Start-up Factory: Haier's RenDanHeYi model and the end of management as we know it
Rate it:
Open Preview
Kindle Notes & Highlights
4%
Flag icon
Creating a great customer experience,
4%
Flag icon
Recognising that the entrepreneurial energy of employees, so often overlooked in complex, modern organisations, is exactly the force needed to create those exceptional customer experiences — and fulfil talent potential and reinforce the dignity of employees.
4%
Flag icon
Establishing the equitable sharing of created value among the three principal actors: the value enjoyed by the customer, the value received by the organisation and its stakeholders because of increased marginal revenues, and an obligation to share these marginal returns with the people who created the value: the employee-entrepreneurs.
4%
Flag icon
The importance of knowing what you are trying to accomplish. Aiming everything at maximising human value; there is no ambiguity here, everyone understands where they are going — and after 40 years of moving in this direction, it is surrounded by little controversy. The value of a small set of guiding principles to provide every member of the Haier community with a compass. In the words of the Corporate Rebels, “No need to worry about every little detail, or who is responsible for what, because the principles provide sufficient guidance.”
4%
Flag icon
A culture of experimentation to find the path, with trial and error, learning, and iteration marking the cadence of progress. Defining the role of the leader as “seeker” — searching for new ideas to inspire the conversational mix throughout the work community, not pretending to be the ultimate decision-maker. A willingness to share power in the pursuit of building an organisation that is attentive to customers’ needs, and swift in response. Almost as a by-product, an organisation that has fewer managers and more leaders is created. An eagerness to seek-out external partners to access knowledge ...more
4%
Flag icon
The capacity to go beyond ambitious dreams and pay attention to the granular details that ultimately determin...
This highlight has been truncated due to consecutive passage length restrictions.
6%
Flag icon
“There is no such thing as a successful company, only one that successfully moves with the times.”
7%
Flag icon
Here is the reasoning: a product is nothing without a buyer. The more value that is created for customers, the more money they will spend. To learn what really adds value to their lives, it is important to be as close to them as possible — and to react swiftly to feedback, demands or criticism.
7%
Flag icon
The focus has always been on reducing the distance between those who create the solutions and those who evaluate them.
7%
Flag icon
For those workers with big dreams and the requisite entrepreneurial drive, Haier’s system can be a greenhouse of opportunity and a hothouse of innovation. The point we are making is that this can become a double-edged sword.
8%
Flag icon
We find, in Haier, a radically decentralised company where people run their own little (and not so little) enterprises, where there is healthy internal competition and the most porous organisational borders imaginable.
8%
Flag icon
The management model now in place at Haier is known as Rendanheyi. This expression captures the principle that employees are rewarded for the value they directly create for the user.
8%
Flag icon
‘We want to change two things. First, the company — from walled-garden to tropical rainforest, a self-evolving business ecosystem. Second, we want to change the traditional lifestyle from a product-based approach to one that is ecosystem-based.’
12%
Flag icon
These struggles in the motoring sector are illustrative of a cruel fact: companies that do not move with the times cease to be competitive. If they don’t upgrade their processes, they can’t compete with emerging players rooted in the digital era.
12%
Flag icon
He speaks of the “large company disease”: as companies grow, they tend to lose efficiency. They become less innovative, less responsive to external stimuli. They lose their customer-centricity, find that they have fewer people close to the buyer, and risk becoming overstaffed and bloated.
12%
Flag icon
These lumbering enterprises continue to provide products and services — but efficiency, flexibility and speed of operations decline. And their innovative power and their corporate character take a dive.
12%
Flag icon
Zhang Ruimin split the company into thousands of small new independent units under the banner of Rendanheyi. This model steers away from a traditional silo organisation of functional departments, developing novel structures that unite.
14%
Flag icon
Toyota successfully challenged some of the ground rules of Ford’s operation. The earlier era focused on mass-production, process optimisation and individualism; Toyota began to adopt concepts that allowed for continuous improvement: a zero-defect mentality, high quality, and collectivism, giving a group priority over the individuals in it.
15%
Flag icon
Haier distinguishes itself from the Ford and Toyota eras in at least three ways: radical decentralisation, internal market dynamics, and the building of micro-communities.
15%
Flag icon
Rendanheyi broke away from this. It radically decentralises the organisation by dispensing with most of the formal hierarchy, removing all middle managers, and providing employees with a high degree of autonomy. Haier replaced its former structure with Rendanheyi — a network of teams. They can be seen as independent start-ups, operating under the Haier brand
15%
Flag icon
The concept allows the company to move its focus from mass production to mass customisation: made-to-order, or on-demand manufacturing. Haier delivers products and services that address specific customer needs, desires, or pain-points.
15%
Flag icon
The radical decentralisation strategy of Haier has “platform-ised” the company in a manner that provides its start-ups with resources, brings them to maturity, and spins them out of the Haier universe when they are ready to stand on their own.
15%
Flag icon
Rendanheyi breaks with these conventions. To efficiently co-ordinate thousands of autonomous start-ups and properly motivate employees, Haier introduced internal market mechanisms and blockchain-enabled contracts (to ensure automatic execution). It also encourages employee initiative and entrepreneurial thinking.
15%
Flag icon
Haier is convinced that only by giving its employees more autonomy and responsibility, and by allowing self-governance, can the collective remain manageable.
15%
Flag icon
Those who stick to the rules and make the most of their opportunities and decisions can be successful.
15%
Flag icon
Haier regards these freedoms as necessary to motivate people — and employees who make the right decisions and are successful in the market can expect high rewards.
16%
Flag icon
Haier people are motivated, and allowed, to make most of their choices — but the market, not the organisation, will decide.
16%
Flag icon
Zhang says that the maximisation of human value is at the core of Rendanheyi — and argues that it should be the core of all business models. Business, he believes, is about people.
16%
Flag icon
Only people can create value. That is why people are key to any business activity. If you put people aside, the balance sheet will be of little use.”
16%
Flag icon
Rendanheyi anticipated this trend by opening-up the organisation: anyone who can create value for the customer may join. Zhang wants Haier to be without boundaries as he believes that all businesses should be open and interactive.
16%
Flag icon
Manufacturing success will be decided by companies’ ability to swiftly locate, and make efficient use of, all necessary resources through connections with stakeholders. Whether these stakeholders are within or without the firm is not important, hence one of Zhang Ruimin’s famous declarations: “The world is Haier’s R&D department.”
16%
Flag icon
Where relationships with external partners in the Ford and Toyota periods were guided by competitive thinking — working mainly with suppliers who offer the lowest prices, for example — the relationships within Haier micro-communities are guided by more collaborative thinking.
19%
Flag icon
Competitors focused mainly on volume rather than quality or customer satisfaction. Their concern was for short-term profits. Zhang and his employees worked to create a brand that would become known for its quality. The goal: zero defects. It required major changes to the factory, and the underlying corporate culture.
19%
Flag icon
In an interview on organisational development, Zhang said that if there was no money, he could borrow, and if there were no products, they could be made. But if the employees lacked confidence in themselves, or in the changes that had been proposed, it would be impossible to create a successful business.
19%
Flag icon
However, by inviting employees to be part of the rule-making process, they became “owners” of the rules. Empowered employees came to see that they could influence decisions, which motivated them to play the game.
21%
Flag icon
Reporting was made clear on a grid, or matrix, showing relationships between functional managers (who manage people) and project managers (who manage resources). Divisions were given the autonomy to operate and co-ordinate independently, and Haier benefitted from the flexibility to manage a fast-growing business.
23%
Flag icon
By making everyone responsible for their own performance and allowing them to profit if they exceeded their targets, Zhang hoped his employees would develop a sense of ownership.
23%
Flag icon
The difference from previous methods: employees were free to decide how they would do their jobs. This was when Haier’s employees started to think of themselves as entrepreneurs, and that changed everything.
23%
Flag icon
Success or failure directly affected the results of the SBU, and outcomes determined earnings. Every individual was truly responsible for their tasks and results (under the same basic system as before) and empowered to profit from superior performance. Zhang wanted them to feel and behave like owners, or as he put it: “Everyone is a CEO.”
23%
Flag icon
23%
Flag icon
The updated SBU structure introduced employees to market dynamics and made them truly responsible for their work. They were free to choose how they fulfilled their tasks, and were aware of the potential rewards and consequences.
23%
Flag icon
“The internet means you cannot be complacent. It reduces distance to the customer to zero. Traditional continuity is broken, and the outdated structures vanish. Avoiding new ideas is effectively giving up. Not using the internet means death.”
24%
Flag icon
Through the creation of a network of autonomous teams, Haier puts itself in direct contact with its customers to improve the delivery of products and services.
24%
Flag icon
That, and the corporate desire for all units to face the market, inspired Haier to replace its siloed SBU structure with a team-based organisational model called Zi Zhu Jing Ying Ti (pronounce at your own risk) or ZZJYT.
24%
Flag icon
Tier-1 ZZJYTs consisted of marketing, product and manufacturing units performing core activities.
24%
Flag icon
Tier-2 units delivered support services, such as logistics, HR, IT, R&D and finance.
24%
Flag icon
Tier-3 units were intended to provide other ZZJYT units with strategic direction.
25%
Flag icon
The ZZJYTs operated within company boundaries, but with the autonomy to run their own profit and loss accounts, hire staff, and make their decisions. Anyone with a good idea for a product could propose the establishment of a ZZJYT.
25%
Flag icon
Each had a direct relationship with its customers and was motivated to maintain and improve that relationship by providing high quality products or services.
25%
Flag icon
It’s all about keeping the customer happy.
« Prev 1 3 4