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Haier’s Rendanheyi 2.0: An ecosystem revolution
By Michael Jacobides, Lisa Duke
Haier in 1984 was a small, local firm on the verge of collapse, with poor-quality products and low morale. Within 30 years, it was transformed by Zhang Ruimin, who took over as CEO, into one of the worlds’ leading white-goods manufacturers, with a reputation for quality and innovation and an increasing global scope and footprint, including GE’s iconic white-goods unit in the US and Candy in Europe. This transformation was driven by a series of disciplined managerial innovations, inspired not only by Zhang’s reading of management guru Peter Drucker and a relentless focus on execution, but also by experimentation. This increasingly gave power to entrepreneurs within the firm, driven by Zhang’s philosophy of ‘Rendanheyi’ (‘ren’ means employees, ‘dan’ means user value and ‘heyi’ means alignment), loosely translated as the integration of people and goals. The aim was to achieve “zero distance to the customer” by restructuring the whole organisation towards identifying and serving customer needs, which was achieved through the introduction of company-wide IT systems that allowed the firm to be restructured first into business units and then into small, self-managed teams, each responsible for their own profit and loss, called zi zhu jing ying ti (ZZJYT), which means ‘independent operating unit’. The goal was to reduce the distance to customers and this ‘inversion of the pyramid’ underpinned significant growth. Yet, while by 2014 Haier had become a success story, the sector was facing structural change due to the internet and ecommerce and the growth of digital platforms and ecosystems. Zhang was happy with the success so far, but mindful of the fact that one never stops. The question was: what could he do to change the dial?
- Consider the choices facing a company to better identify and serve consumer needs.
- Explore how to use organisation (re)design to revive a firm and how to combat bureaucracy, and evaluate the merits and demerits of different systems, more or less centralised and more or less entrepreneurial (vs supportive).
- Illustrate the challenges of shifting from products to broad ‘webs’ of needs, and in particular the shift from product lines to ecosystems.
- Understand the mechanics and inter-organisational arrangements that can make flexible but complex structures work.
- Consider how to manage an entrepreneurial force within a firm and what the trade-offs are – especially as they relate to ecosystems.
- Be able to identify the challenges of becoming an ecosystem player and the different configurations – to centralise or decentralise.
- Learn how to evaluate whether structures can be ‘translated’ from one area to another and from one region to another – with a focus on a leading Chinese firm.
|Publication Date:||July 2020|
|LBS Case Code:||CS-20-013|
|Subjects:||Corporate restructuring, Entrepreneurship, Organisational change|
|Industry:||Consumer goods, Manufacturing|