A Chinese business model for the Internet age

A shop assistant adjusts a Haier air conditioner in a store in Queens, New York. [Photo/China Daily]

Editor's Note: China's economy is in transition. So is every part of it. But what does that mean? Higher productivity, less waste, and more dependence on the domestic consumer market - the answer commonly goes. But for Zhang Ruimin, leader of Haier Group, one of the largest electronic and electric goods manufacturing companies in the country, transition means much more. Interviewed recently by our staff writers Li Yang and Xie Chuanjiao, Zhang said he wants to create a new type of company - not a hierarchy, but a service-oriented platform of innovative groups and creative individuals.

Since the launch of reform and opening-up in 1978, China has imported and adapted international business theories and practices. But the winds of change may be coming as some of the more successful Chinese companies are trying to pursue their own innovative ways to work in the market.

Zhang Ruimin, chairman and CEO of the Haier Group, recently talked to China Daily about how the company, one of China's largest manufacturers of electronic and electrical appliances, is pioneering new values and practices in its organizational management.

Zhang not only wants to make Haier a big global company, but also a business "platform" where different Haier teams offer niche services to customers.

He says that requires the company change its old pyramid-shaped, command-and control-based organization into a "flattened" community of small business organizations that, to a large extent, are self-managed.

And that is a revolution in Zhang's traditional power as CEO.

"What power?" Zhang asked. "The bosses are not customers, why should the workers listen to them?"

In Zhang's model, the CEO can only earn his authority from the consent of the small "enterprises" operating on the company's platform. The CEO's responsibilities are to coordinate the "system", and to provide expertise-based services to the different units that are essentially self-managing.

There have already been some 200 "micro-enterprises" under the Haier umbrella. But up to now, only 10 percent have become fully independent and able to draw all their revenues from market-oriented innovations. "It takes time, as it inevitably will, for workers to adapt to the change and to tap the new resources they can use," he said.