An Entrepreneurial, Ecosystem Enabling Organization

What’s emerging from understanding Haier Group: an Entrepreneurial Ecosystem Enabling Organization, Rendanheyi, and the Ecosystem Micro-Community

Boundaryless Team

August 23, 2019

[since the date of publication of this essay, we made progress, catch up with the latest development on the EEEO concept and access an open source from this page: https://boundaryless.io/3eo-framework/]

An Entrepreneurial Ecosystem Enabling Organization (EEEO)

As a basis of our thinking and reflections, we coined the idea of the Entrepreneurial Ecosystem Enabling Organization as reflective of Haier’s basic elements of shape and culture. The potential transformation of an organization wanting to adopt some aspects Rendanheyi should start, in our opinion, from the premise that the adopting organization should be willing to embrace a set of essential principles and organizational choices.

First principle: becoming a coherent set of loosely coupled, independent units

As some of the readers may know already, Haier’s latest organizational structure is heavily based on the concept of a Micro Enterprise (ME). The ME is — arguably — the most important contribution of Haier to the management history: having independent, loosely coupled units, eliminated Haier’s bureaucracy and organizational (cultural and technical) debt and made the Chinese giant able to evolve quickly in a market-user driven fashion.

Second principle: becoming powered by a culture of independence and entrepreneurship

Haier’s culture has been radically based on entrepreneurial independence, especially during the latest developments. De facto, the very idea of being made of a network of Micro Enterprises cannot prescind from having a widespread entrepreneurial culture, where employees are empowered all the time to create new enterprises (existing a certain set of conditions). Creative entropy and initiative have been clearly a pillar of Haier’s market expansion and evolution: an evolution that started from the periphery of the company (an entrepreneur) rather than from the center with some kind of “innovation” mandate.

Third principle: becoming ecosystem-driven in choices and strategy

The whole revolutionary outside-in transformation, Haier went through in the last decade, was always rooted in an “inverted pyramid” where the user (the ecosystem) is in charge and where employees are “paid by the user” and not by the organization.

Existing Entities

For the sake of this post, I’ll share with you a list of entities that currently exist in Haier’s entrepreneurial ecosystem. The list may change in the future but — at the moment — I believe this represents the clearest way to lay out the company’s universe.

Micro Enterprises

  • Node MEs, which are a result of former supporting platforms (R&D, logistics, supply chain, etc.) being split up.
  • incubating MEs: newly founded MEs working on new product and business areas that are often closely related to traditional industries.

Platforms

  • the ME’s objectives in terms of addressed ecosystem value and performance (network value).
  • the mechanisms to offer employees access to the option pool to incentivize more “skin in the game”;
  • the mechanism for exit;
  • the mechanism for potential dissolution.
  • follow up with investments of her own funds before receiving further investments.

 

External Enterprises

External enterprises are normally considered essentially as holding the same potential then internal enterprises in Haier’s organizational vision. Haier further encourages competition between external and internal entities in bidding for services and leaves no obligations to internal entities to acquire services from internal providers thus radically reducing technical and organizational debt inside the organization: no micro-enterprise or service platform can hide behind internal bureaucracy.

Ensuring Consistency and market focus in a changing landscape: The Ecosystem Micro-Community (EMC)

The concept of EMC was recently born within Haier as an open and dynamic structure, to facilitate co-creating value and win-win situations in large ecosystems of value creation.

  • provide integrated solutions to communities of users sharing similar needs;
  • include nodes both within and outside of the Haier Group, and even those from entirely different industries: can be initiated or led by an external entity as well;
  • are driven by Haier’s value creation and sharing mechanism and profitability, external stakeholders can join to co-create more advanced solutions, which translate into greater margin;

Layering out: the evolution of Rendanheyi seen through three essential layers

As the evolution of Rendanheyi model has progressed, and in convergence with other models emerging in the world, we can highlight the emergence of three essential layers of organizing with three peculiar functions.

  • the process of enterprising relates with how the organization expands to capture and nurture new value creation processes, it deals with experimenting with new products, services and relationships between the user/ecosystem and the organization, it deals with how the organization “explores the new”.
  • the process of enabling relates with how the organization in its various forms provides individual and units with support services — or just rules, practices and customs — that contribute to ease development through focusing on specific activities, instead of covering and replacing common functions

Conclusions

On one hand, as new technologies emerge they become integrated in Haier model enabling the organization to experiment with new organizational artifacts — such as the EMCs. At the end of the day, an organizational structure “IS” technology and therefore is natural that — especially in such an advanced company — the two (the technology and the organization) are almost impossible to separate.

References

[1] Harvard Business Review. (2019). Nimble Leadership. [online] Available at: https://hbr.org/2019/07/nimble-leadership [Accessed 7 Aug. 2019].

Boundaryless Team

August 23, 2019

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