Grundfos steps up R&D efforts to design and develop products for local markets | By Shafquat Ali |
Grundfos pumps are, perhaps, the most copied pumps in the world. “We have been copied left, right and centre,” admitted Ranganath NK, MD, Grundfos Pumps India. “We had some 80 copies made in China and now we have almost 10 or 12 copies made in India – with some companies even blatantly admitting they have copied our pumps. And it is not just the products that are being duplicated even the documentation is being duplicated; they are just changing the number.”
So how does Denmark-based Grundfos, a global leader in advanced global pump solutions with an annual production of more than 18 million pumps, react? “It is sad in one way but it also gives us a little bit of useless pride,” said Ranganath. However, the important thing is that, despite this blatant copying, Grundfos has not stopped pioneering technology. Reason: the company knows that the only way it can retain its leadership position is through constant innovation.
“Since 88% stakes of the company is held by a foundation, we are not under pressure from share market players to increase profits. As such, we invest 4% of our global turnover in R&D every year,” explained Carlo Prola, group senior VP, Grundfos Management. “About 50% of our growth comes from technology platforms that were not developed till 2007. At Grundfos, we invent solutions the world has never seen before and, over the years, we have expanded our business with the addition of new categories and areas by using our technologies in new and creative ways, based on the requirements of our customers.” Recent visits both to the company’s premises in Chennai as well as Grundfos’ facilities in Bjerringbro, Denmark, revealed that the company’s employees – no matter where they are located – are committed to innovation.
Some years ago, when the president of the company was discussing our innovation intent and future plans with a bunch of people and they had said, ‘What do we do?’ he replied, ‘We will look at these three things: Concern, Care and Create.’ We said we’ll put sustainability first and we’ll be there for a growing world,” recalled Ranganath. “And India is a major part of this growing world.” “India is a second home market for us and we are investing in R&D here to develop products for the local market,” elaborated Prola. “The product will not be different from that developed for other markets, but will come with some modifications. The India strategy is focused more on the local markets than on exports.” Not surprisingly, Grundfos has been coming up with products which the Indian market had never seen. “When we began introducing new products, we were not comparing apples with apples,” Ranganath said. “Besides, our pumps were 300-500% more expensive. A normal domestic pump in those days would cost between ` 2,000 and ` 2,500 but our pumps came for ` 20,000. Now, with that kind of an entry, to convince people it took us a little bit of an effort.” But Ranganath and his team spared no effort to educate the market that even though their pumps were more expensive they were also cost effective and energy efficient — and they reduced the power consumption phenomenally.
“In 80% of the cases, the payback was less than 16 months,” added Rangarajan Ramaswamy, director, service and training, Grundfos India. “Besides, the reliability was so high that buyers never had to call a plumber for repairs for many years, which meant overall they started saving money.”
In India we have 40 people writing software for the world. We actually make our own silicon chips and embed it with the required intelligence. So we keep quite a few things in-house, we don’t sell these capabilities, it is just fitted into our pumps and we sell our pumps,” said Ranganath.
“We think ahead and innovate for the local areas,” he added. “Also, we feel that if we start innovating for an Indian market, an emerging market, it will be applicable in other parts of Asia and Africa which we do think will open up in the next decade or so.” Asked about the thought process behind their technology, Ranganath summed it up by saying, “Care for people and the planet, this is the underlying premise for any new technology. A concern for our planet has continued to be our business driver. We were doing that in Europe; we started doing that in China four years ago. Now we want to start doing this in India.”
According to Ranganath, Grundfos aims to understand the market without compromising the company’s value systems and still come up with products that add value not only to the people using them using them but also to the nation.
Elaborating on Grundfos’ positioning in India, Ranganath said, “We decided that we will not downgrade the product just because it’s coming to India, which meant that we were only catering to the top end of the market. We said let’s start with that first; the issue is the same for any product when it first comes to India. We have maybe 2-3% of Indians who can afford anything in the world and then another 4-5% is fairly well to do. And then, there’s a whole mass. So, we said when we bring in products we’ll look at the top end – the top two areas – and let it percolate downwards, which it did.” Currently, Grundfos has about 5-6% market share because it is till a relatively new entrant but it also has products that are yet to reach the masses. However, the company knows only too well that India is more of a mass market and affordability is also a question. “Earlier it was all about the least cost without looking at efficiency, now municipalities are looking at efficiency and power load,” argued Ranganath. However, he added that Grundfos is focusing on higher localisation and exports too with some products ‘made in India for India’, which it expects will contribute to growth in the coming years.
Though 2013 started with negative growth for Grundfos it ended well due to the last quarter picking up and with a positive growth over the year 2012. However, Ranganath does not expect too much of a change this year but he is keen to increase the company’s market share.
Already, there was reason to cheer last month when the company announced that it had sold more than 8,800 solar pumps across the country. The fact that Grundfos continues to be the market leader in this segment in spite of many others making solar pumps in India or importing them is thanks to its reliability. Commenting on this milestone, Ranganath said, “An off-grid, self-sustaining solar pumping solution is the quickest way to provide water to millions. As a company which is committed to a greener and cleaner planet, Grundfos India constantly focuses on offering energy efficient and sustainable pumping solution, of which solar water pumps is one among them. New pumps not only usher in a greener technology but will also help pull many power utilities out of the red.”
He pointed out that at least 36 billion units of the 145 billion units of power that was consumed by the agricultural sector last year could have been saved if energy-efficient pumps had been used.
“Taking into account around 25% additional loss on account of transmission and distribution, the revenue of India is about ` 16,800 crore. On the other hand, if old pumps were replaced with high-efficiency ones, it would have cost ` 70,000 crore. This money can be recovered in just four years,” he explained, adding that Grundfos is always focussed on the lifecycle cost of its pumps, which are more energy efficient than the competition. Looking at green solutions, shifting to solar agricultural pumps is worth considering in areas that have not been electrified, said Ranganath, who has been selling solar-powered pumps for more than five years. Grundfos is focussing on R&D in India so that it can develop pumps and applications for the domestic market. They are looking at developing a basic product that is just as reliable and efficient but at a lower price.
“Even though I cannot scale down reliability and efficiency, I can scale down aesthetics,” he said. For now, Ranganath aims to increase the company’s presence in the price-sensitive domestic pump market with the Italian brand DAB which will cost lower compared to Grundfos. “Though DAB is not the same as Grundfos in product attributes it is better than what is available to customers in the Indian market in terms of energy efficiency,” he explained. “This brand will address the middle market.”
In the long run, however, the Danish parent is looking at two-to-three products specific for the Indian market, said Ranganath. “We are working on solar pumps at a price that would be affordable for the common man, developing a small system that could filter grey water and looking at providing a simple solution that could help consumers measure the power and water they consumed.”
Admitting that price could be the biggest challenge in India, Prola reiterated that Grundfos was keen to emerge as a dominant player in the country. “India is a perfect market for us,” he said.“You have the quantity and quality.”
Clearly, stepping up R&D efforts will be key to Grundfos’ growth in India as the company prepares to pump things up.