Carsten Bjerg, Grundfos
Release Date: 2009-06-29
Grundfos takes pride in creating life cycle solutions rather than just pumps. I would like to give you the opportunity how the company’s strategic direction has evolved over time...If we look into the history of our company, we could say that we were more or less born as a pump manufacturing company. For many years we have been providing pump solutions to the global market. Gradually, we have turned our attention to the sustainability agenda, and more and more we have realized that we can make a difference by making more energy efficient pumps. This has been evolving to the point where today we would say that our business is sustainability and pumps. It is something that has come gradually entered our business model and that today plays a major role in our thinking about innovation and the long term development for our company.
What was the philosophy that drove the company in this sustainable direction?
First of all it illustrates what we believe in as a company. We are a company with a special ownership structure since we are owned by a foundation that does not have a purpose of accumulating money but wants to reinvest in the business and wants to make a difference in the world. This is a value base for what we do. We have also gained a position as one of the leading companies by consistently expanding our technological capabilities, and one way of doing that has been by becoming more sustainable. It is a question of maintaining our competitive edge.
Of course, Grundfos entered China quite a while ago, but did China become a strategic priority for the Grundfos?
Over 10 years ago we decided to establish ourselves in China. Nowadays, we have 1,600 employees in China and the business is developing fine. In the last year, we saw events that lead us into our second phase and we used the more popular heading of China as a second home market. The real ambition is to make China a second home market. Our aim is to understand the Chinese market as well as our existing market in Western Europe, and bring dedicated solutions.
In which areas is the Chinese market different from the European market and to which extent are you customizing your solutions?
I would not claim that we have done that massively so far. We're just starting that journey of modifying our frameworks to the Chinese market. I think the whole market situation makes China very different from most of the rest of the world. Of course there are some similar situations, but definitely different to our Western European market. That brings both business-wise, but also in the context of sustainability, a window of opportunity because business-wise an infrastructure will have to be established. When it comes to sustainability and climate change there is a window of opportunity as fact there's a lot of infrastructure that potentially can be established with the right sustainable solutions.
Most likely, there are different costs associated with the two options. The environmentally and more sustainable solutions are most likely going to have a higher cost. What is the position of the Chinese government when you sit down with their representatives?
I actually don't believe that it necessarily has to be like that. I think already today we see significant examples in China where sustainable solutions are also more sustainable in financial terms. A couple days ago, we were reviewing one of our projects in China where, together with partners, we are providing energy audits to Chinese district heating systems where we see that some existing technologies can provide paybacks of six months. I think we're in a situation where you cannot claim that sustainable solutions are the most expensive. Maybe if you just look at the initial purchase price of the device the price can be higher, but if you consider medium term then often such solutions are financially more attractive.
Well I can imagine there's always a misconception in this case as people tend to think this will cost more money. How is this struggle going in terms of educating the people about the technologies you have to offer?
This of course is a major challenge and for us. Our obvious choices are not always the obvious choices in a developing economy like China's. We there have a major challenge in teaching and explaining why it can make sense to invest in more sustainable solutions. For Grundfos the challenge is massive and unfortunately today we simply do not have the resources to reach out to everyone, even though we would like to do so.
Grundfos has the ambition to grow the company in China to 15,000 people over the next decade. Of course these numbers change very quickly, because that same press release stated that you had 1,200 and now you already mentioned you have 1,600. What will the Chinese market mean for Grundfos and which is the contribution that you can make with such a large presence there?
The facts that you just mentioned are a very good example of what we should be able to do. I think you could say there are basically two paths that we have to follow. One is to show and prove what can be done by using existing technologies and solutions. And the other thing is that we believe that it should be possible to also develop specific innovate new solutions for the Chinese market. This is why we have decided to establish R&D facilities and capabilities in China, so as to more directly address China's needs.
How will that work in terms of cooperation between your R&D centre here and the R&D centre in China? Is there going to be a great exchange or will they operate fairly independently?
No, the intention is that there will be a close cooperation. There will be cooperation in exploring technologies, utilizing capabilities and competencies. However, when it comes to addressing specific needs, the intention is that the Chinese organization takes the lead, because they will end up knowing better what the needs are in the Chinese market.
You travel to China regularly, as do many of the people in top management of Grundfos. How does the company feel as a whole about this focus on China?
I believe that we've already taken some steps in explaining why this is important for our company and that we've already taken important steps in that direction.
What is the main message that you're sending internally to your own people?
The main message has two angles. From a business perspective, China’s potential is very big. The other one is that our contribution to saving the world (big words) can be very big if we manage to find sustainable solutions dedicated to specific Chinese needs. The economic development in China is already massive, and is expected to be even more so, than what we already see in the rest of the world.
I mentioned, in a climate conference we had in China, that it is almost impossible to understand the fact that within the next twenty years another China will be built in terms of square meters. There you can say that there is a choice, either to do it in a way which is bad to the environment and to the climate as we have done in the rest of the world, or you could end up doing it in a more sustainable way. Of course that's what we should try to do. I think everybody has an obligation to try to contribute to sustainable development. At Grundfos we always want to do something that is lead by a sustainable perspective, but of course at the same time, for us to be able to be efficient in a business context, it has to be profitable. Otherwise, we cannot make it.
When you travel with the Prime Minister to China, you're not just there as Grundfos. You come with five companies who were selected because they can make a difference with the Chinese challenge. To which extent are you really representing Denmark?
I believe that there are a group of Danish companies that can contribute and create synergy across China. I think form the perspective of the larger Chinese agenda, it's not particularly relevant whether this contribution comes from Danish companies or companies from other parts of the world. I think that contributions should come from everywhere.
Well, for the Danish it’s quite important.
For Denmark as a nation, of course it's important to play a role and to have companies being active on the Chinese challenge. Now to be very direct, that is not as such my job. My job is to make sure we are part of it. It makes sense for us to join up with the other Danish companies in this, because the area of renewable energies and energy efficiency have been a focus for many Danish companies for quite some years, and therefore, we have some competencies to offer. But I don't believe Denmark should partner up alone with China. There will be the need for others to join as well, but I think if at the same time we could play a bit of a role in promoting the Danish angle it's a way to catch some attention, whereas this might be slight more difficult with single company.
Events like the Climate Change Conference that took place in Beijing are simply there to create awareness of the contribution you can make. At such an event, there is only a small group of people that can attend. As we have the opportunity to reach a wider audience, what are the key elements that you try to get across there?
For me the main message here now is that we do not have to talk about climate change as something that we can only address by starting new research projects and new innovation. There is very much to be done by simply applying technologies already available. and combining that with the fact that some of the efforts already made in the area of energy efficiency are efforts that, as we've discussed earlier, pay back financially. So there is actually a very good case for applying existing technology, both in terms of addressing the climate change agenda, but at the same time also paying back investments in a very attractive manner. I think that message is very important in China as well as in Denmark. We often try and send the same message to decision makers here in Denmark, because the potential is still here also.
So despite all the talk about innovation and new solutions, we should start with working with what we have today?
I wouldn't say that's not relevant, because that's also relevant, but it's not the only thing we have to do. There is very much we can do with existing solutions, but we as a company also invest heavily in innovating new solutions and long term solutions to address the need in ten, fifteen, twenty years time, so I'm not saying that R&D is irrelevant. It’s very relevant, but we don't have to sit and wait. There's so much we can do already.
So what sort of R&D are you involved in at the moment? Is the focus on the efficiency of your existing products, or are you thinking along very new lines and in new dimensions as well?
We are thinking increasingly about new ways of modern thinking. We are also introducing new solutions. We believe we have a role to play in the areas of water cleaning and water treatment. We believe that we have the technologies that can make a difference here. We believe for instance in recycling water, very much in the concept of more decentralized water treatment. We believe that especially in an economy like China’s, where infrastructures are developing very fast, that rather than investing heavily in centralized water treatment infrastructures, we could have compact solutions that can be moved around ,and then you are much more flexible and you can make better solutions.
Is it generally focused on new construction in China? Would you say a whole new China will be constructed, or is it also a replacement of what is already installed today?
It isn't. This is also technology that is relevant for replacing or updating existing infrastructures.
The CEO of Arkitema has lived in China and he considers that what is happening in China is the biggest revolution that is taking place in our time and that's why we have to be there. Do you have a similar feeling, or are you essentially just a much more global company – is this just a part of your development?
It’s part of our development, but it’s a very central part. We have not moved our headquarters to China, but we have recently strengthened our organization and we have added a higher level of management in our Chinese organization. Now we are trying to see who will lead this development. You could say we are doing a similar thing to what Arkitema did, and we now consider China a region in itself, compared to what we have in Europe, and it has a high level of strategic importance. I'm chairman of the board for our Chinese company, and we go there on a regular basis to be close to what's happening.
Will we expect Grundfos to have one of their board meetings in China in the coming years?
We already have, because we believe it is important to understand what's going on.
We understand that later today you'll be having lunch with the Chinese Ambassador. What is going to be the main topic on the agenda there?
Now, we think it's important that we're in contact. We need to understand China and everybody who can contribute to our understanding of what happens, we would like to discuss with. And of course we also need to continuously spread our message and the main message is the one I just mentioned: Don't wait. There are solutions available already.
What do you believe the main question from the Chinese Ambassador will be?
Now, of course the question that we have already had several times is, "How can Grundfos contribute?" How can we contribute to the development that the Chinese government has decided for China? And then this of course is where we can talk about what we have as solutions, but we can also talk about the way we commit ourselves to China, how we establish ourselves to China, and how we can contribute to technologies being available to China, in terms of setting up our R&D facilities, in terms of the cooperation we had with the Chinese universe with it's own technologies and it's own solutions. I have no doubt that Grundfos has something to offer.
| Company: | Grundfos |
| Position: | CEO |
| Country: | Denmark |