Gary Hamel, the world's leading expert on business strategy, did not expect such a "thorny" question at the end of his revisit to Haier three years later. "What is the difference between Haier's CEO and other CEOs?" A very loyal user of Haier asked. Gary Hamel hesitated a little bit, as Zhang Ruimin, Chairman and Chief Executive Officer of Haier Group, was sitting in the audience at that moment. "This is a very tough question." However Gary Hamel did not intend to be perfunctory, and he continued after a moment's thought, "I think CEO Zhang is trying to build the future of corporation, the corporation that can be adaptable for future organization."
But this was not the biggest challenge Gary Hamel faced during this trip. On February 19, he had to summarize what he saw and heard over the past few days in Haier and present the research results in front of more than 300 audience, including Haier's senior leaders, sector owners, platform owners, ecosystem owners, microenterprise owners and other stakeholders, in a one-hour speech. In 2013, he came to Haier with the question of "how the win-win model of RenDanHeYi develops". Now he is surprised that Haier is shifting its focus from ZZJYT to the microenterprise. CEO Zhang has been thinking how to build an ecosystem of shared success for all stakeholders. Gary Hamel was very cautious to make an assertion, because it could be really difficult to predict whether an organization would succeed in the next 5 or 10 years. But Haier's practice of removing top-down design and bringing the subjective initiative of individuals into full play has made Gary Hamel more confident in Haier and he noted "I think it is very likely that Haier will succeed in the future."
Gary Hamel's Question
During his speech in the afternoon of February 19, Gary Hamel posed an interesting question to the audience: what kind of creative spark would be generated when Bill Gates works with Steve Jobs, Larry Page and Mark Zuckerberg? In the tree diagram drawn by Gary Hamel, the founder of Microsoft was on the top of the hierarchy, and the other three were in the lower position as vice presidents of Microsoft.
In Gary Hamel's opinion, this traditional hierarchical management tree diagram predicted a dangerous ending and there would be no creative spark at all. "It implies that the leader at the top is wiser than the middle management or employees at the bottom of hierarchy." Gary predicted the failure was inevitable in this kind of organization, because "all the decisions have to be made by the top level of hierarchy".
In fact, Microsoft, the enterprise that once built a technology empire, was always one step behind in many fields in the recent 20 years. "Leaders' wisdom is sometimes restricted by the times, but they can not limit the entire enterprise's creativity to the boundary of top hierarchy," Gary emphasized, "It does not matter whether they are creators or business people, they have to unleash all the people's creativity."
Before he talked about his gains from the second trip to Haier in public, Gary Hamel had an in-depth communication with Zhang Ruimin, who told him how Haier dealt with these challenges in such a dynamic world.
After eliminating the bureaucracy in Haier, the company is now transforming into an platform, which has accumulated more than 3,800 node microenterprises and nearly one million microstores. The company is no longer a self-contained closed system and fits into the Internet as a node that can connect various resources. Each employee of Haier has the opportunity to become an entrepreneur who can start up his or her business on Haier platform to directly create value for customers. "Leaders must empower all your controls to your employees", CEO Zhang referred to himself as a Chief Designer rather than a Chief Strategy Officer of Haier.
Gary Hamel was amazed at these subversive changes, which were even more shocking than what he had seen at Haier three year ago. "No company is promoting management innovations on such a large scale and in a systematic manner like Haier."
Innovation and Reshaping of Management
One of Gary Hamel's contributions to business ideology is his concept of "core competence", which explains why competitive advantages of successful enterprises are long lasting. Gary Hamel hoped to find the reasons and driving forces behind Haier's transformation from ZZJYT to microenterprises, so as to reveal the hidden core competencies.
"The key in this era is creativity as well as competing and wrestling between organizations. So I believe that organizational structure is of the most importance." Gary Hamel listed the successful enterprises in the global industrial development over the past 120 years, including Ford, General Motors and Toyota. But who is next? In his view, the lack of core competencies of large organizations has become a global problem. "It seems that people have become robots with their talents left completely unused."
Having seen many failure cases, Gary Hamel found in Haier's transformation practice that large companies could also have both agility and creativity. Meanwhile, Zhang Ruimin's opinion on "changed and unchanged" gave him more confidence in his judgment. Zhang Ruimin told Gary Hamel that Haier was becoming two ecosystems: the internal parallel ecosystem, where all departments in a series pattern have become parallel, and the external ecosystem for user experience, and the two ecosystems were integrated well. Since its establishment in 1984, what's unchanged in Haier is its culture of "enterprise is all about people" and "people are the most creative", giving full play to people's initiatives. With the view that business management has been against human nature over the past 150 years, Gary Hamel couldn't agree more with Zhang, "if you want to build a company for the future, an organization for the future, you must make sure that this organization complies with human nature."
Dave Ulrich, guru of human resource management, once expressed his doubts about Haier's practice, saying "that's impossible", "how can everyone become an entrepreneur". Zhang Ruimin explained that, "we are not trying to turn every employee into an entrepreneur, but we want to attract all entrepreneurs to become our employees."
Gary Hamel believes that Haier's reshaping and innovation of management can be converted into external competencies and competitive advantages, which can be demonstrated by the following data: in 2015, Haier Group saw a year-on-year growth of 20%; more than 100 microenterprises have achieved an annual revenue of over RMB100 million, 22 ones have introduced venture capital and 12 ones were worth well over RMB100 million based on the corporate valuation. Gary Hamel said that he wanted to hear staff on Haier's platform shout with confidence that "we can change the world". "Employees with such passion and creativity are (Haier's) real core competencies."
Compared with Bill Fisher, the professor of IMD, who complimented Haier as "the ideal form of China's future organization" and that "Haier has not only set a benchmark in China, but also been referred to as the role model of global enterprises", Professor Gary was more cautious, but he also gave a prediction of Haier's future, "Haier has already become one of the greatest companies with best management practice, and it is very likely that Haier will succeed in the future".
