The world’s largest water pump manufacturer turns to IoT
Grundfos is a poster child for digital transformation: a 75-year-old company shifting from selling water pumps in boxes and water solutions to delivering water-as-a-service. It is the world’s largest pump manufacturer with an annual production of 17 million pumps. The company operates in 56 countries and its products are used in buildings, industries, and to build water infrastructure.
You joined Grundfos a few years ago to head its digital transformation initiative. Why is the world’s largest water pump manufacturer transforming itself?
Our customers are telling us that business-as-usual is not really an option. They want to use new technologies such as sensors to monitor the condition of their pumps so they can act on time and take better care of their pumps—increasing their longevity. As a result, they may buy fewer pumps from us. Now, if we were to continue with the old product-based business model, this could become a problem and impact our sales. Or we could look at this as an opportunity to innovate and provide value to our customers in new ways.
Today, we are driving two major transformations—digital solutions and sustainability. We see digital transformation as an enabler for our much larger transformation to become a sustainability company.
What new technologies, business models, and processes are you considering for the transformation?
Broadly speaking, we are looking at IoT solutions, establishing more direct relationships with its end-users, adopting new subscription-based business models, and reviewing our value production chain. And to that end, we are building cross-functional capabilities in five key areas:
- Digital Engineering to use new digital technologies such as IoT, AI, and simulation in our products. As we engineer our products, we’re also looking at how to build a business with these digital opportunities through subscriptions.
- Data Analytics to create value from all the data that we capture from our products and customers.
- Digital Ecosystems to understand how digital ecosystems and partnerships with smaller companies will help speed up our innovation and drive our growth going forward.
- Go-to-Market Strategies to upgrade our go-to-market channels and capabilities so we are able to sell these new offerings and business models.
- Delivery capabilities that will allow us to deliver our new services.
How are you approaching this transformation from an organizational perspective?
It was very important for the organization to see that we are not creating a digital division somewhere in Silicon Valley or Berlin but we are doing it inside our mothership. We are upgrading all the capabilities in the company to become this new version of Grundfos instead of having a competing division somewhere that takes the fun part of the future away and leaves the rest for the existing business.
A very important component in our success was to have an aggressive timeline for the transformation. We pushed for a timeline of three years where the first year went towards creating the foundation for this change—building the team and capabilities to develop our first digital offerings. Year two was really about preparing to scale with a subscription management platform. And year three was to start scaling the new offerings coming out of Grundfos.
Sustainability is a core value at Grundfos. Can you tell us more about how it weaves into your digital transformation efforts?
Our new tag line says that “we pioneer solutions to the world’s water and climate challenges and improve quality of life for people”. In a world where about 844 million people lack access to clean water, a significant measure of the water we produce is lost in distribution network leaks. Add to this, the threat of climate change with 80% of carbon dioxide coming from energy production. We’re pioneering innovative solutions to change all that.
A great example is a waste-water network in Denmark that we work with. The network effect of our sensors shows the actual flow of waste-water in the network. This enables the company to compare the actual flow with the predicted flow and assess deviations such as infiltrations and leakages. It’s great for our customers because now, they can fix their networks in time and keep them in good condition for longer. Through our digital transformation, we are helping our customers optimize the utilization of their assets and avoid unpleasant things like overflows.
Similarly, there are other use cases that we want to be able to cater to which is why it’s very important for us to offer subscriptions and be in a long-term relationship with our customers. It allows us to switch on and off services based on their use cases and monetize our services accordingly.
What’s next for Grundfos after digital transformation?
Well, it’s very clear to everyone in the company that we are no longer a water pump company. Our purpose is not to sell 19 million pumps next year or 20 million pumps the year after. That’s secondary. Our dream is to deliver water-as-a-service—the one product that everyone in the world needs. We believe that the digital revolution will be followed by the sustainability revolution. And the next generation of companies will be those that solve for sustainability and contribute towards creating the future that all of us want.
Learn more about Grunfos’s sustainability revolution in Grundfos: Pioneering Water-as-a-Service Solutions for Sustainability
And to learn more about how IoT and the subscription business model are transforming manufacturing, check out this free chapter from the national bestseller “Subscribed” — IoT and the Fall and Rise of Manufacturing