Daniel Szuc
Jul 28 · 6 min read
Source: Grant Ritchie


We interviewed Dr Julia Wang from the Peter F. Drucker Academy in Hong Kong about how Drucker’s philosophy might be reflected in the thinking of Mr Zhang Ruimin, the Chairman and CEO of the Haier Group. This enabled us to gain a deeper insight into the environmental conditions that led to Mr Zhang transforming Haier from a traditional white goods manufacturer to a platform organization.

Understanding how a successful platform organization works will help companies thrive in fast-changing markets. Such an organization resembles an ecosystem, so we will use the metaphor of a “healthy living system” to help describe it. In this article, we will illustrate why good examples of successful transformations are hard to find and why the Haier model may be a challenge to duplicate.

Keys to the Haier model for change include:

  • A holistic focus on issues, and an adaptive, resilient system
  • Establishing the proper conditions for learning and for change
  • Time and reinforcement for adopting new mindsets
  • Adopting a continuous learning and adapting system

Healthy System, Holistic Focus

When an organization identifies areas to change, the diagnosis often focuses only on a specific area or process. Unfortunately, this tends to isolate one issue but does not always account for other issues that matter in the environment, or are in more need of attention.

“These days, a different ideal for organizations is surfacing. We want organizations to be adaptive, flexible, self-renewing, resilient, learning, intelligent-attributes found only in living systems. The tension of our times is that we want our organizations to behave as living systems, but we only know how to treat them as machines.” — The Irresistible Future of Organizing, Margaret J. Wheatley and Myron Kellner-Rogers

“Even without that effect, the beneficiaries of the company’s purpose, defined narrowly, are restricted to a small part of the whole system. The health of employees, suppliers, and customers is willingly sacrificed, weakening the coherence and health of society and the environment.” — Dawna Jones, The Intelligence of the Cosmos: Why Are We Here? New Answers from the Frontiers of Science

Preparing the environment for learning and change

It takes time for members of the ecosystem to grasp the concepts that encourage health, and adopt the platform that enables the environment. Often, organizations fail to invest in the creation of learning environments, but expect people to improve magically and gain deeper expertise over time.

“For over 10 years Mr Zhang from Haier prepared the environment in people’s mind, as well as the technology platform to support it,” Dr Julia Wang told us.

At the same time, people constantly interact with their environment, even if their focus is too much on delivering the product. In work environments, people function primarily in a transactional mode that includes the conditions and interactions necessary to produce and deliver the work itself — the outcomes of projects. Unfortunately, in many companies there is little time for being in learning mode within work contexts, whether for individuals or teams.

“The most difficult part is you need the leadership drive with the philosophical thinking,” according to Dr Wang. A willingness to change in these environments and to transform from one state to another starts with having a specific mindset to do so. This requires that people in an organization are putting the right environmental conditions in place to better understand the desired state.

Dr Wang said, “The customer’s confidence needed to be rebuilt by smashing up bad quality fridges.

The story goes as cited from “Building a Global Responsive Organization: The Case of the Haier Group — Li, Xin. (2017)”:

“In 1985 Mr Zhang was informed by a customer that some refrigerators produced by his factory had defects, he immediately checked the inventory and found that 76 out of 400 refrigerators had defects. He then asked employees what to do with these defective refrigerators. As the defective refrigerators could still work, some people suggested to sell them at a discount to factory workers as a welfare contribution.

“Mr Zhang replied that “’f I allow you to sell these 76 refrigerators today, then it means that I allow you to produce 760 defective products like them tomorrow.’

“So, he decided to destroy all the defect refrigerators corresponding to a total market value roughly equal to two workers’ annual salaries. He used a sledge hammer to smash the first defect refrigerator himself and then passed the hammer on to the workers who were responsible for the production of the products.”

Dr Wang added, “It’s a cultural change where you might need to go through suffering and short term setbacks before you can see the results.”

“As an older worker recalled, he would never forget that moment, where the hammer smashed their outdated quality mentalities, and how this event activated the workers’ awareness of improving the quality of their own work.” (“Building a Global Responsive Organization: The Case of the Haier Group” — Li, Xin. (2017)

Change takes time

The term “change” has become all too common and used and misused in organizations today. The desire to improve as part of change is urgent as people look for ways to keep current in an increasingly digital environment and as they deal with significant global issues of industrialization.

Too many organizations equate digital transformation with change. This is a gross oversimplification that cannot be solved through the primary use of methodologies and toolkits alone.

Dr Wang noted, “Mr Zhang has been preparing people for over 10 years by changing their mindset slowly. When people’s mindset is ready, when they see change and they see it as an opportunity and not as a threat.”

There are practices that are constantly in play but hidden from view. We call these implicit practices. They are embedded in behaviors between people that they are not always aware of or do not always pay attention to. They are unintentionally influenced by implicit practices in their own environments comprising cultures, habits, personality, education, family and more. But by generating and reinforcing positive practices within the environment, organizations can reduce intangible sources of waste.

Environments to encourage continuous learning and improvement

An ecosystem rebalancing the yin and yang and needs the nutrients to constantly enhance the self-healing system. People are not in a vacuum as they are constantly in contact with the environment they operate in. It is important to keep the flow going (qi and blood) and if it stops there is a risk of getting sick.

It is the same for an organization.

“The most powerful element Haier has over their counterparts is their agility to change and I have not seen this in other organizations including the high tech industry,” according to Dr Wang.

Learning environments that allow people the time they need to be able to see different perspectives and understand systemic complexity by:

  • listening to other people’s perspectives
  • probing to see what we may not immediately see
  • zooming out to gain greater perspective
  • zooming in on the details within the bigger picture
  • confronting the issues to help solve problems
  • connecting the dots to gain focus
  • knowing what we need to work on and why
  • prioritizing what work to focus on now
  • focusing on that work and its meaning.

Perhaps we need to inspect the term “change” and consider replacements like “continuous learning” with more consideration for the holistic perspective in reference to people’s mind, heart and body.

Perhaps we should consider change not as a “one off” but as an ever-evolving environment that is constantly attracting a diverse and hybrid set of people to promote the regular critique of the current state and better identify futures states on the horizon.


On The Horizon

the economics, structure, and behavior of platform ecosystems

Daniel Szuc

Written by

Make Meaningful Work

On The Horizon

the economics, structure, and behavior of platform ecosystems

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