68 MIT SLOAN MANAGEMENT REVIEW FALL 2019 SLOANREVIEW.MIT.EDU
INNOVATION
sort of challenging has a certain guarantee that it’s
well thought through in terms of how you actually
handle the operational complexity later, because
you have operations and IT people contributing in
the definition,” Werner Zippold, former COO of
ING Direct Spain, told us. Exposing potential offer-
ings to both front- and back-office experts helps
the company keep its solutions simple but powerful
and focused on what customers want.
Shared Insights at
Schneider Electric
Schneider Electric, a $26 billion French company
founded in 1836, has produced iron and steel and
electrical equipment for much of its life but now
offers intelligent energy management solutions. A
large part of its sweeping digital transformation
journey has come from creating mechanisms to ac-
quire and then share customer insights drawn from
experimentation, cocreation with customers, and
cross-functional development teams.
It wasn’t a skill that came easy. Early on, Schneider’s
leaders recognized that putting sensors on major elec-
trical equipment and connecting that equipment to
the internet would allow them to give customers in-
formation about their energy needs and consumption
patterns.^7 Product development staff in the compa-
ny’s 48 business units worked with customers to
understand their expectations, needs, and challenges.
Individual lines of business funded these early
efforts and ideas proliferated, but the initiatives
lacked coordination and big-picture awareness.
“At the start, the businesses owned their product
road maps and therefore determined their needs:
local initiatives, local success, and failures some-
times,” said Michael MacKenzie, vice president of
Schneider’s IoT Technology Platform. “They were
making decisions and learning in a microcosm.”
These early experiments generated some suc-
cesses, but in general, Schneider’s business-unit-
driven approach did not deliver the expected results.
The proliferation of local offerings was not building
significant new revenue streams nor reusable strate-
gic capabilities. “Everyone across the company [was]
trying to reinvent digital for our products, so every-
body [was] establishing partnerships with different
startups offering all types of technology innovations,”
said Cyril Perducat, Schneider’s executive vice
president of IoT & Digital Offers. “But this [resulted]
in multiplication of partnerships, multiplication of
cloud providers, multiplication of connectivity pro-
tocols — anything you can imagine in digital.”
To move forward, Schneider needed to integrate
product development and share learning across the
company. Perducat created an internal Digital Services
Factory (DSF) to take responsibility for seeking busi-
ness opportunities to create offerings that leverage
the capabilities of a new shared digital platform.
Schneider’s DSF team escorts concepts for digital
offerings through four stages: ideation, incubation,
industrialization, and run and scale. In the ideation
phase, the team reviews new ideas to identify recur-
ring and similar concepts, because those ideas,
if applied by multiple business units, are likely to
deliver greater value. Product teams engage key
customers early in the ideation phase to learn the vi-
ability of a concept. The DSF team quickly stops ideas
that do not appear to have a viable business case, and
the company assigns business product owners to the
most promising ideas. If a concept moves to the
industrialization stage, Schneider typically requires
that a customer fund a pilot, thus increasing the like-
lihood that initial customer enthusiasm will convert
into revenues. In this phase, cross-functional teams
work jointly with the customer to ensure that the
offering delivers on the customer value proposition
and that the customer sees it. “In several cases, we
have received very positive customer feedback, but
that’s not necessarily enough for them to spend
money on it,” said Carlos Javaroni, Schneider’s vice
president for IoT Strategy & Business Design.
Schneider has sometimes found that its old
customer contact isn’t the right person to make the
purchasing decision for more strategic energy manage-
ment solutions. For these so-called C-level offerings,
Schneider developed a small team of more experienced
and highly specialized salespeople. These specialized
salespeople become valued members of product de-
velopment teams, helping to incrementally develop
offerings customers want at the pace they want them.
All this has resulted in accelerated product devel-
opment. Schneider’s traditional product development
process involved lengthy, rigorous research and devel-
opment followed by prolonged rollouts of important
innovations. In contrast, the digital offering product
life cycle now starts with an identified customer need,Exposing
potential
offerings
to both
front- and
back-office
experts
helps the
company
keep its
solutions
simple but
powerful
and focused
on what
customers
want.