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Key to all this growth was Haier ’ s behindthe-scenes customer-centric operations system . Rapid innovation based on consumer demand — as with the Tianzun air conditioners released in 2014 — has become routine , because all departments work in parallel . The company ’ s close collaboration among R & D , marketing , and sales also works well in the U . S . market . For example , U . S . -based R & D engineers are required to talk directly to consumers in the design of new products , and their salary is linked to the sales results of the products they design .
Intimacy and Entrepreneurship
In 2005 , Zhang recognized that most of Haier ’ s competitors in China were achieving acceptable levels of service responsiveness and that the company would once again have to reinvent its value proposition . He believed that Haier suffered from unnecessary time delays and guesswork about new product manufacturing volumes , which proved costly when it guessed wrong , and that could be reduced , if not completely avoided , by becoming more intimately aware of customer needs and wants . Employees would now have to get to know the customer better than they knew themselves , or , as Zhang put it , to “ create zero distance with the customer .” Intimacy is a lot more complicated than responsiveness , and this third reinvention required employees to feel closer to their customers . Haier thus inverted its organizational structure into one based on self-organizing work units called ZZJYTs ( an abbreviation for zi zhu jing ying ti , which translates to independent operating unit ). Their three most critical functions — marketing , design , and manufacturing — were now supposed to work directly for customers . Instead of directing the employees who did that work , the ZZJYT managers became service providers to them , giving them the resources and guidance they needed to provide for customers . This minimized the decisions made at higher levels in the hierarchy , making the company more responsive to nascent market needs . Zhang went so far as to announce that this shift in organizational model would proceed even if revenues and profits showed signs of flagging , and even if it were necessary to use some of the returns from successful legacy offerings to make it work .
The new structure proved successful , and the ZZJYTs are still the basic organizational unit at Haier . Each comprises a team of 10 to 20 people — sometimes located in one place , other times virtual — who come from various functional roles and are brought together for a specific mission , and who are given profit and loss responsibility and accountability . They have their own independent accounting systems and complete autonomy in hiring and firing employees , setting internal rules about expenses and determining bonus distribution , and making almost any operational decision that typically would be made by an independent functional organization .
Haier organizes its ZZJYTs in three tiers . First-tier ZZJYTs have the task of directly facing the market , understanding customer needs , and providing customers with the right products . Second-tier ZZJYTs are responsible for supporting the first-tier ones , providing them with the resources and the guidance they need . Third-tier ZZJYT managers are the business division managers or functional managers who set corporate strategies and direction for the whole group . A typical first-tier ZZJYT is composed of sales , R & D , marketing , and finance people . Everyone , whatever their function , is expected to talk to consumers regularly . To Zhang and others at Haier , this organization design represents an explicit effort to avoid being disrupted by technological change . They wanted to make sure that top management would heed early warning signals of disruption , especially those that came from internal staff , and adjust to new realities rapidly and painlessly . Thus , at Haier , the time of information flow between the customer ( the top ) and coordination ( the bottom ) is minimized . Because R & D and marketing people work in the same ZZJYTs , they meet frequently , particularly when new products are considered . Salespeople keep in close touch with customers , so they can estimate the order numbers with a smaller variance than if they were relying only upon forecasts . Once the products are ready for shipment , they go first to the waiting-list clients , and only afterward to retail outlets . This way , Haier keeps inventories low , which saves storage costs and working capital .
The ZZJYTs are not permanently assigned to a particular product or role . Instead , they are formed through internal competition ; participants must apply to work on projects that appeal to them . Winners are chosen on the basis of the quality of their product or service ideas , the attractiveness of their business model , and the feasibility of their goto-market planning . When Haier made the strategic choice to launch a threedoor refrigerator , for example , it invited its employees to compete for the role of leading this initiative by submitting business plans and business models explaining how such a product could best succeed . The company ’ s $ 1.5 billion three-door refrigerator business is now led by the winner of that competition , 38-year-old Pu Xiankai . He was selected , despite his relative youth , because he described the product in an imaginative way . Once appointed to this position , it was incumbent upon him to select a team and to find manufacturers and marketers within Haier to produce and sell his products . Today , he oversees what Haier calls a “ community of interest ,” that is , people throughout the company , and
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