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Interaction and Networking Vital in Global Business

Posted By Prucia Buscell, Thursday, November 13, 2014

China's Haier Group, an appliance maker with a fast growing global market, interacts with customers to tailor its products to distinctive needs. It makes large washing machines for Pakistani robes, small ones for delicate garments, and a durable one for large hoses for washing vegetables on Chinese farms. It also sells water purifiers designed to remove specific pollutants in each of the 220,000 communities across China.

In an interview with Strategy+Business editor Art Kleiner, Haier CEO Zhang Ruimin explains how he took the top post at the company in 1984, studied business management and philosophy, and used his insights to transform a troubled operation into a leading producer of household goods and services. Kleiner writes that the Academy of Management invitation to Zhang to give the keynote address at its 2013 annual meeting signals that China "had produced its first philosopher-CEO." Zhang says Haier has a culture of continual self-questioning and entrepreneurial spirit.

After the arrival of the Internet Age, Zhang explained, the company eliminated hierarchical structure, got rid of most of middle management, shed 4,000 jobs, and created 2,800 small county organizations with seven or fewer people each. As the company becomes platform based, each part of the organization makes autonomous decisions, reaching out to customers, potential employees and collaborators. He wants to make the operation truly "borderless," and says in his vision the company no longer has an inside and an outside.

"We are using Internet technology to connect everyone," he told Kleiner. "As a Haier executive, my goal is no longer to be a maker of home appliances but to be an agent of interaction and networking among people who might be anywhere."

"In the long run," he said, "there won't be any company employees to speak of-only the Haier platform." His idea is, "Whoever is capable, come and work with us." That could include entrepreneurs, people who want to partner with the company, and customers engaged in the process of product development. As an example, he cites the Air Box, a Haier device that lets people use smart phones to control their environment inside a building by connecting to heating, cooling and air filtering devices. Customer input guided the company in having air conditioning units that test and monitor air cleanliness, and the company brought in Samsung and Apple to help meet user requirements. All Haier products are integrated with the internet and Zhang asserts "If a home appliance can't communicate with the Internet it shouldn't exist."

Zhang said the idea of a company as platform represents a stark contrast from past management practices. "It should allow us to bring in and integrate greater quantities of resources-all contributors will be able to enter unhindered," he said, adding that operating this way, "we at Haier are no longer the ones directing things. We are the glue binding everything together." He describes an interactive water quality platform as an example of how the company can perform that difficult task: it can collect and incorporate insights from water treatment companies around the world and resolve users' individual needs through direct interaction with them.

A Harvard Business Review blog by Mark Bonchek and Sangeet Choudary says in today's networked age, business competition is increasingly about having the best platform. The authors describe elements for successful platform strategies, with examples, and what they call platform thinking.

Microsoft CEO Satya Nadella recently told all employees that "At our core, Microsoft is the productivity and platform company for the mobile-first and cloud-first world." Read his speech here. Read Kleiner's Strategy+Business piece here.

Tags:  buscell  complexity matters  economy  innovation 

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