In today’s connected world where the proliferation of digital technologies is inescapable, Schneider Electric (EPA:SU) is capitalizing on burgeoning opportunities offered by the multiplication of connected points underpinned by power infrastructure and solutions, says the $40 billion energy management giant’s boss for over a decade.
Speaking exclusively to your correspondent, Jean-Pascal Tricoire, Chairman and Chief Executive Officer of Schneider Electric, says the Rueil-Malmaison, France-headquartered company finds customers in “every country and every market” discovering their digital horizon differently, if not at a different pace.
“There can’t be a digital world without electricity. That’s a patch we are global pioneers in. Our ‘multi-local’ corporate philosophy in four end markets – building, datacenters, industry and infrastructure – keeps us in good stead.”
So what is multi-local, with nearly one-third of the company’s headline business in North America, another third in Asia, followed by a near similar revenue slice from Europe?
“In our three primary regional markets, every customer views power infrastructure and solutions differently. As a customer-oriented global player, we don’t conjure up one-size-fits-all solutions and linear product offerings. We are multi-local – it’s a simple concept with a multiple facets.”
Multi-local in a global world
With 20,000 plus (active or application stage) patents under its corporate belt, these days around 40% of Schneider’s business is about developing solutions for its customers. “Given that operating reality, the kind of customers we service want their solutions, platforms, kit and goods customized, personalized, and done specifically in a very short amount of time.”
That means both solutions and kit cannot be made or conceived in another part of the world and shipped in. “Standards are different, installation is different, habits are different and people want it for “yesterday”. Hence, Schneider’s regional product and development teams have the autonomy to be quasi-owners of our regional business streams.
“For instance, the way of doing automation in the U.S. is very different from China or India. What we do in China is to a very large extent developed in China, for Chinese Customers. India is very similar, with products and solutions deeply developed with Indian concepts in mind. You can import a theory, but the solution has to be locally tailored – the more we grow, the more we develop solutions locally, the more multi-local we become.”
Perhaps the strategy of in-sourcing regionally, also helps mitigate any tariff or trade wars that may escalate or issues over intellectual property theft? Tricoire declines to define such challenges in “those terms.”
“Don’t get me wrong, I believe in free trade, open competition and fiercely protecting patents. But being multi-local means manufacturing locally, servicing locally and for that matter promoting patented technology where the solution in question is devised (and patented) locally. We think and approach things differently.”
Different approach, same corporate DNA
That approach has been pleasing the market of late. Back in October, sector analysts were expecting 5.5% organic revenue growth in the company’s third quarter. But Schneider beat expectations helped by its multi-local stance, especially in the Asia-Pacific and North America regions, and posted 7.2% growth to €6.38 billion ($7.3 billion).
Subsequently, the company sees full-year adjusted EBITA, or Earnings before Interest, Tax and Amortization, growing in the 8%-9% range for the current fiscal year, an outcome that won market plaudits and got labelled by Credit Suisse as “very solid” with “added positives.”
Schneider is a transformed corporate beast, according to Tricoire, but there’s never any harm flagging and banking on historic branding strength in the electrification sphere that goes back over a century and a half.
To get a glimpse, the uninitiated just need to glance at the southwest side of the Eiffel Tower’s first balcony, where engraved on the Parisian landmark in gold letters would be the name “Schneider”, among 72 names of France’s most revered scientists, engineers, and mathematicians. It’s a nod to Eugène Schneider; the man whose efforts, in partnership with his brother Adolphe, kick-started it all.
Today the behemoth they laid the foundation of operates in 100 countries employing nearly 150,000 people. Its kit is everywhere from households to warehouses, power plants to refineries, and prominent sector brands such as Square D, Pelco, APC, and many more, are its subsidiaries.
Commentators often myopically call Schneider an “electrical equipment manufacturer.” While the description doesn’t half convey what the company is all about these days, its boss is not fussed.
“The Schneider of today is not a company that is changing its corporate DNA; we are building layers of innovative value on top of a very strong knowledge base and historical know-how. Digital is synonymous with electricity, a world we live and breathe in.”
Unsurprisingly, the company’s datacenter energy solutions business accounts for 15% its earnings, and it is “growing by the year because big data cannot exist without reliable power solutions.”
“More holistically speaking, our core businesses of energy management and industrial automation are delivering steady growth. Much of it is down to the acceleration of business conducted with end-users in mid- to long-cycle industries, resulting in higher systems growth.”
Before new systems came internal transformation
What has Schneider buzzing these days is ‘EcoStruxure’, its Industrial Internet of Things (IIoT) architecture conceived to deliver “smart machine” solutions within the energy sphere, using connectivity and automation to strengthen power management capabilities with advanced monitoring and analytics.
EcoStruxure’s solutions pathways run along five solution slants – Power, Machine, Cloud-based IT, Grid and Buildings. The company is making a concerted push in marketing and selling the platform, and its recent transformation has a lot to do with it.
“If you take our recent history from 2003 onward, it has us moving in the past 15 years from the power sector to the convergence of digital and power for efficiency solutions. The first transformation has been the portfolio, the second transformation has been the ability to develop solutions, and the third transformation has been geographic, wherein that 15-year window we went from selling primarily in the U.S. and Europe to a point today where we do 40% of our business in emerging economies.”
From 2003 to 2013, much of Schneider’s refreshed portfolio was built with Tricoire, who was appointed boss in 2006, at the helm. “The old story was to make sure we would be number one in our core spheres – from various voltage levels to secure power, and ensure we digitize everything in our main operating segments. That bit of change was completed with the ($5.2 billion) acquisition of Invensys, preceded by others.
“At which point, we became extremely picky on acquisitions, opting only to go down the acquisition pathway for targets that add value to our portfolio rather than as a raw expansion strategy.”
That’s easily explained by the company’s 60% stake in AVEVA (LON:AVV). In March 2018, AVEVA agreed to merge with Schneider’s industrial software business. Hot on the heels of the deal, in November, the company formally launched a dedicated venture capital funding outfit – Schneider Electric Ventures – armed with €500 million of dry powder to serve as an incubator of emerging ideas.
“Today, we operate in a world where we live with the customer 24/7. We’ve stopped speaking about products alone; we speak about the customer’s business, understand and provide solutions.”
Powered up by diversity and sustainability
With innovation at its core, Schneider’s workforce is rapidly evolving. “That’s because diversity is the mother of innovation. The more diverse opinions you have, the more you have an opportunity to innovate. In an industry that is very male, we are very determined to push gender diversity in our company.
“Schneider has adopted a voluntary objective that at least 40% of new recruits would be female, and in many hubs we are above 50%. In the spirit of being multi-local, we make sure that in every geography, we have local R&D [Research & Development], local leadership and local connections with the most advanced customers, so that at each hub we can develop the best solution adapted to that ecosystem. Yet at the same time we are able to challenge each other and bring forward more innovative solutions globally.”
Schneider’s hiring of engineers has multiplied the team’s size by a factor of three in the last 15 years, with many new or relatively new members of the workforce coming from the software industry. All of it is aligned with a crucial internal objective, and one that’s increasingly demanded of it by customers – the inexorable march to a low-carbon economy.
“We practice what we preach in terms of energy solutions. Schneider Electric is committed to being powered by renewable energy by 2025, and being carbon neutral by 2030. Furthermore, suppliers, contractors or vendors, who work with us have to demonstrate their own commitment to the sustainability agenda.”
Tricoire strongly disputes assertions that such a stance was some sort of “ideology.”
“Far from it, Schneider and our customers consider it to be a question of competitiveness, of attracting new talent, of working with City planners who manage bulk of the world’s population centers, and aligning ourselves with innovative thinking that makes us function.
“That’s needed, because the power of digital can only be truly realized when all of humankind has access to electricity, and 1.3 billion people in some of the most deprived parts of the world currently don’t. That has to change; and as a company we are playing our part.”
And if corporate attitudes remain the green debate’s focal point, Tricoire concludes: “Companies that are sustainable, low-carbon and energy efficient – regardless of the cost of electricity at the point of usage – will always have a competitive advantage. You can dismiss a certain way of thinking, but you cannot argue with smart economics.”
About Schneider Electric
Schneider Electric is leading the Digital Transformation of Energy Management and Automation in Homes, Buildings, Data Centers, Infrastructure and Industries. With global presence in over 100 countries, Schneider is the undisputable leader in Power Management – Medium Voltage, Low Voltage and Secure Power, and in Automation Systems. We provide integrated efficiency solutions, combining energy, automation and software. In our global Ecosystem, we collaborate with the largest Partner, Integrator and Developer Community on our Open Platform to deliver real-time control and operational efficiency. We believe that great people and partners make Schneider a great company and that our commitment to Innovation, Diversity and Sustainability ensures that Life Is On everywhere, for everyone and at every moment.