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02/11/2015

Innovation driving Haier's global growth

Zhang Ruimin, chief executive officer at Haier Group, has a distinct vision for the multinationalconsumer electronics and home appliances giant.

Recognized as a leading global player, the company is taking a "smart" approach when it comesto the future with its next generation of washing machines, refrigerators and cookers.

By using big data linked to the group's Qingdao production base in Shandong province, Haier isbreaking away from the traditional big company business model.

"It's about unifying employees and staff with the customer," Zhang, 66, who has transformed thegroup since he started there more than 30 years ago, said.

To do this involves technology and lots of it-along with massive will power.

Since 2013,21,000 employees out of a global workforce of more than 60,000 have formedspecial "micro ecosystem" teams to produce new products, and monitor the swings and shifts inthe home appliances market.

Listening online to what customers want to buy, as well as tracking popular products andinnovation inside the industry, is crucial.

Big data, a broad term for processing vast amounts of complex statistics which can be boileddown into market and consumer trends, plays a vital role in this "new model".

Once Haier knows what customers are looking for, they can realign their manufacturing, roll outnew models, and cut down on the oversupply of white goods that are no longer popular.

In short, this illustrates, Zhang's management philosophy: "Challenge yourself, overcome yourself."

So far, the company's entrepreneurial program to track business trends has generated 100million yuan (($15.87 million) in extra revenue.

Most of the people involved in the "micro ecosystem" teams are affiliated to Haier, but notdirectly employed by the company. They are paid on results by tracking consumer shoppinghabits and coming up with ideas that will make the company more successful.

Others are at the sharp end of the production process-dreaming up new products. Many aresmall startup companies that came together on the group's online platforms.

"I will not offer you a working position, but an opportunity to start a business," Zhang told a Beijingmedia forum in September when outlining the "micro ecosystem" program.
Innovation has always been a buzzword at Haier, helping the company expand in a highlycompetitive marketplace.

In 2013, the group rolled a funding platform for budding entrepreneurs. These small startups arenow working on 470 projects. Many involve "teams" of "makers", a high-tech term used todescribe entrepreneurial inventors.

These six-or seven-strong groups have helped design new products for Haier such as a self-cleaning washing machine and a smart oven.

"Our team members not only helped design the oven but also produced the mobile app whichallows you to download recipes and improve your baking," Ma Gang, 37, a former telecomcompany employee who now runs a "micro ecosystem" team for Haier, said.

"People using the system can also share their cooking experiences with other users."

Coupling innovation with the Internet is starting to pay off for Haier.

Back in 2004, the company's global turnover was 100.9 billion yuan with net profit running at 1.28billion yuan. Last year, turnover was 200.7 billion yuan with net profit topping 15 billion yuan.

Realizing the importance of Internet shopping, Haier has cultivated the sector and now has 36.85million registered users on its site.

The group's online sales reached 54.8 billion yuan last year, which was a staggering 2,391percent increase on 2013.

With a 10.2 percent market share, Haier was the world's largest household appliance brand in2014 for the sixth straight year, according to Euromonitor, a privately owned market researchcompany in London.

"The company's business and management model is based on innovation," Marshall W. Meyer,professor from Wharton School at the University of Pennsylvania in the United States, said. "Haier has stepped away from conventional management thinking."

Naturally, the group's domestic competitors are going through their own technological revolution.

Midea Group is a privately owned electrical appliance manufacturer in Shunde, Guangdongprovince, and recently invested 1.1 billion yuan in attracting the next generation of productdesigners or "makers" by rolling out an online platform.

Last year, TCL Corporation pumped 100 million yuan into a "startup incubator". The multinationalelectronics company in Huizhou, Guangdong province, also hopes to attract the brightest andbest engineers with a specially designed funding operation.

"We have 20 projects in the works through this incubator, and we will continue to expand in thefuture," Li Dongsheng, TCL's chairman, said.

Zhang Yanbin, the associate president of All View Cloud, a data analysis company in Beijing, isconvinced the pioneering moves by Haier, Midea and TCL will reap rewards.

Standing still was not an option, he pointed out. "In the Internet era, the traditional model could notbe adapted to reflect the changes in the home appliances industry," Zhang Yanbin said.

"If home appliances enter-prises had not started to transform, they would have been in danger ofbecoming obsolete. That is why I admire Haier's boldness of spirit."

As China's economy is rebalanced to a more consumer-led and high-tech model from cheap,mass manufacturing and export-fueled growth, "new business ideas" will take center stage.

"Startup incubators break down the barriers between enterprises and customers," Zhang Yanbinsaid. "They bring entrepreneurs and innovators onto the same online platforms, and this can bethe driving force for development."

Source: 中国日报