SCHNEIDER ELECTRIC:

CONNECTIVITY INSPIRES A DIGITAL

TRANSFORMATION
Jeanne W. Ross, Cynthia M. Beath, and Kate Moloney

MAY 2017 | CISR WP NO. 417 and MIT Sloan WP No. 5230-17 | 13 PAGES

CASE STUDY
an in-depth description of a firm’s approach to an IT management issue
(intended for MBA and executive education)

INTERNET OF THINGS This story traces Schneider Electric’s journey to becoming a digital com-
pany. It highlights the company’s development of an IoT platform to
DIGITAL TRANSFORMATION
support asset performance management and other information-based
PLATFORM AS A SERVICE services. It also describes the organizational changes accompanying
ANALYTICS Schneider Electric’s transformation from an electrical products company
ARCHITECTURE to a digital company.

MIT
MANAGEMENT
CENTER FOR INFORMATION
SYSTEMS RESEARCH (CISR) © 2017 Massachusetts Institute of Technology. All rights reserved.
SLOAN SCHOOL
 Ross, Beath, and Moloney | CISR Working Paper No. 417 | 2

CONTENTS

Background ................................................................................................................................................ 4

Digital Business Services ............................................................................................................ 5

Developing New Digital Business Services ............................................................ 6

Building a Digital Services Platform............................................................................... 7

Selling the Platform and Building Demand

for Digital Services.......................................................................................................................... 10
Selling and Servicing Digital Services........................................................................ 12

Looking Ahead .................................................................................................................................... 13

 Ross, Beath, and Moloney | CISR Working Paper No. 417 | 3

SCHNEIDER ELECTRIC: CONNECTIVITY INSPIRES

A DIGITAL TRANSFORMATION
c,Electric
At the World Economic Forum in 2016, Jean-Pascal Tricoire,
the chairman and CEO of Schneider Electric, described the
opportunities that digital technologies had opened up for his
energy management and automation company:

Connectivity is not new for us. We started to connect things to the

Internet in 1995. But what is happening today is that we are con-
necting from power plant to plug—everything is connected to the
Internet … That means we can bring customers new value,
new capabilities, and a lot of new services.1

People throughout Schneider Electric recognized that the Internet of

Things offered massive new opportunities to monitor and analyze the
performance of connected assets as part of new digital business ser-
vice offerings. It was not apparent, though, which services would excite
customers so much that they would be willing to pay for them. Moreover,
to offer an integrated set of products and services, leaders knew that the
company would need to make enormous changes to the way it operated:

We must design an organization that can deliver new business

models—even though we don’t know exactly what those business
models will be from the outset.

—HERVÉ COUREIL, EXECUTIVE VICE PRESIDENT, INFORMATION SYSTEMS

In late 2016, Schneider Electric was piloting with fifty customers the first
digital business service offering built on its new digital services plat-
form: asset performance management as a service, which was branded
EcoStruxure™ Asset Advisor. EcoStruxure™ was the name given to the
company’s IoT-enabled architecture and platform, which delivered
enhanced value around safety, reliability, efficiency, sustainability, and
connectivity to customers.

1 “The Digital Transformation of Industries,” video of a panel at the World Economic Forum
Annual Meeting 2016, 59:34, Davos-Klosters, Switzerland, January 20, 2016, https://www.
weforum.org/events/world-economic-forum-annual-meeting-2016/sessions/the-digi-
tal-transformation-of-industries/.

This case study was prepared by Jeanne W. Ross of the MIT Sloan Center for Information
Systems Research (CISR), Cynthia M. Beath of the University of Texas at Austin, and Kate Mo-
loney of MIT CISR. The case was written for the purposes of class discussion, rather than to
illustrate either effective or ineffective handling of a managerial situation. The authors would
like to acknowledge and thank the executives at Schnieder Electric for their participation in
the case study.
© 2017 MIT Sloan Center for Information Systems Research. All rights reserved to the authors.
 Ross, Beath, and Moloney | CISR Working Paper No. 417 | 4

EcoStruxure™ Asset Advisor collected structured (from sensors) and unstructured (from logs completed by main-
tenance people) data on the set of Schneider Electric products at a given customer’s site. Using a dynamic risk
monitoring algorithm, the system was able to detect operating risks and drill down to find the source of the risk.
This offering represented an early but critical step in developing new business models. In developing the capa-
bility to deliver EcoStruxure™ Asset Advisor, Schneider Electric had adopted new roles and processes that would
fuel ongoing business model innovations.

BACKGROUND
Founded in 1836, Schneider Electric SE was a global specialist in energy management and automation. In the
21st century, the company had grown dramatically through a series of acquisitions that transformed its historical
portfolio of discrete electrical distribution and industrial control products into high-technology products intend-
ed to drive operational and energy efficiency for its customers.
Headquartered in France, Schneider Electric’s 144,000+ employees operated in more than 100 countries. In 2016,
it generated revenues of €24.7 billion. Traditional markets in Europe and North America provided a little more
than half that revenue, with the rest generated in Asia-Pacific and emerging markets.
In 2016 Schneider Electric assigned P&L responsibilities to forty-eight lines of business organized into three
Businesses that closely reflected its customer segments: Buildings and IT (serving builders and managers of
residential and non-residential buildings, including data centers), Infrastructure (e.g., for energy utilities), and
Industry (industrial firms and original equipment manufacturers). Products were developed, manufactured, and
distributed by the lines of business.
Local sales and field services staff were organized under five regional presidents: Europe, North America, China,
France, and International. A separate sales team sold products and solutions to a small set of global, strategic
accounts. The company essentially served customers using two business models: products were mainly sold in-
directly, through partners and large distributors that provided reach to many small and medium-sized customers;
solutions (systems and services) were sold directly to large end users.
Schneider Electric’s acquisitions in the early 2000s had provided valuable competencies for a strategic redirec-
tion into energy management solutions. In 2016, solutions accounted for about 45% of revenues.2 However, the
acquisitions had also created a more complex company that could not readily integrate products and services
across the company. Starting around 2009, management attacked that complexity through a series of initiatives
focused on reducing business silos and facilitating sales integration. Particularly important was the adoption of a
Salesforce platform that enabled cross-selling and greater transparency of customer data.3 Also helpful was the
ongoing consolidation of ERP systems (i.e., ERP federation) from hundreds of instances down to twelve. But that
was just the start of a long journey towards the creation of new digital business services:

It may take longer, and it’s probably more complicated than we thought. But we haven’t reconsidered
once. We know digitized services is the way forward. It’s partly defensive, partly offensive, but there’s
no question.

—HERVÉ COUREIL, EXECUTIVE VICE PRESIDENT, INFORMATION SYSTEMS

2 “Schneider Electric at a glance,” Schneider Electric SE, http://www.schneider-electric.com/en/about-us/investor-relations/new-investor/

overview.jsp.
3 For more information on earlier transformations see A. Karunakaran, J.G. Mooney, and J.W. Ross, “Accelerating Digital Platform Deployment
Using the Cloud: A Case Study of Schneider Electric’s ‘bridge Front Office’ Program,” MIT Sloan CISR Working Paper No. 399, January 2015.
 Ross, Beath, and Moloney | CISR Working Paper No. 417 | 5

DIGITAL BUSINESS SERVICES

By 2000, most of the electrical products Schneider Electric was manufacturing (e.g., switches, circuit breakers,
transformers) had sensors. Thus, while the Internet of Things was creating increased opportunities for collecting,
moving, and analyzing data, remote monitoring (e.g., monitoring a device remotely) was not a new idea.
Indeed, IoT offers sold under the EcoStruxure™ banner (connected products, edge control, software, and analyt-
ics) represented about 45% of Schneider’s revenues by the end of 2016.4

We look at IoT today like something very new, but remote monitoring already exists on premises, in
plants, in factories. You’ve got a network of devices, sensors, PCs, speaking with a central system that
is doing some monitoring and controlling.

—CHRISTOPHE CLERC, BUSINESS ENGAGEMENT DIRECTOR, DIGITAL SERVICES

In fact, remote monitoring had been the norm in the industry up until 2016. Both Schneider Electric and its
competitors were packaging monitoring capabilities with their products. But remote monitoring was largely a de-
vice-by-device service—each product set off alarms when it malfunctioned. That was useful for identifying when
a particular piece of equipment needed to be fixed or replaced, but it did not help customers anticipate prob-
lems or manage energy more efficiently across a system of devices. It did not present a unique value proposition:

Remote monitoring services were free and promoted to increase product pull-through: “There might
be a failure, and your warranty is expiring. Let’s talk about replacing the equipment.”

—JEAN-PHILIPPE BONNAFOUX, VICE PRESIDENT, DIGITAL CUSTOMER EXPERIENCE, END USERS,

AND CONNECTED OFFERS

In contrast, Schneider Electric leaders viewed IoT as a game changer. Massive amounts of data from multiple devic-
es presented opportunities for new value propositions (see exhibit 1 for the three key types of value propositions):

In 2014, we started to talk about connectivity to connect the dots between our own IT, the digital cus-
tomer experience, and our offerings. We started to think about our digital offerings and, as a conse-
quence, our business models.

—CYRIL PERDUCAT, EXECUTIVE VICE PRESIDENT, DIGITAL SERVICES AND IOT

4 For more detail on Schneider Electric’s IoT strategy, see Cyril Perducat, “Reinforce our core and create value with the IoT” (presenta-
tion, 2016 Schneider Electric Investor Day, London, UK, October 27, 2016), http://www.schneider-electric.com/ww/en/Images/iot-inves-
tor-day-2016_tcm50-277812.pdf.
 Ross, Beath, and Moloney | CISR Working Paper No. 417 | 6

Exhibit 1: Schneider Electric IoT Strategy in Three Ideas

1 EnhanceBusinesswith
Connectivity& Analytics
Maintain and increase our
2 Build New Offers and
BusinessModels
Unlock trapped efficiency value

I~! competitive advantage by

connecting all of our assets
~CJ with connected offers and
subscription business models

ChangeCustomer Engagement
Build lasting life-cycle relationships
that allow us to offer value and
experience, targeted at specific needs

Source: Perducat, “Reinforce our core and create value with the IoT.”

The idea behind EcoStruxure™ Asset Advisor was that customers could benefit from a sophisticated analysis of
the sensor data produced by an integrated set of assets from Schneider’s diverse product lines:
• Energy distribution products like circuit breakers and transformers
• Metering products that measured energy consumption
• Building management products like HVAC or entry access controls
EcoStruxure™ Asset Advisor would allow a facility manager to manage the performance of assets directly or to
rely on a Schneider Electric service center to oversee asset performance management.

DEVELOPING NEW DIGITAL BUSINESS SERVICES

To identify new breakthrough opportunities in digital services, management initially encouraged individual busi-
ness units to experiment with new solutions. Product development staff in the business units identified digital
enhancements to products and worked with customers to understand their expectations. Individual lines of
business funded these early efforts and ideas proliferated:

At the start, it was probably the right way to go, to say to the businesses that they could do what they
had to do: have local initiatives, have local success, local failures sometimes. They could make deci-
sions and learn.

—CHRISTOPHE CLERC, BUSINESS ENGAGEMENT DIRECTOR, DIGITAL SERVICES

This approach generated some successes. In particular, the Data Centers business introduced its Data Center In-
frastructure Management (DCIM) solution, which offered an integrated set of monitoring systems for managing
energy in data centers. Forty percent of the ongoing cost of managing a data center is energy and availability, so
this kind of solution possessed a strong use case. And data center customers were eager customers:

We’ve done really well in data centers because of the nature of the customer base—large cloud provid-
ers … They are technology savvy and very demanding. Connectivity and innovation is their world. We
were pushed by our ecosystem to develop intelligent systems, and our DCIM software was the lead-in.

—JEAN-PHILIPPE BONNAFOUX, VICE PRESIDENT, DIGITAL CUSTOMER EXPERIENCE, END USERS,

AND CONNECTED OFFERS
 Ross, Beath, and Moloney | CISR Working Paper No. 417 | 7

In general, however, the business unit-driven approach was not working well. The proliferation of local offerings
was not building significant new revenue streams, nor, more importantly, strategic capabilities. Cyril Perducat,
who was tapped to lead the corporate effort around digital services, described the core problem:

Everyone across the company is trying to reinvent digital for our products, so everybody is establishing
partnerships with different start-ups offering all types of all technology innovations. But this results in
multiplication of partnerships, multiplication of cloud providers, multiplication of connectivity protocols,
anything you can imagine in digital. This multiplicity is great, but we need to ensure there are econo-
mies of scale for everyone.

—CYRIL PERDUCAT, EXECUTIVE VICE PRESIDENT, DIGITAL SERVICES AND IOT

Perducat’s Digital Services Transformation (DST) team took responsibility for mapping out the company’s digital
strategy and creating the reusable enterprise capabilities needed to deliver on that strategy. The CEO’s concerns
shaped the team’s approach to building capabilities:

Jean-Pascal [Tricoire] told me, “Fix this and bring it under one umbrella.” And to achieve that, I think
we need a platform.

—CYRIL PERDUCAT

BUILDING A DIGITAL SERVICES PLATFORM

Among Schneider Electric’s leaders, Perducat found enthusiastic support for a digital platform. He noted that
individuals had different perspectives on the nature of that platform:

Some people will call it an IoT platform; others will say it’s a cloud platform; some others will say it’s a
connectivity platform. Some will say it’s analytics. Those are all different angles of the same thing.

—CYRIL PERDUCAT

Perducat wanted his organization to build reusable services that could both contain costs and accelerate delivery
of new business offerings. His definition of the platform incorporated the views of the rest of the company:

It’s a set of capabilities that goes from the product to the cloud and enables more intelligence and
ultimately enables services. It’s how we will connect, collect data, transform data into information with
analytics, and then close the loop with business systems.

—CYRIL PERDUCAT

Schneider Electric leaders were committed to investing up front in a platform that would deliver benefits over
time. In their view, the platform would offer a repository of reusable technical capabilities. As a result, Perducat
initially thought that building a digital services platform would be primarily a technology challenge:

I started purely with technical resources. I had a team of people doing remote connectivity; I had some
people that had started to do things around a cloud platform, in partnership with Microsoft. I had
some other people working on analytics. So there were different pieces of things, but the common
theme was that it was centered on technology.

—CYRIL PERDUCAT

The platform would also need to be able to connect with products not manufactured by Schneider Electric. The
plan also included the ability to open the platform to an ecosystem of third-party developers in the future.
 Ross, Beath, and Moloney | CISR Working Paper No. 417 | 8

Perducat’s DST team set about culling external partners to reduce partner variety, and developing shared capa-
bilities concurrently with customer service offerings (e.g., dashboards, analytics, customer apps, energy manage-
ment software tools). They found that indeed, the technological requirements for digital business services were
significant. But many of the toughest technology challenges were being addressed at the infrastructure level.
Core infrastructure was the responsibility of Hervé Coureil’s Information and Process Organization (IPO):

Everything that touches integration [of core processes and data] is done by IPO. Everything that touch-
es the development of new offers is with the DST team. I’d say it’s working pretty well.

—HERVÉ COUREIL, EXECUTIVE VICE PRESIDENT, INFORMATION SYSTEMS

Coureil assigned Alfons Marquez, Vice President for Software and Digital Services, primary responsibility for
building four crucial platforms needed by the DST team to build and operate digital business services: (1) identity,
(2) complex event processing, (3) subscription (billing), and (4) cybersecurity.
The identity platform elaborated on an existing database of installed assets. It associated customer data with
product data, and in doing so provided a complete picture of a customer’s devices. It also distinguished devic-
es manufactured by Schneider Electric from those of other manufacturers. And to develop a valuable identity
platform, Schneider Electric needed to install sensors on many of its older devices that were not yet connected
to monitoring systems:

What we are doing first is we are connecting the equipment to the Internet. Once you connect it, you
monitor it from our platform, and from there we perform analytics on it. From there we go back to the
client with predictive maintenance recommendations.

—JEAN-YVES LAGARDE, VICE PRESIDENT, DIGITIZED FIELD SERVICES, AND ECOSTRUXURE™ ASSET ADVISOR GM

The complex event processing (CEP) platform allowed the company to “close the loop” by automatically routing
signals from sensor data and related analytics to appropriate operational support systems and staff.
The goal of the CEP platform was to connect signals produced by IoT-enabled devices with Schneider Electric’s
back-end processes in order to generate events (e.g., the dispatch of a field service engineer, the subscription to
a new service).

The real magic of a CEP system is that you’re driving the event to the right field service engineer—
somebody who’s on duty in that area, who preferably has the right spare part. Sounds ridiculously
simple. But it’s super complicated. We call this “closing the loop.”

—HERVÉ COUREIL

Exhibit 2 summarizes the CEP concept.

 Ross, Beath, and Moloney | CISR Working Paper No. 417 | 9

Exhibit 2: EcoStruxure™ Platform Bridges the IT/OT Gap

Translating data into actionable intelligence and better (actionable) business decisions

>
z uora •••servicemax accenture

Source: Perducat, “Reinforce our core and create value with the IoT.”

The subscription platform was essential for supporting the company’s transition to business models built on
recurring revenue from the sale of on-demand services. This platform provided a billing engine that allowed
microtransactions, including a credit card transaction of a mere $5:

Billing is super complex, and Billing is a core functionality, because that’s where you have a lot of data
about usage.

—HERVÉ COUREIL, EXECUTIVE VICE PRESIDENT, INFORMATION SYSTEMS

Cybersecurity was a perpetual concern. Schneider Electric had long focused on ensuring the security of its own
data. Delivering digital services meant that the company needed to protect customer data as well. To succeed
with an IoT model, Schneider Electric would need to allay the significant security concerns of its customers.
Coureil noted that customers would constantly be assessing the potential value of the services that they re-
ceived against having to share their data:

We all have our iPhone, and we constantly do privacy and convenience trade-offs. Do I let Google track
me with Google Maps? It’s convenient, but I'm giving away data and privacy. I think you have the
same kind of trade-off in a company. You have to create a value proposition that’s meaty enough, so
that the customer feels it’s worthwhile.

—HERVÉ COUREIL

Marquez’s teams connected these four platforms to Schneider’s existing CRM and ERP platforms. In doing so, he
was reaping the benefits of the earlier transformation initiatives that had simplified Schneider Electric’s technol-
ogy platform:

This is huge because it means that, except for ERP, it’s just one integration. ERP is 1 integration x 12,
but that’s better than it was. If it was not in place, I have no idea how we would even start at this
stage. That’s the beauty of a platform.

—HERVÉ COUREIL

Meanwhile, as Perducat’s team started to build out digital services and Schneider’s digital services platform, they
found that the technical issues were more readily resolved than the organizational issues.
 Ross, Beath, and Moloney | CISR Working Paper No. 417 | 10

SELLING THE PLATFORM AND SHAPING DEMAND FOR DIGITAL SERVICES

Given the long history of business unit autonomy at Schneider Electric, Perducat recognized that he would have
to build business unit enthusiasm for an enterprise digital services platform. The business units had been en-
couraged to create digital services locally. Those businesses that were furthest along were initially unenthusiastic
about shifting to a corporate platform. Perducat noted that it was easier to bring on board business units that
had not yet built anything:

When we started from scratch, we didn’t have to tell them, “Well, you built a standalone cloud infra-
structure, but look, we have decided to partner with Microsoft. So we’ll have to translate all that you
have done to a Microsoft context.”

—CYRIL PERDUCAT, EXECUTIVE VICE PRESIDENT, DIGITAL SERVICES AND IOT

In general, however, prototypes that had been built within business units were expensive and prone to scalabil-
ity and security issues. Perducat started selling business leaders on the value of “sharing the risk of failure with
somebody else in the organization.” As lines of business turned to the Digital Services Transformation team for
support, they initially submitted requirements for projects already in progress and the DST team built services
accordingly. But this approach did not lead to successful, important digital business services:

We were not creating more demand. We were not creating more projects, because we were purely rely-
ing on the fact of the business deciding to start a new project. We were in the platform adoption model.

—CYRIL PERDUCAT

To generate more strategic innovations, Perducat expanded the mandate of his team beyond platform adoption.
He adopted a funnel model to surface the most promising innovations using three stages: ideation, incubation,
and industrialization. His goal was to continuously—and rapidly—move offerings through these three stages,
killing off projects that didn’t demonstrate a viable business case.
Perducat established six digital clusters across business units and sales organizations to work with his team to
generate ideas and guide them through the funnel that would deliver value from Schneider’s EcoStruxure™ (see
exhibit 3 for an overview of the three innovation layers of EcoStruxure™). Each cluster was a virtual team orga-
nized roughly around a market segment with potentially similar or related needs. Most clusters had membership
across multiple business units and all were headed by a business leader.

Exhibit 3: Three Innovation Layers, Four End Markets, Six Architectures

Eco Otruxure N
Innovation At Every Level

~--­
' EcoStruxure
Platform
Building Data Center Industry Grid

BUILDING POWER DATA CENTER MACHINE PLANT GRID

Source: Perducat, “Reinforce our core and create value with the IoT.”
 Ross, Beath, and Moloney | CISR Working Paper No. 417 | 11

In ideation DST members worked with the business units and selling organizations in a cluster to generate myr-
iad ideas for new offerings. Some ideas emerged from concepts jointly explored with a customer, while others
were formulated by the cluster or DST members based on reported customer needs, problems, pain points, and
desires. In the future, customer insights gained from the new digital services might generate ideas:

Once we have these products connected, and we extract a lot of data from them—how the customer
uses them, how the product is performing—these data eventually become the basis of good insights to
redesign the products.

—CARLOS JAVARONI, IOT BUSINESS DESIGN DIRECTOR

During ideation, the team structured and documented ideas with an eye towards identifying recurring and simi-
lar ideas. These were candidates to become reusable services. Once a cluster had accumulated 40–60 ideas, the
ideation phase culminated in a two-day workshop to discuss the ideas. Workshop participants did not vote on
which ideas would proceed to incubation. Instead, the DST leaders used input from the workshop to identify the
2–5 highest-potential ideas to take forward.
In the incubation stage, cluster and DST members developed what they called “demonstrators”—a combination
of mock-up, proof of concept, and prototype. They engaged customers in reviewing demonstrators so they could
learn what a customer would find valuable enough to pay for:

We need to make sure we hear from customers from the beginning, so we know if the idea will result in
an offering, and more important, if customers are getting insights and if they are willing to pay for this
type of solution. In several cases, we have gotten very positive customer feedback, but it’s not neces-
sarily enough for them to spend money on it.

—CARLOS JAVARONI

During ideation or incubation, new offerings were assigned a product owner. This owner would take responsibili-
ty for the product’s commercial success and continue to develop it over time:

We try to avoid a situation where we have a handover from one group to the other. What we have
are gates to see if the project is mature enough to move to an incubation phase or an industrialization
phase, but these gates are not a handover from one team to the other.

—CARLOS JAVARONI

The goal of the incubation phase was to initiate a pilot that a customer was willing to fund—given the value they
received in return. At that point, technologists joined the team to put a solution into place.
Following a successful pilot, Schneider Electric would move an offering into industrialization. Scaling up a digital
service was a complicated and possibly risky venture. To provide the sophisticated ongoing customer support
that digital services like EcoStruxure™ Asset Advisor required, the company needed geographically dispersed
service bureaus with analytic capabilities.

When we scale we have to have service bureaus in multiple geographies. We don’t want to end up in a
situation where we have to invest €100 for something for which the customer is only willing to pay €10.
We don’t want a mismatch between the perceived value and the cost to deliver this value.

—CYRIL PERDUCAT, EXECUTIVE VICE PRESIDENT, DIGITAL SERVICES AND IOT

In time, the company would be able to develop AI solutions to reduce the costs of staffing service bureaus, but
that capability was not imminent. As of the end of 2016, one subscription-based digital service—EcoStruxure™
 Ross, Beath, and Moloney | CISR Working Paper No. 417 | 12

Asset Advisor—was nearing global rollout on the new Digital Service Platform, but many other offerings were
quickly moving towards adoption.
Schneider Electric’s leaders recognized that the company would need to introduce organizational changes to
ensure sales growth and profitability as they took more EcoStruxure™ Asset Advisor offerings from incubation to
industrialization.

SELLING AND SERVICING DIGITAL SERVICES

Digital services represented a very new value proposition for Schneider Electric’s customers. In the past, custom-
ers would make a one-time purchase of a product that was nearly maintenance-free. Going forward, rather than
products, customers would be offered a solution to a business problem (e.g., energy management). This meant
that salespeople needed to establish customer relationships that were outcome-based rather than transac-
tion-based.
At the time, the new value proposition presented a challenge not just for Schneider Electric’s own salesforce but
also for its value chain partners, who sold products to small and medium-sized end customers. Schneider’s value
chain partners recognized the potential disruption digital services entailed:

You might know that the value is there for the end customer, yet there are so many partners or inter-
mediaries that fear being cut out of the value chain. And they don’t know how to sell that new value
proposition. Education and change management are as critical as the technology evolution.

—JEAN-PHILIPPE BONNAFOUX, VICE PRESIDENT, DIGITAL CUSTOMER EXPERIENCE, END USERS,

AND CONNECTED OFFERS

The company saw the need to invest in training to sell new digital service offerings:

We had to train our partners, to educate them to sell such a service. But also in our field service de-
partment, our service people were more trained to sell field services that are electromechanical-based
services, like maintenance contracts. We had to educate our own service salespeople about this new
approach of connecting devices and the future of digital services.

—SEBASTIEN CUGNET, VICE PRESIDENT, FEEDER AUTOMATION

Initially, the salespeople who worked with global strategic customers were leading sales of products like EcoStrux-
ure™ Asset Advisor. Companies that were piloting the full EcoStruxure™ Asset Advisor offering were receiving valu-
able insights on their operations. Most of the pilot sites, however, had signed up for just part of the offering (such
as collection and analysis of performance data) within the customer’s firewall. Additional features of EcoStruxure™
Asset Advisor brought additional value for the customers that were willing to also leverage the cloud.

You have some customers that are early adopters and willing to share data on the cloud, as they see
the value they can get with data analytics. Yet there is the question of who owns the data, particularly
in Europe—the customer or the service provider. Some customers are not yet ready to leap forward,
because some of the information is fairly proprietary and very core to their business.

—JEAN-PHILIPPE BONNAFOUX

As Schneider Electric introduced new selling propositions, management was debating metrics for success. Reve-
nues from digital services were an obvious indicator, but management also wanted to track progress in customer
connectivity. One simple option was to count the number of connected assets, but it wasn’t clear that the num-
ber of assets would necessarily indicate the impact of connectivity:
 Ross, Beath, and Moloney | CISR Working Paper No. 417 | 13

If one plant is connected with five devices or one hundred devices, I'm not sure it makes a huge differ-
ence. Once I’m in the plant and I’m connected to those five, ten, or twenty critical assets, I may derive
as much business as if it were one hundred assets. It’s the quality of the connection more than it is the
quantity of connections. At least on the B2B side. Those assets are associated with critical processes
that cannot afford downtime or catastrophic failure.

—JEAN-YVES LAGARDE, VICE PRESIDENT, DIGITIZED FIELD SERVICES, AND ECOSTRUXURE™ ASSET ADVISOR GM

LOOKING AHEAD
In late 2016, Schneider Electric was still generating the vast majority of its revenues from business models other
than subscription to digital services. Thus, deciding when to ramp up resources in DST, global sales, and distrib-
uted service centers always involved a delicate cost vs. opportunity balance. The commitment to digital services
had, however, gained profound traction in the company.
DST had delivered ten reusable services—with assigned service owners—that could be leveraged in new offer-
ings. Those reusable services accelerated the delivery of digital service offerings. However, most new offerings
required DST to allocate more development resources to project-specific efforts:

The marketing people, the service people, the technology teams in the businesses, they are all coming
with new offers and requirements that are very often ahead of what we have available. We have to
connect the dots and manage the timing and prioritize what makes the most sense from a business
standpoint. It’s the name of the game.

—CHRISTOPHE CLERC, BUSINESS ENGAGEMENT DIRECTOR, DIGITAL SERVICES

In addition to building reusable services and developing new capabilities, Schneider Electric found that it also
needed to transform its culture. Over its history, the company had built a culture of product excellence. A culture
focused on rapid delivery of customer solutions is very different and not entirely comfortable:

R&D will take time to release a product, because it has to be more than perfect. And with good reason.
Our products have safety functions. Then you have the world of software which says, “Okay. Let’s ex-
periment. Let’s iterate. Let’s do it like startups do. Let’s give them a Minimum Viable Product.” There’s
no love lost. Connecting the two is one of the interesting challenges of business leaders.

—HERVÉ COUREIL, EXECUTIVE VICE PRESIDENT, INFORMATION SYSTEMS

MIT SLOAN CENTER FOR INFORMATION SYSTEMS RESEARCH
Founded in 1974 and grounded in the MIT tradition of rigorous field-based research, MIT CISR helps executives meet
the challenge of leading dynamic, global, and information-intensive organizations. We provide the CIO and other
digital leaders with insights on topics such as business complexity, data monetization, and the digital workplace.
Through research, teaching, and events, the center stimulates interaction among scholars, students, and practitioners.
More than ninety firms sponsor our work and participate in our consortium.

CISR RESEARCH PATRONS BNP Paribas (France) General Electric Principal Financial Group

Information as of May 2017

AlixPartners LLP BNY Mellon Genworth Financial Procter & Gamble
L&T Infotech Limited The Boston Consulting Group, Hitachi, Ltd. (Japan) QBE
Inc. Howden Joinery Group plc Raytheon Company Reserve
Microsoft Corporation BP (UK) (UK) Bank of Australia Royal Bank
PricewaterhouseCoopers BT Group plc (UK) Huawei Technologies Co., Ltd.
Advisory Services LLC of Canada Royal Philips
Canadian Imperial Bank of (China)
SAS Institute Inc. (Netherlands) Sabadell Bank
Commerce Insurance Australia Group
Scentre Group (Australia)
Tata Consultancy Services Cardinal Health, Inc. Johnson & Johnson
Limited Schindler Digital Business AG
Caterpillar, Inc. LKK Health Products Group (Switzerland)
CEMEX (Mexico) Ltd. (HK, China)
CISR SPONSORS Schneider Electric Industries
Charles Schwab & Co., Inc. LPL Financial SAS (France)
Aetna, Inc. McGraw-Hill Education
Chevron Corporation Standard Bank Group (South
Akamai Technologies National Australia Bank Ltd. Africa)
CHRISTUS Health
Allstate Insurance Company National Disability Insurance State Street Corp.
Cochlear Limited (Australia)
ANZ Banking Group Ltd. Scheme (Australia) Suncorp Group (Australia)
(Australia) Commonwealth Bank of
Australia New Zealand Government— Swinburne University
APM Terminals (Denmark) GCIO Office of Technology (Australia)
CPPIB (Canada)
Australia Post Nielsen Sydney Water (Australia) TD
CSBS
Australian Taxation Office Nomura Holdings, Inc. (Japan) Bank, N.A.
DBS Bank Ltd. (Singapore)
AustralianSuper Nomura Research Institute, Teck Resources Ltd. (Canada)
DentaQuest Ltd. (Japan)
B2W Companhia Digital Tenet Health
(Brazil) Deutsche Telekom AG Nordea Bank
(Germany) Tetra Pak (Sweden)
Banco do Brasil S.A. Northwestern Mutual
El Corte Inglés Trinity Health
Bank of Queensland Orange S.A. (France)
(Australia) Equifax Plc USAA
Org. for Economic
Barclays (UK) ExxonMobil Global Services Co-operation and Westpac Banking Corp.
Company Development (OECD) (Australia)
BB&T
Fairfax Media (Australia) Origin Energy (Australia) World Bank
BBVA (Spain)
Ferrovial Corporacion, S.A. Owens Corning
Bemis Company, Inc. (Spain)
Biogen, Inc. PepsiCo Inc.
Fidelity Investments

MIT CISR is funded by Research Patrons and Sponsors, and we gratefully acknowledge their financial support and their many
contributions to our work.
Sponsorship and benefits: cisr.mit.edu/community/sponsor-and-patron-benefits
Stay on top of all new releases of MIT CISR content: cisr.mit.edu/feeds

MIT Sloan School of Management Team | Kristine Dery, Christine G. Foglia Associate Director,
Center for Information Systems Research Nils O. Fonstad, Amber Franey, Dorothea Gray-Papastathis,
Cheryl A. Miller, Kate Moloney, Leslie Owens Executive Director,
245 First Street, E94-15th Floor Jeanne W. Ross, Ina M. Sebastian, Peter Weill Chairman,
Cambridge, MA 02142 Barbara H. Wixom, Stephanie L. Woerner
t 617-253-2348 | e [email protected]

cisr.mit.edu | 00