Therefore, Chinese enterprises should be more rational and recognize that price wars cannot solve problems. Price wars can only be used as a promotional tactic. If it is treated as a strategy to rely on, the enterprise will fall into a vicious cycle of continuously producing and selling increasing amounts of inventory.
What enterprises should truly focus on is a value war, making their products continuously meet consumers' ever-changing personalized needs, ensuring that products are worth their price. In fact, true competition should be a game among three parties: enterprises, competitors, and customers. For enterprises and competitors, whoever can achieve customer value at the lowest price, best quality, and higher efficiency will win the favor of customers. The biggest difference lies in the fact that competition centered on customers will be competition centered on value, and absolutely not competition centered on price. Competition deviating from value will ultimately lead to cutthroat competition.
Flat Belly (1)
How can large enterprises avoid being bloated and sluggish? In 2001, Haier carried out a "revolution" on itself: transforming its original organizational structure from a pyramid-shaped line functional structure to a flat structure, changing functions into processes, forming a system centered on order information flow driving logistics and capital flow, implementing business process reengineering.
Internationalization is not just the internationalization of markets; management must also be internationalized. The Haier headquarters located in Qingdao, China, is like the heart of the global Haier network. In the process of internationalization, it constantly keeps pace with the outside world and adjusts itself accordingly. As a large company that has established marketing networks in over 160 countries, how can Haier avoid being bloated and sluggish? In 2001, Haier carried out a "revolution" on itself: transforming its original organizational structure from a pyramid-shaped line functional structure to a flat structure, changing functions into processes, forming a system centered on order information flow driving logistics and capital flow, implementing business process reengineering.
American management scholar Peter Drucker used the example of a symphony orchestra early on to illustrate the "flattening" feature of organizational structures. When discussing why a symphony orchestra is a model of a "flat" organization, he pointed out: hundreds of musicians can play together with their CEO - the conductor - because everyone uses the same score. Clearly, according to traditional management span theory, to conduct a band of hundreds, at least three management levels would be required, and one conductor alone would never be able to direct so many musicians. Therefore, flattening requires each person to be an expert in their own field, meaning one person per task.
Since each person becomes an expert in their respective field, every member within a "flattened" organization must not only have a common understanding of the shared vision - the score - but also maintain the same rhythm under the conductor's direction. Additionally, a fast network connection must be established between each expert, and each expert must take full responsibility for their understanding of the score. This could be traced back to the earliest source of the flattening concept.
In the 1990s, American management scholars Hammer and Champy broke away from traditional management concepts and proposed the business process reengineering (BPR) management idea. The main model of BPR is to center on business operational processes, break the pyramid-like organizational structure, establish a horizontally wide and vertically short flattened flexible management system, allowing enterprises to adapt to the high efficiency and fast pace of the information society, adapt to employee participation in enterprise management, realize effective communication inside the enterprise, and make the enterprise organization have strong adaptability and flexibility. It is clear that the thought of process reengineering is also one of the origins of the flattening concept.
In the past, Haier had a pyramid-style organizational structure where employees reported to multiple levels of management. Now it has been transformed into a flattened structure. Team leaders have been eliminated, and managers directly face operators. Before the process transformation, the order flow was: the supplier sends the order first to the group's marketing department, then through the business unit, planning department, to the production plant, which makes a plan and then issues it to the workshop. After the process transformation, these intermediaries were eliminated, bringing workers closer to market demands. Each department and each employee is directly responsible to the market. A French distributor once ordered 3,000 energy-saving refrigerators, and on the same day, Factory Two received the order information on the computer ERP window and immediately arranged production. In the process before reengineering, this several-hour process took more than ten days.
Factory Two of Haier Refrigerator started implementing process reengineering. Originally, there were six levels of management procedures: below the factory manager were the production manager, production scheduler, workshop director, team leader, and workers; now the procedures have been reduced to two, with the manager directly facing the operator. The original 23 management personnel have been reduced to 9, and the structure has become flatter. The factory manager's office has also moved to the production site. In the workshop, no one calls the former factory manager Li Qingjun "factory manager" anymore, but rather "manager Li."
Flat Belly (2)
Li Qingjun started as a factory manager in Factory One in 1997, experiencing several ups and downs. Every change was like starting from scratch. This time implementing a flattened structure, initially, he felt lost and unsure. "To be honest, it was pretty busy at first, with greater responsibilities than before. Before the reform, there were six levels of management from the factory manager to the worker, and if something went wrong, I could pass the buck to them. Originally, a problem had to go through multiple layers of reporting, and by the time it reached me, it might have been distorted."
Initially, many people worried about this issue, but after a week of operation, it was found that it did not affect order execution but improved it. Orders executed reached a historical high level in that week.
When discussing the significance of organizational innovation for Haier's internationalization, Zhang Ruimin said: The ultimate goal of organizational innovation is to mobilize the enthusiasm of every employee within the enterprise or create an innovative space for them. This change in organizational structure is not for the sake of change but to quickly adapt to market requirements. In today's market competition, speed is the top priority, so all changes in organizational structure are for these two words.
In the 1990s, more and more companies went beyond national borders to compete in the increasingly integrated global market. The existing business operating models could no longer keep up with the rapid changes in the market, leading to the emergence of "business process reengineering". It refers to redesigning the business, management, and operational methods of a company with a focus on work processes, reducing the number of management layers between the highest decision-making level and the lowest operational level, and moving decision-making power as far down the organization as possible, giving the lowest units sufficient autonomy and responsibility for production results, thus forming a "place-based" flat organizational structure.
Jack Welch was a challenger to bureaucracy from the day he entered General Electric. During a visit to a manufacturing plant, he discovered that even the supervision of boiler operations was divided into four management levels, vividly describing such a system ― "When you wear four sweaters going out, can you still feel the temperature? Bureaucracy is our four sweaters!" He always believed that bureaucracy was a barrier to enthusiasm, creativity, and response, and that the strategic planning, control, and formality inherent in these management hierarchies were merely stifling the entrepreneurial spirit urgently needed by GE. Thus, "any hierarchy is bad hierarchy." This extreme hatred for bureaucracy almost became the reason for Jack Welch to leave GE.
Jack Welch's "anger" finally led to the end of GE's bureaucratic system in 1981. From the moment he became president, Jack Welch began drastically transforming GE's organizational structure, quickly cutting out a large number of middle management levels and reducing management positions, even sparing vice presidents from this "flattening storm," ultimately reducing GE's nine management levels to today's 4 to 3 levels... After process reengineering, GE's organizational structure resembled a wheel, with the axle being the president's office composed of Welch and three vice presidents, and the spokes being GE's 13 main business units. The greatest advantage of this structure was simplicity, adapting better to rapidly changing markets.
However, while the flattening pill can treat some big company diseases and bureaucracy, flattening reforms should not be overly radical. Flattening does not mean "the fewer management levels, the better." Each management level, besides decision-making functions, also bears other functions such as planning and control. After flattening, who will implement the original functions of the removed management levels, and can they be implemented as well as before? These two questions are what all companies must carefully consider before implementing flattening. The significance of flattening lies in reducing corporate fat, removing unnecessary excesses, not blindly eliminating departments with real functions and significance. Weight loss should be moderate, and so should flattening.
Floating Ship Rule (1)
Enterprises must not only keenly discover demand but also have the ability to respond promptly and take action. When Haier started developing scale, when other enterprises began to develop scale, Haier had already started integrating businesses; when other enterprises began integrating businesses, Haier had already begun pursuing product quality; when other enterprises began focusing on product quality, Haier had already started diversifying; and when enterprises began diversifying, Haier had already embarked on internationalization.
The "floating ship method" is a way of thinking in market competition. Products must be perfect, otherwise, opportunities may be lost. So, as long as you are slightly better than your competitors, whether it's by a step, a notch, or half a notch, as long as you're better, always maintaining a level above the market, you can seize the initiative in the market and stay ahead of competitors. As the saying goes, "water rises, ships rise." Always being faster than others gives you the edge. This is Zhang Ruimin's floating ship theory and also Haier's competitive philosophy.
The essence of modern enterprise competition is a commercial battle for consumer loyalty. Marketing experts point out that success in modern commerce does not lie in how many stores you occupy but in how many consumer hearts you capture. Whether a business profits does not depend on subjective wishes or how many products it produces, but on how well its products and services satisfy consumer needs. Only by satisfying customers will they buy, and potentially become loyal customers. Consumer needs are infinite, and so is product innovation. Whoever puts in the effort to timely discover needs and swiftly satisfy them will lead the market and surpass competitors.
Nowadays, consumers aren't just fulfilling basic survival needs but also seeking development and enjoyment, especially a spontaneous psychological satisfaction. When supply exceeds demand, consumers often care about whether a product can bring vitality, fulfillment, comfort, and aesthetics to their lives. Consumers judge products based on "satisfaction and dissatisfaction." Haier's "one step ahead" is to meet consumer needs first and occupy their minds.
Haier observed the Chinese air conditioner market and found that on one hand, there was an oversupply of demand, while on the other hand, there was a shortage of products that could meet new demands. One of these new demands was the air quality (oxygen concentration) in living spaces. Chinese consumers were no longer satisfied with air conditioners being mere temperature regulators; they had new requirements for oxygen concentration, humidity, and temperature in living spaces.
Haier quickly seized this demand and exclusively launched oxygen bar air conditioners to meet the new needs of the Chinese air conditioner market. Traditionally, air conditioners were simply temperature regulators, but they also brought many ailments, commonly known as "air conditioning sickness." Medical tests showed that the true cause of air conditioning sickness was not temperature changes but insufficient oxygen use, essentially oxygen deficiency. Haier's oxygen bar air conditioners addressed the previous problem of enjoying comfortable temperatures while suffering from air conditioning sickness, ensuring both temperature and oxygen concentration in living spaces.
Floating Ship Rule (2)
Because Haier found a unique market space, the traditional alternating curves of air conditioner peak and off-peak seasons have been transformed into a consistently rising straight line by Haier. In the quietest month of January 2003, feedback from 600 large malls across the country showed that Haier's "oxygen bar" air conditioner series sold well. While many air conditioners struggled in the cold snap, Haier's air conditioners stood out.
As consumer demands change with the environment and time, a fundamental prerequisite for meeting consumer needs is sensitivity and speed. This requires a "rapid response, immediate action" work style. Someone asked Napoleon why his army always won battles, and he sincerely replied, "That's because my troops always arrive at the battlefield a few minutes earlier than the opponent to prepare for battle." Enterprises should focus on comprehensive development, think further than competitors, and act earlier for customers to outperform rivals. A classic story often told in marketing classes is:
Two people in a forest encounter a big tiger. A quickly takes out a pair of lighter sports shoes to change into. B is frantic, yelling, "What are you doing? Even with new shoes, you can't outrun the tiger!"
A replies, "I just need to run faster than you."
In other words, as long as A runs faster than B, the tiger will eat B instead of A. Running a business is like an elimination match. In an era of oversupply, how do you stay half a step ahead of competitors?
In April 2001, Jie Juzhi, then general manager of the Shanghai Center of Haier's Business Flow Promotion Department HMS, saw local news reporting that Shanghai would introduce time-of-use electricity pricing, with electricity costs during low-demand hours (22:00-6:00) being half of daytime rates.
Through market research, Jie Juzhi learned that savvy Shanghai residents were beginning to have this cost-saving mindset: "If appliances could use electricity at night and enjoy benefits during the day, that would be great!"
He realized that Haier's washing machines, dishwashers, water heaters, and other products already had features suitable for this demand, but these hadn't been publicized yet. At the same time, he learned that many consumers requested larger capacity water heaters.
That evening, Jie Juzhi organized staff to refine selling points, establishing time-of-use appliances as a new product promotion point, and created POP posters on the same day. Following this, he held an information release conference, launching this powerful punch first.
Simultaneously, he immediately fed this information back to the group's various product divisions, customizing more products suited to this market demand.
Jie Juzhi's quick response not only seized market opportunities but also drew admiration from public opinion circles. The Liberation Daily commented that day, "So many companies in Shanghai failed to seize this business opportunity, yet Haier in distant Qingdao firmly grasped it!"
American scholar Theodore pointed out: "New competition is not about what products factories produce, but what added benefits their products provide." Because buyers aim to satisfy certain needs, they prioritize products that align with those needs. Meanwhile, enterprises must not only keenly discover needs but also have the ability to respond promptly and take action. When other enterprises start developing scale, Haier has already begun integrating businesses; when other enterprises start integrating businesses, Haier has already started pursuing product quality; when other enterprises start focusing on product quality, Haier has already started diversifying; and when enterprises start diversifying, Haier has already embarked on internationalization. Haier has undergone changes from small to large and weak to strong, always staying half a step ahead, relying on forward-looking insight and rapid response capabilities.
Making Your Own Cake to Eat (1)
As long as you create the demand, the market can be very large, which is called "making your own cake to eat." "Making your own cake to eat" is a highly monopolistic concept. In such fierce competition, we must find a market truly belonging to us. How do we find a market that belongs to us? We must base it on the resources of our own enterprise.
How does one eat a cake between two people? By sharing it; how about among 100 people? By competing for it; and for one person? You can eat it however you want. The macroeconomic market environment in which contemporary enterprises survive is like a cake, with various types of large, medium, and small enterprises competing for survival and market share, all wanting the largest piece and pushing others out. In competition, "there is no second place, only first." Haier's approach differs from most enterprises. They believe that merely focusing on the existing market is far from enough. Instead of seizing shares in the current market, it's better to create a new cake, another market, and become the occupier of that market.
The essence of "creating a market" is to use one's own advantages to create a new market. Haier's requirement for technological innovation is to create demand, remake "a cake," and lead the market by creating markets and guiding consumption. Zhang Ruimin pointed out that the enterprise's business goal closely follows the market, which not only means adapting to the market but more importantly, developing the market. Since the market changes very quickly, it's hard to fully adapt. "The only unchanging rule of the market is that it is always changing." Since the market is always changing, simply adapting to it may always lag behind. Haier's ideal is to lead the market and play a role in guiding consumption.
Under the principle of "creating a market," each of Haier's business units has made bigger cakes with distinctive, user-satisfying new products: The Air Conditioning Division launched the "Little Superman" frequency conversion dual-unit air conditioner and the "Shuai Yingcai" 2P home cabinet series, winning the market due to their understanding of the market and leading the summer market with absolute advantages in recent years. The Washing Machine Division introduced ultra-thin washing machines and top-opening washing machines, filling gaps in the domestic washing machine industry; Haier's kitchen series products are also diverse, including warm quilt machines, electric irons, etc., each new product creating a new market and new consumer groups. It is this continuous stream of new products that ensures steady growth in the economic benefits of Haier's various products.
There is a simple story that illustrates what it means to create demand and create a market: A shoe factory preparing to develop leather shoe markets in the South Pacific islands sent two marketers. The first marketer landed and saw that everyone went barefoot, concluding that there was no market since no one wore shoes. The second marketer saw the same thing but concluded: "No one here has shoes, how pitiful, the market potential is huge." He analyzed the situation: currently, there is no demand for shoes, no actual demand. But when the product is placed there, demand will naturally arise. So he decided to stay and develop the market. This is called creating demand. As long as the demand is created, the market can be very large, which is called "eating the cake you made yourself." "Eating the cake you made yourself" is a highly monopolistic concept. In such fierce competition, we must find a market truly belonging to us. How do we find a market that belongs to us? We must base it on the resources of our own enterprise.
Making Your Own Cake to Eat (2)
Haier people admire this saying: "Selling ice cream should start in winter." Haier believes that there is only a seasonal mindset, not seasonal products. Any product may have a season, how to deal with the off-season? If you think the off-season should sell less, you definitely won't create a market; if you find a market that belongs to you in the off-season, you may turn the off-season into peak season. The invention of the "Little Genius" washing machine is an excellent story