Haier Delayers to Encourage Innovation and Teamwork
A fascinating and useful profile here from The Economist of Zhang Ruimin, the Chinese entrepreneur who has guided Haier through a successful strategy of international expansion. Ruimin challenged the preconception that Chinese manufactured goods could be produced very cheaply but to a poor quality. His relentless focus on higher production quality has enabled Haier to become the world's largest producer of "white goods" such as washing machines, fridges and freezers.
The Economist article describes how Haier's investment in new product development and innovation enabled it to steal a march on its competitors, including in mature and highly competitive Western markets:
By listening closely to demanding consumers, his firm’s fast and frugal engineers came up with clever products like mini-fridges built into computer tables (for students), freezers with a slightly warmer compartment (for keeping ice cream soft) and horizontal deep freezers with two tiers of drawers (for Americans too lazy to dig to the bottom). Haier also developed new niches, such as affordable wine fridges, ignored by Western rivals obsessed with economies of scale. It is now pioneering wireless charging of appliances.
Haier is now delayering, with Ruimin deciding to remove the firm's entire middle management layer from the organisational structure! That looks like a move which will further encourage and reward an innovative culture at Haier. The business has split its employees into 2,000 self-managed teams each of which has profit responsibility (mini profit centres).
A fast-moving Chinese multinational that has achieved global market leadership and is well-placed to exploit the growing middle class in China. No wonder that US venture capitalist KKR decided to invest in a 10% stake recently!