EEEO CONVERSATIONS #5

Beyond the mechanics of Haier: leading 40 years of entrepreneurial transformation

Bill Fischer on the relentless evolution of Haier Group

The past few months have seen Boundaryless busy at evolving its understanding of how to integrate business model innovation with organizational development.

While such new learnings will be consolidated in a new emerging framework released in Creative Commons and included in our ongoing research, with this new series of interviews (EEEO Conversations) we want to give you a sneak peek about what is cooking behind the scenes. Emanuele Quintarelli will interview thought leaders such as John Hagel (former Co-Chairman Center for the Edge at Deloitte), Doug Kirkpatrick (best selling author and former controller at Morning Star), Jabi Salcedo Bilbao (President at NER Group), Michele Zanini (Co-founder MLab and co-author of Humanocracy), Bill Fischer (Professor at IMD), Martin Reeves (Chairman at BCG Henderson Institute) and other trailblazers from different industries and parts of the world will help us to reflect about foundational topics in search of a unified firm-market theory and practice of organizing.

Thus make yourself comfortable and explore this new series of news about the developments towards the Entrepreneurial Ecosystem Enabling Organization.

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• Ecosystemic Evolutions: Organizing Beyond Boundaries by Simone Cicero
• The EEEO TOOLKIT — a strategic design framework unifying business model innovation with organizational development, released in Creative Commons.

EEEO Conversations

#5— Beyond the mechanics of Haier: leading 40 years of entrepreneurial transformation

Well beyond the usual dreams of transformation, Bill Fisher, IMD Professor and one of the best observers of Haier Group’s journey, invites us to explore how a global incumbent, in a largely commoditized industry, can achieve market leadership by continuously and systematically upending its organizational model for almost four decades.

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This series is hosted and developed by the host Emanuele Quintarelli and the rest of the EEEO microenterprise at Boundaryless.

Transcript

The following is a semi-automatically generated transcript which has not been thoroughly revised by the guest. Please check with us before using any quotations from this transcript. Thank you.

Emanuele Quintarelli
Welcome, Bill, we are very glad to have today with us Bill Fischer, professor, but also, I think one of the real experts on the journey that Haier went through in the last four years, trying to rethink and revamp what management and leadership mean into an IoT into a durable and into an interconnected market. Today, with Bill we’re going to have a conversation to explore the long term trends and impacts but also the deep principles, that I’m inspiring some of the practices that we are seeing in Haier, but that we are also seeing in other organisations. So first of all, Bill, thank you so much for being with us.

Bill Fischer
Thank you for inviting me, it’s always fun to talk about Haier, it’s always fun to be with you guys at Boundaryless. And I must say that the only thing that troubles me is that when you say I’m an expert, you know, I realised that if I’m an expert, we’re all in trouble. So but I’ll do my best I think I’m a observer of a remarkable journey. And that’s about as far as I’m gonna go.

Emanuele Quintarelli
I think you’re very humble. But still, maybe you’re raising a point at the end, the meaning of having expertise is also changing and this could be part of our conversation today. So my first question is a bit broader of Haier itself. I think in the last few decades, each one of us has seen a number of technological and social disruption, that brought the massive power shift between the inside of the firm and the outside of the firm. At the same time, a bit on the background, but not much on the background, especially in some countries, such as the USA, we have a growing level of risk, uncertainty and unpredictability due to global environmental crises, political instabilities, and all of these is reflected on organisations, organisations that are becoming exposed to, a lack of productivity, inability to keep up with the market absenteeism, and say also in need to run them themselves very easily, both of the cultural level and they at the business model level out. How do you see this big, long term trends playing out in your own work and your own research and your consulting activities?

Bill Fischer
So it’s profound, I mean, you know, every generation thinks that they’re special, and they’re in unique. But I think we have a claim to at least historically be among the generations that are experiencing enormous change in several different dimensions at the same time. You know, you think about digital transformation, which is really changing the way most organisations work and then you add on to on top of that hyper connectivity, which is an outcome of that, and you think about the way in which customer experience expectations are growing rapidly, exponentially. And then you throw in, you know, things like the COVID virus, the the impending climate catastrophe that we all know we’re facing, but nobody’s doing anything about and you think about frustration with the way in which human talent is being employed. And you know, all of those things, open up requirements to do something and do something fast, and the ability to do something and do something really wonderful. And so I think that’s never going to change in our lifetime. Why would it get simpler? you know, this is, this moment, when you and I are speaking is the easiest, simplest, slowest moment, the rest of our lives from here on out, it gets only more complex and more rapid. And so I think it’s going to change the way we think about managerial choices and organisational design, all that sort of stuff. I think it’s big.

Emanuele Quintarelli
And I think what you’re saying gives even more importance to our conversation. And because that means that things are going just to get worse, if we don’t start to address them. So we have, I guess, a big responsibility and a big opportunity at the same time to fill the dots and to build some connections. And this is really one of my goals for today. And the starting point for this conversation, as you know, is the amazing work that the Haier has been doing for fourty years, I think there is no need for me to explain to you, you probably know much more than myself about it. But it is my understanding that what Zhang Ruimin did is partially a response to these long term farfetching trends. So my second question for you is, what does really stand out for you terms of both the direction, but also the artefacts, the practices, and the experiments that the Haier has been trying in the last fourty years as a response to these macro global and quite worrying trends?

Bill Fischer
So that’s a good question. Because I think what makes Haier different is there’s three or four things that make it really different. One is, one is the persistence. So it’s been doing this for four decades, not at the magnitude of changes that it’s doing now, but you can see the fingerprints, the DNA, if you will, of today’s changes, as far back as 1984. So you know, they’re there. And so that continuity of change is remarkable. I don’t know of any other organization, there are very few organisations that have been that persistent in the industry. And the scale, the scale is 70 80,000. People, you know, it’s big. So this is not a small startup, you know, with kids running around and flip flops, this is real people making real things, I think that makes a difference. I think the other thing that makes it different is that it’s in what traditionally has been called an old economy industry. So this is not the high tech stars that we associate with all sorts of innovative work. This is a real company in an industry that for a long time was making commodity products. So those things make it really different. In fact, for a business school this is a wonderful example, because you bring it most most executives who go to business schools come from, you know, successful market leading incumbents that are doing things in traditional ways, highly bureaucratic, and they envy the you know, Apples and Googles and Alibabas of the world Tencents, because they say they can do these things we can’t but Haier is doing them. So in a sense, it becomes a beacon of hope for all managers, you know, if they can do it, we can do it. And I think that that’s a major differentiator of Haier, I think that’s why it’s so inspiring. The other thing, if I can just make a short answer long, is that what I see is, most organisations, everybody today aspires to be transformational. But that’s usually where the conversation stops with the aspirations. I think the thing that also differentiates Haier in my mind is the details. So not only do they have daring, bold aspirations, but they then build a system that mechanically supports what they want to do so and so it makes it easier to do these things rather than harder. And hat’s wonderful. I think.

Emanuele Quintarelli
You touched upon a couple of very interesting points. The first one, I think it’s a bit frustrating for large incumbents because, you know, working with many of them, I hear the thinking, Yeah, but you know, we are big, you know, we have lots of people, we are global, we are not doing the knowledge, we are doing real stuff. And Haier is removing all those excuses, because it’s a demonstration that this is possible. And maybe it’s a bit surprising for some of these organisations that haven’t been exposed to it. It’s a demonstration that it’s possible, but it is also the visualisation of the distance maybe between your own organisational culture and structures and what the extreme most extreme part of the market is doing. The second aspect that you have highlighted is the mechanics. There is lots of talking, lots of lip service, in my experience, but maybe not enough action or not an action there is not brave enough. So, which are the practices in this case that really are meaningful for you, as a demonstration of the trajectory that Haier is doing? So what’s really surprising about it?

Bill Fischer
Well, let me just step away for a second from the mechanics, and let me just talk about some other things that are unique with Haier or relatively unique. One is that this is not their first transformation, you know, depending on how you count, there’s been six transformations. Each one of them has come before it’s necessary. So rather than waiting until the industry which they’re a part of runs into the threat of disruption, Haier has disrupted itself. It disrupted its industry and itself in the in the process. And so I think that’s the perfect time to do this. You make your move when resources are abundant, and people feel good, right? Most organisations that I work with, never make the move and when they start thinking about it, resources are scarce, and people are afraid. So that’s not the time to do that. Right. So I think one of the things that’s been interesting about Haier is its timing. I think the other thing is that these are big changes, but they’re big changes built on incremental choices and a lot of familiarity. So, you know, I would argue that the performance management system that Haier uses today is a direct lineal descendant of what they use in the early 80s. And if you brought a manager from the early 80s back to see what they were doing today, she or he would understand that performance management system. So I think what Haier is not doing is asking people to take a flying leap into the unknown, right? Haier is providing, if you will, handrails that are familiar. And so you’re not overtaxing the sensory capacity of individuals, they don’t have to be afraid of everything, they just have to focus on one or two things, because everything else is relatively familiar. And I think that’s a very clever way to move into the future. And then, of course, you know, they’re bold, they’re really bolder than anybody else. But they’re bolder, because the rest of the changes are sort of in consequential, so it’s the big ones that they have to worry about, not the small ones. You know, I just moved back to the US from Switzerland and we thought that was a big move. After living in Switzerland for 25 years, it’s the small things that are just slowing us down. It’s all the details stuff. And I think Haier addresses that. At the same time, they’re encouraging people to make the big jump, so it makes it easier for them to change.

Emanuele Quintarelli
Are you implying that it takes 40 years to get this far?

Bill Fischer
No, but I am implying that 40 years is an enormous advantage. Because over 40 years Haier has developed an employment brand of being an organisational innovator, an organisation that prizes entrepreneurship, so the people that are at Haier today, are perfect for the challenges Haier is going to throw with them. And they’re perfect for that because they know that Haier has this employment brand that is consistent. Most organisations pay very little attention to that. And so they get a group of people that they hire, some of whom are enthusiastic about change, others who hate it, and they and they start off with problems on the home front before they even start to conquer the future. So I think 40 years is really played the highest advantage.

Emanuele Quintarelli
And does this help with self selecting people? so what I hear in the statement is, maybe this is not for everybody, is this what you’re thinking? so at the end to thrive in an environment like Haier’s one you have to believe in something, you have to be able to leave something. That is dramatically different from what we experienced in many other organisations. Is it true?

Bill Fischer
I think it’s really helpful. And I think it is true. Over the last couple of years, I’ve interviewed a number of microenterprise. And we’ll talk about microenterprises leaders, and I’m in every one of them has a different entry story. So no two of them seem to be alike, they all come from different places for different reasons and done different things. But what they do have in common, is they see Haier as a place where they can live out their entrepreneurial dreams. And that’s really rare for a large company to have that sort of image.

Emanuele Quintarelli
I agree, it’s really unique, or at least quite rare. Let’s jump into the mechanics for a bit, if you agree. So we have microenterprises that are already a bit surprising for many incumbents. We have EMCs, this new concept for empowering micro enterprise to coordinate themselves not to impose a coordination. And then we have a number of other tools, let’s say like Industry Platforms, SSPs, Shared Services Platforms. And then we have smart contracts, we have blockchain. What’s really surprising, if you put yourself into the shoes of, a big telco, or a big oil and gas company, or a big manufacturing company, because at the end, Haier is producing services, but it’s still producing goods, right? Which one of these or maybe all of these are so dramatically different from what you expect in a traditional organisation?

Bill Fischer
So we could argue about this forever, right, because everybody has a different opinion. The micro enterprises have really capture, for me, the essential elements of what’s the Haier’s spirit or what’s called Rendanheyi. If you think about Rendanheyi as a philosophy, there are three elements that are important: one is Haier wants to give the customer a great experience. Second is it wants to employ the talent and expertise at Haier to do that, it wants to free up that talent, so that they can fulfil their potential in the service of customer expectations. And the third thing is, it shares the value created with the customer and with the employees who created it. And this is the latest stage, in a 40 year journey that started with giving people responsibility, measuring those responsibility on a daily basis, rewarding them. So I mean, you can see this, it’s changed, it’s gotten bigger, it’s richer, it’s more complex, and more interesting. But, you know, it’s an evolution. And I think that what Haier has done is it has really taken the micro enterprise concept to what I think is its ultimate expression. So you have the three rights, the right to create strategy for your micro enterprise, the right to hire, and fire, and the right to share, distribute the value created. And out of that comes zero distance to the customer because it makes sense if you’re in a micro enterprise to get as close to the customer as you can get, out of that also come and that means you’re faster moving, and faster reacting and much more customer intimate, it gives you a stake in the game because I’m not only playing for the corporate shareholders, now I’m playing for myself. It allows me to be an owner, as well as an entrepreneur. I mean, there’s so much going on in those concepts, that I think the micro enterprise for me is you know, the most interesting piece of it, but I have friends who will tell you it’s the platform’s or it’s the EMCs. And, you know, and I just this morning, I’ve spoken to people on both sides of that spectrum. And what’s interesting is that they all fit together to make this synergy, which gives you more rather than less.

Emanuele Quintarelli
Thank you, very insightful. And I agree, I think that, that the microenterprises at the end is the smaller but definitely not the less important aspect of this journey.

Bill Fischer
But Emmanuele, let me ask you a question here. But let me speculate something. As we move into an ever more complex future where the customer expects more, and Haier needs to respond quickly Haier has chosen to partner with external partners, in order to be able to bring in expertise and talent that it couldn’t get otherwise. And so there begins to build a blurring between the Haier’s boundaries and the boundaries of these of these partners. And I think, at some point, you know, the platforms on which the micro enterprises sit will become extremely important, because they are the best opportunity for scalable learning that I’ve seen going into an unknown future. So I think there’s a real you know, so this is a this is dynamic equilibrium, right? It’s changing all the time.

Emanuele Quintarelli
Yeah, you’re raising so many good points, I need to mentally remember them, because I want to come back to a few of them. What you are saying is that these idea that the Haier is building, at the end is not just rethinking the firm, it might eventually reach an inflection point in which there is no firm, or the firm somehow blurs into a market in which you have many microenterprise that belong to more than one firm. Is it something that you envision, eventually this evolution, as you said that the end is going to play out not just at the company level, but at the market? at the global level? Is this something even possible?

Bill Fischer
Yeah, absolutely. I think absolutely. I remember a conversation I had with an ecosystem owner, within Haier, so a micro enterprise leader who also was responsible for an ecosystem, who said that, already today, our most important competitive assets are relationships. Now, you know, that’s an interesting thought, because the relationships are almost all outside. So if that’s your most important asset, what does that mean for the structure of the firm? What does that mean for the way strategy is determined? What does that mean for intellectual property and branding? I mean, everything changes when you adopt that sort of the relationships are more important than anything else.

Emanuele Quintarelli
And this brings me back to another point that you raised about philosophy. Yes. And I must say that in the West, we tend to copy the practices, but somehow do ignore or misunderstand or not implement the philosophy, the principles behind it. And I’m starting to see on the market the number of big firms talking to clients and suggesting them to copy paste, the Rendanheyi. There is this new model, why not trying it as we did with agile from Spotify, and ING and others. So my next question for you is looking at the philosophy and I know that Zhang Ruimin really is into it, and their roots are into it. What’s the deep philosophical perspectives that maybe are different to copy for us, the West that are the real enablers, and also the beacon for the evolution of the practices and the Rendanheyi?

Bill Fischer
So I have to say that I haven’t seen any choices that Haier has made that could not be made by anybody else, right? I mean, there’s no magic, there’s no secret ingredients, what Haier is doing anybody could do, but they choose not to. And for me, the most important one is the willingness to give up control at different levels in the management system, including the very top. Because the old control mechanism makes no sense any longer. And I think that’s difficult, because managers spend their lives trying to amass control, you know, as they move up in the hierarchy. But if you really believe in zero distance with the customer, and you really believe that people who are closer to the customer know the customer better, and therefore, why would they ever need permission from somebody else to be able to do what’s obvious to them, then you really do give up control. You know, Kevin Nolan, who’s the CEO of General Electric Appliances, the United States, says that they’ve done away with their Corporate Strategy Group (they’re a Haier company), because the strategic decisions are being made at the micro enterprise level or at the platform level, and so, strategy and corporate strategy, if you will, to the extent that it exists, is really the ex post rationalisation of a lot of different choices being made by a lot of different people, that’s very different than GE would have experienced, 20 years ago, when it would be all have been made at the top. So for me, that’s probably the most difficult thing that I see happening for other organisations to emulate. So you see, as a result, organisations who try. I spoke to somebody just the other day, who have micro enterprises, but they don’t give away their autonomy. So to be fair, those micro enterprises perform better than the old silos do because the old silos really didn’t engender pride in what people were doing or a feeling of, you know, this is mine, I want it to work, but think about how far they could go, if they really allow the workers to take control of their destiny and those small micro enterprises. And can I make one more comment? One of the things that I think is so important to recognise is that Haier has not lost its mind when it does this, what it has, is a series of checks and balances throughout the organisation. So that any micro enterprise that makes really bad decisions will be corrected fairly quickly, either from within side the micro enterprise, or on the platform. So it’s if they’ve abdicated responsibility, they’ve just they’re just expressing it different.

Emanuele Quintarelli
Can you tell us a bit more about this, because I believe that some organisations listening to us may be asking themselves the same, very same question so at the end How may I release control, but at the same time, also maintain some safeguards, some protection systems that may avoid the boat to sink?

Bill Fischer
Sure. So if you’re in the kitchen appliance business, for example, you are moving from a world where you perhaps spoke to the customer once every 10 or 15 years, they would come in, buy a refrigerator, you were good at that, you know, 30 minute pitch, they left if the refrigerator works, they come back again 10 years later, 15 years later, buy another one. Today, nobody buys first just a refrigerator Well, probably almost half of Haier customers today no longer buy just a standing unit they buy a suite of hyperconnected appliances that talk to one another. And those people have a different perception of what those appliances do for them and how they work so the typical customer buying a new connected kitchen, a smart kitchen, can talk to Haier 10 to 15 times a day, not once every 10 or 15 years, but 10 or 15 times a day. That’s a completely different competitive environment to be in. So what I think Haier has seen is that you simply don’t want to scale up what you’re already doing in a in a normal kitchen, you want to really speak to the conversations that the customers are generating, you now know what they’re buying, you now know how they’re using your appliances, you can help them with recipes, you can help them with food pairings, you can help them with wine selections, all sorts of stuff. But you can only do that, if you think ahead of the curve, right? Because nobody else is doing that. We’ve never done this before, we have no idea what’s going to work or what isn’t going to work. So what are the mechanics that Haier has chosen, and I emphasise the word chosen, because it’s a conscious managerial choice is Haier has decided that it’s, this is my interpretation, Haier has decided that it’s better to bet on the future, by allowing employees who really know what’s going on in an industry to take some chances. Rather than predict, you know, roll the dice for one big plan and predict what’s going to happen, and hope you get it right. And so what Haier has said is to start a micro enterprise, you need three employees. And they need to convince a platform that they have a good idea. So that’s a licence to innovate. But what Haier has also said and by the way, those three employees are responsible for bringing in the seed capital to start this thing. So you know, what we’re saying is, take a bet and if your bet works, and we respect you for your expertise in the industry, that’s why we’re allowing you to do this. And if your bet works, you have a chance to become a startup star. I mean, you have to be financially wealthy, and well respected everywhere. And if it doesn’t work, you know, you’re going to lose some of the money that you brought in your own money or outside capital. The company is not at risk, like it might be if it was placing the resources on the table and we’ll end this thing fairly quickly, and you’ll go back into the labour pool in Haier. So what we’re trying to do, is we’re trying to build the possibility of taking some really interesting big choices, without incurring in associated risks that could could imperil the health of the organisation.

Emanuele Quintarelli
Yeah, at the end of what Haier seems to be doing is massively parallelizing experiments with skin in the game from from the people, but also with the support of a big corporation to making them work and making them succeed and making them scale. It looks like a significantly different discontinuity from our we think about strategy, how we think about innovation, how we think about relations, specifically everything.

Bill Fischer
Right, and the owner, and we’re talking about micro enterprises sizes, maybe 10 or plus and minus, those employees will always own more than the majority of the equity so if this thing takes off, they specifically are going to be rewarded financially for this. Haier might exercise its options to have a minority share, but the majority share is always going to be with them. So that’s a very interesting inducement to me. It also treats expertise, tacit expertise in particular, stuff you pick up on the job, and treats it seriously respects it, and offers it the opportunity to see what it can do. And when we talked earlier about frustration with the fulfilment of talent, this seems to me to be a real counterweight to that. This is saying, We respect what you know, if you want, we’ll give you a chance to try something and see how it works.

Emanuele Quintarelli
Let’s do another step in topics we want to cover today. Our feeling as Boundaryless is that Haier is a very mature example of an undergoing trend, actually an undergoing set of trends. And many people into the space are aware about other examples, just Burgzorg, Morning Star, WL Gore, Whole Foods Market and others, but with different names in different parts of the world, in different industries, have been running other experiments. Do you see any connection? Do you see any common theme? any common principle between these pioneers of self management and self organisation? And what Haier is with Rendanheyi?

Bill Fischer
Yeah, absolutely and I’m going to try to resist talking about the structures, because the structures, I think the structures are different, and when we look at those organisations that you mentioned, the structures are so different that that becomes a categorizer of these organisations. But you know, before we get those structures as byproducts of other choices and we started out this conversation, talking about the big, the meta themes that are running through our environment, and I think that the leadership of the organisations you mentioned, have similar observations about the world around us whether it’s about, we need to get more out of our talent, for the talent sake, or customer expectations need to be bolder, or the technology is changing the environment, we need to be faster. I hear those things over and over and over again, when I talk to the firms that you’re mentioning. So I think then what happens is on the almost inevitable dismemberment of the organisation and breaking it into smaller units, whether they’re micro enterprises, or branch offices in Handelsbanken, I think that’s almost inevitable, right? I think that what you see is that if we’re going to do this, we’ve got to get people more involved, and we can’t get them more involved at the scale that most of these organisations are. So we need to attack the scale, and we need to attack the incentives, and we need to attack the proximity the closeness to the customer. And I think as you do that, it becomes ineluctable, almost unavoidable that you get smaller organisations end to end involvement on local p&l in order to be able to make this work. So the mechanics are really important, but they’re driven by the pursuit of these meta objectives, and I think in almost every case, the firms involved think is a better business type of situation, that we’re moving into an operating situation where the present businesses are unfit for service. And we’ve got to do something radical to change it. Not because we want to do something radical, but because that’s the only way we’re going to get the engagement that we want, the closest to the customer that we want.

Emanuele Quintarelli
So flipping the coin, if the market is asking us to do this, we have now plenty of examples, and we have Haier knowing that this is doable at scale, it is doable everywhere. It’s doable in every industry. Why are still most traditional organisations stuck in anachronistic, let’s say unproductive mindset, approach, principles, culture, whatever you want to give the responsibility to? What is missing them? And why this journey is so difficult and why I believe it cannot be copied just by visiting Haier?

Bill Fischer
So the wise guy answer, you know, the wiseguy responses because they choose to be right. And I think that’s true. I think these organisations, either explicitly or implicitly, probably implicitly, shy away from the choices that Haier makes, I think part of it is that they don’t trust their employees sufficiently to do the right thing or to be leaders. Actually, what’s interesting is that yesterday I spoke to an organisation that has micro enterprises and not Haier and they said, we’re experimenting this, we’re in the early days. Strangely enough, the best employees are ones who were not the best employees in the old bureaucratic model, that our real stars are people who are outliers in the traditional model. So I think, you know, organisational functions and measurement systems tend to categorise people by performance along traditional dimensions and what we’re talking about is changes that defy those traditional dimensions. So in a sense, we’re not only asking many leaders to give up control, but we’re asking them to give up to control to the very people that they suspect are on the margins of the organisation. These people are probably highly talented, they’re in the margins of the organisation because the organisation doesn’t speak to their needs or talent or desires. And yet, nobody sees that or nobody talks about that. So my sense is the biggest single problem is not awareness but hesitancy, hesitancy to take the first step. You know, if I have a year or two to go in my position and I take the first step now, I don’t have another position coming and it doesn’t work, right. So I think it’s a sense of trying to preserve the status quo, not because we know it works, but because we can’t imagine what would happen if we turned it upside down.

Emanuele Quintarelli
But then, what’s the starting point? So okay, if this is the reality, we must, or we are at least living with, what may be the starting point, with the expectation of getting it before forty years. Why every organization has 40 years, right?

Bill Fischer
I think there’s two schools of thought, one school of thought says, Look around, find the place that you can change easiest, begin the change. Often, it’s not a particular function or process, but it’s the future. So we’re going to run future oriented projects different than we run the present, we’re going to have every organisation has to manage its future and its present, the present always wins unless the future is protected. So we’re going to protect the future, we’re going to move it somewhere else, we’re going change the name, and we’re going to give them the licence to run that organisation differently. But that means the people who are presently working in the present have no future. Right? So maybe that’s not such a good idea. The alternative, which I’ve heard of Gary Hamel and Mr. Zhang Ruimin say is that, you know, you have to have the courage to change it all. Right now, you know, and if it works, if you believe it’s going to work in the future, why not have it work now in the present? And I have to say that my sympathies are with the latter. My sympathies are with that. But, when I talk to managers, they all are very much into, let’s change the future and use that as a laboratory for experimentation. But of course, it’s not big, and it’s small, and it’s, you know, and then let’s run the present the way it’s always run. And I think we’re going to see over the next few years, real efforts to transform large successful organisations doing both things, both approaches.

Emanuele Quintarelli
This is another area you touched upon before, and then you’re bringing up again, the CEO, and leader.

Bill Fischer
Yes

Emanuele Quintarelli
Quite all of these stories I mentioned. And of course, Haier is another one, have a very charismatic leader, a crazy, a philosopher, somebody that is not really fitting with the mainstream and that is brave enough to do something different and risky, and sometimes, to bet the boat with it? Is this mandatory? Is this really the key and potentially part of the problem in those organisations that are not trying.

Bill Fischer
So ironically, I think that organisations that aspire to be bottom up, almost always have to have strong, self confident, courageous top down leaders, right, because they’re the only ones who are willing to share responsibility and give up control. And I don’t think this is a new thing. I think if you look back historically, if you look at ABB with Percy Barnevik or if you look at I was very interested in an organisation in Denmark called Oticon, they make hearing aids I’m wearing Oticon right now out of loyalty to them. My first case was an Oticon case, but they had a fellow named Lars Kolind in the early 90s, who turned the organisation upside down very similar in many ways to what Zhang Ruimin is doing with Haier or you look at Buurzorg or you look at Handelsbanken, you know, what’s interesting about all of them is that the leaders themselves are not charismatic, per se. They are serious, and thoughtful and well informed. And all of their charisma then is vested in what they know, and how seriously they take it and their commitment, rather than some type of flashy, superficial type of charisma. And they’re very effective in moving the organisation. I mean, there’s a small design firm in Palo Alto called IDEO, it’s very well known, it was one of the founders of design thinking, their founder, Dave Kelly. He said, he defined the job of the CEO is giving and protecting the self confidence of people who had to make big decisions down below in the organisation. Kevin Nolan, who’s the CEO of General Electric Appliances, says that his primary job as CEO, is to make things smaller. You know, Zhang Ruimin has demonstrated this over and over and over again, by giving people responsibility, letting them run. So my sense is that it’s a different type of leadership, it’s a leadership that’s constantly curious, that’s very much aware of what’s going on, that’s outside in, all of this is outside and understands what’s going on, around the organisation, and then tries to shape the organisation so that it’s responsive to what’s going on outside. And, the Curiosity part is really important, because they search out other people doing these things, and invite them in to learn from so. So I think there’s a lot of things in common among people who have launched these transformations.

Emanuele Quintarelli
Isn’t there are also risk in it. Take the example of Oticon and Haier, and many others that have been pioneers, that at some point, due to a number of reasons. Ownership shifting, market shifting, eventually went back to traditional hierarchical structures, and CEO Zhang Ruimin has been guiding, or if we don’t, we don’t want to say guiding at least inspiring and energising this journey for forty years, what’s going to open when eventually, it will have to leave the baby go? How does this transition is going to be looking like? so is there a risk in this and I’ll do protect your organisation from it?

Bill Fischer
It is always a risk, right? It’s business and there’s always a risk involved. And, you know, you’re right about Oticon and ABB, at big reversals and what they were tempted to do, largely because of unforeseen surprises. Surprises in demand surprise in the marketplace, surprises in what they understood the business to be like in the ABB case after a big acquisition, and how that really played out. And you think about the present COVID-19 crisis, and how that has affected many businesses, we’ve taken some chances and all of the sudden, you know, they’re scrambling to survive. And I think that’s an unavoidable part of taking taking chances. What Zhang Ruimin has said to me, is that, when people ask him about who will be the leaders after he retires, he says, we already have them. We have, you know, several thousand micro enterprise leaders, and they’re running businesses. Now, they’re not as big as Haier, but they’re running them in the same spirit of how Haier is run and they are gaining self confidence as they go along. So he said, we’re in a sense, we’re not only generating new businesses and interestingly, extra value for the customers and the like, but we’re generating a new leadership cadre. I think that’s there’s a lot of wisdom in that, you know, about 15 years ago, where it seems so long ago, 15 years ago, I wrote a book with a colleague Andy Boynton called Virtuoso Teams. And what we looked at was small teams that change the industries that they were a part of, and they change the industries they were a part of. And incidentally, this was without reference to Haier it was a completely different sort of situation. But what we found was small teams where everybody was involved and types of engagements that allowed people to display their talent. You know they were spectacular, they were great to work in and they change the industries they were part of. And one of the things that we concluded was that, in situations like that, people have a chance to think about leadership as they do it. So it’s not just being in a position and hoping to get to the next position, and always saying, it all depends what the guys above us say. It’s really being the guys above us. It’s weird, our choice. And Warren Bennis, the late student of leadership, said that, when he looked at leaders, one of the common traits they had was they had gone through a formative experience some point in their career, that forced them to think he’d call it the cauldron that forced them to think about what leadership meant. And I think that’s happening at Haier today. So, you know, these micro enterprises are not guaranteed straight shots to success, but most of them fail. So people have a chance to think about what went wrong, what we would we do differently, and then they also get a chance to do it again. So in a sense, what’s happening is, you have a learning engine within Haier, that is creating leadership insights. And my understanding is that every weekend Zhang Rumin meets with groups of people at Haier to talk about these very things, you know, what are you learning What’s going on? what’s changing in the world around us?

Emanuele Quintarelli
It sounds quite incredible to be sincere. And just fantastic. I have one last question for you. And we’re really at the end of this conversation. Lots of ideas, I would like to project what we are seeing now you’re into the society. And I don’t know if you acknowledge that, but we feel we’re approaching a sort of inflection point in which let’s say the way which human beings are inhabiting the planet must shift if we want to survive, at least because we have this planet only. And that probably means that also large organisations, corporations must have a role in. I’m wondering whether what Haier is doing in decoupling the business in many interconnected micro enterprises transferring the ownership and accountability to individuals, then maybe opening this out to the entire society, not just to some external enterprises could be the opportunity not just to shift the mechanics but to shift that the reason why, to shift really the Why the organisations are generating value and what kind of value and how they are generating this value and maybe value that doesn’t mean money. Is it something that you are seeing approaching or we are still too far from it, and we are just dreaming?

Bill Fischer
I’m very much sure of that view of the world. We’re going through the COVID virus period right now. And I think that we’re seeing that there’s two thoughts that come to mind about the COVID virus. One is that yesterday, in the United States, we learned that the President knew that the COVID virus was dangerous, but he encouraged people to engage in reckless behaviours. You know, that to me is an abdication of leadership responsibility, I think leaders should respect the people who they’re leading, they ought to share information with them, they ought to trust them within within limits. Remember, Haier is not a wild and crazy place, there are limits to what you can do, I think that what you need to do is to be able to build a system that allows people closer to the problems to step in and try to fix. And then and then having a series of checks and balances that protects everybody who’s involved. But to vest all of the authority in government officials who are far away, is guaranteed to make us learn less and be slower in our response. And I think we’re moving into in particularly climate changes that will just kill us literally kill us if we allow slowing and inadequate responses. The other thing about the COVID virus that I thought was so interesting is when people finally said, we don’t know what we’re doing and now I’m really talking about people close to the hospitals who said, we don’t have enough ventilators. And, you know, I’m telling you, you are Italian, you know this all too well, we don’t have the right assets, that I was amazed at the output of ideas that came from everywhere about building different types of ventilators and creating different types of PPEs and masks and what have you, you know, there’s so much talent that never gets asked. And so my sense is that what Haier is doing with Rendanheyi is in a sense, in a microcosm, what we should be thinking about in society at large, you know, we ought to be trusting people to get on with it, we ought to be sharing the information good or bad, and we ought to be helping them when we can. And that’s very different. I’m in New York at the moment. And in New York, I’m caught unaware by the COVID virus, the response was a daily sharing of the information, bad as it was by the mayor. And then inviting people to come forward with with suggestions in that. And New York today is really a an illustration of what can be accomplished as a result of that. And I think that’s very much what what Zhang Ruimin is doing with Rendanheyi.

Emanuele Quintarelli
I very much like this further connection, I think this is a big hope, not just for business, but really for humanity to survive, not just COVID, but really say these complex times in the technical sense. We’re really at the end of this conversation with you, thank you so much for spending time with us. What we are going to do is to keep having these conversations, these EEEO Conversations with other thought leaders, other practitioners, because we believe that there is a need to really highlight not just the practice is but the principles, the lessons learned, and the similarities among what is happening in different parts of the world. So thank you so much for being with us. And we are seeing each other’s again in the Rendanheyi master class in October. So we invite everybody that is listening to us to be with us in a bit more than than one month with Bill and with Simone Cicero. Thank you so much. Have a good day.

Bill Fischer
Thank you Emanuele.

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