additional content a small , crowded urban apartment . The machine became extremely popular , among , for example , families with newborn children .
Lei Yongfeng , director of R & D for the Tianzen ( Heaven ) air conditioner
in a manner previously unseen in the Chinese market , through a system called “ Overall Every Control and Clear ” ( OEC ). Every day , workers tracked quality results using paper and pencil , and their wages were tied directly to the outcomes . This gave the company a simple means of establishing goals and controlling achievement for “ everything , everyone , and every day ,” and a way to encourage employees to constantly challenge their previous performance .
For the next 30 years , the operational capability of OEC gave Haier what behavioral experts George Kohlrieser , Susan Goldsworthy , and Duncan Coombe call a “ secure base ” on which to build bold change . For example , the company managed logistics with a zero-defects focus , resulting in very low inventory , short delivery times , and low working capital . In the years that followed , as new business models were introduced , the disciplined mindset of OEC was never abandoned . Instead , it was scaled up to meet ever more ambitious goals . Workers grew accustomed to taking small steps that added up to great results .
The Niche Innovator
In the late 1990s , a farmer in the Chinese countryside complained to Haier that his washing machine was full of dirt and was not functioning well . The local distributor sent a technician to the farmer ’ s house , where he discovered that the farmer had been using the washing machine not to wash clothes but to clean sweet potatoes . At this time , agricultural markets had been permitted to open in China , and cleaner vegetables commanded higher prices . The repair technician reported immediately to Haier ’ s headquarters about this practice , which was growing increasingly common in the region . Inspired , the company soon released a vegetable washing machine , designed to accommodate the extra grime and soil of the tubers . Around the same time , Haier ’ s researchers observed that unlike Western consumers , many Chinese people hand-washed their underclothes every day at home . They found it more hygienic and socially discreet to wash these separate from other clothes and away from public washing machines . In response to this consumer need , Haier launched a small , low-energy washing machine called the Little Prodigy that could easily fit into
These episodes represented the start of the second reinvention at Haier : a new form of customer-responsive innovation . This was timely , because quality was no longer a great differentiator in China ; other companies had caught up . Zhang built upon the company ’ s hard-won workforce discipline , and the accompanying performance – pay relationship , to link employees directly to customers . To break down the “ invisible walls ,” as he called them , between functions , Zhang assigned teams made up of members of different functional departments to specific projects . He avoided the conflicts of a matrix structure by introducing “ market chains ” ( based on the value-chain concepts of Michael Porter ), in which it was possible for all individuals at Haier , no matter what their role , to trace their actions directly to the marketplace . These market chains replaced functional silos as the key organizational unit .
This was also the phase in which Zhang began building Haier into a global company . He approached this challenge by adopting Mao Zedong ’ s strategy of “ occupying the rural areas to encircle the city ,” gaining strength first with niche products for sectors where there were few competitors . The company took full advantage of its customer-responsive innovation capability to do this . In 1997 , recognizing the needs of college students in dormitory rooms , it launched mini-refrigerators in the United States . It followed with wine refrigerators in 2004 . And then , during the 2000s , Haier parlayed that success into becoming a mainstream producer of appliances for the U . S . market . Meanwhile , in Pakistan , Haier sold extra-large washing machines designed for heavy robes .
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