CHAPTER 14 THE POWER OF CULTURE

Have a look at the oft-cited Fortune 500 companies. Besides their skyrocketing numbers and zealous CEOs, what makes these companies stand out? It is their corporate company culture.

Take Zappos, the online shoe-wear company that ascended the ladder of company stardom in very little time. Zappos’ company’s culture stood out in many ways. For example, the online retailer became famous for running a hiring process that looks more like a courtship than a job interview. Candidates are invited for several events, talk to different people within the company, visit the premises and so on before even being considered for a job. This whole string of consecutive dates can take months, but this patience and thoroughness in the selection process results in a near-perfect cultural fit. Zappos organized quarterly off-site retreats for new recruits called ‘culture camps’, where employees are immersed in all things Zappos, using a culture guidebook which is written by company employees. And that’s just the HR department. When Zappos was bought by Amazon later on, unfortunately the culture was not maintained.

A company should build a culture that acknowledges the power of positive thinking, harnesses it, and leverages it. It should also recognize that both hard and soft skills are needed to make the right decisions and turn that metasystem into a team instead of a loose-knit web of free radicals. Lastly, companies looking to function in a larger metasystem should celebrate free speech, as much within their own organization as in their broader networks and collaborations. They should encourage feedback and create an openness of mind that feeds their constant quest for self-betterment.

La famiglia

We are both fans of Italy. Apart from its great wines, history, fashion and landscapes, it’s also characterized by its great family spirit. Italian families bond like no other. Although they can have huge fights and shout at each other like there is no tomorrow, they always stick together. In order to be ready for outside partnerships, companies need this family spirit within their own organization. Deep trust, care for each other and sharing difficult and enjoyable moments together need to be embedded in the root culture. You need to be “a famiglia” internally to engage positively in the village around you.

In navigating uncertainty, you should go easy on your partners, keeping in mind tolerance is a bidirectional thing. The vibe or setting you want much resembles that of a family, actually; a close-knit group of people who are happy to depend on each other. People who are loyal and forgiving of each other’s mistakes, knowing that not only do these happen, they are inevitable if you are looking to grow. And, since they’re stuck with each other for the long haul, they’d better make things work, avoiding nightmares at Christmas dinner.

A positive mindset is a characteristic of strong families. They need this energy to bond for the long haul.

The negativity bias

Our world used to be a dog-eat-dog world. In pre-civilization times, existence was a battlefield with one choice: killing or being killed. Humans had to focus on threats and pay constant attention to the bad and the negative in order to outsmart hazardous situations lurking around every corner. Those who were more attuned to danger had a higher chance of surviving. And when they did survive, they passed on their negativity to the next generation through their dark and angry genes, meaning pessimist tendencies flourished.

Today, the majority of humans don’t have to fight for survival anymore. The odds of you being devoured on your way to work are neglectable. Still, the tendency to see the worst in all that surrounds us is part of our genetic make-up. Our ancestors provided us with an excellent negativity radar. And so we continue to attribute more weight to negative events, people or elements than we do the good things in life. While this tendency towards the negative once gave humanity an advantage, it has now turned on us, slowing down our progress and even our chances of survival. Our talent to paint black what should be pink isn’t doing us much good.

Neither does our inability to forgive. If the bad experiences or mistakes tend to stick to us, it follows that we find it harder to digest them and move on. But making mistakes is about as human as it gets. We all make mistakes, pile them up by the dozen and assemble an impressive collection during our lifetime.

The phenomenon described above is called the negativity bias. Not only is it a psychological oddity, it is an evolutionary one as well, and therefore very stubborn. We are wired in a way that makes it much easier for us to remember negative experiences than positive ones. For every negative experience we have, we need about five positive ones to even things out. If you’re a five-year-old, it means one piece of broccoli can only be forgotten after five pieces of chocolate. If you’ve just started as an intern, you’ll need five compliments to make up for that one reprimand. In our case, when building a metasystem, it’s one breach of trust versus five consistent, trustworthy examples of good behavior to feel a partnership is successful.

For instance, newsstand magazine sales increase by roughly 30 % when the cover is negative rather than positive. It is no surprise, then, that a “good news day” organized by an online Russian newspaper resulted in a 66 % decrease in readership. Sadly, the real victims aren’t in the news. It’s us, craving all this bad news.

We’ve mentioned it a couple of times, but we really want you to be very aware of this tendency. Of all the information we absorb on a daily basis, it’s the negative words that cling. This bias is so deeply ingrained in our neural networks that it heavily influences our way of looking at things. It makes us miscalculate situations, opt for the worst possible outcome, and fail to give people the benefit of the doubt. Of course, you can try and find five things to feel good about for every one depressing event. Or you can acknowledge that the mathematics aren’t fair and that you are denying yourself an easier ride.

Positive is the new negative

A lot of studies and literature have shown us that having positive expectations about someone can impact this person’s future behavior in a positive way (aka Pygmalion effect). An example. When teachers were told they’d be teaching a class of high-performing students – while in reality, the student’s level was average or even low – students ended up with better results than usual.

However, we might not even need science to prove our point. When someone believes in you, this belief strengthens you and helps you achieve your goals. Likewise, when people put you down and expect nothing but the worst from you, this lack of support is often partly responsible for you underperforming. These dynamics are apparent in different contexts, ranging from education to family, friends and companies. Behavioral psychologists call it the self-fulfilling prophecy: a prediction that is all the more likely to come true, just because it’s been said out loud.

The good news about these self-fulfilling prophecies is that they work both ways. If you believe somebody likes you, you will behave in a more likeable way and they might actually turn out to like you. Simple as that.

Careful what you wish for

The self-fulfilling prophecy shows that believing is a powerful tool. Religion proves this point. Faith mobilizes millions of people to live according to certain principles or to adopt rituals for defining moments in their lives. In the worst cases, religion can be a reason for its adeptness to wage war, all of it based on mere beliefs. The same can be said about money. Dollar bills are in fact nothing more than pieces of paper imprinted in green, yet we collectively choose to believe that they are worth more than a regular piece of green paper.

The question is how you will use the human capacity to believe and leverage its potential. It is a means, but to what end will you apply it? Do you want people to violate or boost your trust? Do you want to collaborate or isolate? Do you want to see the world as a battlefield, or as a basket full of treats holding a slightly mysterious promise of a good life? Do you want to tell them a story they can relate to and believe in?

Looking at the positive side of things is a choice. Unlike happiness or other products of the land of milk and honey, a positive attitude can be willingly fashioned. You can choose to be positive. Doing so will open up opportunities. You will attract positive people and good news, and when things do go wrong, you will be all the more resilient, able to turn the situation around. Somewhere down that road, your positive outlook on the world will help you build trust, engage in powerful relationships and survive the next decade. Bonus: it might make you feel good, too.

Positivity, a weapon of mass creation

We believe positivity can create value, both in a private and a professional setting. We also believe being positive is a choice – and one that actually impacts reality, too. Like the self-fulfilling prophecy, what we believe is more likely to actually be. Positive people can really be an engine for companies and partnerships. Their curiosity, problem-solving skills and overall attitude makes a useful blend in finding ways to cooperate.

To build your metasystem company, you need those dreamers. The fearless, the creatives, the ones who care to elevate each other and focus on solutions instead of problems. You need them because the future belongs to those who move past the negativity bias, rewire themselves for positivity and inspire others to do the same.

The female soul

We know this is a tricky subject. By no means do we want to minimize the socio-political weight of the ongoing debate of the place of men and women in society. Neither do we want to present ourselves as experts on the matter. While we acknowledge this debate’s importance, we will refrain from attempting to add anything significant to the research, or the battle for equality between the sexes. Our respect for these efforts, our gratitude for those fighting the battles and our moral support for the cause goes without saying.

However, what we want to discuss in this chapter has nothing to do with gender per se, nor with formulating an answer to the question or need for equality. What we propose is part of the answer to the question this book is about, namely how to survive the next decade as a business. This chapter is part of our attempt to help companies shift their goal from profit to purpose, from money to people, from short term to long term sustainable businesses.

Seeing as we write about people, about an outdated world vision, about the need for change in our attitude, we felt the need to write about two specific sets of traits, or skills, or sensitivities that can be called male and female. They could also be named black and white, or arrow and mirror. While the symbolic power of the color or object might fire us from our responsibility, it would bring us further from the core of our hypothesis. Male versus female is a hot topic and a highly complex one, but that doesn’t mean we should ignore the presence of masculinity and femininity in each of us, or ignore how certain traits impact our interactions, our way of seeing the world, of running a company.

Masculine vs. feminine energy

Now we’ve had the disclaimer stating everything we didn’t want to talk about, let’s focus on what we do want to talk about: energy. Let’s look at what drives you. At the skills, talents and urges you possess and the ones you ignore. We believe two types of energy can be identified in any person, one of which is very well represented in the business realm and one that is a tad neglected, to put it mildly.

Rather than opposites, these two skill sets are parts of one whole. Being skeptical of either one will only result in underusing the full scope of your capabilities.

Masculine energy traits

The masculine energy is focused on doing. It’s assertive, self-driven, and goal-oriented. You see it, you want it, you get it. If this side had a color, it would probably be blue. This is a structured energy: it thrives on numbers and feels more at home in the quantitative than the qualitative. “Show me the numbers! ” and an image of heaven as an endless excel sheet.

This energy doesn’t hesitate to take a frontrunner role and manifest itself as a “follow me, I’ll get us out safely” hero type. It is fueled by confidence and a clear and focused view on its surroundings, apt at quickly separating the wheat from the chaff.

This may sound like a perfect mix of character traits, a recipe that doesn’t need anything more. Looks can be deceiving, though. While not very inviting or vulnerable, the masculine energy can only really come to its full potential when flanked by some more feminine traits. Moreover, this way of going at things may at times be a little too rigid or linear.

Feminine energy traits

The feminine energy cares and connects with others. It empathizes and actively tries to understand emotional dynamics in relationships. It adapts easily to changing environments because it’s less rigid, more flowing, searching for harmony and trust rather than control. As if it had antennas, it senses change in people and situations very quickly, allowing high-frequency connections.

If patience is a virtue, this energy is definitely scoring points in that area. The trinity of vulnerability, empathy and reciprocity makes people who interact with this energy feel at ease. They feel they can soften, stop racing and stop judging. Instead of “getting shit done”, and “moving fast and breaking things”, the female energy creates room to think, discuss, doubt, create, iterate, fail and try again. Again, many positive traits that may, however, benefit from their male counterpart. This way, things get done without breaking out in an emotional tsunami.

Gender in the blender

Seemingly opposites, these two energies are in fact better when combined. Reality doesn’t fit into an excel sheet, nor are all problems fixed with debate and coaching. The magic lies in constantly balancing both energies, between people as well as within yourself. Most importantly, we should refrain from arranging these traits hierarchically. Neither of them is better than the other. They are Yin and Yang: distinctly different, but inherently bound to one another. As the white dot in the black swirl tells you, Yin and Yang form a dynamic system where one part needs the other and both complement each other.

A PERSONAL CASE STUDY

THE FEMALE SIDE OF RUGBY

Being a life-long rugby player – an open-side flanker, for the connoisseurs – Nils thought rugby could serve as proof that our take on the “male” or “female” soul has nothing to do with gender or superficial, first-degree perception. While seen from outsiders as savagery, rugby is in fact built on inclusivity, respect and care.

This has a lot to do with the fact that a rugby team needs very different talents, which it cannot find in just one person: speed, agility and strength, as well as more technical skills like kicking, ball handling and jumping. Excelling in all these disciplines requires a team of very different, yet very complementary players to work seamlessly together. When South-Africa won the Rugby World Champion in November 2019, it was as much to the credit of small, fast and agile scrum-half types like François ‘Faf’ De Klerk – 1.70 m and 88 kg – as powerful giants like Duane Vermeulen, 1.93 m, weighing in with his 117 kg.

Of course, rugby harbors many “male soul” characteristics like strength, focus, confidence and assertiveness. But the ‘female soul’ is present in its every fiber as well. A key notion in rugby is being “in support” at all times, which means being ready and available to help your teammates. Never thinking of your own pain or exhaustion, you are always there for your team. Take that support away and not only will you lose the game, but you and your teammates will be in for a lot more physical strain. Players are only able to charge or tackle giving it their all because they trust their team will always be there to support them. In rugby, there is no place for prima donnas, heroes or cheats. It’s not theater, there are no tricks. Only commitment and respect for the rules – always. Maybe that’s why they are called laws in rugby.

In certain phases of the game, like scrums or line-outs, the roles and positions of the players are pre-set. This rearranging of players in a fixed constellation gives teams time to optimize their use of the different skills they harbor. During the game, though, with the ball moving back and forth over the pitch, the formation is broken and players are scattered about the field. To react to this ever-changing layout and be able to exploit every opportunity, the team needs to be fully aware of players’ new positions. It understands (a) that every member on the team has its value and (b) that there needs to be room for looseness in the pattern to be efficient and fast-responding.

Unlike in other sports, rugby coaches don’t stand at the sidelines screaming. They are perched at the highest point of the stadium, from where they have a helicopter view of the game. This means there is almost no direct communication between a coach and his team during the game, apart from the half-time briefing. In other words: teams have to learn to fend for themselves. To act independently. To correct themselves. To train their intuition.

In rugby, players on the field each act as coaches to their fellow team members. The captain, however, takes the lead and plays a pivotal role in steering his team towards victory. Charismatic as he is, South Africa’s captain Siya Colisi was instrumental in creating strong ties among his own players. He did this by giving his team a goal much bigger than the space between the goalposts. To Colisi, playing ball was about setting an example. Following the vision of Nelson Mandela who wanted to build a rainbow nation, the captain saw in rugby an opportunity to show South Africans that all humans are equal and that they can accomplish great things when they work together.

Another aspect of rugby that showcases its female energy is respect for the referee. This respect is total and unquestionable. After the game, players form a double line and applaud the referee. They applaud the other team, too. After the match both teams sing and party together, which is what they call the “third time”. This unwavering respect sets rugby apart from other sports. So much so that in a much-shared video fragment, referee Nigel Owens calls a player to order, asking him not to shout about anything again, arguing that “this is not soccer”. Point made.

This respect on the field translates to the rest of the stadium as well, where supporters from both camps sit side by side on the stands. Rivalry is not a thing in rugby, supporters can appreciate good rugby from either team and will cheer for a beautiful tackle, no matter who made it. Hooliganism isn’t a thing either. If problems do arise, they are resolved among fellow supporters without any need to bring in stewards or police. In small regional derbies and Six Nations games alike, harmony between all involved forms the basis of any game. A perfect, if somewhat unexpected, case of how male and female energies work best when they work together.

Now let’s get to work

Just as people get along better, feeding both the yin and the yang works for companies, too. They will thrive when combining forces. Looking at the repartition of both energies within businesses today, we’d estimate it is about 10 % female and 90 % male. We vote 50-50. Not as a mathematical rule of thumb, but as a fluid guideline for HR decisions, say, or simply to give a little more attention to the underrepresented energy. If you want to get your company up to speed, ready to engage in a metasystem, you’ll need both.

Business culture has been a very male affair for decades. If you want to start balancing this out, it is time you actively invited female energy into the boardroom. This doesn’t mean you have to hire more women. It could, but it doesn’t have to. The moment you start being more trustworthy, that moment you make room for soft skills; these energies begin to balance out.

Go ahead and make room for dialogue next to the numbers. Stay away from a shark-style sales approach or the sink-or-swim welcome for newcomers. Rather, invest in coaching, in collaboration, in a less top-down, pyramid-like structure. Spread out responsibilities and accountability so that your company can become more resilient and more flexible; and so that each member can be an ambassador. It is a much more inclusive and welcoming approach.

For far too long, employees have left their female energy at the door when entering the workplace. That’s a loss not only for them, but for the company as well. We’ll send you off with five key traits of the company of the future to help you balance out those energies.

Courageous conversations

Diamonds are a girl’s best friend. Your best friend, however, may be a problem. Because if you learn to look at a problem as not a problem, you may see an opportunity where others see only trouble. Of course, this is only true if you decide to climb over the roadblock ahead instead of merely sitting around, waiting for it to vanish all by itself.

In business, these roadblocks often consist of ironing out the kinks between yourself and other people. However, humans aren’t too enthusiastic about confronting their differences. According to a 2018 study by Bravely, 70 % of employees in the US avoid difficult conversations with their boss, colleagues, or direct reports. 53 % of them handle ‘toxic’ situations by ignoring them. And that causes a whole new problem, because ignoring the original problem does not make it go away – much to the contrary.

Avoiding conflict isn’t merely problematic, it is also expensive. A 2016 employee survey performed by VitalSmarts, an American corporate training company, revealed the cost of our habit of dodging conflict. According to their calculations, every single conversation failure costs an organization 7,500 US Dollars.

This avoidance makes sense, though. Even in business, we are only human. We don’t like bickering, much less full-blown arguing. Instead, we prefer our comfort zone, this mental space of routine and familiar habits, where things go as predicted. When we’re in the zone, we feel tranquil, mentally secure. Both our anxiety and stress levels are low and we feel at ease.

While this is surely a positive and pleasant place to be, it isn’t much help when faced with problems. In fact, whenever you’re in a pickle, a bit of discomfort will help you find a way out of it. Psychologists Robert M. Yerkes and John D. Dodson did some research on what we now call the comfort zone. They labeled it a state of relative comfort, which ensures a steady level of performance. Good, yes, but when things go bad, you need a whole lot more than good. You need grand. And to be grand, both psychologists discovered, you need the right level of anxiety. Slightly elevated stress levels, which they’ve called “optimal anxiety”, allow you to push beyond your own boundaries, see solutions you’d normally consider out of reach and do things you didn’t think you were capable of.

Whereas we view discord as treacherous, booby-trapped terrain, the truth is that leaving our safe perimeter can be a rather invigorating experience. Being on the prowl for risky undertakings 24/7 wouldn’t be good for your stress levels or your health, but you will benefit from treading on unknown ground every once in a while, as this is where unexpected things happen. And in this realm of surprises, as you know, innovations are born.

Words don’t come easy

Humans are nothing if not social. Take away our belongings and we’ll survive, but take away our friends and family and we’re lost. Relationships are the fabric of society. They are what gives meaning to our lives. This is true in personal life, but just as much in business. In both contexts, relationships require care and time. Humans may be social beings, but we are fickle, too. We easily feel misunderstood, unfairly treated, dissatisfied and just plain hurt, even when we’re carrying a briefcase and have a business card that carries status.

Keeping in mind problems don’t usually self-resolve and good things happen when we try something new, it is easily deduced that handling interpersonal conflicts is a better idea than to let relationships wither and die. To overcome our reluctance to broach uncomfortable subjects with partners or team members, we should therefore engage in courageous conversations to resolve problems.

Don’t think of these conversations as band-aids in need of being pulled off, quick and dirty. In educational leadership development, courageous conversations are seen as a way to challenge current practices. They are not pro forma chats, nor are they heated discussions. They are honest conversations that result in valuable feedback, intended to help you grow your organization. And if you act on what you learn during these conversations, you should be able to improve performance and overall wellbeing. This is true on a team-vs.-boss level, but also in a metasystem where friction may have to be confronted and you will have to work out a format in which everyone can be heard.

The never-ending story

In Greek, “logos” means word and “dia” means through. The Greeks, it seems, interpreted a conversation as a flow, a stream of meaning. And as streams meander, they may lead you to understand things in a different way.

Looking at a dialogue as something that doesn’t necessarily lead to a result will alter your expectations. On the team level, you may be looking to resolve a problem and then move past it. Even then, you shouldn’t be this pragmatic during your conversation. If a courageous conversation is about creating room for improvement, learning to see potential and spot possibilities, then by default, it is not only about resolving the issue.

Very often, conversations are an attempt of both parties to win the other over. We choose our arguments to convince the other that in the end, we are right and they are wrong. This urge to win dissipates if you look at the conversation as an exploration of both parties’ worries, thoughts and ideas. Look at the conversation as an ever-evolving, ongoing exchange and the long-term look changes the way you’ll go into the conversation. All of a sudden, it’s not about winning anymore.

The same applies to courageous conversation on the metasystem level. Ideally, these conversations are devoid of conflict, making it even easier to accept that there is no clear goal to steer towards. Except that in the end, you want the conversation to feed your company and the metasystem as a whole with fresh, new ideas.

With employees as well as with partners and collaborators, imagine every conversation to be part of a larger story you’re writing together, or a correspondence between pen pals. It is always being added to, and it doesn’t have a predefined ending. As you write, you find out in which direction it takes you. Surprises guaranteed.

Be willing to learn

The aim of these conversations is to tackle issues while paving the way for an integrated way to spot new opportunities. It’s about growing the right mindset, which is a willingness to learn, and to accept that courageous conversations aren’t as much about talking as they are about listening.

To reach consensus, you will need to understand whoever is opposite you at the table. Sincerely trying to see things from another perspective will gain you wisdom. It will tell you what the other party fears and fancies, what their inspirations and aspirations are, what goals matter to them and what drives them to reach these goals. This knowledge is crucial in aligning your purposes, but will also lead to new insights and open new paths you may decide to explore. Understanding the other is an ongoing process of going back and forth. In the early stages, your broker of trust will serve as a go-between, reassuring both parties and acting as a translator of sorts.

Furthermore, this conversation you’ve so courageously taken up shows your intent: it’s reassuring for the other party to know you are willing to listen and willing to invest in your mutual relationship. Follow the rules for courageous conversations we’ve worked out in Chapter 18 and you’ll see how these dialogues work as a way to identify new opportunities, not just as a means to iron out any wrinkles. Use them to reflect on the way you are used to running things. Make them an integral part of your learning process by embedding them in a schedule, like you would a yearly evaluation. And look at this conversation as a tool to explore what possibilities are out there, waiting to be mined – not as a quest for the ultimate answer or a quick fix to a long-lasting feud.

Build your own little empire

Bringing together a larger group of people with different backgrounds – and different assumptions – but a common goal is a very good way to start a dialogue that is true to the etymological origins of the word. An exchange instead of a negotiation.

To organize this conversation, it is important to make the right choices when building your metasystem. In his book “On Dialogue”, David Bohm argues that groups of six to eight people are too small to leverage the advantages of all these backgrounds. But create a network of twenty to forty conversation partners and you have a decent-sized group, perfect for learning from one another.

When putting together this group, you’ll have to make very clear that its intention is not to make decisions. Apart from the date and place of the next meeting, this group won’t decide anything. This way, you will free all participants of any obligations and create a space in which they are free to contribute whatever they feel relevant. It’s open mic night and everyone gets their time on stage. No interruptions. No agenda, either. This is about being open by design, about letting the conversation take unexpected turns. You don’t know where and how some idea may take root. But you’ve just created plenty of fertile ground for it to grow wild. Into a garden, perhaps?

One last thing. Don’t look at this “talking group” as a “talking group” that just spouts opinions about things. Nor is it a closed-off club with fixed members. The idea, always, is to create a space where change can happen. And for change to happen, you need a sustained and repeated effort. Item number one on your to-do list consists of mapping out the nine dimensions described above, finding out just how you can make them work for your organization, how you can fill the gaps and balance out the negatives. Just like with the courageous conversations, this isn’t a one-time effort. It’s a sustained attempt to keep all the plates spinning. Don’t worry if you break some China, it’s part of the deal. As long as you remember that finding balance isn’t about standing still, it’s about constant movement.

Take the Metasystem Wheel and look where you stand. Define your action plan keeping three key questions in mind:

•Do you have the strongest possible purpose?

•Are you really geared towards collaboration?

•Do you have the right culture to enable your journey?

THE HAIER CASE: A DETAILED BEST PRACTICE EXAMPLE

HOW TO TRANSFORM A LOCAL MANUFACTURING ENTERPRISE INTO A GLOBAL ECOSYSTEM OF INTER-CONNECTED MICRO-ENTERPRISES

As we outlined, whenever you want to engage in partnerships and metasystems you need to start from within first. The Haier case is one of the best examples as the company rebuilt its traditional silo structure into an ecosystem of 4,000 micro-enterprises and deploys many of the dynamics we have described in the Metasystem Wheel above.

Haier is a multinational corporation that manufactures household appliances like air conditioners, refrigerators, washing machines and freezers. But more than that, it is an example of mastering quality control and building a metasystem in which everyone has skin in the game. Five lessons from CEO Zhang Ruimin himself.

1. Quality trumps everything else

In 1984, Zhang Ruimin was appointed CEO of Haier. At that point, it was half state-owned and the quality of its products wasn’t always up to par. Word has it Zhang once destroyed a whole bunch of fridges. He’s received a customer complaint about a refrigerator. Just to be sure, he ordered all other refrigerators in the factory checked for the same flaw. It appeared that 76 refrigerators showed the same issues. Zhang had his workers hammer the faulty refrigerators until they were in shambles. Knowing a refrigerator was worth two years of a workers’ salary, you can be sure Zhang’s message was clear: only the best is good enough.

2. Close the gap between employees and customers

Zhang transformed Haier from a company that aced qualitative mass-production to a company that excels in mass-customization. The key to this transformational success was a fundamental shift in strategy. CEO Zhang Ruimin introduced a new philosophy: Ren-dan-heyi.

Rendanheyi creates a culture of “zero distance” between employees and consumers. It makes employees connect, care and co-create with their customers. And the system rewards them for it. “At Haier, we no longer pay our employees. Instead, they are paid by customers.”

3. Break it up

Under Rendanheyi, Haier replaced their traditional hierarchical pyramid with an ecosystem of 4,000 micro-enterprises organized in a flat, parallel structure. This way, Zhang eliminated the entire layer of middle management.

The micro-enterprises are small, autonomous companies with startup-like features.

•They are user-oriented and have to create value for their users to get paid.

•The greater the value they create, the better they are paid.

•Each micro-enterprise employs between 10 and 15 people and is empowered to make its own decisions in terms of business strategy, hiring decisions, resource allocation and compensation.

•The employees of each micro-enterprise are made into entrepreneurs. They share in the profits and operate autonomously. In return, they build an ecosystem of solutions around their business.

4. Make the parts work together

To make the switch from micro-enterprises to a complete ecosystem, Haier defined three types of micro-enterprises within its realm.

• Transforming micro-enterprises

•Incubating micro-enterprises

•Node micro-enterprises

The first two are customer-facing enterprises. The transforming kind focuses on reinventing Haier’s legacy business: from selling household appliances to building ecosystems of solutions around household appliances.

The incubator kind explores new business opportunities. An example is Xinchu, a smart refrigerator that connects customers with third-party services selling fresh food and delivering it within 30 minutes.

At last, there are node micro-enterprises. These support the transforming and incubating enterprises. They sell them products and services like components, manufacturing, HR support, marketing campaigns and so on.

REFRIGERATION PLATFORM

Micro-enterprises are organized into platforms. These platforms facilitate collaboration between the micro-enterprises and are organized around a specific category (for example refrigeration) or a capability (for example digital marketing skills). A typical platform consists of 50 micro-enterprises working together. For example, the refrigeration platform has six transforming micro-enterprises serving different customer segments. Around these, there are sales, design, production and support nodes.

5. Take the collaboration outside

At Haier, collaboration doesn’t stop at platform level. As every micro-enterprise is meant to build an ecosystem of solutions, Haier’s philosophy is focused on collaboration. Naturally, this extends to third parties outside the Haier ecosystem. That’s why micro-enterprises are encouraged to collaborate with external partners.

In fact, every new product or service at Haier is developed in collaboration with others. For example, when Haier started to develop a new home air conditioner, it teamed with Baidu. This social media network asked potential users about their needs, pains and gains; which resulted in more than 30 million responses. Likewise, Haier sets up collaborations with academic institutions and technical experts. Through the HOPE platform, which stands for Haier Open Partnership Ecosystem, the company gathers experts from over 1,000 domains who confidentially share their patents – with the understanding that they’ll be rewarded if their technology is used in the final product.

Haier has transformed itself from a traditional manufacturing model to a customer-centric ecosystem run by self-governing employee entrepreneurs. By breaking-up Haier into a modular, agile structure of micro-enterprises, Rendanheyi seems to be a perfect model for being adaptively resilient as a company in these uncertain times.