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Open Innovation Case Study in China: Haier

The Epitome of Chinese Open Innovation

Since the 1980s, Haier has been a leader in consumer appliances across the world and China. In order to become the current world leader in consumer appliances Haier has gone through 3 phases of evolution.

Their latest evolutionary form does away with middle-management and sees the company take a shot at “Open Innovation” by recreating itself as an internet platform-based company made of “micro-enterprises”, complimented by the open-resource HOPE platform.


With profits jumping an average of 13% year-on-year, Haier’s open innovation strategy has become the golden child of the business world, and other corporations are scrambling to uncover Haier’s secrets. This article has narrowed down Haier’s success down to 3 big “Open Innovation” practices that have helped boost Haier’s success in recent years:

1. The HOPE Online Platform

One of the major pillars of Haier’s Open Innovation strategy is the HOPE (Haier Open Partnership Ecosystem) online resource portal, which helps to boost technological exchange and feed the fire of open innovation. It is also the world’s largest parallel ecosystem platform.

The portal is an online global platform that connects Haier with a network of technical partners and resources from a range of different industries across multiple companies to find solutions to technical or resource problems. The target groups of HOPE are geeks, R&D firms, research institutes, universities, and individual engineers.

This enables the company to overcome technical and business issues by gaining knowledge from or partnering with people in similar industries across the globe allowing for cutting-edge problem solving, R&D, marketization, and faster product development cycles. At present the platform has close to 400,000 technical specialists, with 500 new ideas being generated each month and 200 innovation projects incubated per year.

In addition to the HOPE platform, Haier has also established 5 R&D centres in China, the US, Asia, Europe, and Australia which connects 1.2 million scientists and engineers to create a unique innovation ecosystem. The R&D centres also help Haier tap into and amplify technologies from local technologies around the world, as well as cater products to foreign markets.

2. Boosting Entrepreneurship

Another trick of Haier’s “Open Innovation” strategy centres around allowing the company’s employees to openly innovate anything that interests them, utilizing any resource they can get their hands on.

CEO Zhang Ruimin’s changed the company structure so that Haier employees can themselves become entrepreneurs, with each section or department of the company becoming a “micro-enterprise” dedicated to an innovative product or idea. With middle management kicked out, the company becomes a “flat organisation” and a melting pot of ideas, talent, and resources. At present, the company has 2000 micro-enterprises.

In order to boost entrepreneurship, employees are actively encouraged to go after their own business ideas using any resource that they can find, as part of Haier’s new “Open Innovation” philosophy. If employees have a compelling entrepreneurial idea that they wish to pursue, they are free to propose the idea for a new product or service within the company.

If the idea gains enough traction from employees as well as suppliers and customers, the employee can form their own micro-enterprise within the company by recruiting across the company to form a team dedicated to making the project work.

The new micro-enterprise, although still under the Haier umbrella, manages its own budget and profits, and will be paid by the value they create for customers. Micro-enterprises are encouraged to utilise the HOPE platform to find their own resources and partners for marketing, distribution, and production.

These resources will often come from outside of the Haier company, and the HOPE platform allows for open innovation by helping “micro-enterprises” cross-pollinate their ideas with the outside world.

3. Closer Relationships With Customers

The changing of Haier’s company structure from a top-heavy traditional hierarchy to a “flat organisation” of micro-enterprises also means that it’s new “Open Innovation” strategy involves innovating alongside the desires of customers. Within the new “micro-enterprise” structure, there are 3 tiers of micro-enterprises, each with specific roles.

However regardless of which tier of “micro-enterprise” and employee belongs to, all team members are expected to interact with customers and suppliers on a regular basis. This has allowed Haier to openly innovate in accordance to changes and preferences in the consumer market as there is now “zero distance” between the company and consumer.

Additionally, “Tier-3 micro-enterprises” in the “flat organisation” structure are partly dedicated to R&D, which involves analysing social media data to analyse customer needs and creating new product leads. According to Haier, each day over a million users engage with the company over its products providing the company with ideas on improvements and future products.

This is done through both traditional customer interaction and social media commentary. Using big data technologies to scan microblogs and online social media, the company states that it can produce 1200 unique product ideas each year. This helps centre Haier’s “open innovation” strategy around the specific technical and preferential needs of consumers allowing it to produce products that develop alongside the customer’s lifestyle.

4. A Real Life Example of How Open Innovation at Haier Works:

In October 2014, Haier launched and advanced food preservation system for its refrigerators that can help maintain the freshness of fruits and vegetables. This technology was created using the HOPE platform, but how did it all begin?

 

  1. A netizen made a comment on a microblog complaining about how commercially available fridges could not maintain he freshness of fruit and veg.                     
  2. Haier’s big data capabilities picked up on this comment and the comment was sent to Haier’s Refrigerator R&D department in June 2013
  3. The department recognised that the problem could be solved but it needed inspiration.
  4. On the HOPE platform it posted a request for refrigerating technology that could “keep spinach fresh for 7 days”.
  5. Five technical providers responded to the issue
  6. In November 2013 after further interaction, 2 of the 5 were selected for the R&D platform to cooperate with: a research institute (helped to develop high-humidity food preservation technology), and a company (to supply high-humidity containers)
  7. In October 2014, the new technology was added to Haier’s existing product range.

 

In a year and a half, Haier is able to improve its products based on the complaints and specifications of a potential customer, and turn a simple microblog into a booming business idea.

By XNT,

contact@thexnode.com

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