A Chinese business model for the Internet age

Haier still doesn't have a mature organizational model, Zhang admitted. But he is quite clear about its basic goal. That is for it to become a company of many innovators and implementers, a company of "makers" who are good at combining new technologies and practical skills.

Zhang has been active in explaining his new management concept at various business forums, although he says it is still too early to obtain tangible results and solid data from the structural change he has initiated.

"As a direction for progress, I think this is absolutely correct", he said, although he noted that such a change will unavoidably meet many uncertainties along the way and will have to avoid contracting the so-called large-enterprise disease, such as rampant bureaucracy. But the key, he stressed, is that in the "Internet age" it needs to be done.

Since 2013, Haier has radically restructured - cutting 26,000 positions for middle-level managers in a company that had 86,000 employees in total.

Zhang explains business in the Internet era has three main characteristics: zero distance from customers, centerless organizations and distributive use of resources.

"Hanging on to the past is just impossible," said the 65-year-old industrialist.

Following these new characteristics of the times, Haier's ongoing organizational change aims to make the company into a platform that encourages employees to become innovators (or "makers", in Zhang's own word) by utilizing the resources within the company and on the Web so they can provide customized products and services to satisfy the demands of customers.

By transforming Haier into an open business platform, Zhang said he hoped that the company would enable customers to access services provided by some of the most intelligent people in the world.

Zhang's determination to pursue change comes from his deep conviction that Haier's growth up to now is mainly a result of its following trends rather than creating trends.

"When a storm comes, pigs can also fly in the sky - although they don't know why," he said.

During that storm in the early 1980s, Zhang turned a bankrupt State-owned refrigerator factory in the coastal city of Qingdao, Shandong province, into a company that takes in 160 billion yuan ($27 billion) in global revenue now.

To achieve that, the company has been engaged in a constant learning process, whether adopting the Total Quality Management from Japan in the 1980s, or the Six Sigma management model from the United States in the 1990s.

"But these models are losing their shine in the Internet age," Zhang said, and so, braving all kinds of criticism and disbelief, he is courageously pursuing his own model.

Li Yang is a writer with China Daily. Xie Chuanjiao is China Daily's correspondent based in Qingdao, Shandong province. liyang@chinadaily.com.cn and xiechuanjiao@chinadaily.com.cn

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