Innovation drives global growth

China's home appliances firms are reaping the rewards of a high-tech approach

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

The company is taking a "smart" approach to 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 is breaking away from the traditional big company business model.

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

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 formed special "micro ecosystem" teams to produce new products, and monitor the swings and shifts in the home appliances market.

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

Big data, a broad term for processing vast amounts of complex statistics can be boiled down 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 out new models, and cut down on the oversupply of white goods that are no longer popular.

This illustrates, Zhang's management philosophy: "Challenge yourself, overcome yourself."

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

Most of the people involved in the "micro ecosystem" teams are affiliated to Haier, but not directly employed by the company. They are paid on results by tracking consumer shopping habits 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 are small 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 Beijing media forum in September when outlining the "micro ecosystem" program.

In 2013, the group rolled out a funding platform for budding entrepreneurs. These small startups are now working on 470 projects. Many involve "teams" of "makers", a high-tech term used to describe 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 which allows you to download recipes and improve your baking," Ma Gang, 37, a former telecom company employee who now runs a "micro ecosystem" team for Haier, says.

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

Coupling innovation with the Internet is starting to pay off.

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

Haier has cultivated the Internet shopping sector and has 36.85 million registered users on its site.

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

With a 10.2 percent market share, Haier was the world's largest household appliance brand in 2014 for the sixth straight year, according to Euromonitor, a market research company 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, says. "Haier has stepped away from conventional management thinking."

The group's domestic competitors are also going through their own technological revolution.

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

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

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

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

Standing still is not an option, he points out. "In the Internet era, the traditional model cannot be adapted to reflect the changes in the home appliances industry," Zhang Yanbin says.

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

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

Contact the writers at fanfeifei@chinadaily.com.cn and xiechuanjiao@chinadaily.com.cn

(China Daily Africa Weekly 11/06/2015 page19)