Guest Lecture – High Tech Business Venturing Digital Business Innovation Sønderborg 28.02.2014
Programme 1. Welcome 2. Personal profile 3. Grundfos 4. Why Grundfos Connect? 5. How we innovate and create value 6. Feasibility analysis in the Customer Development Process 7. Some practical examples 8. CDP in high technology projects – key learnings 9. Polypower case: What does MVP mean to you? 10. 5 minute pitches and class discussion
Personal Profile Founded Lonk Design – DIY website builder for SME’s 2006 2007 2008 2009 2010 2011 2012 2013 2014 Started MSc. Innovation & Business Founded the Sønderborg Student Foundation Founded DCore – Decentralized Control Software Graduated MSc. Innovation & Business Business Lecturer at MCI Global Business Graduate with Grundfos Business Developer within Grundfos Connect Business Developer in Beijing, China Business Developer in Silicon Valley, USA
Grundfos in brief • Founded in 1945 by Poul Due Jensen • Annual production of more than 16 million pump units • Turnover of DKK 22 billion in 2012 • More than 18,000 employees worldwide
Grundfos in brief • Grundfos primarily manufactures: • Circulator pumps • Water booster pumps/systems • Submersible pumps • Industrial pumps • Dosing pumps • The world’s largest manufacturer of pumps and pump systems • Production and sale of electronic motors • Development, production and sale of electronics for the control of pumps and pump systems
Grundfos in brief NORTH AMERICA: 3 sales companies 2 production companies 3 other brands EUREG: 26 sales companies 12 production companies 7 other brands ASIA PACIFIC: 11 sales companies 2 production companies 2 other brands EMERGING MARKETS: 11 sales companies CHINA: 2 sales companies 2 production companies
So…. We are a very stable company. We have always been profitable. Historical growth rate averages around 10 percent each year. We have a full product portfolio offering the most efficient, intelligent and durable pumps to our customers wherever they may be in the world But is this enough??? Can it be maintained indefinitely??? Increasing competition Commoditization Reaching the limits of hardware improvements
The Grundfos purpose Grundfos is a global leader in advanced pump solutions and a trendsetter in water technology. We contribute to global sustainability by pioneering technologies that improve quality of life for people and care for the planet.
The traditional approach Source: Boschonian AB
So…. What do you think are some of the consequences of investing heavily in TDI and SDI while not developing strong competencies in CDI? A very strong ‘we built it ourselves culture’ High investments -> Optimistic projections -> Uncertain / diminishing returns Projects with a very long time to market A limited number of concepts is explored, predominantly from a technical feasibility perspective and at a relatively high cost per concept evaluated
Grundfos Connect Unleashing our digital potential
Welcome to the connected world In 2020, an estimated 50 billion things will be connected in the Internet of Things. This presents a unique business opportunity for Grundfos. Industry is moving into a digital era and Grundfos will play a leading role.
Think about the reach Grundfos products have … We have the potential to make the connected world a more intelligent and efficient place 16 MILLION PRODUCTS 800 MILLION PEOPLE 10% OF THE WORLD’S ELECTRICITY CONSUMPTION Grundfos produces more than 16 million products every year Grundfos pump solutions collect water for 800 million people and distribute it to 600 million Grundfos has a significant impact on the 10% of the world’s electricity consumption that is used for pumping
Grundfos 4.0 Grundfos’ foundation is manufacturing world-class pumps and Grundfos still is the industry leader in innovation. To sustain our position Grundfos must accelerate the journey of digitization.
How we innovate and create value Source: Boschonian AB
The innovation process IDEAS BUSINESS MODEL SEARCH BUSINESS MODEL EXECUTION STEP 1 STEP 2 STEP 3 STEP 4 A PROJECT STARTS WITH BUSINESS IDEAS FROM: • Customers • Grundfos Internally • Open Innovation Platforms • Partnerships / Ecosystem These are funnelled into the Customer Development Model. In most cases ideas are hypotheses to be tested on the market. CUSTOMER DISCOVERY • Turn hypotheses into facts • Test value proposition • Verify the problem, product and business model hypotheses • Next step, Iterate or Exit CUSTOMER VALIDATION • Conduct Pilots to gain Proof of Concept • Sell to early customers • Identify scalable and repeatable business model • Next step, Iterate or Exit CUSTOMER CREATION • Get ready to sell • Position and Launch • Scale in first chosen market • Next step, Iterate or Exit CUSTOMER ACCELERATION • Align departments for full scale and fast response • Manage sales by market type • Scale in all chosen markets • Manage product life cycle PRODUCT/SOLUTION DEVELOPMENT RELEASE MANAGEMENT SALES MANAGEMENT
Feasibility analysis starts at step 1 IDEAS BUSINESS MODEL SEARCH BUSINESS MODEL EXECUTION STEP 1 STEP 2 STEP 3 STEP 4 A PROJECT STARTS WITH BUSINESS IDEAS FROM: • Customers • Grundfos Internally • Open Innovation Platforms • Partnerships / Ecosystem These are funneled into the Customer Development Model. In most cases ideas are hypotheses to be tested on the market. CUSTOMER DISCOVERY • Turn hypotheses into facts • Test value proposition • Verify the problem, product and business model hypotheses • Next step, Iterate or Exit CUSTOMER VALIDATION • Conduct Pilots to gain Proof of Concept • Sell to early customers • Identify scalable and repeatable business model • Next step, Iterate or Exit CUSTOMER CREATION • Get ready to sell • Position and Launch • Scale in first chosen market • Next step, Iterate or Exit CUSTOMER ACCELERATION • Align departments for full scale and fast response • Manage sales by market type • Scale in all chosen markets • Manage product life cycle PRODUCT/SOLUTION DEVELOPMENT RELEASE MANAGEMENT SALES MANAGEMENT
Some key points • Don’t waist your time starting out with a 30 page business plan • Projections are worthless because you have no track record to base them on • Facts are outside of your building – No business plan survives initial contact with customers • Build a Minimum Viable Product (MVP) • This is not a technical proof of concept • This is not a working prototype with a full feature-set • The MVP is: • A tactic for cutting back on wasted engineering hours • A strategy for getting the product in the hands of earlyvangilists as soon as possible • A tool for generating maximum customer learning in the shortest time possible • The goal of the MVP is to build the smallest possible feature set representing the core value of your concept and testing this against customers • Go out and test your MPV and Iterate …. a lot • Don’t move to the next phase of the process until your hypothesis have become facts Source: Steve Blank
Example Project Generating business value by mapping real time water use in F&B processing
Example: GateSense The Gatesense project empowers people to unleash their creativity and create significant value for society. The first co- creating IoT platform for a sustainable world invites you to join our community.
Some key learnings • A pivot is not a failure • Technical feasibility is still VERY important. Everybody wants to buy an affordable time machine • Customer Development is close to useless unless your product development and/or partners can iterate the product with speed and agility • Don’t focus on single success cases, you want to build a scalable business – search for a pattern • Preserve your cash until you find that pattern • You know a customer wants to buy your product the moment they paid you for it – don’t simply take their word on it. Source: Steve Blank
Polypower Case In your groups: - Decide on and describe your Minimal Viable Product - Create your hypotheses on: - The customers - Their problem - The solution you will offer - The channel you will use - Create a rough draft of your anticipated business model - Present your MVP and your plan for going to the customers and testing your hypothesis in the coming week