Haier's boss surprises his acquired US management - Bill Fischer

Bill Fischer

When Haier took over GE's Appliances, US management feared the future. But the Chinese takeover is very different from the American style, they discovered. Western firms are victim of their traditional viewpoints, tells IMD-professor Bill Fischer, who studied Haier's very different corporate style, to AP.

AP:

Haier has tried to speed up product development by using the internet to ask potential customers for suggestions and feedback, an approach taken by Chinese smartphone brands. The company says a new appliance can go from drawing board to market in as little as one year, down from more than three years. 

CEO's Zhang Ruimin’s management changes “are more impressive than we see anywhere,” said William A. Fischer, a professor at the IMD business school in Switzerland who has followed the company for a decade. He co-wrote the 2013 book “Reinventing Giants: How Chinese Global Competitor Haier Has Changed the Way Big Companies Transform.” 

“He trusts his employees to play more of a leadership role,” Fischer said. 

He said a group of European executives he took to Haier headquarters two years ago refused to believe its decentralized style could work. 

“I was struck by how daring Haier was in their thinking. And the people I was working with were hostages to very traditional ways of working,” said Fischer.

More at AP.

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Chinese management reform: shunned by the West - Bill Fischer

Bill Fischer

When Western companies discovered new management systems in Japan like Just-In-Time in the 1980s, they applied it fast,despite initial misgivings.But when they see now new ways of decentralizing corporate structures in Tencent and Haier, they are reluctant to take it serious, says Haier-watcher and IMD professor Bill Fischer, co-author of Reinventing Giants: How Chinese Global Competitor Haier Has Changed the Way Big Companies Transform at AP.

AP:

Haier has tried to speed up product development by using the internet to ask potential customers for suggestions and feedback, an approach taken by Chinese smartphone brands. The company says a new appliance can go from drawing board to market in as little as one year, down from more than three. 

Zhang (Ruimin)'s management changes "are more impressive than we see anywhere," said William A. Fischer, a professor at the IMD business school in Switzerland who has followed the company for a decade. He co-wrote the 2013 book, "Reinventing Giants: How Chinese Global Competitor Haier Has Changed the Way Big Companies Transform." 

"He trusts his employees to play more of a leadership role," said Fischer. 

Fischer said a group of European executives he took to Haier headquarters two years ago refused to believe its decentralized style could work. 

"I was struck by how daring Haier was in their thinking. And the people I was working with were hostages to very traditional ways of working," said Fischer. 

The strategy appears to be paying off. Last year's profit rose 12.8 percent from 2015 to 20.3 billion yuan ($2.9 billion) on revenue that increased 6. 8 percent to 201.6 billion yuan ($29.3 billion). Transaction volume on its business-to-business and consumer-oriented internet platforms rose 73 percent to 272.7 billion yuan ($39.6 billion).

More on Haier at AP.

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Haier´s strategy to enter American homes - Bill Fischer

Bill Fischer

When China´s leading white goods producer Haier bought the appliances department of GE it caught the headlines. But the acquisition might not be as important as the underlying strategy to enter American homes, says IMD professor Bill Fischer, co-author of the book Reinventing Giants: How Chinese Global Competitor Haier Has Changed the Way Big Companies Transform to Bloomberg.

Bloomberg:

Besides the purchase, Haier forged a "long-term strategic partnership” with Fairfield, Connecticut-based GE to jointly expand in high-tech manufacturing areas such as healthcare and the industrial Internet. According to Bill Fischer, a professor of management at the Lausanne-based IMD business school, that was Haier’s biggest coup. 

“I believe that Haier sees the partnership as potentially more important than the acquisition itself,” said Fischer, who’s written a book about Haier’s transformation. 

The tie-up between Haier and GE was discussed “at the senior-most level” of both companies and potential global projects that draw on each other’s expertise have been identified, a Haier spokesman said in an e-mail. A joint working group is being put together to narrow down details, according to the spokesman.... 

Haier’s true aim is likely not in emulating the old GE, but to go for a less asset-heavy and nimbler strategy, where the company uses its assets as a “platform” to collaborate with others, much like how app programmers work with the iPhone and iPad, said IMD’s Fischer.

More in Bloomberg.

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How cheap China became a business disruptor - Bill Fischer

Bill Fischer

For long China has been displacing Western companies by cheaper products. But many have failed to see how this displacement has been overtaken by disruptive business models, writes IMD professor Bill Fischer in the Harvard Business Review.

Bill Fischer:

China has not been a huge technology innovator, despite being the world’s second-largest investor in R&D, but Chinese businesses have found ways to use innovations in processes, business models, and customer experience to their disruptive advantage. Xiaomi’s phones are not technologically disruptive in hardware terms, but they are revolutionary in customer experience terms; customers come to expect and appreciate their weekly OS updates. Technologically, Tencent’s WeChat may seem like a WhatsApp knockoff, but it allows users to do a multitude of things that other messaging apps cannot. Again, this is true disruption (although not particularly successful outside of China so far). Haier’s organizational reinventions allow it to accelerate the time to market for its Tianzun advanced household heater/air conditioner/air purifier — a potentially disruptive advantage in what is a slow-moving industry. 

We in the West have long prided ourselves on our business process acumen, strategy savvy, and customer centricity while stereotyping Chinese competition as being nothing more than low cost. As a result, we have missed China’s transition from displacer to disruptor. Today China’s businesses are becoming considerably more disruptive than we have given them credit for, making Chinese competition more formidable in the future. This is not to say the road ahead for China will be a smooth one. The major barrier the country must overcome is entrepreneurial. We spoke with several Chinese entrepreneurs in Kunshan last month — young and old, working in both the private sector and the public. They consistently characterized their peers as too short-term oriented to create truly disruptive change, and the country’s cumbersome state-owned enterprises as too slow. Entrepreneurs in Chinese industries from animated media to applied medical research said that China’s insistence on domestic standards are resulting in less-ambitious innovation and that the education system is not supporting appropriate talent development. The former country head of a major multinational pharmaceutical company (a Chinese-American one) observed that “made for China,” rather than “made for the world,” often is easier, cheaper, and more profitable than pursuing truly disruptive changes, an observation echoed by the Chinese managing director of an internationally funded pharmaceutical venture capital fund operating in the China market. This emphasis on “made for China” is also a peeve of a “returnee” chaired Beijing University professor who pointed out that some returning young Chinese scientists are avoiding new challenges, preferring instead to “continue their advisor’s work.” 

Nonetheless, there are enough suggestions of business model disruption appearing in China that it is highly conceivable that soon we might be entering a period of two-speed change. The first will be continued displacement by ever-more-competitive Chinese companies who compete on cost. The second will be disruptive business model innovation occasionally appearing in less-familiar sectors of the Chinese economy, powered by emerging entrepreneurs. 

This presents Western companies with a fresh challenge. Displacement can be combatted in a number of ways, from process improvements to government trade actions, and cost advantages tend to be temporary sources of competitiveness, but disruption presents a more profound challenge. It calls for real transformation in incumbent companies — something that is notoriously difficult to achieve.

More in the Harvard Business Review.

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Haier´s strategy into US homes - Bill Fischer

Bill Fischer

The purchase of the GE appliances section by Haier is part of a strategy to enter American homes, says IMD professor Bill Fischer, who studied Haier intensively, to Bloomberg. How different is Haier from GE?

Bloomberg:

Besides the purchase, Haier forged a "long-term strategic partnership” with Fairfield, Connecticut-based GE to jointly expand in high-tech manufacturing areas such as healthcare and the industrial Internet. According to Bill Fischer, a professor of management at the Lausanne-based IMD business school, that was Haier’s biggest coup. “I believe that Haier sees the partnership as potentially more important than the acquisition itself,” said Fischer, who’s written a book about Haier’s transformation. 

The tie-up between Haier and GE was discussed “at the senior-most level” of both companies and potential global projects that draw on each other’s expertise have been identified, a Haier spokesman said in an e-mail. A joint working group is being put together to narrow down details, according to the spokesman.... 

GE’s sale of its appliance unit comes as the manufacturer is itself attempting to positionas a digitally savvy industrial manufacturer, by expanding a business providing data analytics capabilities for its heavy-duty equipment. The company earlier this month announced it would move its headquarters to Boston to bolster those plans. 

Haier’s true aim is likely not in emulating the old GE, but to go for a less asset-heavy and nimbler strategy, where the company uses its assets as a “platform” to collaborate with others, much like how app programmers work with the iPhone and iPad, said IMD’s Fischer.

More at Bloomberg. 

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How Haier reinvented itself four times - Bill Fischer

Bill Fischer

Haier is for years the largest white-good manufacturer, not only in China, but worldwide. IMD professor Bill Fischer explains how the first Chinese company to go global did so by unconditional focussing on their customers, in Strategy Business. How Haier reinvented itself four times in 30 years.

Bill Fischer:

Much of the credit for Haier’s success accrues directly to Zhang Ruimin, the company’s CEO since 1984. Throughout the 30 years of his tenure, his sharp focus on customer service leadership has given the company consistency even as it propels Haier through dramatic changes. Zhang was the leader who proposed that Haier should never see itself as just a manufacturer of products, but instead as a provider of solutions to its customers’ problems. In the earliest years, that meant bringing new levels of quality and reliability to Chinese products. Later, it involved increasingly sophisticated forms of customization and new types of services. Through its simplicity and continuity, this principle has given all employees a reliable compass with which to make decisions, even in the face of disruptive market challenges such as new technologies or new competitors. 

To accomplish its goal, Haier has consistently cultivated and rewarded high-quality talent; the company has been a magnet for many of China’s most capable engineers and businesspeople. This approach is especially noteworthy within China’s cultural and social context. In a country that was just beginning to emerge from a Maoist mind-set when Zhang took the helm, the idea that success depended on the entrepreneurial efforts of individuals, recognized for their differences and rewarded for their achievements, was relatively unfamiliar. Haier has thus invested a great deal, especially for a Chinese company, in training its employees and demanding innovative ideas. 

Despite the success it has achieved, and its willingness to stick to one core value proposition (and one CEO) since the 1980s, the company has never become complacent. Zhang established early on that changes would be a way of life, not soon-to-be-completed episodes that must be traversed. “The only thing that we know is that we know nothing,” he says. “If you don’t overcome yourself, you will be overcome by others.” 

Indeed, Haier has reinvented itself at least four times. The first reinvention, in the 1980s, was the decision to differentiate the company by the quality of its products. The second, in the 1990s, was the adoption of consumer-responsive innovation, starting with (but not limited to) products for particular customer needs. The third, which took place in the 2000s, was the reorganization into a bottom-up structure, in which self-managing teams led decision making. The fourth, going on today, is the reinvention of Haier as a truly Internet-based company, open to the world in a way that few other companies have attempted, let alone realized.

Much more in Strategy Business.

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Are you looking for more experts on branding at the China Speakers Bureau. Do check out this list.

Bill Fischer is also the author of Reinventing Giants: How Chinese Global Competitor Haier Has Changed the Way Big Companies Transform
 

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The organization of disorder at Haier - Bill Fischer

+Bill Fischer 

White goods producer Haier has an amazing story of change, where its CEO Zhang Ruimin reinvented the company, three times, tells IMD-professor Bill Fischer in CKGSB Knowledge. Fischer is co-author of Reinventing Giants: How Chinese Global Competitor Haier Has Changed the Way Big Companies Transform.

CKGSB Knowledge:

Q. One of the things Zhang Ruimin did was break the company into different bureaus, effectively creating internal competition. How does that work?  

A. If you are moving from ‘responsiveness’ to ‘intimacy’, in ‘responsiveness’, you need to listen very well to the customer and respond quickly. With ‘intimacy’ you need to get so close to the customer that the slogan was ‘zero distance to the customer’. That means you need to change the way in which you go to market because you are now dealing with ideas rather than just customer responses to offerings. You need to have a factory system that is infinitely responsive because you don’t know what’s going to come out of this. You raise uncertainty multifold. You need to build an organization that’s capable of dealing with unforeseen uncertainty. 

In order to do that [Zhang Ruimin] needed to really free up the skills of his workforce because they had no idea what the customers were going to tell them. They needed to have an organization that was fluid in terms of how it moved to changes in the marketplace. He recognized that the existing departmental, functional, silo-ed organization would be too slow to do that. So he had to hire new skills, and then he had to put them into an organization that was able to move quickly and coherently the way the customer wanted. He had to take out the existing organizational units because they were historical, rather than anticipatory. What they settled on was an internal labor market where you literally auctioned off opportunities. So the slogan is “Haier doesn’t offer you a job but offers you the opportunity to create a job.” 

If you are going to do that, you need a labor market inside where people bid for work and then assemble teams to address that work. Those teams dissipate at the end, and go back into the labor market rather than remain in place because of historic success. If you do that, you need a mechanism for choosing a leader. So they use performance, they appraise business models and promises to pick leaders. But once that leader is in place and assembles a team, his or her team appraises their performance every quarter and votes [on whether] they want to keep them in position or not. Everything changes. It’s the organization of disorder that allows them to perform so well.

More (including a video interview) at CKGSB Knowledge.

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Betting on quality pays off for Haier - Bill Fischer

Bill Fischer

Among the Chinese companies becoming fast household names among global players, Haier was one of the first to enter the word arena. Haier´s CEO Zhang Ruimin has put his bets early on quality, explains IMD professor Bill Fischer in The Corner, and that explains why he is winning now.

The Corner:

Zhang had it all figured it out, explains Bill Fischer Professor of Innovation Management at IMD business school in Lausanne, Switzerland.  “Zhang thought at some point China would be a market where quality would be appreciated. He believed (in such market) there would be brands whose one of their features would be quality as a differenciator.” 

And so, Zhang began to make small and progressive changes to develop a brand capable of fulfilling the promise of quality, always with the guarantee of an excellent costumer service. “He succeeded and foreign brands started coming into China to compete against Haier,” says Fischer. The ideal scenario for China would be that many local brands could achieve Haier’s reputation and capacity for innovation. And thus they’d become Ambassadors of a new made in China, most sophisticated and exclusive... 

According to the philosophy behind Zhang’s vision for Haier, the quality of products is strictly linked to management. And therefore, product innovation is a logical outcome of management innovation, explains Fischer.  Haier has now five innovation and R&D centers in China, Japan, Australasia, Europa and the U.S.A. intended to develop a global working ecosystem.

More in The Corner.

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China lacks big dreamers - Bill Fischer

+Bill Fischer 

Innovation is no stranger in China, as CEO's of Baidu, Tencent, Haier, Alibaba and Huawei show. But it is only a handful, argues IMD professor and leading author on innovation Bill Fischer in the Harvard Business Review. There is not a innovative culture, although Haier offers hope.

Bill Fischer:

Yet, all of these Chinese big dreamers are also at the top of their organizations and have the power to move their dreams as well as author them.  In fact, at this point in time, it’s still hard to drill deeper into most Chinese organizations to identify who the dreamers really are — those whose dreams can carry an organization forward, especially for expatriate managers who are limited by culture and language in their ability to truly assess the potential of their talent. 

For those operating in China, this is, indeed, a quandary. You look around at the resources that characterize China’s wealth, and see human talent that has to be among the most promising on the planet.  It’s a big country, filled with smart, ambitious people, but who are the ones who are dreaming big enough? 

One lesson on how to address this question comes, ironically, from an old-economy company.What white-goods producer Haier has chosen to do is to offer every employee (and there are 80,000 of them) the opportunity to effectively become the CEO of a real operating company, provided that their dreams have real merit. Searching for new ideas at Haier involves a competitive screening of business model proposals, open to all, out of which projects and project leaders are chosen. 

Project proposals that are selected become the basis for self-organizing, autonomous business units, led by the proposal author, and responsible for not only their own staffing, but also for the design, manufacturing and marketing of the resulting product. They literally are small companies who must face all of the same business decisions that we typically associate with larger companies. What’s different, in Haier’s case, is that the opportunity is offered to all, and selection is based on the quality of the proposal. As they say at Haier: “Haier doesn’t offer you a job, it offers you an opportunity.”  As an illustration of this, in one example that we studied (for three-door refrigerators), the leader of this business — who was chosen in a business model competition — was in his early 40s, at most, and yet was running a $1.5 billion business after two years.  It’s something that could never have happened in most other large, complex organizations. More in the Harvard Business Review.

Bill Fischer is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.  

China Weekly Hangout

Labor camps, the one-child policy, hukou's, pollution, internet censorship, state-owned companies, energy policy: they are just a few of the subjects that appeared last week in the 21,000 character document released after the Third Plenum of the Communist Party, spelling out reform plans for the coming years.
The +China Weekly Hangout plans to discuss some of those plans and will ask panelist whether the Third Plenum did bear a mouse or an elephant. Pending a few logistical challenges, we will hold our online meeting on 21 November at 10pm Beijing time, 3pm CET and 9am EST. We will pick subjects, depending on the expertise of the people joining us on Thursday, and summarize with the question how likely it is president Xi Jinping will pull off the planned reforms.

Can China innovate, asked the +China Weekly Hangout on October 21 2012, a discussion with political scientist +G. E. Anderson and China consultant at-large Janet Carmosky. Moderation by +Fons Tuinstra of the China Speakers Bureau

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The China model: replacing middle management by competition - Bill Fischer

+Bill Fischer 

When Japanese ways to organize business like Just-In-Time hit the world, it changed how companies work profoundly. China has not yet produced such a disruptive model, but white-good producer Haier might just be on the way, says IMD-professor Bill Fischer in Business Week, by replacing middle management by internal competition. 

BusinessWeek:

Instead of following a top-down organizational flowchart, the company—which has 80,000 employees—is subdivided into self-organizing internal units. Each unit has the power to vote out ineffective leaders. New projects are staffed via an internal talent pool, wherein employees are evaluated based on their interests, credentials, and past achievements. 

“Everything is up for bids and competitive,” Fischer says. Employees are propelled from assignment to assignment based on their aptitudes and willingness to take on new responsibilities. He cites the example of a successful internal bid to launch a three-door refrigerator model; the winning bid was submitted by a 36-year-old who “never would have had the chance to lead in a normal Chinese company because he wasn’t senior enough.” Moreover, compensation is based upon competence, not seniority—as is the norm in China and elsewhere. “Now they’re trying to build an internal social media platform to determine who’s available for new projects and how well they’ve performed in the past,” says Fischer. 

Haier’s other big management innovation is to view its customers as assets in product development, not simply as revenue stream. Thus, Haier employees who interface directly with customers have an elevated role in decision-making because they are seen as channeling valuable business intelligence. This turns upside-down the usual help-desk model, in which staffers answering the phones are usually the lowest on the totem pole, relegated to repeating prewritten talking points. 

“We now take periodic product revolutions for granted, but not management revolutions,” says Fischer. “Most of us are still following the management principles of people long dead. Zhang is willing to experiment.” And it’s an ongoing experiment. As Zhang himself wrote in Harvard Business Review: “People respect the leadership of an organization for different reasons in different periods.”

More in Business Week.

Bill Fischer is the co-author of Reinventing Giants: How Chinese Global Competitor Haier Has Changed the Way Big Companies Transform


Bill Fischer is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

China Weekly Hangout

A discussion at the +China Weekly Hangout on June 6 on the way the EU and the US are dealing (of fail to deal) with China, with negotiation expert +Andrew Hupert from New York, Swiss lawyer +Nathan KAISER from Taipei and political analyst +Steve Barru from Denver, Colorado. Moderated by +Fons Tuinstra of the China Speakers Bureau.

Devastating pictures of tourist areas in the Golden week of October showed again that taking a holiday together with 428 million others is not always a good idea, even though a growing number might go abroad. The now adjusted system of Golden Week was introduced to encourage consumer spending - still high on the political agenda. But would a paid leave, where you can decide yourself your holidays, be a good alternative? Some love the ideal, others loath it. And what is worse, many Chinese would most likely not take their holidays, but try to cash in at the end of the year. That would cause consumer spending to drop. What would you do? How did you spend your holidays in October, and what would be a good alternative? Join the +China Weekly Hangout on Thursday 17 October, 10pm Beijing Time, 4pm CEST(Europe) and 10am EST (US/Canada). You can leave your remarks here, but during the event you can also ask questions and remarks using the Question tool at the event page here. At the event page you can also register for participation at the hangout. (You can read our initial announcement here.)

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Haier: organizing entrepreneurs, not workers - Bill Fischer

+Bill Fischer 

China's electronics manufacturer Haier has become one of the world's leading firm in renewing its way to organize production. IMD-professor Bill Fischer explains in Entrepreneur.com how workers are organized like entrepreneurs, working on their own fate.

Entrepreneur.com:

Fischer: Zhang Ruimin, the chief executive officer, will tell you there's a very Confucian element in what they do because there's respect for order, there's discipline and people get along because they have a shared tradition. I will tell you that it stems from choices by management that created this culture. The managerial choices at Haier are very thoughtful. They're all aimed at the vision and the vision has been consistent for 30 years. I think you can do this even if you're not Chinese. 

Entrepreneur.com: The official work hours at Haier are 9:00 a.m. to 6:00 p.m., six days a week, but teams rarely leave before 8:00 p.m. Investment bankers and entrepreneurs in United States can relate to those kinds of hours, but how would this go over at most U.S. companies? Fischer: The difference is the people at Haier think of it as working for themselves. They're really running small businesses under the corporate umbrella. What Haier has done is say to people: ‘You are the masters of your own fate. You're going to run this business and you'll succeed economically as a direct result of your performance." There's a saying at Haier that Haier doesn't give you a job, it offers you an opportunity. That's different from serving your time or clocking in and clocking out. These people really feel they are CEOs of small businesses and they are, actually. 

Entrepreneur.com:Yet, this isn't a free-for-all.

Fischer: Not at all. Performance is being measured in the marketplace and it's also being measured by the colleagues who have a direct financial stake and career stake in the outcome of the unit's performance. It's a very performance-driven atmosphere. At Haier you get every day a sense of what your total salary will be based on the performance of your unit. Every day they're facing those realities for better or worse. One thing I hear a lot from people is "We could never give up that much control." My sense is you need discipline and creativity but they don't have to be mutually exclusive. The most creative organizations I see are also very disciplined.

More in Entrepreneur.com

 Bill Fischer is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

China Weekly Hangout 

What is behind due diligence firms in China, we asked ourselves as one of the leading voices in the industry, Peter Humphrey was arrested last summer for illegal business practices. The +China Weekly Hangout will discuss due diligence of the due diligence firms on September 25. You can read our announcement here, or register for participation at our event page. Joining us from Taiwan is Miguel De Vinci (aka 李洛傑).

China's companies are going global, including its internet giants. The +China Weekly Hangout joined the debate on September 5. Should Facebook, Twitter and Google+ worry now Tencent, Baidu, Sina, Alibaba and Xiaomi have plans to expand globally. Not yet, said investor +William Yung, media-expert +Paul Fox and +Tech in Asia editor +Steven Millward. Well, maybe Whatsapp should. Moderation by +Fons Tuinstra of the China Speakers Bureau.

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