Schneider Electric, a global leader in energy management and automation, has unexpectedly removed its CEO, Peter Herweck, due to disagreements over the company’s strategic direction.
Herweck, who had been in the role for 18 months, was replaced by the head of the company’s energy management business, Olivier Blum, to drive Schneider Electric’s next strategic phase, which includes scaling its energy management and data center operations.
As a company, Schneider Electric has strong views on how data center electrical systems should evolve to meet AI’s power demands, as Network World reported last month.
The board cited “divergences in the execution of the company roadmap at a time of significant opportunities” as the reason for Herweck’s removal.
“These decisions take immediate effect,” the company said in a statement.
The unexpected change in leadership has raised eyebrows in the industry. While Schneider Electric has not provided specific details about the nature of the disagreements, the move highlights the increasing pressure on CEOs to deliver strong performance and navigate complex business environments.
“Information relating to the financial conditions of the termination of functions of Peter Herweck and appointment of Olivier Blum will be made public according to the applicable regulation and to the recommendations of the corporate governance code AFEP-MEDEF to which Schneider Electric is referring,” the statement added.
Analysts, however, showed surprise over this move by the French firm.
“Given the financial performance of the group in recent periods, the clear strategy and targets outlined with the November 2023 Capital Markets Day and the share price performance, this is a major surprise,” analysts at JP Morgan wrote in a note to clients reported by Reuters.
Why did Herweck leave?
Schneider Electric’s board cited as the reason for Herweck’s departure “divergences in the execution of the company roadmap” — a roadmap he had outlined in November 2023, six months after his appointment as CEO. Insiders suggest he may have been too slow to implement his own strategy.
“The CFO and Head of IR hosted a short call this morning that outlined the Board felt the strategy was not being as decisively or collaboratively implemented as hoped and that the CEO’s style was not a fit,” the JP Morgan note said, according to Reuters.
Speed and agility in competitive markets is critical, especially within the company’s systems division serving the data center sector. This division now accounts for nearly one-third of the company’s revenue and is growing at a rate of 19% annually. The green transition presents further growth opportunities, particularly for companies with a significant presence in China.
The specific areas where the board sought faster progress from Herweck are not entirely clear. Talks about an acquisition of engineering software developer Bentley Systems ended in May, possibly hindered by the reluctance of the family controlling the target to relinquish control. Like its competitors, Schneider Electric is keen to expand in the rapidly growing software sector, which has seen substantial deals, such as Siemens’ recent $10.6 billion acquisition of Altair Engineering.
Herweck may also have faced challenges adjusting to Schneider Electric’s decentralized governance and decision-making framework. His successor, Blum, has been with the company for 30 years, which might indicate a preference for leadership familiar with the organization’s structure. Herweck’s previous experience at Aveva, acquired by Schneider Electric in 2022, may have complicated his adaptation to working under Chairman Jean-Pascal Tricoire, who has strong views on the company’s direction.
On top of that, Herweck’s short tenure was marked by supply chain challenges and recent regulatory scrutiny.
A surprising transition
The announcement of Blum’s appointment, however, signals a renewed focus on aligning Schneider Electric’s growth trajectory with the rapidly evolving demands of energy management and digital infrastructure.
Blum, who has been with Schneider Electric for over three decades, brings deep experience in overseeing global operations. Having served as the leader of the company’s energy management business—spanning critical sectors, including data centers — Blum’s expertise in digital and sustainability-driven strategies is expected to aid Schneider Electric’s ambitions to support AI-ready, sustainable infrastructures, such as data centers. His appointment follows a career of executive roles, including positions as Group Chief Strategy and Sustainability Officer, Country President of Greater India, and a leader in China.
Schneider Electric’s data center role
As one of the leading providers of energy management solutions, Schneider Electric is highly active in data centers, which are increasingly central to AI and digital transformation initiatives across industries. The company estimates within next five years, the energy requirements for AI-enabled data centers would reach to around 10% of worlds electricity consumption compared to one percent now. However, recent pressures on Schneider Electric’s operations—such as ongoing supply constraints and regulatory setbacks in Europe—have posed challenges.
Earlier this month, French regulators fined Schneider Electric in connection with a price-fixing investigation, though not related to its data center business, adding pressure on the company as it navigates a growing demand for energy-efficient and AI-compatible infrastructure.
Blum’s appointment comes on the heels of these challenges, with the new CEO tasked to navigate Schneider Electric through complex operational and regulatory landscapes, while capitalizing on booming data center demands.
Source:: Network World