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Grundfos' New Business Creation Journey and Lessons Learned
Thorbjørn Machholm
Group Director, Business Development and New Business
Grundfos Holding A/S
+45 2125 5832
Facts
• Founded in 1945 by Poul Due Jensen
• Global sales of EUR 3 billion
• 85 companies in 45 countries
• 18.000 employees worldwide
• Ownership a family Foundation
• EBIT 8,3% of sales
• R&D 6% of sales
• The world’s largest pump company
• R&D, Manufacturing, Sales & Service
Grundfos Group
Markets
Technologies
Pumps, Motors, Drives, Controls, Sensor + Sub-systems
A company with strong values and
an ownership focusing on long
term growth through innovation…
2
Innovation paradigms and timeline…..
1995 2005 20151985
”Nerd” ” Team worker” ”Specialist &
Entrepreneur”
”Holistic
Intrapreneur”
Partnerships
Business Models
Open Innovation
Technology driven
3
How do you stand out from the crowd?
Urbanization
and Mega Cities
CO2 and climate changes
Population growth
Growing middle class
New technologies
Expanding and
emerging markets
Grundfos challenges and opportunities – NBC Drivers
the Growth agenda, the Green agenda, the Technology agenda
5
Growth ambitions 2011-2015… and beyond
How to make breakthrough innovation within a large, old and rigid organization
as a result of a dedicated effort – and not by coincidence ?
6
Evolutionary Innovation
• Building on and out from Core
• Business Models
• Financial Models
• Strategic Partnerships
Breakthrough Innovation
Projects that promised at least one of and preferably more than the following:
1. New to the world performance features
2. Significant (5-10x) improvement in known features
3. Significant (30-50%) reduction in cost
2004 - 2010
2008 - 2013
7
Corporate Venture Building a New Business capability
Innovation Intent Capability embedded in core organization
• 2004 Grundfos New Business A/S
• 2005 – 2010 Building up capabilities
Old paradigm New paradigm: Innovation Intent
It is more expensive than we thought !
It takes longer than what we thought !
… and we want this to be an embedded competency
• 2008
• Migration + sustaining capabilities
• New Governance
Innovation platforms
New innovation platforms initiated in 2008• Future Home Living – China
• Zero Impact Commercial Buildings
• Rethink Decentralized Water Treatment
R.I.P 2010
R.I.P 2012
R.I.P 2013
8
The Journey: Cycles of evolution and… Metamorphosis
Old paradigm
• Opportunistic new business approach far from Core
• Venture Capital inspired model
• Building companies
New paradigm
• Strategically driven innovation platforms closer to Core
• Governance structure to enable embedding capabilities
• Building capabilities and competencies
Strategic Intent
• Strategy rationalization based on capacity,
Business Segment priorities + Board priorities
• New Business creation integrated with Core
• Capabilities and competences embedded in Core
2004 - 2010
2008 - 2013
2014
9
Direction forward and next design change – 1st step Frontloading
• Enables us to handle more complex projects… Lessons learned from the previous cycles of evolution (TMOR)
• Make PDP projects more predictable – and less likely to fall pray to technological arrogancy!
Ensures that Technical, Market and Organizational uncertainties are considered before we are ready for PD
• Ensures that new innovations are continuously fed into PD
Innovation profile created and decided upon prior to PD
Inclusion and demonstration of new technology
Low
Medium
High
Technical Market Organizational
Product Development Process
Technology
project
Frontloading
project
Leve
l o
f u
nce
rta
inty
Resource
•
10
Technology Competence Areas
Materials Motors/Controls
Sensors Water Treatment
ElectronicsHydraulics
The need for transition
120
100
80
60
40
20
0
20122010200820062004200220001998
The slope of the
curve is becoming
flat.
So what’s next?
100%
70%
62%
23% 22% 18%
Ye
arly
en
erg
yco
nsu
mp
tio
n
12
Transition and repositioningStrategic layers of value creation
Physical
Instrumented
Interconnected
Intelligent
Strategic
Business Models
CAPEX OPEX
Capabilities & Competences
Acqusitions & Strategic Partnerships$
$$$
13
Learnings and key insights
• Visible top management/CEO commitment and strong leadership is paramount to the success of new
business creation and it defines the live or die equation of the new business innovation activities.
• You’ve got to find a way to manage the (constant) ”battle” over resources and funds between Core and
New Business to enable new business creation to grow and mature
• Contrary to what we initially thought, success is defined more by Organizational and Ressource
uncertanties than Technology and Market uncertainties.
• NBC takes time – and this is in opposition to Core’s expectations and KPI requirements. We need to run
our activities with a different set of KPIs and ROI requirements.
• NBC has a lot do to with building new competencies – new competencies must be embedded inside your
organization. We reinvented our ”modus operandi” but were still facing O + R Uncertainty!
• NBC, the D-I-A methodology and Uncertainty Management are generally accepted and embedded
concepts today.
• Innovation Management is really all about people.
• Metamorphosis went from Explosion/Expansion (New Business) to Implosion/Re-focus (Innovation
Platforms) and now new business creation around and embedded in Core.
14
New Business Creation
Appendix
• NBC # 1 - Build a culture for NBC and innovation
• NBC # 2 - Learn how to deal intelligently with uncertainty
• NBC # 3 - Learn how to recognize opportunities
• Critical NBC questions
• The Innovation Piano
• Opportunity Scouting
• Opportunity Engine and DIA Process Support
• D-I-A Model and Roles for Radical/Evolutionary Innovation
• NBC Incubation Methodology for Breakthrough / Evolutionary Innovation
• NBC Models, Tools and Checklists
NBC # 1 Condition
Build a culture for NBC and innovation
16
NBC # 2 Condition
Learn how to deal intelligently with uncertainty
17
NBC # 3 Condition
Learn how to recognize opportunities
18
Critical NBC questions
• What is your organizational commitment to or capacity for innovation? Do you have an innovation
strategy in place? Where are you in terms of building a capability for innovation?
• What is your definition of innovation? Do you have a common language and cultural understanding
across the company?
• What is the mandate for innovation in your company compared with product development?
• Have you defined and clearly articulated your strategic intent (versus current strategy) for long term
growth (5 to 10+ years)?
• Do you have the right structure or group in place for innovation to support your growth objectives? Is the
environment supportive of innovation (entrepreneurial versus operations culture, learning oriented
mindset and clarity of roles and responsibilities)?
• Do you have specific innovation processes, tools, decision-making criteria and metrics for success for
managing higher uncertainty new business opportunities, which go beyond product development phase
gates?
• Do you have a plan for developing and attracting innovation talent? What have you accomplished with
your innovation objectives? What are the challenges you face that are getting in the way of achieving
your growth objectives?
19
The Innovation Piano
20
Partners
Networks and
EventsInternally or
externally driven
Universities
and Research
Institutes
“Something that can
generate enough
opportunit ies to
continuously feed the
New Business
Creation portfolio”
“Something that can
generate enough
opportunit ies to
continuously feed the
New Business
Creation portfolio”
Articles, reports
and conferences
Employees
New Inventions
•Seeking Funding
•Seeking Corporation
•New Technology
•Partnership
•Research
•Knowledge
•Data
•Concept experimentations
•Business Partners
•Strategic Trends
•Emerging Broken
Processes
•Professional Networks
•Emerging Broken Processes
• Ideation
•Grundfos Challenge et al
•Activate Creativity Beyond
Job Responsibility
• iShare
• Ideation
•Trends
• Inspiration
•Corporate Foresight
•Technology Scan/Plan
•Business Strategies
•Market Relations
•Subject Matter Experts
Thought Leaders
•Validation
•Trends
•Drivers
•Barriers
External
Inventors
Grundfos
Organization
Opportunity Scouting
21
Due Diligence and Acquisition Candidates
Opportunity
Engine
TransitionAcceleration
Business
Plan
Incubation
Business
Proposal
Discovery
Business
Concept
Opportunity Engine and DIA Process Support
22
Discovery Incubation Acceleration Operations
Co
mp
an
y A
reas
of
Fo
cu
s
Project Maturity Timeline
Transition
Management
Organization and
Resource
Requirements
D-I-A Model and Roles for Radical/Evolutionary Innovation
23
Toolbox
• Learning Plan
• Incubation
Questions
• Uncertainty
Management
Checklist
• Voice of the Market
/ Technology
• IP Strategy
• Partnering Strategy
• Partner Profiles
• Value Pitch
Late IncubationTransition Preparation
Business
Implementation
Market
Launch or
Acceleration
Mid-IncubationMultiple
Experiments
Early IncubationConcept
Framing
Discovery
Business
Concept
Proceed or Sunset
Decision Junctures=
Toolbox
• Learning Loops
• Voice of the Market
/ Technology
• IP Landscape
Detail
• Thought Leader
Identification
• Strategy
Framework
• Thought Leader
Influence (techies /
lead stakeholders)
• Transition Strategy
• Value Pitch
Toolbox
• Go-to-Market
strategy
• Acceleration
Questions
• Business Plan
• Thought Leader
Influence (lead
customers)
Toolbox
• Learning Loops
• 9-point Strategy
• Value Pitch
• Business Model
Creation
• Market Entry Strategy
• Lead User
Identification
• IP Plan
• Thought Leader
Influence (visionaries /
lead users)
• Transition Plan
• Business Proposal
Incubation
Radical Innovation Group
Product Genesis
Chasm Institute
Others
New Business Creation Incubation Methodology for
Breakthrough / Evolutionary Innovation
24
• D-I-A Process and methodology
• Opportunity Scan and Discovery
• Opportunity Recognition Tool
• Opportunity Placement Tool
• Portfolio Evaluation Tool
• Technology Readiness Tool
• Market Readiness Tool
• Transition Readiness Tool
• Uncertainty Management Checklist
• Learning Plan / Learning Loops
• Value Pitch / Value Proposition
• Business Model Creation
• Chasm Institute Tools
• 9-Point Strategy
Joanne Hyland
President and Founding Partner
rInnovation Group
www.rinnovationgroup.com
Jeff Hovis
Managing Principal
Product Genesis
www.productgenesis.com
Mark Cavendar
Managing Director and Founder
Chasm Institute
www.chasminstitute.com
NBC Models, Tools and Checklists
25
New Business Creation is a multi purpose game
I. Creating new space for long term growth – pre-empting the future
II. Creating a new organizational structure to allow New Business projects to be successful
III. Experimenting with and developing towards a future organizational paradigm
IV. Creating new career paths for Grundfos managers and building new capabilities and
competencies
V. Sound investment of Grundfos capital
VI. Asset protection, asset utilization and asset development – and “keeping the factory full
when production moves out”.
VII. Developing Grundfos’ public image as an innovative and attractive company
26
