Thermondo: A digital business in a non-digital industry

By Phillip A. Pausder, Founder & MD of Thermondo.

After the Fukushima nuclear catastrophe, Chancellor Merkel proclaimed the transition to renewable energy. That was an important step – for Germany and the entire world. It quickly became clear to my co-founder and me that the future of the energy industry lies in decentralized power. For homeowners, that means modern heating in the basement and solar thermal energy on the roof to reduce fuel consumption and CO2 emissions. This is how the idea for Thermondo was born.

When we founded Thermondo in 2012, there was a great deal of skepticism: skilled crafts and digitization? People frequently told us it wouldn’t work. Today, we have over 180 employees in all of Germany, and we are the market leader in our segment. Along the way, we have been able to secure funding by prominent investors such as E.ON, Holtzbrinck Ventures and Rocket Internet. There were and still are many challenges we must face.

We created a business model that – due to digitization – is both scalable and promising: a faster and simpler way to modernize a heating system. Thermondo offers a full-service package with minimal customer expenditure, and is hugely beneficial to the environment and climate change targets.

Our business model is unique in the German skilled crafts sector. Our supplier market, heating, ventilating, and air conditioning (HVAC), is deeply fragmented. The players think and work offline, and the sector is missing established and stable processes that enable innovation and scaling. In addition, the HVAC sector is a so-called “mixed trade”. As well as heating systems, an HVAC technician also installs air conditioning systems and renovates bathrooms.

Thermondo, however, focuses on digitization and specialization. That means our entire work process is computer-assisted, data-driven and efficient. And because we specialize in replacing heating systems, our expertise in this area is growing with each passing day. Our software, like our organization, is continually learning so that we can optimize our processes and the quality of our work.

thermondo, heating, digitization, energy

Naturally, digitizing a traditional craft sector has been a mammoth task. We have created the largest digital product database for heating solutions. There has never been anything like it. Individual equipment manufacturers haven’t had the necessary data available in digital form either. We created an algorithm that generates a bill of materials for each heating exchange on the basis of only a few data points. Within seconds, an offer can be created that would have previously taken weeks. Our backend communicates in turn with our installers’ vehicles and verifies which additional parts need to be ordered for a new building site. Additionally, the placing of orders and the just-in-time delivery of the new heating systems takes place automatically – directly to the customers’ homes. These are only a few examples of the digitization and interconnectedness in our enterprise.

Finally, a business model depends on its customers. Thermondo’s customers are owners of single-family and semi-detached houses. Most of our customers are over 55, yet technically savvy. The idea of ordering a system online is very familiar to them. But the consultation and the heating system installation must also be fast, easy and of the highest quality. In the non-digitized business of upgrading heating systems these days, contractors do everything by hand – picking out the appropriate equipment, preparing the offer, planning the building site, etc. At Thermondo, the customer consultants and the technicians are supported by an interconnected, highly complex IT infrastructure. This allows us to replace the heating systems more efficiently and to the highest standards – just the way customers want it.

One challenge with our digital business model lies in raising awareness for digital processes in a traditionally non-digital environment, showing the homeowners, equipment manufacturers, wholesale dealers, etc. the hidden potential of digitization and interconnectedness. And we’ve been doing it successfully. The reactions of our customers have been overwhelmingly positive. We are also constantly experiencing great reinforcement from the energy sector – as evidenced by a high number of successful partnerships with major players.

With the future of the energy sector becoming more and more decentralized, intelligent and sustainable traditional utility companies will be looking to partner with innovators like Thermondo.

Being an entrepreneur comes with many challenges. Still,  I strongly urge everyone to follow through with their ideas and start a business. Within an academic framework, there is a limit to what one can learn about the topic of entrepreneurship. Through IE’s strong cultural focus on entrepreneurship I developed the desire to start my own company. Beyond that, IE Businesses School provided me with an outstanding knowledge of finance, which is essential for an entrepreneur. And last but not least, the school’s interdisciplinary approach taught me interconnected thinking. I have adopted this holistic approach and use it daily as a company founder.

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