HAIER'S WIN-WIN VALUE ADDED APPROACH.

Author:Krumwiede, Kip
Position:Cover story
 
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In the past five years, Haier Group, headquartered in Qingdao, China, has had great success transforming itself from a traditional manufacturing model to a customer relationship model consisting of "microenterprises" run by self-governing employee entrepreneurs. To support this transformation, Haier developed the Win-Win Value Added (WWVA) statement. The WWVA statement is designed to evaluate micro-business units from five perspectives: user resources, sharing of profits, revenues, costs, and marginal income. It combines financial and nonfinancial business data to monitor and drive value added by the enterprise and its users. The WWVA statement is user-centric, driven by a new open Internet of Things (IoT) "ecosystem" linked to other companies' products and services and participated in by users. It has helped Haier transform its prior top-down management control system into a micro-business-unit value-creation system. Haier's goal is to create a "win-win" platform that includes all users, stakeholders, and other companies' resources. This article describes the purpose behind the WWVA statement, how it works at Haier, and how it can contribute to fostering innovation and creating value for customers.

The Purpose Behind the Win-Win Value Added Statement

Haier Group is the world's largest appliance manufacturer, specializing in refrigerators, dishwashers, water heaters, air conditioners, televisions, washing machines, smart home appliances, customized products, and more. It has 29 worldwide manufacturing bases, 10 research and development centers, and more than 76,000 employees. Haier Group owns Haier, Casarte, GE Appliances, Fisher & Paykel, Leader, and AQUA as its smart home appliances brands. At the recent 2018-2019 Global Top Brands awards ceremony sponsored by International Data Group (IDG) and held concurrently with the Consumer Electronics Show (CES), it received "2018-2019 Global Smart Appliances Brands Top 10" and "2018-2019 Global CE Brands Top 50" awards.

Haier's new organizational focus exploits three features of the IoT era: zero distance, decentralization, and distributive networking. Zero distance refers to the relationship between the enterprise and its customers, referred to as "users," who can participate in the whole process of manufacturing their appliance, thus enabling mass customization. Decentralization means everyone in the organization shares the responsibility for developing new product ideas. The goal is to achieve this by connecting every employee and entrepreneurial team with customers and resources throughout the world via the internet on open shared platforms. Distributive networking entails flattening the organization and distributing resources throughout the organization rather than consolidating control over them at headquarters.

Haier's business model transformation helped drive its microenterprises to deal with users directly through the open shared platforms, resulting in several shifts. Strategically, it shifted from a "production-push" model, which motivated channel stuffing and overproduction to increase short-term profitability, to a retail sales model. Organizationally, it was a shift from being company-centric to user-centric (i.e., zero distance). The company now provides entrepreneurial training and resources for its employees to turn them into owners of their own microenterprises. Virtually any Haier employees with an idea can form a microenterprise, but the team must develop a specific business plan and go through a competitive approval process to ultimately become functioning. They also must continue to meet expected targets to remain in operation. Ultimately, they may spin off as a separate enterprise with Haier as one of its investors. Operationally, instead of a price war, there's now a "value war" to compete on value provided to users. Finally, performance management changed from using a traditional income statement to a WWVA statement to motivate the whole company to focus on meeting user needs, with advancing value provided to the user as the common goal.

Haier's WWVA statement combines financial and nonfinancial data to evaluate the value of the enterprise and users and dynamically monitor and drive value creation. The purpose is to continually measure the value added by the company, users, and service providers throughout the user...

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