How Grohe finds growth through innovation

The sanitary-fittings manufacturer’s chairman, David J. Haines, who is also CEO of Lixil Water Technology, explains how Grohe is meeting changing customer needs through product diversification and innovation—and why CEOs are the ultimate brand managers.

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Grohe, the leading global provider of sanitary fittings, has been growing rapidly around the world. In this interview, David J. Haines, who served as Grohe’s CEO for ten years and became CEO of Lixil Water Technology in April, discusses his focus on developing product lines, his commitment to recruiting diverse talent, and how he closely managed the Grohe brand—all while seeking to reduce its environmental impact. This interview was conducted by McKinsey’s Rik Kirkland, and an extended and edited transcript of Haines’s remarks follows.

Interview transcript

Growth in a volatile world

We’re a company that is focused on growing a lot faster than our competitors and a lot faster than the market. So we see four or five sources of growth. If we look at it from a product perspective, we see lots of room for innovation. We can see products that use less water. We can see products that are more environmentally friendly, with better design.

If I look at it with a geographic lens, we all know about the issues in Europe with lower growth. But we’re a global company, in about 200 markets. In Asia, for example, we’re growing double digits in markets like India. The United States is, at the end of the day, the biggest economy in the world, and we’ve seen major growth opportunities there. And we actually see excellent growth opportunities in certain markets at home in Europe, like Germany and my home market, the UK. So, yes, it’s a volatile world. There are lots of issues, geographically. But we believe that there are growth opportunities basically everywhere, provided we do a good job.

Investing in talent

We have two crown jewels. The first is the brand. The Grohe brand is renowned, in this industry and worldwide, for its quality, its technology, and its design. The second crown jewel—and the one that, as I’ve been CEO now for more than ten years,1 I appreciate more and more—is the people that I work with. Whether it’s in leadership functions, in manufacturing functions, whatever function around the globe. I’m not just paying lip service to this. We really try to make sure that we have the best people for the job, in the right location. Where we have great people, we often have great results.

When I first came to Grohe, it was very much white, German, male-dominated. Today, we’re completely multicultural. At our global headquarters, in Düsseldorf, we have about 25 or 30 nationalities. We have women leading our businesses in India, in China, in the UK. We have various nationalities in other functions. So we are totally global, and that’s something we need to expand. We also look outside of our industry and try to bring in the best global talent.

The CEO as brand manager

Where I put focus changes from year to year, from situation to situation. I started off by focusing heavily on restructuring and cost management. These days, it’s the two crown jewels—they are the issues that I really try to pay my attention to. Yes, capital allocation. Yes, where to invest. But I put a lot of effort into the brands and into the choice of people and managing those people and ensuring they’ve got the tools to do their job as best as they can.

Brands are far too important to be left to brand people and marketers. It is the responsibility of the CEO to nurture the brand. And what you have to focus on there are the actual products—the quality, the technology, the reputation, how you manage those brands and that you treat them with the appropriate amount of care and attention that you would anything else.

Brand management, if you want to call it that, is as much a science as it is an art. Many people think it’s just an art. I think that the issue these days is to get as much data about the health of your brands as you can, to find correlations to what works well and what doesn’t work well, to do more of the good stuff and less of the bad stuff, and to be on top of where your brands are in the mind of your various constituencies.

Conservation through innovation

When I first came to Grohe, I wouldn’t have thought of innovation as a big part of the industry. But as you get into it, you realize this is a technology industry. We’re dealing with the world’s most scarce and, in many ways, most harsh resource: water. Anything that we can do to enhance the customer experience and, at the same time, to conserve water is our obligation.

We invest an awful lot of money, time, and effort into finding innovative showering solutions where the consumer gets the same shower experience using 20, 30, 40 percent less water. Nothing is more environmentally unfriendly than a leaking tap: we invest in our cartridges to make sure that 20, 30 years after you’ve put in the tap, it doesn’t leak.

Under the innovation umbrella, I would differentiate two things: renovation and true innovation. A lot of our products we renovate. And there we tend to be upgrading, using new materials, using new processes. That accounts for probably 50 to 60 percent of our work.

True innovation includes digital. We use digitalization in the interfaces for consumers and we copy many of the things done in other industries using icons. For example, we have a shower now that you can pause while you wash your hair. So rather than just leave the tap running, you press the pause button. Then they press the pause button again to go back to showering at the preset temperature. That’s a little example of digital technology in the water space providing a superior customer experience.

About the author(s)

David J. Haines is chairman of Grohe and CEO of Lixil Water Technology. Rik Kirkland is the senior managing editor of McKinsey Publishing, based in McKinsey’s New York office.

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