Haier has internal free market in talent and an open innovation model

The radical boss of Haier wants to transform the world’s biggest appliance-maker into a nimble internet-age firm. Haier Group has 9.6% of the global appliance market and sales of over $26 billion. It is ranked as the eight most innovative firm worldwide (ahead of Amazon).

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.

Previously, the firm’s 80,000 or so workers toiled in traditional and distinct areas like manufacturing, sales and so on. Now, they are organised into 2,000 zi zhu jing ying ti (ZZJYTs)—self-managed teams that perform many different roles. Each is responsible for profit and loss, and individuals are paid on performance. In the past, managers relied on internal support services for, say, research or marketing. To encourage open innovation, the firm insists the new ZZJYTs must attract outside partners and resources.

If ambitious employees spot an opportunity, they are free to propose an idea for a new product or service. A vote, which can include not just employees but suppliers and customers, decides which project goes ahead. The winner also becomes the project’s leader. He forms his team by recruiting from across the company; employees are free to join or leave ZZJYTs. Mr Zhang says the goal is “a free market in talent, so the cream rises.”

He explains why such disruption is necessary: “If we don’t challenge ourselves, someone else will.” If that sounds like talk straight out of Silicon Valley, in a sense it is. He is convinced that if Haier is to flourish in the internet age, it must become a services company. He even thinks it can mine user information to become a “big data” firm, to serve customers even better.

Yang Lin, who started at the firm 12 years ago as a technician, won the contest to become the head of the team for automatic top-loading washing machines. He works extremely hard, he says, not only to earn his bonus but also to stay ahead of the catfish. That is what the firm calls the person with a rival idea who came second in the voting. He works on the victor’s team but watches for any chance to unseat him.

Does this upset Mr Yang? “I can’t run things like an emperor,” he reflects, “but I don’t mind. In fact, I’m a catfish to other teams myself.” It’s fish-eat-fish at the heart of the world’s most successful white-goods firm.

SOURCE – Economist magazine

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