Week 47, 2022—Issue #230
Haier EMCs: Customer Scenarios, Business Ecosystems, and Leading Targets
Each week I share three ideas to help you build better organizations. This week, those ideas are all about scenario thinking. This article was originally published in the WorkMatters newsletter on Nov 25, 2022.
The term Enterprise Micro-Community or EMC originates from Haier’s Rendanheyi model. It refers to a business ecosystem created in support of one or more customer scenarios.
Here’s what you need to know:
1. Customer Scenarios
Innovation is best defined as the realization of customer value. It starts with unmet needs and ends with those needs being satisfied.
Some needs are easy to satisfy while others are not. And the more challenging they are the more value they tend to generate.
This is especially true when several unmet needs are involved. Tackling compound problems can be very difficult, but also very valuable.
This is where Customer Scenarios come into play. Businesses can generate more value by thinking in scenarios as opposed to individual needs.
2. Business Ecosystems
Conventional wisdom suggests businesses should focus on one narrowly-defined need and gradually expand from there.
Customer scenarios sound like the exact opposite. But they’re not. Scenarios tend to be complex, but there is nothing to say that businesses must act alone!
Few organizations have the capabilities and resources needed to address a scenario end-to-end. Most need help. Startups especially so.
Enter the Business Ecosystem — a dynamic group of largely independent players that work together to create more value than what they can do individually.
3. Leading Targets
Getting several independent players to work together is, of course, easier said than done. Haier found that out the hard way.
When they first introduced their so-called MicroEnterprises, they did so without a governance mechanism. Collaboration soon devolved into competition.
The solution came in the form of a contract with Leading Targets. These contracts explain who will get what and when, and under which conditions.
These so-called “EMC contracts” proved key in turning ecosystems into communities that could work together to create customer value and share the proceeds.
Interestingly, the emergence of EMC contracts was not a centrally organized event. It was a grassroots practice that proved successful and then spread.
Today, it’s Haier’s default practice for building ecosystem communities atop scenarios of unmet needs. Explains Minaar, Moree, and van der Lecq in The Startup Factory:
The first step in creating an EMC is taken by the initiating microenterprise. By default, it becomes the EMC-leader…EMC contracts are forged according to these rules: Each microenterprise sets its own goals, and potential rewards are calculated. Each contract aims for higher profitability than the industry average to out-perform the market. The range of value-added sharing is defined before production starts, with lower and upper limits…Every microenterprise that becomes part of the EMC will receive income only when the entire ecosystem succeeds at creating added value for the user. Profit will then be divided based on predetermined agreements on the value and size of the individual contributions.
That’s all for this week.
Until next time: Make it matter.
How can we build better organizations? That’s the question I’ve been trying to answer for the past 10 years. Each week, I share some of what I’ve learned in a weekly newsletter called WorkMatters. Subscription is free. Back-issues are published to Medium after three months.
