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Zhang Ruimin
The Chinese physicist who smashed his products to create Haier as the world's leading home appliances ecosystem.
Zhang Ruimin 张瑞敏 is the founder of Haier Group, the world's leading home appliances business. In 1984 he became director of Qingdao Refrigerator Factory, famously asking each of his managers to smash their existing products with a sledgehammer to demonstrate they needed to move to world class. The small, failing collective factory evolved into a world leader, and an ecosystem brand.
Zhang Ruimin is Chairman and CEO of Haier, the world’s leading white goods business. In November 2019 I got to interview him for my new book Business Recoded.
From its base in Qingdao, Haier has revolutionised the world of refrigerators, washing machines, air conditioning, and many other home appliances. Not just in China, but increasingly as a global brand. Zhang has become a world-renowned entrepreneur, creating a unique, innovative, evolving business model that fuses management philosophies of east and west.
In 1984, Zhang became director of the Qingdao Refrigerator Factory. Over the last 30 years he turned a small, collectively-owned factory with a 1.47 million yuan loss, into Haier, a global enterprise, with a turnover of 188.7 billion yuan (2015). In 2016, he demonstrated his global ambitions with a $5.4 billion deal with GE to buy GE Appliances.
Zhang has developed his own management ideology which he calls rendanheyi. By dividing a company up into micro-enterprises on an open platform, he dismantled the traditional hierarchical system of management (eliminating 10,000 middle managers), and creating small teams with a “zero distance” between employee and the needs of the customer. Each small business acts largely independently, encouraging innovation, flexibility and risk-taking.
We share a background, having both studied nuclear physics. “When I first studied physics I was amazed by the perpetual motion of sub atomic particles. Electrons and protons coexist in a dynamic equilibrium, created by their equal and opposite charges. This sustains a continual existence, it enables atoms to come together in many different formats as molecules, each with their own unique properties, and within these atomic structures is huge amounts of energy”.
“Applying this idea from physics to business, small teams of people with different backgrounds, skills, and ideas, can co-exist incredibly effectively. It is the ability to create small diverse teams where ideas and actions are equally dynamic, that enables a business to sustain over time. They become self-organising and mutually enabling. Ideas, innovation and implementation are continuous. And they can easily link with other teams, like atoms coming together as molecules, for collaborative projects and to create new solutions.”
As a result, he challenges the old supremacy of shareholders in the value equation, putting a premium on employees, and the value created by them and for them. However at the same time, he recognises the need to empower employees to be more customer intimate. As a result the rate of growth has risen from 8% to 30% in recent years.
Whilst Haier in the 1990’s was focused on the Chinese market, improving quality to international standards, the 2000’s was about reaching across the world, but with localisation and customisation. The 2010’s have been all about digitalisation, embracing the power of automation and data, to the point where Haier is now one of the world’s leading producers of “smart” products, embedded with IOT, and connected intelligently.
However the implications are profound. Today it is no longer about standardisation, and creating the best product. Haier’s brand purpose is all about making people’s lives better. Therefore Haier is looking beyond products to services, and how it can do more to help people live in their everyday lives, with a focus on the intelligent home.
“In a digital world of globalization, connectivity and personalization, there is no such thing as a perfect product. People will buy scenarios, or concepts, where the products might be free and just enablers of services. Haier’s products embrace the internet of things to ensure that they connect with other devices, with other partners in our ecosystems, and with people and their homes. In the future, maybe the product will be free, and people will pay for services – from food delivery, to home entertainment, security or maintenance.”
This ecosystem model is now core to Haier’s future. Zhang believes that Haier is the first true ecosystem brand. “We want to create a rainforest of perpetual life” he says.