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Conference for Confucianism and Entrepreneurship: Haier creates a new kinetic energy ecosystem with the "3E" of the Internet of Things (IoT)

30-09-2018

Zhang Ruimin

From September 28 to 30, the 2018 Conference for Confucianism and Entrepreneurship was held in Jinan. The guests of this conference come from different fields such as the global business circles, scientific and technological circles, educational circles and so on, including representatives of the world's top 500 enterprises, leaders of large central enterprises and private enterprises, and many Nobel Prize Winners, nearly 30 academicians at home and abroad, Yangtze River Scholars, and more than 80 community leaders in five continents.

This conference is regarded as an important measure for Shandong to promote the conversion of old and new kinetic energies, receiving great interest in the industry and at home and abroad. Zhang Ruimin, Chairman of the Board of Directors and CEO, Haier Group, was invited to give the keynote speech to explain how Haier has seized the commanding height of the old and new kinetic energy conversion in the Rendanheyi Model and took the lead in realizing the ignition of the Internet of Things (IoT).

The Rendanheyi Model empowers new kinetic energy on everyone

Gary Hamel thinks that "people are an important motive force of social progress." Technology, equipment, and software are just external tools driven by innovation. New kinetic energy always comes from the main body of innovation - the endogenous power of people. However, since the industrial revolution over more than 100 years, the assumptions about people, whether they are economic or social men, have regarded people as tools of management and a performer. People's innovation power is suppressed, so they can only wait passively.

For more than 30 years, Haier has been insisting on the main line of "man's value first". Respecting employees and inspiring employees to innovate and start a business. Haier must not be the first and only company that has used a such slogan, but it truly accomplishes it from concept to mechanism. Zhang Ruimin puts forward the assumption that everyone is a self-motivated person, thinking that everyone's potential is unlimited, and everyone can create value with self-motivation. People are always the source of value creation. Haier's subversive innovation mechanisms, such as the organization mechanism and salary mechanism in the Rendanheyi Model truly provides guarantee for the stimulation of everyone's new kinetic energy.

In terms of organization, Haier subverted the bureaucracy into a networked organization. Without leadership, it completely returned the power to hire, remuneration power and power to distribute to entrepreneurs. Microenterprises became the basic unit of enterprise innovation and entrepreneurship, and employees were converted from passive performers to self-employed, self-organized, and self-motivated entrepreneurs around user needs. In terms of remuneration, Haier changed the salary fixed by the enterprise into the paid-by-user salary, and shared the corresponding value by satisfying the user needs and creating the value of the users. This kind of compensation mechanism based on value creation also fundamentally protects the innovation passion of entrepreneurs.

Initiate the "3E" of the Internet of Things (IoT) to empower industrial upgrading

In the IoT Era, based on the driving mechanism of the Rendanheyi Model, Haier took the lead in initiating the "3E" of the Internet of Things (IoT): ecosystem, ecosystem revenue and ecosystem brand. There is a logical relationship with progressive optimization between "3E". Among them, the ecosystem is a necessary condition, the ecosystem revenue is a sufficient condition, and the ecosystem brand is the pursuit of the goal. Different from the attributes of the e-commerce "transaction" platform, Haier's "3E" of the Internet of Things (IoT) is an ecosystem for co-creating & win-win of the parties, achieving the co-creating & win-win of all stakeholders. The parties can realize value-added sharing in the ecosystem, and constantly iterate new requirements based on user needs and meet new user needs, thereby iterating new "species". Ecosystem brand can create upgrade user experience for lifetime users.

There is also a logic with progressive optimization between the "3E". Zhang Ruimin said that the ecosystem is a necessary condition, the ecosystem revenue is a sufficient condition, and the ecosystem brand is the pursuit of the goal. As the basis, the ecosystem carries the task of acquiring user needs and innovating user experience; the ecosystem revenue adds the value of experience and continuously iterates it through the sharing of the resources of the ecosystem. However, the ecosystem value created by the ecosystem and the ecosystem revenue will become a kind of sustainable and scaled status, finally forming an ecosystem brand to be applied in all corners of the IoT Era.

Under the business model of the "3E", Haier has built such ecosystems as Ecosystem of Internet of Clothes, Ecosystem of Internet of Food, Ecosystem of Internet of Blood and COSMOPlat. Haier washing machine breaks through the hardware product of a single washing machine, but combines the washing machine, detergent, clothing industry, etc. surrounding the user needs for clean clothes, to build the Ecosystem of Internet of Clothes, so as to jointly meet the various needs of users concerning clothes. At present, Haier's Ecosystem of Internet of Clothes has gathered more than 2,400 resource providers. As of August 31, 2018, the cumulative ecosystem revenue of the Internet of Clothes platform was RMB 947 million. COSMOPlat industrial Internet ecosystem brand platform, as the main body of implementation of Haier's Rendanheyi Model and the "3E" in the manufacturing field, is the world's first industrial Internet platform for users to participate in the whole process, enabling the mass customization according to the user needs. The product non-storage rate reaches 71%.

"3E" creates new kinetic energy ecology across industries and cultures

Taking Haier's Ecosystem of Internet of Clothes as an example, it broke the boundaries between enterprises and industries, and built a platform with the factory, shop and home interconnected that can fully meet the needs of users for clothes, covering washing machine brands, clothing brands and detergent brands. Through the application of RFID Internet of Things, the whole ecosystem of clothing production, store management, wearing, fitting and caring of clothes has been opened up, which has driven the upgrading of clothing enterprises, reduced the inventory of clothing enterprises by 30%, and improved the sales of clothing stores by 18% and the orders of ecological resource providers by 18%. In the past, after the clothes were sold to the users, they had no contact with the users. After connecting the COSMOPlat platform, the user's clothing experience data and interaction requirements can be timely fed back to the clothing manufacturers, thereby achieving mass customization in the clothing industry, reducing inefficient supply, reducing the waste of resources, and driving the upgrading of the clothing industry.

15 industrial new ecosystems such as Internet of Clothes, Internet of Food, Agriculture, RV and ceramic building have been constructed, covering 60 sub-sectors, allowing SMEs to enter and use platforms. They become the carrier of the conversion of new and old kinetic energies of SMEs and the accelerator of transformation and upgrading. Zibo Ceramic Building Industrial Park can reduce enterprise cost by 7%~10% and increase capacity by 20% on COSMOPlat; Weihai RV enterprises can increase orders by 67%, and reduce comprehensive procurement cost by 7.3% on COSMOPlat; in the agricultural field, the traceability of the whole process of agricultural products was realized by the Internet of Things (IoT). In Jinxiang, Shandong Province, the selling price of garlic planted with COSMOPla increased by 25% in the case of widespread loss of garlic farmers this year, which stabilized the garlic market and guaranteed the income of garlic farmers.

Haier's Rendanheyi Model also has the cross-cultural universality. After GEA's implementation, GEA has transformed from traditional linear management to user-centered nonlinear management. In the case where US household appliance industry fell 1.1% from January to August this year, the growth rate of 11% was realized.

In the key node of the global economy transforming to a new form, and in the critical stage of the transformation of China's economic growth from high-speed growth to high-quality development, the Rendanheyi Model lets us see the great potential of Chinese traditional culture to promote the conversion of new and old kinetic energies, as the first management model that integrates the essence of Chinese and Western cultures. Zhang Ruimin said in his speech: "inner cultivation and exterior action". At the time of the Conference for Confucianism and Entrepreneurship, enterprises should strengthen their inner cultivation, innovate the management model, seize the opportunities in the IoT Era, and overtake by changing lanes in the IoT Era.

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