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  • Writer's pictureBill Fischer

Foreward, Corporate Rebels' Startup Factory

Bill Fischer

This originally appeared as the foreword to Startup Factory, Haier's Rendanheyi and the End of Management As We Know IT, by Joost Minnaar, Pim de Morree and Bram van der Lecq, Corporate Rebels, August 1, 2022


Believe it or not, there are still places on this planet where if you use the word “innovation” your audience hears “technology.” Actually, this confining, but instinctive, linking of things, products and devices with the term “innovation,” is not that uncommon, and, yet, as the saga of Haier illustrates, there are so many more, grander definitions of innovation possible than the most traditional associations recognize. In fact, one way of summarizing the evolution of Haier is to reference the changing focus of their innovative efforts; from products and better quality (1984); to service and faster responsiveness (1998); to intimacy with the customer and knowing more about them (2005); to being truly outside-in with zero-distance to the marketplace, and replacing knowing with learning (2015); and, now, presently, to be increasingly ecosystem-driven, allowing the world to truly become Haier’s R&D department. Each of these changes in innovation foci, while simple to say, actually represents an enormous change in the way that Haier works, and the role of the employees. To accomplish so much change in just forty years, is also testimony to the embracing of the continuity of change that has marked Haier’s story.

 

What makes all of this possible, is that, as the Corporate Rebels observe, “Haier is on a constant quest to find undiscovered riches and seams of value.” But, what does that mean, and how might we all learn from this? To begin, we should recognize that Haier is not a normal organization. Almost everything about it, from it’s affinity for change, to its ever-shifting  structure, to the culture that powers such efforts, to the distributed  autonomy that marks its microenterprises, is different from a traditional organization. In fact, what Haier is proposing, with its Rendanheyi philosophy, is nothing less than a new management model for us all to consider.

 

 In 1997, management guru Peter Drucker, predicted that “a distinct and quite different management style and management structure” would be emerging from China in the future. There is good reason to believe that Rendanheyi, which is more a philosophy of working and organizing for the maximization of human value, than it is an approach or technique, could well be the first of such Chinese-originating management philosophies to be shared with the world. Rendanheyi is built upon at least three guiding principles:

•            The centrality of creating a great customer experience; echoing Drucker’s own definition of the goal of a business being “to create and keep a customer”;

•            Recognizing that the entrepreneurial energies of the employees, so often disregarded or overlooked in most complex, modern organizations, is exactly the right force to create these great customer experiences, and to fulfill the talent potential, and reinforce the dignity of the employees involved;

•             Establishing the equitable sharing of the value-created among the three principal actors involved: the value enjoyed by the customer, the value received by the organization and its stakeholders as a result of increased marginal revenues, and an obligation to share these marginal returns with the very people who actually created the value, the employee-entrepreneurs.

 

Accordingly, the story of Haier’s evolution is also the story of the author of that evolution, Zhang Ruimin. Mr. Zhang, himself, has gone through a striking personal, professional metamorphous, from a government functionary, working in the Qingdao municipal government, overseeing the Qingdao Refrigerator Company, then an almost bankrupt collective organization, and then accepting to be the Director General of this organization, when no one else would step-up to help restore the organization’s vitality; to the present day, where he is now globally regarded as one of the most astute designers of the organization of the future, as well as Chairman of the world’s largest home appliances group. There are many things that Zhang Ruimin understands, that form the basis of much of Haier’s success, and among them are:

 

•    The importance of knowing what you are trying to accomplish.

•    At Haier, everything is aimed at maximizing human value; this is no ambiguity here, everyone understands where they are going, and after forty years of moving in this direction, there is little controversy.

•    The value of a small set of guiding principles to provide every member of the Haier community with a compass to point the way. In the words of Corporate Rebels, “No need to worry about every little detail, or who is responsible for what, because the principles provide sufficient guidance.”

•    A culture of experimentation to find the path, with trial, learning and iteration marking the cadence of progress.

•    The role of the Leader as “seeker.” Searching for new ideas to add to the conversational mix throughout the whole community; not pretending to be the ultimate determiner of any and all decisions.

•    A willingness to share power in the pursuit of building an organization that is more attentive to the customers’ lives and fast in response; and, as a by-product, creating an organization that has fewer managers, but more leaders.

•    An eagerness to seek-out external partners in order to access knowledge domains that are unfamiliar to Haier, despite [or, because of]  its market-leading success; and, then, share power with them, as well.

•    And the capacity to go beyond ambitious dreams and pay equal attention to the granular details that ultimately determine the success of such big dreams.

 

As a result, Haier, today, is heading with confidence into a future that will be markedly different from anything that their industry has seen in the past. The advent of the smart home and the hyper-connectivity that characterizes the Internet of Things, is changing Haier’s customer journey from a spasmodic search for solutions, into a continuous conversation about experiences. Few organizations are prepared for such a startling change in the way in which they engage their customers, and ever fewer have yet chosen to explore such radically different ways of organizing to make that engagement succeed. Haier is moving full-speed ahead in just such directions, and is in the midst of a major transformation to demonstrate that large, mature, presently-successful organizations still have a future. Ironically, they are doing this by effectively making each part of this mammoth organization, smaller and more autonomous. Economies of scale are giving way to economies of learning, and, as Corporate Rebels tells us, “Haier has porous boundaries… best be traced with a dotted line. With big spaces between the dots.”

 

One of the most charming features of this delightful book, which has managed to make a complex, and often confusing story, easily understandable, are the frequent reports from an  intergalactic starship heading into the unknown, perhaps in a search for intelligent life. Unlike all too many contemporary complex organizations, which are intellectually barren,  Haier abounds with intelligent life, and the lessons being beamed back from this remarkable journey will hopefully inspire many who read this book to go forth on their own journeys of exploration, change and liberation from the bonds of legacy managerial thinking which have trapped so many in the past. May these insights, and the readers who adopt them, go forth and prosper.

 


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