Power Sheet – June 9, 2016

Ruimin was in New York for the GE deal closing and to accept a Legends in Leadership award at the Yale CEO Summit. Even many CEOs don’t know that Haier is the world’s No. 1 appliance brand, and most have no idea how he has done it – by fundamentally remaking the company at least three times, always thinking further ahead than his big competitors.

Here’s what he’s thinking now: “In the old economy, competition is between products or between brands. But in the Internet age competition is between platforms. You either become the platform or you end up owned by the platform.” Zhang is therefore creating an Internet-of-things platform for refrigerators and ovens, among other products. “The concept is not new,” he says, “but in this business there’s not one product that really embodies it.” In addition to Haier and its customers, which he prefers to call users, the platform would attract food makers or sellers; “advertisers can use this platform,” he says, as can others he hasn’t imagined. As a result, “the company won’t be an independent organization, but rather a node on the Internet.”

So far this is innovative, not revolutionary, thinking. But then Zhang pushes it further. “All large business organizations are plagued by the big company disease. Bureaucracy sets in, and they tend to be very slow. You have to be very bold,” he says. Next step in his reasoning: “Only the frontline employees know the users and their needs. So we need to destroy the hierarchy. Now we have no departments anymore; instead all employees are part of entrepreneurial teams” – about 3,000 of them – “like in-house startups, which I believe is unprecedented.”

They’re more like in-house startups than you would ever imagine. Each team must attract venture capital funding from outside the company, and then each team member must personally contribute capital. If the team can’t attract outside capital, then it must be dissolved. And who are the team members? “One of the principles is that these teams are open to society, not just existing employees,” Zhang says. “It’s fully dynamic.”

As for where this leaves him: “I am no longer the boss. At the most, I’m a shareholder in the teams.”

Now he’s sounding like an out-there business futurist. But he isn’t one; he’s running the world’s largest appliance brand, with 60,000 employees, or 73,000 after the GE acquisition. He doesn’t force the companies he buys to manage exactly like this, but, he says, “we are asking the local managers to apply this philosophy to their operations” based on their own countries’ cultures and laws.

Zhang holds no illusions about what comes next: “We have implemented so many reforms with the goal of creating something truly revolutionary,” he says. “Now we have to produce the revolutionary changes we’re talking about.” You’d say it was a long shot, but it’s exactly this kind of thinking that has taken him where he is.

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