World View

The analysts and journalists have come to a meeting room in London's Savoy Hotel to hear about Schneider Electric SA's commitment to e-commerce. But Jean-Paul Jacamon, Schneider's vice chairman and chief operating officer, has a little confession to make. "Just a few years ago," the 52-year-old Frenchman admits, "I had no use for computers." Because Schneider has become "more and more a paperless organization," though, Jacamon has found himself adapting. "I personally no longer have any paper files," he boasts. "My filing cabinets, they're all gone." Such adaptation to new realities has been a hallmark of the Schneider story in recent years. Now employing more than 65,000 people in 130 countries, the Paris-based leader in electrical and automation equipment has been growing rapidly, extending its global reach by aggressively targeting new markets, making acquisitions in key sectors, and forging alliances around the world. The company -- a conglomeration that includes brands such as Square D, Merlin Gerin, Modicon, and Telemecanique -- saw sales increase by 18% from 1995 to 1998, with operating income jumping by 56% during that same period. The first half of 2000 has brought more good news in the form of 4.58 billion euros (roughly US$4.12 billion at current exchange rates) in half-yearly sales, an increase of 14.3% over the same period last year. Profits for the first half grew by 24.8% to 604 million euros (roughly $545 million). That's also been good news for stockholders, who have seen the company's shares triple in value since early 1996. Stock watchers seem to think the growth can continue, with 83% of analysts surveyed for the Financial Times Web site recommending a buy on Schneider's shares. One analyst who concurs is Swantje Conrad, who studies Schneider for J.P. Morgan & Co. Inc. in London. Although she sees some weaknesses in its global position, Conrad says Schneider "is one of the few companies of its type in Europe that is delivering on its promise to shareholders." While Schneider was reporting a hike in half-year profits, she noted, two of its main competitors, Invensys PLC and ABB Ltd., have had trouble convincing the markets they could put up good numbers. Conrad rates Schneider as a "buy" based both on the impressive numbers it has posted and on the fact that the company "is very well geographically diversified," she says. Schneider, which makes roughly 75% of its sales in electrical distribution equipment and the remainder in industrial control and automation, does half of its business in Europe, 30% in North America, and 20% in the rest of the world, according to its 1998 annual report. But those numbers soon could shift as the company continues to pursue growth in Asia and Latin America. Schneider's strategic advantage, says Chris C. Richardson, president and CEO of Schneider Electric North American Div., is that the company is able "to be both local and global, depending on customer preference. "We're everywhere," says Richardson. "We can help large global companies because we can give them the standards to build a plant in China, in Ireland, in Alabama, in Brazil." That's a major component of Schneider's global strategy: presence. But it's not the only component. To do battle with its chief rivals -- Siemens AG, General Electric Co., ABB, and Invensys -- Schneider also has sought to broaden its base by making acquisitions. In the U.S. this year, the company has acquired EFI Electronics, a surge-suppression specialist, and Quantronix, which makes sizing and weighing systems. In France the company gobbled up Infra+, a manufacturer of LAN wiring systems, and Bardin, which produces fault detectors for distribution networks. In other regions the company has acquired Indian manufacturers S&S Power Switchgear Ltd. and Crompton Greaves Ltd., both of which manufacture switchgears; Australia's Nu-Lec Industries Pty. Ltd. (switchgears); and the South African company Conlog Pty. Ltd., producer of electrical metering systems. Schneider's acquisition strategy has received some criticism, according to J.P. Morgan's Conrad, who says some would argue that the company does not move quickly enough. The two other main criticisms, Conrad says, are that Schneider has too small a presence in the important German market for industrial controls, and that there are holes in its product line in that sector. Other key components of Schneider's global strategy are e-commerce and the corporation's efforts to communicate via the Web both internally and externally. Indeed, the London briefing was conceived as an opportunity to lay out the company's plans to make the most of its "e-assets," and to introduce analysts to Eric Pilaud, the man in charge of SchneiderElectric.net. Already, says Jacamon, 27,000 of the company's 67,000 employees are connected by the Schneider intranet, and extranets have been set up with 51 top suppliers. The company also is planning to expand the deployment of e-way, an electronic distribution mechanism that's already operational in the U.S. The company has ambitious goals on this front. Schneider executives want to see 50% of technical support handled online by 2002, up from the 5% today. The target for online orders is to increase from 25% today to 45% in 2002, and procurement of supplies is to jump from under 100 million euros ($90 million) now to more than 500 million euros ($450 million) in two years. Schneider is hoping to create another revenue stream with PowerLogic, a central site for managing power that allows companies to outsource the management of their power consumption, says Pilaud. The system also tracks the quality of the power supply customers receive, he explains, giving them leverage with utilities over rates. "It's about going further through our own product," says Pilaud. Global Reach Jean-Paul Jacamon unwraps a sugar cube and pops it into his mouth. The analyst and media lunch concluded, he settles into a chair in a dining room at the Savoy and prepares to discuss the lessons Schneider has learned from being a presence in 130 countries. The presentation and lunch were of a distinctly global stripe, as it happens. His companions in this London dining room were a mixture of British and American journalists, analysts who had black-taxied over from the city's financial district, and French share-watchers who had made the cross-channel journey by train -- as had Jacamon and his colleagues -- and would return to Paris later that afternoon. "It makes for an interesting day out of the office," joked one analyst, an American working for a French investment bank. But Jacamon, a friendly and energetic man, is deadly serious when it comes to discussing what it takes to achieve success on a global stage. The company's strength in this regard, he says, is based on its Franco-American heritage. "We take advantage of that," he says. The company also uses its global reach to make life easier for customers. Jacamon cites the example of a supermarket chain for which it does business around the world. "For them, the most important thing is shortening the time between when the decision is made and the opening of the supermarket," he notes. What Schneider did in this case was create a predesign that would work anywhere, and then customize it to a particular location's electrical standards "as soon as they made a decision," Jacamon says. That sort of approach, however, is only possible if there's a truly global presence and a staff that understands the realities of other cultures. "You need people who have it in mind that things can be completely different in one place than they are in another," he says. "It's more a mind-set. I think people have to try to understand and to learn." Not understanding cultural differences is the most common mistake companies make when they try to do business elsewhere. Some of Schneider's competitors that operate in Europe, he observes, don't see the differences among the UK, Spain, and France. "It's the same when we operate in Asia," he adds. Jacamon is forthright in admitting that Schneider needs to learn this lesson. He notes that of the company's top 150 managers, only one-quarter are not French. But nationality isn't everything. "The solution is not necessarily to have Chinese in China," says Jacamon. "It's more to have good multicultural managers, to have managers who have long experience in other countries. In China, for instance, we have an Englishman who's spent a lot of time in the U.S. and in Australia." That executive's experiences have helped open his eyes, says Jacamon. "It's much easier for him to understand Chinese culture because he's prepared to see the differences." Richardson, Schneider's North American chief, says the company also recruits people in its emerging markets to come to work for Schneider in Paris or Palatine, Ill., so that they can get a chance to learn the company and its culture before going back to their own countries to work. One initiative in the company's efforts to find potential recruits has been to sponsor prizes for electrical engineering students. In Australia, for instance, an essay contest is held in which third-year students vie for a prize of (Australian) $5,000. All those factors are important, Jacamon explains, but they dwindle in significance if a company is not willing to embrace decentralization. "If you have an organization where every key decision is made in one central country, you have a lot of difficulty, even if you have multicultural people," he says. Popping another sugar cube in his mouth, Jacamon smiles and relates the experience of one American company with operations in France. A corporate directive was issued saying that the consumption of alcohol in a company building was strictly forbidden. No exceptions would be made. "This was madness to the head of their French operations," says Jacamon. "In France, a lunch without a wine is not a lunch." The French executive's solution, he says, was to receive top customers at other locations until he could get the directive reversed. Warming to his theme, Jacamon tells of a small French company that was bought by an American group. Someone at headquarters issued a memo telling executives in France that it was company policy to give each employee a turkey on Thanksgiving Day. Memo to the home office: France doesn't celebrate Thanksgiving. "In each country," Jacamon says, "you have specific things you must know." Understanding Differences That's been Richardson's experience, as well. The head of Schneider's North American operations says it's been instructive to see how cultural differences work themselves out. "Even meeting styles are different," he says. One effect of the North American presence within Schneider has been a fine-tuning of management styles, explains Richardson. "Americans are much more incentivized by money than the French," he says. "The rewards systems have had to be adjusted." Schneider's acquisition of Square D, which was finalized in 1991, has meant much movement of people back and forth across the Atlantic, particularly at the engineering levels, says Richardson, who himself spent a year and a half heading the uninterruptible-power-supply business from offices in the U.S. and in Grenoble, France. "It's certainly got me thinking more globally," he says. Richardson says he has learned a tremendous amount from his experience in moving from a position in which he rarely looked beyond the U.S. border to his current post. From Jacamon's perspective, that's the sort of experience more American managers need if they are to succeed in a global market. "I think they must pay more attention to other cultures or they will have difficulties," says Jacamon.