Digital Transformation:
Energy Technology and IT

Michael Krigsman: Digital transformation is one of the hot topics of our time, but what do we mean by digital transformation? What are the operational issues that are involved? What are the complexities? What are the opportunities?

I'm Michael Krigsman. I'm an industry analyst and the host of CxOTalk. Today, we are speaking with Hervé Coureil, who is the chief digital officer of Schneider Electric.

I want to say a heartfelt thank you to IPsoft. Right now, we are in their AI Experience Lab, which is their innovation center in New York City. I'm so grateful that IPsoft is making this episode of CxOTalk possible.

Now, before we begin, please tell your friends to watch, tell your family and, for sure, subscribe on YouTube.

Hervé, thank you so much for being here.

Hervé Coureil: Hi, Michael. Thanks for having me.

Michael Krigsman: You're the chief digital officer of Schneider Electric.

Hervé Coureil: Indeed.

Michael Krigsman: Tell us about Schneider Electric.

Hervé Coureil: Schneider Electric is a pretty big company, actually, a very global, $25 billion in revenue, more or less, 144,000 employees. We call ourselves the global specialist in energy management and automation.

Our job in life is to make energy safe, reliable, efficient, and sustainable. We do it in a few very, very specific end markets, so home, buildings, infrastructure, data centers, industries, and factories. That's really what Schneider is. It's a very, very global company.

Really, efficiency is our model. We are thinking day and night about how to make energy, the consumption of energy efficient, on how to make processes that are powered by energy efficiency.

Michael Krigsman: Now, you're the chief digital officer. At Schneider Electric, what does that role encompass?

Hervé Coureil: Digital is a big deal in Schneider Electric. As I said, what wakes us up every morning is the business of efficiency. It's really how we make the consumption of energy efficient, how we make processes efficient.

If you want to make a process of building an infrastructure energy efficient, it's not just about energy. It's not just about moving electrons. You also need to move bits. You also need to move information content together with energy.

That's really where the world of energy, the world of information, energy technology, information technology, are blending together. Suddenly, everything is digital. In Schneider Electric, our digital transformation is not only about digitizing and doing things differently, but it's also becoming digital. It's about creating digital services to do different things.

Michael Krigsman: It sounds like you are transforming digitally yourselves and you're also helping your customers, helping enable their digital transformation as well.

Hervé Coureil: That's absolutely true. Our customers, which are either in buildings, industries, infrastructures, [or] data centers. Energy is a big deal for them. Their digital transformation encompasses improving their efficiency, improving how they consume energy, improving how they hone their processes.

A big deal of what we do is in helping our customers transforming digitally. I was speaking about the world of energy, the world of IT coming together. It's also how the world of operational technology or OT and IT are coming together because, again, it's not only about running a process. It's not only about distributing energy. It's doing it efficiently.

To do it efficiently, you need to consume information. You need to be real time. Suddenly, digital is everywhere. It's really at the heart of the value we want to provide our customers.

Michael Krigsman: Let's unpack this a little bit because, when you talk about energy efficiency, on the surface it's not clear why there's a digital transformation component there. It's like, okay, let's be sure to turn out the lights when we go home. Obviously, it's much, much, much more complex than that.

Hervé Coureil: Yes, absolutely. Of course, you have various levels of complexity, sophistication, et cetera. But, if you take a building, a building is almost a living organism and ecosystem. You have people moving in and out. You have … (indiscernible, 0:05:13), … (indiscernible, 0:05:15), HVAC, elevators, people badging. Suddenly, how do you make that building, that ecosystem efficient? How do you really enable, in real time, to make decisions that would allow you to take a hotel, for instance, to turn the lights on or off, to change your HVAC, air conditioners, et cetera?

It's really interesting. If you really want to make a big dent from an energy standpoint, it's not just about things. It's not just about breakers, et cetera. It's about connecting those things. Here, it really becomes interesting because, at one level, you want to connect those things on-premise because you have a local control system that will be in the building, on the factory floor, and so forth. You don't want to depend on a network. You want to be absolute data agnostic … (indiscernible, 0:06:17) real time.

At the same time, for cloud, and what comes with the cloud--take artificial intelligence, machine learning, and so forth--allows you, beyond the particular building, beyond the particular shop floor, to aggregate information and, suddenly, to think about how you can become predictive, how you can drive predictive maintenance, how you can drive optimization algorithms that are going to take weather data into account, for instance, in order to tune your energy consumption even more.

Michael Krigsman: It sounds like you're designing products both from the standpoint of energy efficiency, but almost equally so from the standpoint of usability.

Hervé Coureil: That's indeed very important. In the world of industrial automation, connecting of product to a local control system is not new because that has been done for ages. Now, again, the superpower of the cloud suddenly gives you much more ability and allows you to create much more value than before. Then the experience that you're giving with your products becomes super, super important.

We're really spending a lot of time thinking about how to provide the best experience, an experience that's consistent, that's intuitive. It's a big deal because the world of enterprise IT and the world of our personal IT at home have evolved. Nobody wants a very bad user interface anymore. Everybody wants to be able to operate through their mobile phone, a mobile device, so it's very much a big deal for us to stay ahead from that perspective.

Michael Krigsman: You've been talking about AI and machine learning, so what does that enable you to do? What's the data set that you're operating on? What kind of data are you collecting, aggregating, and then analyzing?

Hervé Coureil: Yeah, it enables you to drive efficiency. It does many things internally. You're digitizing. You're doing things differently where AI allows you to do things, scoring leads or whatever, that you would not have been able to do before. That's one thing.

There's another element, which is really everything around customer experience. Voice, vision: only those two things, which are powered by AI and machine learning in the backend, are amazing. We really see voice, for instance, being quite a big deal not only in our industry, but in many, many different aspects. Really, in customer experience, AI is kind of a new computing platform, and we are seeing more and more customer experiences being developed on top of that new computing platform.

Then you add the third block, which is really how you add AI in our products. Our products, of course, are very technology intensive. They are here to solve very specific, real-world problems. They're at the intersection of digital as a platform, but also with very, very deep and profound knowledge and segment expertise.

You take a very deep segment expertise, you take digital capabilities, you mesh them together, and that's how we really envision AI and machine learning in our products. For instance, preventative maintenance, predictive analytics, optimization algorithms are things that we embed in our digital services that are going to augment our products, really meshing together deep AI knowledge with the very deep segment expertise because, if you want to have good AI, as artificial intelligence, you need to have good IA as information architecture.

You need to understand that model. You need to understand how the data is structured. When you have the deep segment expertise, you understand how data is structured and you're able really to leverage that segment expertise to perform functions and enhance, augment your product and your services very, very considerably.

Michael Krigsman: What now do your customers expect from you in terms of outcomes, and how is that feeding back into your product design, product development?

Hervé Coureil: It's interesting. When we created the digital team, our IoT team, one of the first things we did was realizing that you had the product development and you had digital service development. The key for us was to blend the two and that, for digital services development, we needed to put the customer at the center of it. We've created a process. We call it the Digital Service Factory, internally. But, that basically allows us to start with design thinking sessions with a customer, testimonials, interactions, et cetera where we try to make sure: are we solving the right problem; have we expressed the right problem with the right outcome; and so forth?

We've really been changing the way we address customers. We're also looking at how some of our partners and customers are behaving, trying to learn from the real-life problems. It's interesting because, more and more, we have a very engineering sort of centric company, very technology-centric. But, more and more, design thinking like ethnography, understanding the human behavior is becoming also as important, and it's really about how you blend the two, which is a significant change that digital is bringing us.

Michael Krigsman: Why does digital take you down this path where we can even talk about design thinking, which is empathy?

Hervé Coureil: Yes.

Michael Krigsman: You used the term ethnography. What about digital transformation takes us there? You're this hardcore engineering company in energy.

Hervé Coureil: True.

Michael Krigsman: How did we end up there?

Hervé Coureil: I think it's interesting because digital, when you think about it, there's a lot of impact. It's one of the very interesting aspects of digital. It gets you to sort of model how we're thinking as human. It gets you very close to human behavior. You need to understand, in a strange way, the more you have machine learning, the more you go through the path of AI, the more you need to understand how the mind works, the more you need to understand how people behave.

Suddenly, behavior, you're not just about zero or one type of product that's enough, right? You are optimizing an ecosystem. An ecosystem is made of people. People are behaving. Suddenly, that people science, that social science becomes something that you need to basically take into account.

Michael Krigsman: Why? How does this take you into needing to understand people better? What's the link?

Hervé Coureil: I think, because people and machines, at the end of the day, we interact wherever. You take a building, you take many factories, they are made of people. [Laughter] We like to think about how we complement people, how we augment people, how we make them more performant, how we empower them. You can't do that without really deeply understanding what an operator needs, what the C-level need, having your personas right, and applying the right design thinking. When you get away from this analogy type--zero, one [laughter]--to something that's much more complex, you need to embed human behaviors in how you design your systems.

Michael Krigsman: Hervé, would it be accurate to say that as you're aggregating this data, you need to have an even more profound sense of that domain knowledge you were talking about; because of the aggregated data, your products can do so much more, so much more nuanced, that if you don't have that deep sense of the domain, you'll miss the mark?

Hervé Coureil: I think so. I really think that we saw an era where we had massive Internet companies, like big technology platforms, very agnostic, very horizontal, et cetera. I think we are now moving into an area where we are transforming specific areas of the industry, of the economy, et cetera. If you're really about transforming an industry, then it's how you mesh the deep understanding of an industry with a deep ability to use technology.

You're not selling technology. You're solving problems with technology. That's just a completely different approach.

Michael Krigsman: Is that your goal to transform the industry?

Hervé Coureil: Yes.

Michael Krigsman: You're a 200-year-old company, which means you have gone through many transformations. But, this description of digital, of using the data, of AI, I have to imagine is driving internal change to Schneider Electric. Maybe you can talk about that. I think change is one of the most difficult--

Hervé Coureil: Oh, yes.

Michael Krigsman: --parts of transformation for any company.

Hervé Coureil: Absolutely. We all hate change, right? [Laughter]

Michael Krigsman: [Laughter]

Hervé Coureil: I'll leave now. But, I think, when we look at our digital transformation and we apply it to Schneider Electric, we see five big pillars, if you will. We sort of discussed the first one at length, which is really how we're transforming our offers, how we're transforming the services, the products, the system that we are providing to our customers, to augment them, to provide more value to customers. That's the eco-structure, architecture, and how we enhance it with AI and analytics, et cetera; the IoT that I was mentioning before.

The second pillar is really thinking about experiences, so thinking about mobile, thinking about voice, thinking about having an end-to-end experience for our customers where we make things simple for them, whether it's a C-level executive, an operator, or just somebody who wants to grow their catalog of product. How do you make it relevant and context-rich right away? The experience is, of course, a very big deal that sort of spans a continuum of customer experience, partner experience, even employee experience, of course.

The third pillar of our transformation is really security because you can't be an operation in … (indiscernible, 0:18:42) technologies, you can't be a large company without a laser-sharp focus on security, obviously.

The fourth area is really talent. Talent sort of echoes the previous conversation, I feel, where we want to have a mesh between people who have that segment expertise and people who have that digital understanding, who are digital disruptors. Having a mix of talent, a mix of leadership where we blend people that understand deeply the segments where we operate and people who understand technology, digital, and how digital is disrupting everything.

On the fifth pillar, so we spoke about a firm eco-structure, we spoke about experience, we spoke about security, we spoke about talent. The fifth one is foundations. That's probably one of the trickiest ones because, whatever you like, if you're a large company, if you grow through M&A, you have added a lot of applications. You have citizen developers that are defined that little bit of software here and that little piece of application there.

Very quickly, your foundation, they can be on a critical path of your digital transformation. It's very important to think how you are unpacking the monolith, how you are unbundling the monolith so that you can expose specific services and consume them in different context. Working on the foundation is something that's super important.

As I like to say, you can't spell digital without IT. Foundation is a big deal and, if you don't take care of it, if you don't apply a great amount of thinking on how you're going to architect it, how you're going to make sure that it's going to enable your transformation, not get in the way, you can be at risk of slowing down. The last thing you want to do at times of digital transformation is to be slowing down.

Michael Krigsman: What about metrics, measurements? How do you evaluate digital transformation?

Hervé Coureil: You may know I started in finance, so I kept from that a passion for metrics that you can't imagine. [Laughter]

Michael Krigsman: [Laughter]

Hervé Coureil: But, we track metrics in every of the five pillars that I was mentioning from a digital transformation standpoint. We have what we call the Digital Barometer that is sort of the overall scorecard, if you will, of our digital success. When we have an executive committee, we look at our people scorecard, we look at our financial scorecard, we look at our quality and customer satisfaction scorecard, and now we look at our digital scorecard, in addition.

The digital scorecard tracks those five pillars. On offers, we look at, of course, how we are developing and growing those new offers. On experiences, we look at how happy our customers are with us digitally. We look at having better scores with digital engagement than with physical engagement.

With security, we have, of course, a lot of specific security metrics that we look at. With talent, we look at how much, in our teams, we are blending digital talents with people who have the segment expertise that we are talking about earlier on. Then, in foundation, we look at the health of our landscape, and we look at how we are doing in terms of driving the simplification, if you will, of our application landscape and how well we are doing in exposing services or making our foundation an asset, not a liability.

Michael Krigsman: That's really interesting. You have a very, very detailed framework going across. I was going to say digital transformation framework, but it's a business operational framework that has digital components, and so you're measuring the business against these very clearly defined points.

Hervé Coureil: You are right. There's also an element that we have not touched on that I think is super important when you start thinking about metrics and so forth. It's really resource allocation because I think the big deal is, you have a portfolio of initiatives, back to experimentation. Some will fail. Some will succeed. Some will get big. How do you allocate resources? How do you allocate resources between operating systems, on creating new systems, and then just ideating and incubating totally new ideas?

I'm very passionate. Again, probably the finance background, but I'm very, very passionate about how we are allocating resources. I think that the precision in resource allocation, the thinking, the deep thinking behind where you put your money is super fundamental and, actually, is one, I would say, of a big predictor of success.

If you just spend money based on what you had last year and there's no real choice, versus having a fairly transparent marketplace of projects that compete in a healthy way for resources, and very explicit decisions to say, "This is what I'm going to do because I feel that--" and I have success metrics; I have golden metrics; I know whether I'm on track or not. That makes a world of difference.

We did spend a lot of time creating that resource allocation theory or framework that I think is extremely important because, again, you're looking transversely at a lot of different things, so you need to figure out where to invest and what speed. You don't want your resource allocation process to become a bureaucracy.

Michael Krigsman: For you, digital transformation is not some sort of general, abstract goal, "Oh, we're going to do some more marketing."

Hervé Coureil: [Laughter]

Michael Krigsman: [Laughter]

Hervé Coureil: No, I love marketing, but it goes well beyond. It goes well beyond that. I think that's what I like. It touches so many things.

We were speaking about AI earlier. It's how you're digitizing internally. It's how you are transforming your business to become a digital business. It's how you are creating things that are very, very specific to solve very, very particular problems. It's how you are leveraging platforms in order to reuse what exists just as reinventing. It has so many different facets. It's very, very holistic from that perspective.

Michael Krigsman: Now, as we finish up, one final question for you: So, it's very clearly that Schneider Electric is very far along the digital transformation maturity curve. People who are watching that are thinking, "How do I do this? I want to do this too," how do they begin? What's most important?

Hervé Coureil: I think it's really, probably, a healthy paranoia. It's waking up every morning and looking not only at your direct competitors, but also at what's happening in other industries. What has happened in media? What has happened in the travel world, and so forth?

It's really this paranoia that you're never doing enough. Success can bring complacency, et cetera. You don't want that to happen, so if there's one piece of advice or one thing that I try to wake up every morning having that in mind, it's really to make sure that we're not becoming complacent.

Yes, we're doing some good things. But, never fast enough, never good enough. [Laughter] We are always sure that somebody could go faster and better, so looking at not just your industry, but besides your industry boundary is something that's super important because, at the end of the day, technology is a big flattener. Technology flattens everything. What's happening in another industry may end up impacting you after a while. I think this paranoia is super important.

The other aspect that I touched upon is, how do you create a mindset of empowerment over control? I think that's very, very key, especially in today's world, in the digital world. You need to be genuinely looking at empowering others, whether it's customers, partners, employees, associates, whatever.

Michael Krigsman: Healthy paranoia that pushes you all the time to improve and, at the same time, empowering your employees so that this healthy paranoia is distributed through the whole organization and everybody is pushing hard.

Hervé Coureil: Absolutely.

Michael Krigsman: Hervé Coureil, thank you so much.

Hervé Coureil: Thank you so much. Thank you, Michael. Thanks for having me.

Michael Krigsman: We have been speaking with Hervé Coureil, who is the chief digital officer at Schneider Electric. Once again, subscribe on YouTube, and I want to say, again, a very heartfelt thank you to IPsoft for making this possible. We are in their AI experience lab called Amelia City in New York City. Thanks, everybody, and we will see you soon.