'Innovation distinguishes between a leader and a follower.' - Steve Jobs.
Conventional wisdom holds that Chinese firms, although fearsomely good at exploiting country-specific advantages such as cheaper labour or a large home market, belong to the follower category as deemed not very good at manufacturing innovative and reliable products. However, if you’re looking for cutting-edge ideas to manage innovation, go no further than the successful 30-year-old Chinese home appliances provider, Haier.
Haier has recently been recognised as one of world's most innovative companies and one of China's ten leading innovative companies by Fast Company (in its 2014 annual guide to leadership in innovation). Its Tianzun air conditioner launched in January 2014 will be the first connected appliance to meet Apple’s rigorous MFi standards for iOS devices connectivity. Every year for the last five years, Haier has also been named by Euromonitor International as the number one brand of major appliances in the world, while BCG nominated it as one of the ten most innovative companies in the world two years ago.
As often, it starts with a purpose and Haier’s is to “create innovative home appliances that anticipate the fast-changing needs of consumers in more than 100 countries around the globe”. Unlike most Chinese rivals, its business strategy has always focused on offering its own innovative quality products at a competitive price into America and Europe, thereby learning about the expectations of the world’s most ‘sophisticated’ customers.
Haier’s purpose is translated into cutting-edge ideas to manage its innovation process, including its mantra that the customer should dictate the business. It views customers as assets in product development and Haier employees who interface directly with customers have an elevated role in decision-making as they channel valuable business intelligence on local customer wants.
Haier engineers then develop clever products to exploit new niches such as affordable wine fridges (ignored by Western rivals obsessed by economies of scale), mini fridges built into computer tables (for students), freezers with slightly warmer compartments (to keep ice cream soft), or horizontal deep freezers with two tiers of drawers (easier than digging for ready meals at the bottom).
Haier’s strategy of adapting to local market needs is further evidenced by products such as its freezers, which stay frosty without electricity for up to 100 hours and are top sellers in Africa and other places with undependable power, or its addition of a special sari-gown setting to its washers in Pakistan as well its washing machines operating under low water pressure, typically found in India’s urban apartments.
Another cutting-edge idea to manage innovation is its decentralised, flat management structure designed to adapt more quickly to evolving customer needs and respond more efficiently to changes, thereby putting customers at the centre of the product development process. Its 80,000 employees are encouraged to track evolving market trends and form autonomous project teams to address emerging opportunities. New projects are staffed via an internal talent pool, where employees are evaluated based on their interests, credentials, and past achievements. The teams are empowered to find innovative solutions to increase competitiveness in their respective markets and successful business models are then shared with teams in other markets.
The recently launched Tianzun air conditioner was developed by such self-managing team that recognised growing demand for a more flexible and responsive air conditioning unit via an online engagement programme involving more than 670,000 internet users.
From the outside, Haier’s organisation looks like an adaptive learning system where employees are given more autonomy and accountability and where trust and diversity of views are fostered to drive a disciplined innovation process focused on local client needs.
Since flirting with insolvency in the 1980s, Haier has become the world's leading brand of home appliances, with a 9.6% market share (alongside Whirlpool) and China’s first global brand, with revenues of US$29.5 billion and profit of US$1.76 billion in 2013.
Steve Jobs mentioned once that innovation distinguishes between a leader and a follower – the process continues for Haier as it aims to become the leader in connected and intelligent home appliances.
Haier was ranked ♯4 in Fast Company’s 2014 ranking of China most innovative companies. More information can be found here
by Christelle Espinasse - inSTRATEGIA
