Week 40, 2020
Haier: Internet-of-Things, Rendanheyi, and Ecosystem Micro Communities
Each week I share three ideas on and about the future of work. And this week, those ideas serve to introduce Haier — the fascinating white goods manufacturer out of Qingdao, China.
Why am I writing about this? Haier is getting lots and lots of attention these days. And for good reason. Not only is it a fascinating case study in organizational design, but it’s also a rare example of successful large-scale transformation. Here’s what you need to know:
1. Internet-of-Things
Listen to an interview with Haier CEO Zhang Ruimin and you’ll notice many a reference to what he calls “The IoT Era”. Two reasons. First, Haier is a leading provider of connected devices such as smart fridges and TVs. And so in that sense, IoT is simply a reference to the technology that Haier is providing to its customers. Second, IoT is also a metaphor for the interconnected and constantly changing world in which we now live — a world for which Haier’s organization model is specifically designed.
2. Rendanheyi
Rendanheyi, loosely translated as the integration of people and goals, is the foundation for this model. And it views the organization not as a hierarchy of employees, but as a network of entrepreneurs who are in constant and direct contact with their customers. This is important for several reasons, not least because entrepreneur compensation is directly tied to the value they generate for the customer. Entrepreneurs have ownership. And they are free to set their own goals, make hiring decisions, and allocate resources as they see fit.
3. Ecosystem Micro Communities
In practice, this means that Haier is made up of 4,000+ Micro Enterprises (MEs) who operate across a number of Ecosystem Micro Communities (EMCs). Think of MEs as independent businesses in everything but name. And think of EMCs as value chains involving N number of MEs (and external businesses!) that work towards a common goal and are governed by a time-bound contract signed by all participants. The end result: a structure worthy of that well-known saying “loosely coupled, highly aligned”.
Haier hasn’t always been structured this way. EMCs are a relatively recent phenomenon. And MEs first arrived on the scene back in 2012. And as far as I’ve been able to tell, this is quite indicative of how Haier actually works. Unlike western organizations who prefer to see change as a finite process with a start and end, Haier has embraced change as the constant and continuous process that it really is. And that’s quite an achievement considering that Haier is now the largest white goods manufacturer in the world with close to 100,000 employees entrepreneurs!
But, and this should come as no surprise, it’s not all roses — at least not for everyone. Company reviews on sites like Glassdoor (an admittedly Western source) suggest that while autonomy is part of the Haier experience, so too is hard work and long hours. And for those who have yet to embrace the organizational model (Haier has acquired a number of Western businesses in the last decade), the lack of strategy and direction can be misinterpreted as a lack of vision or worse, purpose.
But nothing could be further from the truth. Because while Haier is charting new territory with its Rendanheyi model, it's doing so with the express purpose of designing a new type of organization — an organization able to thrive in the IoT Era.
That’s all for this week.
For more on Haier, start HERE.
Until next time: make it matter.
/Andreas
