelines and evolving delivery capabilities.
Navigating the shift to new marine fuels
Pankaj Sachdeva: Let’s talk about the marine sector. You’re leading the commercial adoption of many new technologies, such as ammonia-capable engines. How can more alternative fuels become mainstream in marine?
Håkan Agnevall: The transition will take a long time. We are still investing in strategies to reduce fossil fuel emissions. But we have also invested a lot in making combustion engines ready for other new fuels.
I categorize fuels into three buckets. Fossil fuels is one. For the second bucket, which involves biofuels and carbon-neutral fuels, we have engine platforms ready and have already delivered hundreds of methanol engines.
The third bucket consists of zero-emission fuels, such as ammonia and hydrogen. In marine shipping, ammonia is the most likely zero-carbon fuel for large ships because hydrogen requires too much tank volume. Hydrogen may be feasible for smaller ships, but ammonia is more practical for large, long-distance vessels. We are starting to deliver our first engines on a small scale.
In the marine sector, the major concern is combining environmental sustainability with financial viability. Let’s be very frank: Green fuels are two to four times more costly than fossil fuels. To make the transition to green fuels happen on a large scale, you need to create a level playing field. First, you need regulations for global carbon pricing. IMO is a critical player in establishing global regulations. That process is moving forward, but building consensus across an organization that represents most of the world’s countries takes time.
When I talk to customers who own large fleets, they say, “I’m building a vessel right now. It’s going to be in service for 30 years or more. How should I think about sustainability?” Over the coming decade, regulations may change, and more green fuel may become available, bringing down some of the cost. Given the uncertainty ahead, customers should derisk vessels by being flexible about fuels. Companies that make a technology bet on a specific fuel could be stuck with a stranded asset if that fuel is not competitive in ten or 15 years.
Pankaj Sachdeva: Are large fleet owners consulting with you more regularly during the vessel-purchase process, given all the critical decisions that they must make?
Håkan Agnevall: If you go back about ten years, heavy fuel was pretty much the only solution for marine energy. It was an easy choice that was handled by a company’s engineering or operational department. Now the fuel selection is highly strategic. It involves not only the operational engineering side but also top management up to the board level—and that shift creates a whole new ecosystem with which we can interact. It also offers opportunities for us to create value, as customers will need new fuel strategies as engines evolve.
Clients often say, “You talk a lot about three buckets of fuels. Tell us which one will be the fuel for the future.” But we do not yet know what that fuel will be. I would argue that over the next 30 years, multiple fuels will emerge as the preferred choice. There could also be different preferred fuels in different parts of the world because the decision is very tightly tied to politics, and fuels could differ by application—for example, cruise and container vessels could make different choices.
The decisions will be complex, so flexibility is key. Flexibility is not only about the engines. You also need to think through the vessel architecture because tank sizes vary by fuel type. That means that fuel choice is a highly strategic discussion.
From AI to advantage
Pankaj Sachdeva: How is Wärtsilä using AI in its products and services?
Håkan Agnevall: We focus on three areas. First, like most companies—certainly all industrial businesses—we are leveraging AI as a tool for continuous improvement. That strategy involves many small changes, and Wärtsilä has already made plenty of those. It used to take us a day to find and compile documentation for customers or regulators. With the help of AI, we can do this in three minutes.
Second, we’re applying AI to develop customer service offerings. Services account for more than half of Wärtsilä’s revenue and are an important lever for creating customer satisfaction. With the help of AI, we extract a lot of data from the physical world, including our engines and vessels, then run the information through digital tools. Combined with employee expertise, we can provide uptime reliability while reducing fuel consumption and emissions. This is where we are making our strategic bets and investing hundreds of millions of euros.
And third, we’re looking at some of our major processes end to end and determining how we can leverage AI to redefine them. We will start in certain areas, such as finance and services, and learn from experience.
I would argue that to succeed with AI, the most important thing isn’t having the latest, fanciest tool or the slickest engineers. It’s having people who are excited about the efforts, as well as a strong culture focused on continuous improvement—a culture where the technology is perceived not as a threat but as an opportunity.
Pankaj Sachdeva: For the CEOs, the CFOs, and other executives running industrial businesses such as yours in the energy value chain, what’s your advice for the next ten years?
Håkan Agnevall: Stay curious and focused. Stay focused on the customer and really understand how they use our solutions. Wärtsilä has been around for more than 190 years, but we still have a lot to learn about how people use our equipment and services. We must also understand how usage changes as technology advances. To me, the changes represent an exciting opportunity. Beyond technology, rapid changes in society also offer new opportunities.
I would also say that you can create competitive advantage through your service business. But how do you build a great service business? We used to say, it’s like a tripod: You need a great product, great people, and a great culture. Some of the technology might be copied, but no one has learned to clone people yet. Building a good, customer-oriented culture is also difficult. But if you can create that secret sauce, you will have something that can really set you apart in a heated global competition. We recently added a fourth leg, and that is great data. To be in a great service business, it’s not only about the product, people, and culture. Great data helps you develop an even better customer offering.
