Innovation Intent 2025 and Sustainability: Concern, Care and Create for Sustainable Growth

Henning SandagerGroup Senior Vice President, New Biz, Marketing & Program ManagementGrundfos Holding A/S

Facts • Founded in 1945 by Poul Due Jensen

• Global sales of EUR 3 billion

• 85 companies in 45 countries

• 18.000 employees worldwide

• Grundfos is a debt-free company

• Ownership a family Fundation

• EBIT 8,3% of sales

• R&D 6% of sales

• The world’s largest pump company

• R&D, Manufacturing, Sales & Service

Grundfos Group

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Markets

TechnologiesPumps, Motors, Drives, Controls, Sensor + Sub-systems

A company with strong values and an

ownership focussing on long term

growth through innovation…

Urbanization and Mega Cities

CO2 and climate changes

Population growth

Growing middle class

New technologies

Expanding and emerging markets

Grundfos challenges and opportunitiesthe growth agenda, the green agenda, the technology agenda

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New Business was created ”outside” Grundfos

• New Business Projects must be outside Grundfos – simply because they do not fit inside !

• New Business Management is a “bridging” organization between New Business Projects and the mainstream organization – and where focus must be on understanding and managing the drivers, the uncertainties, the needs and the necessities of New Business Projects

• NB markets are very much politically driven markets, and markets where the implementation of political decisions does not always take place in transparent or logical manners…

• Technological solutions are often driven by governmental (EU / US federal and national) restrictions and/or requirements/regulations…

Technical

Political-Legal

Market

New Business Development = f (Technology + New Business Models + Uncertainty)

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Radical Innovation and Uncertainties

Technical Uncertainty Low High High Put together known

technologies in new ways New Business

Market Uncertainty

Low New technologies for known markets

Grundfos main focus Incremental innovation

Organization Uncertainty

Resource Uncertainty

Technical Uncertainty

Market Uncertainty

Organization Uncertainty

Resource Uncertainty

Technical Uncertainty

Market Uncertainty

LOW

HI

Incremental Innovation Incremental Innovation

Radical Innovation

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Radical Innovation

Projects that promised at least one of and preferably more than the following:

1. New to the world performance features2. Significant (5-10x) improvement in known features3. Significant (30-50%) reduction in cost

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Evolutionary Innovation

• Building on and out from Core• Business Models• Financial Models• Strategic Partnerships

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Grundfos – ownership structure

DenmarkThe Poul Due Jensen

Foundation

SwitzerlandGrundfos Holding AG

Production companies Acquired companies

DenmarkGrundfos Finance A/S

SwitzerlandGrundfos Insurance

Management AG

Sales companies

EmployeesDenmark

Poul Due Jensen’s Family

New Business A/S

DenmarkGrundfos Management A/S

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2005 – 2010 Structure of Grundfos New Business

Grundfos New Business A/S

New Business Board

GrundfosHolding

New BusinessProjects

New BusinessDirectors

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New Business portfolio companies

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Concept Pre-market Market entry Exit Integrated

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Corporate new business creation is a multi purpose game

I. Creating new space for long term growth – preempting the future

II. Creating a new organizational structure to allow NB 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

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The Grundfos dream

We employ 75,000 people

50 % of growth is coming from technology platforms not invented in 2007

1/3 of our turnover comes from other products than pumps

We’re still number 1 in circulators

We are specialists in selling directly to end-users

We are experts in understanding user needs

We are the first choice workplace for the best and brightest

We have made Grundfos a truly global company!

A truly globalised Grundfos

China as a second home market

Business differentiation

New innovation platforms

Taking sustainability to the next level

Great people in Grundfos

2008 - Grundfos Innovation Intent white paper heading for 2025

• 50 % of growth is coming from technology platforms not invented in 2007

• 1/3 of turnover comes from other products than ”just” pumps

Growth ambitions 2011-2015… and beyond

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How to make breakthrough innovation within a large, old and rigid organization as a result of dedicated effort – and not by coincidence ?

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Corporate Venture Organizational and New Business Creation Capability embedded in Core

• 2004 Grundfos New Business A/S• 2005 – 2010 Expansion: Build up of capabilities Innovation Intent

New Innovation Platforms and New Governance

Old paradigm New paradigm

It is more expensive than we thought ! It takes longer than what we thought ! It’s too bloody difficult ! … and we want this to be an embedded competency

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• 2008

Innovation platforms

New innovation platforms initiated in 2008 :• Future Home Living – China• Zero Impact Commercial Buildings• Rethink Decentralized Water Treatment

2012 New Biz totallyembedded in org.

The Journey

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

Learnings

• 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 venture 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 Ressource and Organizationaluncertanties than Technology and Market uncertainties

• It takes time – and this is in opposition to Core’s expectations and KPI requirements. We need to run ouractivities with a different set of KPIs and ROI requirements

• It has a lot do to with building new competencies - you must ensure that new competencies get embeddedinside your organization. We reinvented our ”modus operandi”.

• From Explosion/Expansion to Implosion/Re-focus and new business creation around and embedded in Core

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