Haier has developed an organizational model based on ecosystem principles, a departure from traditional hierarchical models. This topic was explored by Gary Hamel and Michele Zanini in The End of Bureaucracy (for a summary, see my analysis, Hamel and Zanini on The End of Bureaucracy).
One way to differentiate ecosystem-based organizations is to consider them as horizontal and loosely-aligned networks of self-organized, self-driven, self-optimized organizational units, which Haier calls micro-enterprises. However, microenterprises still operate within the principles and managerial environment of Haier, and therefore their autonomy is not absolute. This may sound like a weakness, but the loose interdependencies between the members of an ecosystem are a source of strength, not a flaw in organizational design.
Most critically, the Haier model stands in sharp contrast with vertical hierarchies of top-down, tightly-aligned, non-autonomous organizational units which are the general case across the industrialized world, and which have their foundations in early industrial models. The era of siloed, top-down, command-and-control organizations is over, and the decentralized and distributed innovation and entrepreneurship of ecosystem organizations is fueling exponential growth wherever it occurs.
The Internet of Things (IoT) is part of the newest wave of the IT revolution, an element of the fourth industrial revolution (as explored in Evolution of the Platform Organization: 3 Haier, Rendanheyi, and Zhang Ruimin’s Vision), along with technologies like AI, robotics, bioengineering, and 5G. The Internet of Things, however, is uniquely important in manufacturing and related industries, and will play a key role in the continued fusion of mass production and customization which has become a global trend. In subsequent posts in this series, we will explore the role of the Internet of Things in Haier’s platform ecosystem advance.
The table below shows the social evolution of the platform organization as a function of the technological era. Haier and other leading platform organizations are involved in a transition The table below shows the social evolution of the platform organization as a function of the technological era. Haier and other leading platform organizations are involved in a transition toward ecosystem economics and dynamics based on a technological era of platforms.
In this, the Platform Era, business and society are adapting to new models of communication — such as the use of protocols built into the tools, applications, and infrastructure of information technology platforms. As a result of those new communications channels, along with intentional organizational changes to operate in a more agile and responsive way, platform businesses can be considered as more fast-and-loose than the tight-and-slow organizations that are the dominant model across the world, today.
What is the Ecosystem Micro-community?
Haier’s CEO, Zhang Ruimin, has developed a set of principles that explore a model of interaction between micro-enterprises that are aligned toward shared ends and to dispel the notion that micro-enterprises do not have relationships with each other. This concept is called Ecosystem Micro-community.
Consider a Haier micro-enterprise that was formed to pursue a new market niche — for example, Community Laundry, an app-based service to allow college students to reserve dormitory washing machines and pay digitally. The team that created the idea created relationships with other micro-enterprises within Haier to help with marketing, the Internet of Things programming, and so on. That network of Haier micro-enterprises also aligned with dozens of external partners, who offered various value-added services to the students, the users who are the principal recipient of the value added by the others.
That ecosystem of Haier micro-enterprises, the external partners, and the community of users that participate in the design, development, and operation of Community Laundry can be viewed as an ecosystem micro-community (EMC). Any EMC can be viewed as operating at two scales at once. At the most micro scale, the community is an ecosystem of loosely-aligned units (each self-organized, self-driven, and self-optimized), with the Community Laundry micro-enterprise playing the role of micro-community owner and orchestrator. At a more macro scale, the network can be viewed as a single entity, a coherent ecosystem called Community Laundry. Both are true at the same time.
Just as with cells in a human body that pass through a lifecycle of renewal and decline, the constituent units of the ecosystem micro-community can come and go, as when the team within the Community Laundry micro-enterprise owner chooses to use a different group for marketing support, or sign an agreement with a different development group for IoT programming. These decisions are made with the goal of providing better products and services for the end customer, and fair dealing between the various constituent partners is mediated by Haier principles for sharing the returns on the ecosystem’s success.
The idea of ecosystem micro-community includes a set of principles that impose order on what might otherwise become skewed by power imbalances inherent in the relationships between micro-enterprise owners and the rest of the ecosystem micro-community. In this way, mutualism, shared cultural norms, and evolutionary selection provide constraints that counter discord, contention, and unsustainable practices.
Henry Mintzberg offered up his idea of outside-in, emergent strategy as distinct from the top-down, deliberate strategy of industrial companies, and positioned it as a way of learning:
The whole question of how managers learn from the experiences of their own organizations seems to be fertile ground for research. In our view, the fundamental difference between deliberate and emergent strategy is that whereas the former focuses on direction and control-getting desired things done, the latter opens up this notion of ‘strategic learning’. Defining strategy as intended and conceiving it as deliberate, as has traditionally been done, effectively precludes the notion of strategic learning. Once the intentions have been set, attention is riveted on realizing them, not on adapting them. Messages from the environment tend to get blocked out. Adding the concept of emergent strategy, based on the definition of strategy as realized, opens the process of strategy making up to the notion of learning. Emergent strategy itself implies learning what works: taking one action at a time in search for that viable pattern or consistency. It is important to remember that emergent strategy means, not chaos, but, in essence, unintended order.
One of the two engines of ecosystem platforms is the learning engine, the other being the transactions engine (the part that most people think about). The apparent chaos of a network of loosely-connected, but interdependent entities is, in fact, the best sort of learning engine, where the learning comes at low cost and as the outcome of already necessary communications between the parties. This leads to not chaos, but unintended order.
The emergence of the Internet of Things and the rise of the platform ecosystem era of organizational development are linked, and as a result, the shape and dynamics of the platform organization are complex. We’ve touched on the Haier concept of ecosystem micro-communities, and explored its utility as an organizing principle when discussing both transactions and learning in ecosystems. In upcoming posts in this series, we will examine other aspects of this central concept in Haier thinking.