Good afternoon everybody and welcome to the Learning from Leaders series. Today we have the very privilege to welcome the chairman of Schneider Electric, Mr. Jean-Pascal Tricoire. And as always, our host for Learning from Leaders, Peter Vanham. Without any further ado, I pass the floor to you, Peter.
Thank you so much. Look, it's such a pleasure to be with you and to be with all of you for this last Learning from Leaders from this semester, and actually our first one that is virtual. There was a time, I don't know if you remember, that we did this always virtual, which was during the COVID years that we couldn't meet in person. Now we have the pleasure to be back virtually. We have the pleasure to welcome Jean-Pascal. Jean-Pascal is the chairman of Schneider Electric, one of the largest companies in Europe and the world, and a truly global company. Jean-Pascal, I think you can confirm that even with your personal presence physically. As we meet virtually, I always like to ask, where are you joining us from and of course, how are you?
So I'm good, and it's really good to be with you all and to be with you, Peter. And I am calling in from Beijing, because tomorrow the French president, and I'm French as you can gather from my accent, is visiting the capital and there is a big economic delegation that goes along.
Oh, that's fantastic. And of course you will then, I suppose, be part of that delegation and also be able to show the presence of French companies around the world. I think it might not be an exaggeration to say that Schneider Electric may be the most international, the most global of all French companies, but I'll leave it to myself to say that and you don't have to diplomatically add to that statement.
That's great. Maybe one more icebreaker, JP, because you know now you go by JP internationally, is that right?
Yeah, because Jean-Pascal has not been designed as a first name for international business.
That's great. I'm a little bit more lucky with Peter in that sense, I suppose. So I would ask you one more question just to get to know each other. We're now basically in the holiday period. In the US, we just had Thanksgiving. Over here in Europe, we'll go into Christmas and the New Year. Is this for you and for the company typically a very busy or a calmer period?
It's awfully busy. For anybody who's been in sales, you know that it is a time to close a year and has a fiscal finishing in December. Very busy. For anybody like me who is a chairman, who's been the CEO of a company for 20 years, on part of several boards, it's a time where you have plenty of boards to close a year, and it's a time where human beings, being all attained of the same craziness, we think that in one month we can finish everything we have procrastinated to do during the year. So it's awfully busy.
Okay. So I understand that even though you're based in China, you don't follow the Chinese calendar, which would give you an extra month I suppose, but rather the Western calendar. Now maybe I should start with a very basic question, JP. I of course got to know you and the company over the years and I've been very impressed with how it expanded internationally and adapted to this era, the AI era. But I think some people, especially those in Europe I would guess, would know Schneider Electric, they just wouldn't know it really from what the core of the business is today, but perhaps what it was many years ago, and that's the electric switches that Schneider used to and still makes, the switches you find in many homes around the world. But of course, you are today a huge global company and you do way more than that. Could you tell us a little bit about the switch, no pun intended, about the company, what the company made and what is the business model that allowed it to grow so fast?
Look, we define ourselves very early on as a global energy technology partner of our customers. And when we do that, there is not only energy. If you want to manage energy, you have to manage also the process of your customers. Anyway, if you try to find the reason, I've been CEO of the company for 20 years, which is 2003 to 2023, and we almost multiplied the size of the company by five. The reason for that growth can be put in three or four factors. Number one, we bet on three elements which were pivotal or tailwinds that would grow much faster in the period to come. One is electrification, and as we speak, the world is becoming infinitely more electric. The second one is digitization. So the combination of IoT, everything connected, data, big data going on the cloud, and now AI means that everything around us will be connected, will self-manage itself, will become autonomous for more efficiency. So electrification, digitization, and from the beginning, from the inception in 2003, we decided to be the company of technologies for sustainability. Helping our customers to make the most of their energy and resources. And at that time, if you rewind back in 2003, we were a very small company in Europe and in the world. So we had to take a different path. So that triple bet on electrification, digitization, on sustainability might seem obvious today, at the time it was contrarian. And we took another path which was innovative in our industry. We said that most of the change would come through emerging countries, because this was a place of urbanization, industrialization, digitization, and people were ready to leapfrog what had been done in developed countries and go faster. And I was personally coming from five years in China, one year in South Africa. I had been in charge of what we were calling international, which was everything outside of the US and Europe in the company for the past many years. So that was a strong point of me and the people I was knowing. So today, as we speak, emerging countries make 50% of the business of the company. China is our second largest country after the US. India is the third largest country. That combined with those technological pivots has really accelerated the growth of the company.
I mean, it's really amazing to see that happening, especially at a time by the way where a lot of companies actually find it increasingly difficult to globalize, still to go from their home region to become a global region. I was going to ask you this question a little bit later in the conversation, but since you mentioned this shift to emerging markets, let me ask you right now. How was it possible for you to be successful in shifting to these global markets? Because it's one thing to say the opportunity is there, many people know that. It's another thing entirely to be successful when you go into a market like China or India.
Of course, unique technologies, things that nobody else has to propose around the world. And in our case, we decided to be very focused in that triangle of sustainability, electrification, and digitization, which 25 years after almost we still are focused on. So being very sharp on one thing makes your value proposition unmatched, especially in a sector which is not that simple. Still very fashionable because you hear electrification and digitization in mobility, electric cars, in data centers, that's actually the biggest bottleneck of AI, in heat pumps, in solar microgrids, and so on. Electrification is everywhere. So that focus really helped us to develop. Now the second point, which this time is a personal cradle, is what makes a difference is people. If you have the right people in a place in the world, then you're going to have the right business. Very often people mobilize a business and then try to find the people. I've always tried to find the people. Good people attract excellent people. Actually, average people attract bad people. And make no mistake, it's a very difficult art. And I've mistaken many, many times. But when you get that right, then you start to have a very strong team in a place, in a country, that makes the business their own and drives it as their own company, and then you win. You find a way. So it's about strategy, technology, and people.
Yeah, I think that makes a lot of sense. And I would maybe add a third hypothesis, JP. I'm curious if you would agree with me. But this makes me think a little bit of the model where the person in charge says we are really going to become a global company. Believe me, not because I say so, but because you look at me. You personally, JP, you're now in Beijing, but actually you are based in Hong Kong. So you really said, let's show it that we mean it. And you personally went to the other side of the world to show, hey, this is going to become an increasingly important fold for the company.
Yeah, you've got it. At the end of the day, life goes very fast, right? And we have roughly 4,000 weeks in our life, and probably half of it or maybe a little bit more if you are in Asia at work, right? And if you want to make a difference, you have really to accelerate the clock. Everything is about speed. It's not about the size. It's about speed. And in our case, getting bigger and getting more global was a fundamental condition for development but also survival. It was not going fast enough. So at one point, which is six years inside my mandate of 20 years, I decided to show the example. At that time, our biggest challenge or opportunity was to build Asia, and I dissolved the executive committee in all zones. So since then, we have been operating as a network of peer-to-peer people in the executive committee all over the world. And then I moved myself to Hong Kong to close the example and to be on the front line. I've never believed in headquarters. I've been a long time on the field before. I've always looked at headquarters with suspicion because the real action and the truth is close to your customer and close to your field people. And this is what we did, and we still approach Schneider as this, which means that when we co-struck, we are ready. We're already only communicating by computers, by e-meetings, on those kind of things.
Yeah. No, I think that's a very powerful example. And by the way, it makes me think, I was once in Rio de Janeiro in Brazil and I visited the National History Museum there, and one of the things they were very proud of, I don't know if you know this, is that this was the only empire so to speak where the king, in this case from Portugal, actually moved to the colony to Rio de Janeiro and went to live there.
Not a difficult choice for Rio. It is a really great place, isn't it?
Anyway, so you've sort of done, you're following in the footsteps of the Portuguese emperor, I suppose.
Yeah, I don't define me as an emperor, a servant of my people and customers.
That's a good one. Now maybe I'll ask you one more a little bit about the business. You talked about this big shift towards sustainability, digitization, electrification, they all go hand in hand. Just to put this into perspective, if you were to deploy your best technologies to the global energy system versus today, how much power, how much energy could we actually save if we adopted Schneider's best practices in terms of energy management and savings?
We have no choice, right? If you take the big picture of energy, energy is your passport to a decent life. For anybody who's had power breakdowns or energy shortages, you know that life becomes miserable. Today we have only 5 billion people on earth of the total 8 billion who have a decent access to energy. We're going to have 2 billion more joining us in the next coming 25 years. That means we have to supply energy to 5 more billion people. 5 to 10. So we need at least twice the energy that we are using today. But at the same time, and this has been the obsession of Schneider, you've got to provide energy with sources and in ways that reduce the emissions by a factor of two from where we are today. So we need to decrease the carbon intensity of everything we do by at least a factor of four. And you could say okay, innovations coming in 10 years, we have no time, because a ton of carbon emitted today is 10 times more massive than the ton of carbon in 10 years time. So our thing is to deploy the technologies which are existing today at scale in electrification, in digitization, in software to manage all of this, in AI, so that we immediately start having the gains that we need and we don't wait for some miracle that could come in 20 years that will not come actually because the systems of energy have a long hysteresis.
Right, they have a big inertia. I try to make sure I have a good vocabulary, but I needed a second there when you said basically you mean that they're slow to change, right?
No, but I mean every year the world is rebuilding or retrofitting less than 0.5% of the building. You change your car maybe every 5 years. So during 5 years nothing will happen.
You won't see. I have an electric car I suppose and I use mostly my bike to go to work, so I feel a little bit better now about my own impact. But JP, maybe one final question then on the business. Because of course one force that goes into the opposite direction I suppose, but that is creating amazing opportunities we all know it is AI. AI is sort of the equivalent of a new industrial revolution. We already use it every day. I hope we don't use it to make our papers at EU Business School, but at the very least it's a big help.
But if you put this into historical terms and also energy terms, to really benefit from this AI revolution, how much more energy do we actually need?
Look, you have to put the whole equation. You have to zoom out and look at the whole equation. On one side, AI is the fastest growing consumption of electricity in terms of concentration of power. On the other side, data centers inclusive of AI but not only AI are representing only 1.5% of all electricity consumed, which means it's 0.3, 0.4 of all energy consumed in the world. It will double in the next coming five years. That means 0.8, still less than 1%. It will double again by 2035. 1.5. If you apply AI on smart building, smart cities, smart manufacturing, smart mobility, you can save 30% of energy on 80% of the world energy consumption. So sum it up or make it simple. This consumption to power AI is increasing, but the savings it can provide to our society is at least 15%. So it's a gain of 10 on net. Actually, it will benefit us in that sense, and that's of course the story of these industrial revolutions.
I know we still have a chance to come back to this question, but I also want to make sure we ask you some personal questions, JP. Maybe I should start with not where you are today but where you were many years ago, not that many years ago but a few years ago, when you were the age of the students. What did JP at that point in time want to become? Was he sure he was going to become the CEO and chairman of one of the largest companies in the world?
I had no idea. And by the way, it was many years ago, not a few years ago. But I had no idea. I come from a small village, farming origin. Nobody in my family had ever been in business, which means they even had no reference for high schools, universities, and everything. And I just happened to be lucky to be okay at school, right? And then things developed. But at that time, I just knew one thing. My life was operating in a territory of 20 square kilometers and I wanted to discover the world. I was avidly reading as soon as I could. I chose my path. But had no idea, of course, that I would do what I've been doing over the past 20 years.
Yeah. And it's one of those things, you know, somebody way smarter than me once told me, Peter, he said, when I asked him the same question, he said, 'When I was young, I don't even think the word CEO was widely used.' So could I have dreamt of becoming the CEO? Well, probably not because people used a different term to refer to the boss, the chief of a company. So that just goes to show, doesn't it? And then of course AI never existed. So there's so many things that are going to happen down the line that you don't know. What were some of the things actually that you did do and that you were passionate about when you were young? I know I should disclose this. You and I have had a few conversations. So I know that for example, you love kayaking.
