World Monitor Magazine June #3 - Page 124

additional content external partners along a value chain, who have made a commitment to help his team. The activities of all the ZZJYTs are linked by internal contracts. For example, if the three-door ZZJYT needs market research data about a certain region of China, it entertains proposals from the several marketing ZZJYTs that provide such services, as well as looking outside Haier. The ZZJYT leaders also know that they cannot develop all the cutting- edge technologies they need in-house. Therefore, willingly embracing the concept of open innovation, they collaborate with organizations everywhere they operate — which is how the company ends up working with the best universities and research institutes in the world. To provide talent for the ZZJYTs, Haier created an internal labor market. Now the right number of employees with the right skills gravitate to the right organizational positions at the right time. Instead of offering its employees jobs, the company offers everyone a continuing series of opportunities to find jobs, considering the contributions they have already made. “The level of scrutiny takes some getting used to,” says Fu Haining, the chairman of the LongLongigo group, which operates Haier retail stores in China. “In the beginning, it can be a little painful, because the culture of constant challenge can make you feel like what you’ve done, what you’ve achieved, isn’t recognized. Later, you come to realize that this is what it takes to stay ahead in an extremely competitive market.” An Internet-Based Platform After its first three reinventions, Haier looked nothing like a conventional modern complex organization. Its culture — embracing rather than resisting change, while holding true to its original core principle of customer service leadership — is the most important asset of the company today. 118 world monitor Qu Guinan (left) and Jiang Hanke, two executives from the water purification program But Zhang, in recent years, has questioned the ability of even this level of innovation to succeed. Inspired by the success of the latest wave of Internet- based companies, he is currently launching a fourth reinvention, this one involving the Internet. This is known at Haier as the “networking strategy.” Even the ZZJYTs, the focal point of the previous wave’s business model, are slated for dramatic change. Zhang has proposed eliminating the current second-tier ZZJYTs, presently home to most of Haier’s middle managers. The company would instead become a collection of platforms, each able to adjust to changes in the consumer market by drawing on support and collaboration from the others. This new Haier approach involves opening up the company to intensive collaboration not just with customers, but with innovators around the world — including with competitors. “The platform helps us attract first-class resources,” says Lei Yongfeng, the R&D director for PAC, Haier’s air conditioning platform. “It could be R&D resources based at a university or at a technology company. In the past, our relationship with a supplier like Mitsubishi might have consisted of us going to them and giving them the specs for a new air conditioning compressor. Now, they can see for themselves what our customers are asking for. The direct view they get makes them more responsive, which in turn helps our innovation efforts.” Water purification is another example of the increasing scope of Haier’s collaboration. The company entered the business through a joint venture with the Strauss Group, an Israeli technology firm, which provided the technology while Haier focused on marketing, distribution, and service. But then Haier broadened its platform to include many other R&D partners; for instance, it shares more than 20 water purification patents with Dow Chemical. The result is a new level of proficiency that goes beyond anything Haier has done before. For example, the company now uses Internet access to customize every product it sells in China, whether bought in a store or online. Customers choose the color combinations, features