Schneider Electric is a French-based multinational company specializing in automation solutions, software, spanning hardware, energy management, and services (Vendrell‐Herrero, Parry, Bustinza & Gomes, 2018). Even though the company’s headquarters are based in Rueil-Malmaison, France. The company has also established its officers at the World Trade Center of Grenoble having officers all over the world. As a reputable technology company, Schneider Electric is a Fortune 500 company that is traded publicly on the Euronext Exchange. Besides this, it is also a component of the Euro Stoxx 50 stock market index. By 2016, Schneider Electric had recorded a revenue of 25 billion euros, thus demonstrating its strong financial base. It is also the parent company of APC, Pelco and Square D. Presently, the company has an employee base of 144,000 who are spread across 100 countries where Schneider Electric runs its active operations (Vendrell‐Herrero et al., 2018). This paper will seek to outline the company’s history and its digital business model. The paper will also discuss Schneider Electric threats from digitization and the competitive landscape as well as detailing the company’s horizon in the future.
History of the Company
Schneider Electric has its roots in steel, iron and the armament factories of Schneider-Creusot. The company’s historical origins can be traced back to the 19th century when the Schneider brothers decided to invest in Creusot foundries. As a result, this made them key players in the machine and steel industry (Vendrell‐Herrero et al., 2018). However, this paved the way for Schneider & Cie to also venture into the emerging electricity market. Historically, it can be pointed out that Schneider Electric was established during the first Industrial Revolution. In this essence, it has managed to endure through expertise, dedication and the strength of acquired businesses more than 180 years after its establishment. It is for this reason that it has demonstrated its commitment to deliver innovation at every potential business level.
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Upon acquisition of forges and mines at Le Creusot in 1836, Brothers Schneider created Schneider &Cie two years later. In 1891, the company established itself in the electricity market has successfully become an armament specialist (Vendrell‐Herrero et al., 2018). By 1919, it expanded its operations to Eastern Europe and Germany through the European Industrial and Financial Union (EIFU). The strategic expansion continued until 1949 when the company undertook the comprehensive restructuring after the Second World War, an exercise that was led by Charles Schneider.
Such approaches enabled the company to restructure its core market operations, and by 1975, the Schneider Group acquired the interest in Merlin Gerin, one of the market leaders in the distribution of electrical equipment (Bengtsson & Kesson, 2018). Between 1981 and 1997, the company divested its operations from shipbuilding and steel. From this point, Schneider Electric strategically focused on electricity, a phenomenon that was achieved through strategic acquisitions. It is for this reason that by 1999, the Schneider group developed systems, installation, and control following the takeover of Lexel. It also adopted its current name during this period. After such acquisitions, the company grew organically from 2000 to 2009 by acquiring new market segments such as movement control, UPS as well as building automation and security (Foss &Saebi, 2018). From 2010 up to present, Schneider Electric has been reinforcing its position in critical power and smart grid applications as well as software. Therefore, it is evident that throughout history, the company has made several strategic choices and technological breakthroughs. In this regard, it has been able to build a robust technology portfolio through brands such as APC, Clipsal, Feller, Foxboro, Invensys, Merlin Gerin, Merten, Pelco, Square D, TAC, Telemecanique, Televent, and Triconex.
Digital Business Model Framework
It can be pointed out that Schneider Electric started in the lower left quadrant as the supplier. This is because, in 1836, when Brothers Schneider acquired forges and mines at Le Creusot before creating Schneider & Cie; and in 1891 when it became an armament specialist, the company had little direct knowledge of the preferences of their end customers (Vendrell‐Herrero et al., 2018). At this point also when it was starting, the company did not have any direct relationship with their end customers. It is for this reason that in 1891, the company launched itself in the emerging electricity market, a decision that was just undertaken for survival purpose. This is because, at this point, the company had very little knowledge regarding the preference of its end customers. By starting in the lower left quadrant, Schneider Electric as initially specializing in selling its services and products to the distributors in the value chain.
Figure 1 : Digital Business Model (Marshall, 2016)
Understanding the Importance of Going Digital
Schneider Electric understood the importance of going digital in the period ranging from 2000 to 2009. During this period, the company undergone organic growth and also made several acquisitions in other new market segments (Bengtsson & Kesson, 2018). Therefore, this necessitated it to go digital. As a result, it partnered with Accenture to create a digital service factory for acceleration of its innovations and even the speed to market. Even though the framework of delivering electricity has not undergone many changes for more than a century, digitization for the last ten years had enabled the company to rethink its approach to operations in the market and identify innovative ways to serve its customers (Marshall, 2016). Following the rising service expectation from customers, Schneider Electric decided to go digital as a way of reinventing its framework of new customer experience with the corresponding new digital services aimed at meeting the expectations of customers. Through the created Digital Services Factory, Schneider Electric has been incubating, designing, deploying and using analytics to accelerate its digital development.
Threats Faced by the Company from Digitization
Cybersecurity is the primary digitization threat that has been faced by Schneider Electric. In this case, the adopted IoT platforms and system architecture of the company have been targeted by cyber attackers, thus disrupting the routine company operations and also compromising the safety of crucial customer information under the custody of the company. For instance, the company’s EcoStruxure connects over one billion devices through 9,000 system integrators and more than 500,000 installations (Bengtsson & Kesson, 2018).
In such a case, a cyber-attack on such a platform deployed by the company will expose many users to unprecedented vulnerabilities. For instance, on 14th December 2017, Schneider Electric disclosed that hackers had invaded its Triconex safety systems by exploiting the bug that was in the system. This was a significant threat being faced by the company, especially after digitizing a majority of its operations. In this case, the hacked Triconex system was the one that was being used by Schneider Electric in oil and gas plants, nuclear facilities, water treatment facilities, and mining. Therefore by hacking such a system deployed to run the company’s core operations, malicious attackers have the capability of shutting down Schneider Electric’s vital industrial processes.
Therefore, cyber threat is the primary threat the company is facing from digitization, a phenomenon that has been experienced in the recent past when the attackers exploited the vulnerabilities to cripple down critical plant operations of Schneider Electric.
Competition
Schneider Electric faces competition from Siemens, Rockwell Automation, Generic Electric, and USBid. In this case, Siemens is an electronics and engineering company established in 1847. As the key competitor of Schneider Electric, Siemens operates in the fields of healthcare, transportation, energy and in dusty (Vendrell‐Herrero et al., 2018). For the case of Rockwell Automation, it specializes in the provision of information solution and industrial automation globally. Other notable Schneider Electric competitors in the market include Eaton, GE Digital, Alstom and Festo, and United Technologies.
Figure 2 : Schneider Electric Competitors (Vendrell‐Herrero et al., 2018)
Opportunities Presented by Digitization
Digitization presented Schneider Electric with several opportunities. Through digitization, the company has been able to present the efficiency of its digital architecture EcoStruxure. Furthermore, the company has been able to leverage the opportunities provided by IoT, cloud capabilities and analytics (Bengtsson & Kesson, 2018). In this regard, the company has invested in such key areas to help in the proper management of its power distribution. For instance, by deploying the EcoStruxure Grid, Schneider Electric has been able to open up its IoT-enabled framework for seamless digital transformations regarding distribution utilities. For instance, the deployed EcoStruxure leverages on IT/OT convergence to ensure high efficiency in the operation of the company’s grid. It also helps in the optimal asset management, thus enabling the company to run its operations smoothly.
Figure 3 : Digitization of Schneider Electric (Bengtsson & Kesson, 2018)
Schneider Electric has also utilized digitization to improve in the competency of its power distribution in places such as India. For instance, it has leveraged on cloud capabilities, software, analytics and automation offered as a result of digitization to optimize its process and drive greater energy initiatives (Holmström, 2018). This has also enabled the company to partner with several state discoms in the provision of digital technologies for the grid. For instance, Schneider Electric commissioned a SCADA-DMS for Bihar Power Distribution Company, thus helping in the reduction of its incurred overall costs by reducing unscheduled downtimes, curbing theft of power, faster detection of faults and improving the mapping of customer usage.
Rating the Company on Eight Organizational Capabilities
Mobile Customer Self-Service
Schneider Electric has a mobile app that facilitates its engagement with customers. The app also enables customers to control and monitor the safety of circuit breakers via the smartphones.
Open Supply Chain/ APIs
Schneider Electric has opened up its business for other organizations to build break-out new services and products using the company’s API (Bengtsson & Kesson, 2018) . Presently, the company offers Rate Engine APIs, Client Hierarchy APIs, Data Type APIs, Sub Site Metric APIs, Metric APIs as well as Cost and Usage APIs.
Employee Social Network
Schneider Electric has an enterprise social network connecting over 150, 000 employees in about 100 countries working with thousands of services and products. It helps it generate valuable business-oriented communications monthly.
Community-Based Customer Care
Schneider Electric has established customer support team that can be engaged by customers in their preferred language.
Unified Communication
Schneider Electric has incorporated social media in its unified communication for addressing the arising proliferation challenges,
End-user It and Competitive #CoIT
Schneider Electric uses SaaS, IoT and mobile devices to communicate and manage its routine business operations. It is for this reason that the company has a mobile app where users can interact with the company and monitor their electricity consumption.
Migration to the Cloud
Through digitization, the company adopted cloud system for storage of its crucial information. This has been achieved in conjunction with the deployed IoT platforms.
Digital Business Leadership and Transformation
Schneider Electric CIO and IT leaders has been focusing on innovations in the entire business operations of the company. It is through innovation that the company has been able to stabilize itself in the market.
Competing Digitally: Content, Customer, Experience, and Digital Platform
Content
Schneider Electric is known in the market for its emphasis on concrete and precise content in all its engagements.
Customer
The company has positive customers’ encounter with its products and services. In this case, the customer experiences that have been given are positive to the company’s brand, services and products.
Digital Platform
Schneider Electric has adopted EcoStruxure as its core digital platform. The company also has cloud-connected digital services. It also incorporate IoT innovation in its digital transformation.
DBMS Quadrant
In the Gartner, the operational database management system (DBMS), Schneider Electric fall in the second quadrant. This is because it is a leader in global energy management and automation now. In particular, this has been reflected in the company’s ability to execute and completeness of vision as depicted by its StruxureWare.
Figure 4 : Schneider Electric as the Leader in the DBMS Quadrant (Bengtsson&Kesson, 2018)
Current Competition in Same Business Sector
Currently, Schneider Electric faces competition from companies such as;
General Electric
It is a U.S-based company specializing in the provision of aircraft engines, industrial and consumer appliances, machinery, electric motors, weapons, and wind turbines. The U.S and the European countries are its major markets for its products. Presently, it has a capital revenue share in the market of 11% (Ghezzi & Cavallo, 2018). Besides this, it has an employee base of an estimated 300,000 employees globally, making it a notable competitor to Schneider Electric.
Alstom
This is a multinational company based in France specializing in rail transport products. Established in 1928, Alstom’s products and services in the market revolve around signaling, vehicles, and railway. Recently, it merged with Siemens with the aim of consolidating its operations across frontiers such as the market in Europe. With an estimated total asset of $38 billion, it has an employee base of 20,700, a majority of which are from the European Union. In this case, it competes with Schneider Electric in the manufacture of products aligned with the railway industry transportation.
ABB Ltd
It is a multinational company based in Sweden specializing in the production of automation technology services, heavy duty electrical equipment, power and robotics (Bengtsson & Kesson, 2018). ABB has an employee base of 133,000, and it has established its service centers in different countries globally, thus making it a worthy competitor to Schneider Electric.
Larsen and Turbo
It is a multinational corporation based in India dealing with construction equipment, IT, financial services and engineering equipment. It has an employee base of 86,500 that are deployed in different regions globally to facilitate its delivery of services to customers. With a revenue of $17 billion as at 31 st December 2017, Larsen and Turbo is a significant competitor to Schneider Electric.
Horizon for the Company
Schneider Electric has been championing sustainability and innovation for its future operations. Through its market operations, initiatives have been put in place to reduce company emission by 2050 significantly. Considering that the energy consumption has been projected to increase, the company has reiterated its commitment for employing sustainable measures in its routine operations to meet the market demand while at the same time championing for environmental conservation.
The company has been pursuing innovation measures to cut down on its greenhouse gas emission. As a technology company, the innovative approach anticipated to be explored in future is aimed at eliminating carbon output and energy wastages, thus increasing its efficiency (Bengtsson & Kesson, 2018). This has been demonstrated through the EcoStruxure, whose architecture cuts across automation, energy, and software for acceleration of efficiencies. In future, the company plan to leverage on IoT advancements to help it meet the demand for sustainable energy in the market. In this essence, the company intends to champion “green for growth” in all its future undertakings.
Conclusion
Based on the presented discussions, it is clear that Schneider Electric specializes in automation solutions, software, spanning hardware, energy management, and services. However, it understood the importance of going digital in the period ranging from 2000 to 2009 whereby it undergone organic growth and also made several acquisitions in other new market segments. Digitization has enabled it to leverage on the opportunities provided by IoT, cloud capabilities and analytics, thus stabilizing its operations. Throughout its routine activities in the market, its competitors include Siemens, Rockwell Automation, Generic Electric, and USBid.
References
Bengtsson, L., & Kesson, E. (2018). Digital Resources, Business Models and Inter-Firm Relations. Academy of Management Global Proceedings , (2018), 141.
Foss, N. J., & Saebi, T. (2018). Business models and business model innovation: Between wicked and paradigmatic problems. Long Range Planning , 51 (1), 9-21.
Ghezzi, A., & Cavallo, A. (2018). Agile business model innovation in digital entrepreneurship: Lean Startup approaches. Journal of Business Research .
Holmström, J. (2018). Recombination in digital innovation: Challenges, opportunities, and the importance of a theoretical framework. Information and Organization , 28 (2), 107-110.
Marshall, B. (2016). Schneider Electric: Intro to PLC Programming.
Vendrell‐Herrero, F., Parry, G., Bustinza, O. F., & Gomes, E. (2018). Digital business models: Taxonomy and future research avenues. Strategic Change , 27 (2), 87-90.
