Marianne K. Knudsen

Grundfos

Pumping it up for the future

Grundfos case

The world’s population is rising, and the demand for fresh water raises with it. This is good news for the world-leading pump manufacturer Grundfos. Unfortunately, competition is harsh and increasing, making it necessary for the 70-year-old Grundfos organisation to transform itself from a conventional hardware giant into a company fully capable of delivering customised digital solutions alongside its world-renowned pumps.

Pumping it up for the future

Grundfos case

The world’s population is rising, and the demand for fresh water raises with it. This is good news for the world-leading pump manufacturer Grundfos. Unfortunately, competition is harsh and increasing, making it necessary for the 70-year-old Grundfos organisation to transform itself from a conventional hardware giant into a company fully capable of delivering customised digital solutions alongside its world-renowned pumps.

“We have had a leading position in the market for years, but we can definitely see that the products are becoming commoditised, so price is becoming increasingly important and that puts pressure on us as a company”.

Marianne K. Knudsen
Senior Director, Head of Digital Commercial Offerings in Grundfos

Before joining Grundfos, Marianne was a management consultant for 10 years, and spent quite some time in Switzerland. In 2008, she was invited into a group called “Everest 2009”, which wanted to draw attention to and celebrate the 60-year anniversary of the human rights declaration by climbing Mount Everest. The group had the ambition to carry the 30 articles of the declaration all the way to the highest point on Earth, to symbolise that human rights are meant for all of us. Marianne didn’t make it to the summit, but the initiative fundraised a lot of money for Amnesty International and spurred much attention to human rights.

Nokia 6230

Remember the Nokia 6230? It was quite a hit back in 2004, sporting cool features such as an MP3 player, a video recorder and a colour display. Back then, Grundfos had developed technology enabling text messages to be sent directly from Grundfos’ pumps to the pump owners’ mobile phones. The messages contained information about the status of the pumps, basically making this an early facilitator of predictive maintenance. Unfortunately, however, Grundfos didn’t commercialise the solution and capitalise on the opportunities it offered. The times of the first mobile colour display seem far away now, but predictive maintenance is increasingly becoming the new rave in many business models across industries. As part of a large-scale digital transformation process, this “old” feature has now, at long last, become a top priority for Grundfos as well.

Through 83 companies, Grundfos is directly accessible in 56 countries, and through the company’s network of partners, distributors and subdealers, they are present in even more. The company employs around 18,500 people today.

Poul Due Jensen founded Grundfos in 1945 from his basement in Bjerringbro, Denmark. Today, Grundfos is the world’s leading pump manufacturer, supplying water to almost 800 million people every day.

In the heart of Moscow, Russia, Europe’s biggest oceanography centre has filled its tanks. The Moskvarium is home to thousands of sea animals from all over the world. And a lot of Grundfos pumps, too. The pumps are used in the water supply, heating and sewage systems of the 80 (!) different aquariums

A Poseidon of the North

As the world’s leading pump manufacturer, Grundfos supplies water to almost 800 million people every day throughout the year, as well as heating to numerous buildings and other facilities. Though the water business may seem like a fairly stable place to be, given the increasing demand, Grundfos is experiencing pressure from all sides. “We’re in a highly competitive and fragmented market with more than 9,000 pump manufacturers across the world, but only a few with a true global presence. We have had a leading position in the market for years, but we can definitely see that the products are becoming commoditised, so price is becoming increasingly important and that puts pressure on us as a company. We also see a lot of digital offerings in the market place right now, with buildings becoming smarter and smarter, creating demands for new solutions”, says Marianne K. Knudsen, Senior Director, Head of Digital Commercial Offerings in Grundfos.

Moving from a conventional hardware company to combining hardware with advanced software services sounds like a major transformation, but also a compelling story. Marianne, however, has no desire to toss away the core business of Grundfos: the production of hardware and trendsetting water technologies, in favour of becoming a software company. “We still believe that you need a pump to deliver water. That won’t go away. Digital bits and bytes can’t deliver anything but data. You still need the physical element”, says Marianne, and continues, “but you can do very much around the pumps and that’s what we’re really looking at today. This is where we would like to utilise digitalisation. We sell more than 16 million pumps a year and we’ve been in the market for a long time. We have a huge installed base out there where we could build other offerings than just delivering pump functionality. Ultimately, this will enable us to deliver better customer value and experiences”.

Nevertheless, this is a huge transformation for Grundfos. “For so many years, we have relied on really good relations to our distributors, our installers and the consultant engineers. That has really been our route to market. And now we also need to focus on home owners, hospitals, water utilities and all the other types of end users”, says Marianne. She explains: “They don’t know us, they might know our brand, but they don’t know what we can do for them. So for us to build a direct relation with them, we need a new mindset in our company”. To Grundfos, it’s time to start thinking beyond the technologies embedded in the pumps. “We have the best hydraulics in the world, we develop the most energy-efficient pumps in the world, and now we want to move our sales beyond the pump. How can we develop software as a service offering? Predictive maintenance, monitoring, optimisation, fault-prevention and prediction? This will require a completely new mindset”, says Marianne.

“They don’t know us, they might know our brand, but they don’t know what we can do for them. So for us to build a direct relation with them, we need a new mindset in our company”.

Following the light

A couple of years ago, Grundfos initiated their 2020 strategy. As part of the strategy work, Grundfos outlined where they wanted to be – both within the strategy period and beyond, and how digitalisation could be utilised to enable the strategy. “For us, it was important to say that this is not two strategies; we have one strategy, and we know where we want to move the company. Digitalisation needs to be an enabler for delivering on that strategy”, explains Marianne.

The enabling through digitalisation in Grundfos is built around four key lighthouses. The first one is customer relations, particularly improving the contact to end users. “As a homeowner, you might not be interested in knowing what type of pump you have in your basement, but you are interested in the heating you have in your room. So how can we play a bigger role in ensuring that you have the exact temperature you want?” says Marianne. The second priority is to connect Grundfos’ products to the cloud. As soon as they are connected digitally, Grundfos will be able to start analysing their data on a large scale and make an impact in new areas: “How can Grundfos help a city optimise its water supply to accommodate all the needs of the people in the city – all day long? Digitalisation is what can enable us to create that overview of the peaks and low periods of water consumption in an entire city”.

Once Grundfos has established a closer connection to the end users and connected their products to the cloud, their third lighthouse is to deliver new business models; new types of services defined by the needs of the different client segments. “Maybe we can help guarantee the uptime of running pumps within a hospital to ensure that there’s always heating and cooling and the exact type of purified water that they need”, says Marianne. The fourth and final step on Grundfos’ digital journey is to ensure that their entire value chain is digitalised to ensure a seamless flow from the suppliers through the organisation and to the end users.

“For us, it was important to say that this is not two strategies; we have one strategy, and we know where we want to move the company. Digitalisation needs to be an enabler for delivering on that strategy”.

Detecting disruptors

When Grundfos embarked on their digital transformation journey, it was like looking at a blank piece of paper; everything was possible, Marianne explains. “What we did was to interview 30 thought leaders around the world. Everyone from our distributors to professors to consultants to writers to start-up companies, and asked them: ‘What do you think can disrupt our industry and our company?’”. Through this exercise, Marianne and the rest of the leadership team gained a lot of insight into how other people view the pump industry and Grundfos as a company. “It was fantastic to get all of that insight and then to see what type of dialogues we could initiate with our employees, leaders and managers on the topic of digitalisation – and disruption”, Marianne says.

Alongside utilising thought leaders as inspirational sources, Grundfos also turned an eye to large international companies such as GE, Apple and Google to gather a trick or two from how they use digital technology. However, it became strikingly evident that there is no fixed formula on how to conduct a digital transformation. “We might have been a bit naive in the beginning, but we definitely found out that hard work is required. And also some tough decisions along the way”.

On a positive note, Grundfos’ management team was surprised by the amount of excitement they were met with in the organisation when the employees were engaged in the project and mobilised to be part of the change. “When we started talking with our colleagues in various places and levels, we discovered a lot of ‘skunk work’ on different digital solutions. A lot of experiments just started coming out of the woodworks as soon as we put digitalisation on the agenda”, says Marianne. “You could say that we’ve actually worked with this for many years already, we just really haven’t paid enough attention before. And now, with the clarity of our strategy, we can also start to nudge the projects in the right direction”.