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external partners along a value chain,
who have made a commitment to help
his team.
The activities of all the ZZJYTs are linked
by internal contracts. For example, if
the three-door ZZJYT needs market
research data about a certain region of
China, it entertains proposals from the
several marketing ZZJYTs that provide
such services, as well as looking outside
Haier. The ZZJYT leaders also know that
they cannot develop all the cutting-
edge technologies they need in-house.
Therefore, willingly embracing the concept
of open innovation, they collaborate with
organizations everywhere they operate
— which is how the company ends up
working with the best universities and
research institutes in the world.
To provide talent for the ZZJYTs, Haier
created an internal labor market. Now the
right number of employees with the right
skills gravitate to the right organizational
positions at the right time. Instead of
offering its employees jobs, the company
offers everyone a continuing series of
opportunities to find jobs, considering
the contributions they have already
made. “The level of scrutiny takes some
getting used to,” says Fu Haining, the
chairman of the LongLongigo group,
which operates Haier retail stores in
China. “In the beginning, it can be a little
painful, because the culture of constant
challenge can make you feel like what
you’ve done, what you’ve achieved, isn’t
recognized. Later, you come to realize that
this is what it takes to stay ahead in an
extremely competitive market.”
An Internet-Based Platform
After its first three reinventions, Haier
looked nothing like a conventional modern
complex organization. Its culture —
embracing rather than resisting change,
while holding true to its original core
principle of customer service leadership
— is the most important asset of the
company today.
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Qu Guinan (left) and Jiang Hanke, two executives from the water purification program
But Zhang, in recent years, has
questioned the ability of even this level
of innovation to succeed. Inspired by the
success of the latest wave of Internet-
based companies, he is currently
launching a fourth reinvention, this one
involving the Internet. This is known
at Haier as the “networking strategy.”
Even the ZZJYTs, the focal point of the
previous wave’s business model, are
slated for dramatic change. Zhang
has proposed eliminating the current
second-tier ZZJYTs, presently home
to most of Haier’s middle managers.
The company would instead become
a collection of platforms, each able
to adjust to changes in the consumer
market by drawing on support and
collaboration from the others.
This new Haier approach involves
opening up the company to intensive
collaboration not just with customers,
but with innovators around the world
— including with competitors. “The
platform helps us attract first-class
resources,” says Lei Yongfeng, the R&D
director for PAC, Haier’s air conditioning
platform. “It could be R&D resources
based at a university or at a technology
company. In the past, our relationship
with a supplier like Mitsubishi might
have consisted of us going to them and
giving them the specs for a new air
conditioning compressor. Now, they can
see for themselves what our customers
are asking for. The direct view they get
makes them more responsive, which in
turn helps our innovation efforts.”
Water purification is another example
of the increasing scope of Haier’s
collaboration. The company entered the
business through a joint venture with
the Strauss Group, an Israeli technology
firm, which provided the technology
while Haier focused on marketing,
distribution, and service. But then Haier
broadened its platform to include many
other R&D partners; for instance, it
shares more than 20 water purification
patents with Dow Chemical.
The result is a new level of proficiency
that goes beyond anything Haier has
done before. For example, the company
now uses Internet access to customize
every product it sells in China, whether
bought in a store or online. Customers
choose the color combinations, features