Haier, beyond strategic intrapreneurship

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When I studied next-practice intrapreneurship, as part of an EC project, I came across “Corporate rebels”. I am a fan, and I would highly recommend subscribing to their newsletter

Haier

In “corporate rebels”, the authors mention Haier. I first came across Haier after reading “The day after tomorrow“. Haier is mentioned in lots of books about intrapreneurship. Haier is a shining example of intrapreneurship at a strategic level or a truly entrepreneurial organisation. A network, ecosystem or platform of mini-companies that are extremely close to the market.

Start-up Factory

So the corporate rebels decided to write a book about Haier specifically, titled “Start-up Factory: Haier’s RenDanHeYi model and the end of management as we know it”. Compulsory reading for anyone interested in innovation, adaptability, organisation structures, employee engagement, change management and any other business buzzword you can imagine.

The Haier principles

It is the case study for “Reinventing organisations“. Explaining Rendanheyi. Rendanheyi is built on a number of principles: 

  1. Creating a great customer experience,
  2. Everyone is an entrepreneur.
  3. Equitable sharing of created value among the three principal actors: the value enjoyed by the customer, the value received by the organisation and its stakeholders.
  4. People are a company’s most valuable asset, and two types are involved in creating value: entrepreneurs (internal) and customers (external).
  5. Zero distance to the user.
  6. Freedom to create and act autonomously.
  7. Fierce internal competition.
  8. Removal of all middle managers.
  9. Blockchain-enabled contracts.
  10. An open system (anyone that can add value to the customer can join the Haier ecosystem).
  11. Emergent leadership (The willingness to ask for input, the ability to listen, and the ability to “steer things in the right direction without the authority to do so, through social competence.
  12. Open book management (full transparency).

Leadership

Maximising human value, guiding principles, a culture of experimentation, Defining the role of the leader as “seeker” — searching for new ideas to inspire the conversational mix throughout the work community, not pretending to be the ultimate decision-maker, the willingness to share power in the pursuit of building an organisation that is attentive to customers’ needs. Also read “Everybody Matters: The Extraordinary Power of Caring for Your People Like Family“.

Future proof

Haier is radically decentralised and a self-evolving business ecosystem with thousands of internal start-ups. You need that type of structure to prepare for an IoT-driven, shared economy where products and services are co-created with the customer. Innovation is no longer limited to boffins and inventors in the research department. It is citizen development on steroids.

The results

  • Haier has created three independent listed companies
  • Five have reached unicorn status
  • Thirty-seven are considered gazelles.
  • The rate of successful start-up incubation at Haier is 49%— against a global average of just 10. 
  • Haier has a presence in 186 countries, a 13.3% global market share in major appliances and 44% in smart appliances.
  • About 50% of employees get a score of four stars or higher, meaning they are eligible for higher rewards.
  • 62.6% of all microenterprises are led by people under 35.

Platforms

Haier is now organised into six main platforms or “fields”: Smart Home, Touchpoint Iteration, Thousands of Links Sharing, Industry & City Integration, Culture, and Smart Connection, all with their own sub-fields based on user scenarios rather than specific products.Zhang Ruimin believes that “either you own a platform, or you will be owned by a platform”. Read “Machine, Platform, Crowd: Harnessing Our Digital Future”. On these platforms, transparency is key. At Haier, all individuals and teams are measured on productivity, profitability, and customer satisfaction, with peer ranking based on these metrics available to all staff via digital tools.

Clusters

Industry platforms bring together micro enterprises working on similar products. They incubate and support the microenterprises. They form a bridge between micro-enterprises that work in similar sectors by facilitating the exchange of resources. Investing is one of the most important roles these platforms have. Platform leaders often act as venture capitalists and strive to invest in microenterprises that can help them realise their goals. The investor-investee relationship between platforms and microenterprises usually entails a Value Adjustment Mechanism, or VAM, contract.

Micro-enterprises

A group of entrepreneurs would come together, find an opportunity in the market, and pitch their ideas and approach platform leaders or other microenterprises to invest in their idea. There are two types of microenterprises. User-facing microenterprises and supporting microenterprises.  Each microenterprise has a leader. And microenterprises can organise themselves however they see fit. Entrepreneurs of a supporting microenterprise can, if they wish, temporarily join other microenterprises and provide services of their own. Every microenterprise has its own profit and loss statements. If a microenterprise doesn’t manage to find enough income, it ceases to exist, and the entrepreneurs move back to the talent pool. Customer evaluations directly influence microenterprises; the more customers appreciate the product, the more likely the products are to be sold. The more a microenterprise earns, the more the entrepreneurs receive. In a way, the customers pay the entrepreneurs’ salaries.

Decision-making power and support

For such a system to function, it is essential that entrepreneurs can influence the outcome of their work. They need decision-making power, the right to negotiate contracts with potential clients, and the ability to develop new products without having to convince managers three layers up. It’s not a case of giving employees a job, it is providing them with a chance to become successful. Haier strives to help entrepreneurs and microenterprises to be successful and get the rewards they’re hoping for. In the talent pool, entrepreneurs receive coaching and learn new skills.

Ecosystem-Micro-Communities

Haier has now moved from micro-enterprise to Ecosystem-Micro-Communities or EMCs. Going beyond the product or service but managing the full user experience to the nth degree. The experience economy on steroids. Joe Pine would be proudA platform of mini-communities that integrate the producer with the customer with indeed zero distance. Full co-creating. Hardwired loyalty. I am very impressed, and it fits with the many, many books I have read on leadership, marketing, distribution and the buzzwords I mentioned before. 

The book ends with five tips

  1. Get inspired
  2. Set guiding principles
  3. Invite Others. Organisational transformations are not the exclusive domain of board members, nor are they fancy prestige projects for executives.
  4. Start small. Any vision of transforming a company top-down overnight is a mirage.
  5. Scale. Although starting small is smart, the change initiative must be scaled throughout the organisation.

Beyond strategic

Haier is THE example of strategic intrapreneurship. Beyond strategic even. If you want to find out what level your organisation is at, try our intrapreneurial index, which we developed for the European Commission. You can click here. It is free.

Workshop

There is a workshop on the second of November where we will share some of the lessons learned and where to start. You can book here.

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