Ruimin explains: "There is no perfect product, only a scenario that iterates towards perfection. This is because they believe traditional products will be replaced by 'scenarios', as soon as physical objects (like kitchen appliances) are connected to other devices via IoT enabled technologies. Instead, they should focus on developing so-called 'scenario offerings.' Haier believes that EMCs should not focus on bringing new products to the market. But a community of interest can solve these problems." Both groups want more benefits for themselves, and at the same level different departments operate in silos, almost like enemies. In traditional organizations, subordinates and their superiors are in a game. Therefore, EMCs do not play games with their leaders. Of course, they bear any losses in such ventures, and when losses reach a threshold, the community is dissolved. The more value created, the more profit there is to share. All related MEs organize themselves together to co-create and share value. Ruimin explains: "EMCs are clusters of MEs along an ecosystem value chain. Haier clusters multiple MEs into so-called 'ecosystem micro-communities' (EMCs). In this post I will highlight the most important ones: 80,000 employees became 4,000+ microenteprises (MEs), each preferably made up of less than 10 people."Īt the heart of Haier's Rendanheyi model are not just MEs, there are other important concepts, designed in a way that helps the firm adjust to fast-moving circumstances. The organization became a platform without imposed leaders. We started by breaking up the hierarchical organization and removing all mid-layer departments.ġ2,000 middle-level managers had to become entrepreneurs or leave. Rendanheyi was first proposed in 2005, and has evolved over 15 years. But keeping in sync with a varying beat over time is difficult. It's the result of being in sync with the beat of the times, either intentionally or unintentionally. The so-called 'success' of companies is absolute. Ruimin continues: "Why disrupt the traditional model? Because organizations are only successful when they are relevant to the times in which they exist. Things are moving too fast for many to keep pace." This is why Fortune 500 companies now have shorter lifespans. To ossify is to hide in a cocoon and inform today's efforts with yesterday's successes. To evolve is to transform and stay relevant to times and trends. Why? Ruimin: "Organizations are only given two options: to evolve or to ossify. So, Haier decided to create its own management model. But in the IoT era, we have run out of templates to follow." Ruimin said: "Until recently, Chinese firms had been emulating and learning from advanced management practices around the world. Recently, at the 6th China Manufacturing Power Forum, Zhang Ruimin (CEO of Haier Group) laid out why Haier's model, dubbed Rendanheyi, could be the next influential management model by embracing the possibilities new IoT technologies will enable. It is the generally accepted term for the phenomenon in which physical objects (like buildings, airplanes, cars, mobile devices, kitchen appliances and many more) are connected to the Internet and thus to each other, gathering massive amounts of data, and often acting on it automatically.
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